Provia approaches RFID in a double way Part five: 3PL support and optimization of SCE

Nowadays when the identification of radio frequency (RFID) is constantly on each one 'lips of S, and when each suitable supplier of application of company protects his bets towards becoming RFID-loan or convinces even the market that is exactly its solution RFID-in conformity what it doctor (like, Wal-Mart, target, Albertsons, and the U.S. Defence Department [DoD]) ordered, the quiet typical software of Provia (www.provia.com), a private-held supplier of the solutions of software of the execution of chain of provisioning (SCE), feels time naturally came so that it is more vocal about its efforts of RFID, though after it has already made so much efforts in terms of validation of principle in field.

At the end of May, Provia announced with the distribution/ expo computer 2004 Chicago, Illinois, (US) that its event of ViaView/management alerts and produced of decision-making aid plays a main role in the visibility of offer to the data of chain of provisioning for companies providing the products RFID-labelled to Wal-Mart and to other retailers.

Moreover, at the end of March, Provia announced that it was aligned with its head office of over fifteen years, systems of Viastore, a leading vendor of automated storage and the systems of recovery (AS/RS), and the control systems of material handling, with more than 3.000 cranes installed in the whole world.

As for the products 'improvements functional, at the end of 2003, Provia announced the release of FourSite 4.4, a levelling of its solution of realization directed towards suppliers of the logistics of third (3PL). The globalisation on an industrial scale is a big factor affecting the logistics and the management companies of chain of provisioning. Because of the energetic increase in total manufacture and competition, the 3PL suppliers constantly seek to refine their processes of chain of provisioning for a greater effectiveness and to offer to their customers a competitive advantage. For this purpose, Provia 's FourSite helps more than seventy 3PL customers to control the complex needs and the inventories of fluctuation of a multitude of daily customers. This newer release adds increased possibilities, such as options based on the WEB increased by invoicing, multiple codes of fate, and advance of work, in the following improvements of application:

* The transactions of invoicing-invoicing and invoicing of ViaView for the publication are available to ViaView, by which the users have the visibility based on the WEB with the latter invoicing and of the transactions of invoicing to make smarter decisions.

* Periodic invoicing-automatics calculate the periodic expenses, such as the quantity square length employed by a customer each month, for a faster invoicing.

* Deferred income-automates the process to manually make entries with the user in the plan of accountant of the book of S ('GL).

* The multiple fate code-creates a process which makes it possible users of FourSite to define the definable fields of user (UDFs) in the level of product, and stores the specific information of UDF by the fate of inventory.

* Work detect-adds the possibilities to the specific invoices of customer of product related to the activities of work of collection. The additional fields capture types of equipment, measuring units (UOM), and indicators of invoicing to take account of the automated invoicing based on the information of work.

On release of FourSite 4.1 of 2002, Provia 'solution of S 3PL was available for UNIX and the platforms of waiter of Windows 2000 and with Oracle, Informix, and basic support of data of waiter of Microsoft SQL, and uses of each configuration the same source code. To have the identical product available in the multiple platforms and databases should offer to customers of Provia freedom to choose the configuration that the best adapts their needs for businesses. Moreover, since ViaWare WMS 6.0 of 2002, Provia claims to be the first supplier to offer true arranged a functionality of level in a simple WMS for Windows 2000, Linux, and the platforms of UNIX. By offering the same product of WMS for all these platforms, Provia aims at providing a solution independent standard, extensible, and basic of data able to meet the needs for the environments of the most demanding WMS. Provia 'strategy of simple-source of S also includes the basic independence of data, so that the companies can choose between the databases above for the WMS. Moreover, this should make it possible the company to completely concentrate the research and development on a simple product of WMS.

Addressing some weak points of the current systems of SCE which obviously mainly always automate and do not optimize necessarily operations in the short-term calendar of optimization, and, consequently, full saving often are not carried out yet, in second half of 2003, Provia announced the availability of a solution of product for the optimization of SCE. The continuation of product, ViaOptimize, is a stage advanced for the companies which already automated their equipment with Provia 's WMS and now looks at optimization like key zones of improvement, effectiveness, and reduction of the costs.

