Supply Chain Management in Retail and Marketing – An Industry Perspective

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Mr Vineet speaking on Supply Chain Management

On 4th July, TAPMI was fortunate enough to host three prominent personages of JDA Software Group, Inc., Mr. Muralidhar Joishy, Vice President-Consulting Services at JDA Software, Mr. Umesh Gaur, Senior Director Consulting Services at JDA Software and Mr. Vineet Subhedar, SME Supply Chain Consulting at JDA Software, who took a special session for the students of Supply Chain Management. The brief session was designed to bring forth the intricacies in Supply Chain Management from an industry perspective.

The session started off with the benefits of a global platform for all the industries. Mr. Vineet cited the example of Ford Ecosport and Ford Fusion, both of which had standardized parts so as to reduce the inventory levels required. This has saved a lot of operating expense for Ford.

The next touched upon were the benefits of capacity utilization and production facility. The example mentioned to illustrate this was of Sweekar and Saffola, 2 leading oil brands. Mr. Vineet mentioned how Sweekar 1litre packs were so much in demand that packaging for this brand was running out. So the company switched over at that time to packaging Sweekar 5 litre packs, Saffola 1 litre packs and Saffola 5 litre packs. This ensured that the production facility did not remain idle.

With the use of CPFR (Collaborative Planning, Forecasting and Replenishment), the company was also able to estimate the demand to a large extent, thus ensuring that they did not lose out. CPFR brings together the company and different vendors to accurately estimate the demand. This demand is then used to plan the production appropriately and schedule the supply of raw materials in a JIT (Just-In-Time) fashion. This ensures lesser stock of inventory is present on the shop floor, which in turn would reduce the money tied up.

The team of consultants from JDA Software also impressed upon the students, the 5 important facets of any supply chain, namely, vendor development, flexibility, centralization, supply distribution and quality management. The companies have realized the importance of vendor relationships when it comes to cutting costs. A typical supply chain consists of one or more suppliers, one or more products made at the plant and multiple channels that handle distribution. A supply chain optimization generally deals with optimization on the supplier side.

They also touched upon how the outlooks of manufacturing industries have evolved over the years. Traditionally, the focus had been on optimizing the machine hours available, the productivity and the manpower available, without considering the demand for the finished products. This caused the manufacturers to push their products into the market when the supply was more than the demand. The retailers and distributors were expected to generate the pull for the products. However, with the companies now looking at distributors and retailers as more integral parts, this situation has been addressed to a large extent. The industries work on a pre-plan drawn out with the help of their channel partners. Therefore, now the production is done to meet the market demands. The example of Samsung and its retailers was quoted to prove this.

The next topic for the session involved the key challenges faced by the industries. These challenges pertaining to demand uncertainty/volatility, globalization, escalating customer expectations and new product development were now being addressed with the assistance of channel partners. Earlier, selling was regionalized and the products were made at source, namely the plant. Then came the era when production was done wherever it was cheapest, but the selling was restricted to the individual regions. Nowadays, the selling is also global. Moreover, if own production plants around the world cannot make the product at the cheapest rates, then the production is outsourced to third party vendors. Supplier performance has therefore emerged as a critical factor and is determined by the weighted average of technology, quality, responsiveness, delivery and cost (TQRDC).

This changing face of supply chain management has met with a lot of resistance, owing to the change in the associated roles and responsibilities. The old guard has, however, started seeing the associated benefits and things are slowly moving forward. The empowerment of the customer is at the helm of these changes. Customers today are more informed and make purchasing decisions after evaluating all available options and channels. The proliferation of the internet has not only enabled everyone to find out more about the product of their choice, but has also increased the bargaining power of the customer by providing the option of online shopping. The discounted rates of e-commerce sites and the ease associated with such transactions only augment the role that IT is playing in the entire gamut of operations.

The team then highlighted the retail responsiveness that is prevalent in the industry today. Linkages are identified between products at the retail level. For example, it makes more sense to stock shades and sunscreens in the same retail location. Demand signals are located at every POS (Point of Sale) to capture a more accurate and realistic picture. These signals were then transmitted on a daily basis to the manufacturers. Comparatively larger retailers like Wal-Mart took demand signals every 4 hours.

The next topic touched upon was the Retailer Maturity Model, which highlighted how retailers have grown over the years. Initially, retailers were concerned only about infrastructure. Then came the age when specialized business acumen dominated. It was followed by the age of integrated planning and execution, which culminated in the era of consumer connected retail. This era afforded the highest degree of agility, flexibility and value. Private labels also started emerging during this era.

The last topic of discussion centred on shelf connected supply chain, an aspect of consumer connected retail which deals at the shelf level instead of shop level. Important aspects of these are demand driven consumer centricity, cross channel consistent brand experience, multi-dimensional view of customer and collaborative planning. The team highlighted this with the example of planograms, designed by either the company or retailers, either themselves or through consultants. The one for Walmart, for example, was designed by JDA. Its importance is particularly highlighted in the fact that TESCO used this to great effect in South Korea, wherein people could order online after seeing these displays at the metro stations, and get them delivered to their homes as per their convenience.

This session was of benefit to all the participating students, and this was evident in the volume of questions being asked of the team. They even took time out to brief the students about JDA Software, its journey over the years in India, and Impactix, which is responsible for around 90% of the planograms. Mr. Umesh particularly touched upon how the acquisition of i2 Technologies and the recently concluded merger with RedPraire have boosted the competency of JDA Software, and made it a truly end-to-end solutions provider.

The session concluded with Mr. Sanjay C. Choudhari of T.A. Pai Management Institute felicitating the guests with gift hampers and thanking the guests for taking time out from their busy schedules to enlighten the students.

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