During years the host centres of distribution had the challenges to control the daily cost, the equipment, the inventory, and the exits of personnel, which are all the constraints which can negatively affect capacity of C.C one 'of S to function profitably. For this purpose, the continuation of ViaOptimize is composed of three products: Programmer, planner of capacity, and dynamic notching. These applications, once combined with ViaWare WMS, should make it possible equipment of distribution to provide the exit, the effectiveness, quality, and the maximum use possible of resource by the optimization of the orders in all the service. It potentially provides an improvement by increase in productivity, and makes it possible its customers to take into account existing constraints and changeantes, and configurations of order.

In other words, the product of programmer models the warehouse considering the entry (for example, the orders, standards of task of warehouse and order the flow of process), the constraints potential or the necks, including work available, the equipment, the services with added-value, the synchronization of inventory, the complexity of order and the transport conditions (for example, time of passage) which can affect the optimal output of a service. It also produces a daily program constraint-based which includes times of release of order, conditions for the equipment of warehouse, and the work stations of personnel and assembly. Those are in addition to the programs detailed for lanes of scaffolding, optimal order of the orders, order grouping in economic groups, choice of means of transport, programs release of vagueness with gauges of vagueness, dock and schedule of appointment, needs for labour per task and zone, etc

The programs are transmitted to ViaWare WMS where plans of new wave are produced and released with the labour of D.C. feedback in real-time of reality against the programmed execution allows for moving adjustments the program if an unexpected event occurs. In the case of an unexpected event, such as lacks of inventory or breakdowns of equipment, the programmer is immediately re-executed and an updated program is produced, fascinating in consideration the new constraints and allowing the output maximized service to continue uninterrupted, whereas the course of operation of WMS in the host centre of distribution is automatically changed by the supervision of work.

The planning of workload starts by looking at current orders and how they form part of the finished model of capacity of the service. Orders are scheduled by the service based on objectives and constraints of businesses. Thus, the programmer would determine the optimal flow of order for the things like, the availability ratio maximum of exit, inexpensive, or, and is based on the possible constraints. Those constrained include the capacity of work; complexity of order (for example, kitting, gathering of beam, etc); engagements of availability ratio (C. - with-D., dates of order); completion period and cost of transport; or availability of inventory. The results would be optimized programme of release of order, programs forwarding, dock and schedule of appointment, and tasks of work per hour. The users can isolate and drill-towards bottom a simple order showing from the detailed stages and the establishment from the program.

This optimization in real-time of the method for realization should make it possible customers of Provia to configure the complex, multi-step kitting and the operations of assembly in environments of make-with-actions (MTS), make-with-order (MTO), and configure-with-order (CTO) by the trade in addition to constraints like provisional costs of labor or overtime, possibilities of equipment, costs of transport, the availability of inventory, and delivery dates required to ensure the optimal order in which orders should be released for the treatment.

The product of planner of capacity, on his hand, glances with all work and costs relative to achieve orders and to carry on activities in the host centre of distribution above the several days and makes it possible directors to evaluate the associated cost differences. Like example, the planner of capacity evaluates work and the real costs requested to obtain with a particular order outside the door and with his destination to respect a requested deadline of the delivery. The cost and the effort to employ provisional or of overtime of work and to send the article outside today against employing dispatched forwarding and sending it tomorrow outside can rather exactly be now compared and evaluated so that the planners can develop work, the operations, and the most effective plan of transport which provides orders per hour and the low possible cost.

Provia approaches RFID in a double way Part six: Impact of the market

Nowadays when the identification of radio frequency (RFID) is constantly on each one 'lips of S, and when each suitable supplier of application of company protects his bets towards becoming RFID-loan or convinces even the market that is exactly its solution RFID-in conformity what it doctor (such as Wal-Mart, targets, Albertsons, the U.S. Defence Department [DoD]) ordered, the quiet typical software of Provia (www.provia.com), a private-held supplier of the solutions of software of the execution of chain of provisioning (SCE), feels time naturally came so that it is more vocal about its efforts of RFID, though after it already deployed so much efforts in terms of validation of principle in the field.

At the end of May, Provia announced with the distribution/ expo computer 2004 Chicago, Illinois (US) that its event of ViaView/management alerts and produced of decision-making aid plays a main role in the visibility of offer to the data of chain of provisioning for companies providing the products RFID-labelled to Wal-Mart and to other retailers.

Moreover, at the end of March, Provia announced that it was aligned with its head office of over fifteen years, systems of Viastore, a leading vendor of automated storage and the systems of recovery (AS/RS), and the control systems of material handling, with more than 3.000 cranes installed in the whole world.

As for the products 'improvements functional, at the end of 2003, Provia announced the release of FourSite 4.4, a levelling of its solution of realization directed towards the third suppliers of the logistics of part (3PL). The globalisation on an industrial scale is a big factor affecting the logistics and the management companies of chain of provisioning.

Provia remains a supplier of applications interesting of company, a limiting anomaly. With knowing, he is a supplier of the execution of chain of provisioning (SCE), but relatively small and quiet, private-held which offers applications and services typically envisaged much larger, suppliers of the line one. Although with roughly $30 million (of USD) in the incomes, one does not await Provia 'prominence of S among customers of the line one; nevertheless, it carried out an enviable balance on the market of the logistics of third (3PL) during its initial years like systems of Haushahn and engineers (HS&E) - more than 2.200 systems (AS/RS) installed in the whole world, whereas it achieved in the whole world of the installations of more than 500 SCE to more than 160 customers. Consequently, ViaWare can be found in IT of the infrastructures of the suppliers 3PL de first order like, of world Menlo, the logistic ordering of total, Versacold, and the logistics of NYK. Provia 'hearth recent of S.A. also be on the space of private storage of the line one and bases it high profile of customer who includes large the private customers of storage of the line like Gillette and electric Graybar. Provia also serves the market 3PL de la arranged two, and will continue to launch on the market in the space of the line one, while concentrating on the additional tools of configuration for the line two space, which is a larger market.

On one will frront vertical, the 3PL suppliers and the wholesale/industrial distribution continues to be hot sectors for Provia, although its solutions find the favour increasing among manufacturers of the goods packed by consumer (CPG), and with a less degree, manufacturers of process of food and drink, manufacturers of point, and retailers. Provia had increased its presence apart from the verticals 3PL (which always occupy half of the sound install the base). Although the supplier has to still articulate at the market of the clear roadmaps to establish these functional prolongations outside, the expansion of 3PL to other industries should not be a colossal company because the conditions for 3PL are already completely demanding and communal ground through much of industries.

As for Provia, its capacity to prudently increase its traditional management systems of warehouse (WMS) intuitive in a true expertise of SCE for asresser with the customers increasingly required 'management of realization of order was played its continuous strong execution well. The management system of order of FourSite (WHO), added to its methodology and tools designed to make it possible customers to apply its faster and easier solutions, made him a leading vendor with the 3PL companies, and a similar exploit has to be still folded up to capture other vertical segments. The product of WHO was particularly attractive because it makes it possible the 3PL d' companies to post the multiple customers and to post them for services with added-value interfaces including/understanding the management of buying order, the management of forwarding of order, management kitting of order, the invoicing of event, the integration of the exchange of information of invoicing of birthday, invoicing, electronics (EDI), the integration of AutoFAX, Internet access, accountancy, exchange of pallet, perpetual inventory, soft attribution, etc

The relatively recent and delivered products like ViaView, a product which combines the visibility of chain of provisioning, the management of event, and decision-making aid, or its product of ViaOptimize, conceived to optimize equipment 'produced by limiting the constraints in an exposure of service that Provia is capable to increase its position to produce new forms of income. ViaView 'new device executive of instrument panel of S makes it possible directors to have close to the access of real-time to inventory and order the statute. The product also makes it possible users to subscribe to the events and the not-vents. The report of analysis of work and exception are allowed by the support of Microsoft Excel and reach, as well as for with the report of Infomaker, crystal, and Cognos and with the analytical products. For this purpose, moment an order is created, the software of Provia the 's ViaWare and the series ViaView aim at helping of the orders of way of directors in real-time and make orders obvious in all the whole process of the delivery, which is the core of its proposal for a value.

Provia 'cutting off of S in 3PL S could come in handy if the suppliers of Wal-Mart realize that they cannot respect the deadline of January 2005 due to the many exits in and independent of their will. This can to create occasions for suppliers 3PL, if these suppliers decide externaliser their forwarding and treatment of the products which go in Wal-Mart, rather than invest time and the resources in its own deployment of RFID. Moreover, much of other retailers observe Wal-Mart narrowly and will require probably soon possibilities of RFID of their own suppliers network. It is thus very probable that these 3PL 's turn to Provia for the assistance with the conformity of RFID, one or the other in rapid-fixes the approach of RFIDware or complete a major way of ViaWare RFID.

The fact that Gillette had already employed the technology of RFID with ViaWare WMS to detect cases and pallets of its selected marks of female shaving of the products would further have supporting Provia 'perception intuitive of S in industry (for details to see the case study of RFID: Gillette and Provia). Provia also recently also unloaded important new agreements, including the video of spectacular, the detail without wire, and Applica, a manufacturer of the line of Black & Decker of the consumables. Moreover, a certain number of Provia 'customers of S added the products of the continuation of Provia to their strategy of logistics, reflecting Provia 'success continuous by S by attracting new customers and marketing in his base of customer with new solutions.

Provia allots to part of its success the fact that the software of WMS (in particular examples of legacy) tends to being among more adapted to the customer requirements of the applications for company, which makes it often more accessible so that the companies give up the process of levelling and for install just new and more outside-of-box functional applications of WMS. The decision taken by a great number of customers of Provia to improve recently could be a will with Provia 'capacity of S to provide to its customers, extremely of standard outside-of-the-box product which requires limited modifications, to make it easier and more profitable to improve and to carry out the strong proposal for a value and the new devices in the levelling. Provia 'methodology described above of transfer of the knowledge of S is also completely important in this process.

SCP and SCE must collaborate for a better realization Part one: How SCP and SCE address WMS

1. The applications of the planning of chain of provisioning (SCP) must address the lack of costs of logistics and information precis which would allow decisions more optimized through the whole chain of provisioning. SCP typically produces daily weekly magazine or plans (in a better scenario of case), but without approaching in right proportion the exits which emerge almost each moment in the dynamic environments of logistics. Thus, the plans are often inadmissible as soon as they are made, whereas only one replanning does not answer the question from what went badly initially (C. - with-D., there is not any service to learn from the former plans of the 'insufficiencies).

2. The applications of the execution of chain of provisioning (SCE) must address moreover the lack of visibility in real-time of inventory and necessary of the information of feedback of management of event so that SCP answers the chain of provisioning attends exchange while establishing and by carrying out manufacturing drawings and materials.

Much was known as recently about the prosperity of the market of SCE and its counterparts of SCP being one of the worst segments of execution of applications of company during the continuous deceleration of the economic activity still. While the ERP of in back-office of core and probably the systems much more cumbersome of SCP could have traditionally excelled with planning, conceptual optimization, and the financial functions of integration, they do not have however, storage, management yard, planning of distribution network, or management addressed of logistic transport/. However, more and more, each company of user success of S is dependent on its capacity to make the almost immediate end product or the performance of service with the customers. Moreover, problems of inaccuracy of data and contradiction, complex of planning/model algorithms requiring sophisticated qualifications of user, lack of integration easy to other applications, and the appropriateness all plan contributed to the traditional products of SCP falls stiff of their thanks early.

The request of the collaboration of chain of provisioning of close real-time, in their turn, will stress growing on any company capacity of S to be immediately made with the promising orders delivery dates on a total basis and to keep to uniformly these commitments always then. This available-with-promise that (triphosphate adenosine) the aptitude of /capable-to-promise (PCT) will be made more complex as the companies count on a growing number of associated and suppliers to obtain the raw materials, meet, and deliver the end products. The SCE thus gains the increasing conscience among the companies which realize that planning can make only so much without capacity take the good ones and convenient decisions and to be carried out on the floor of store, in the warehouses, or the chain of whole distribution.

However, it would be too na.ve to draw aside the need for adapted planning, because independently in the way in which a sensitive system of SCE can be, awaiting chaos to occur and only then the test to act would be also disastrous, as it was with compiling almost ideal plans (by cumbersome algorithms) and never not doing anything about carrying out them or to obtain feedback about their results. The companies need information in real-time of the systems execution develop and adjust optimal plans rather, whereas the side of execution should draw benefit from the more realistic plans for promptitude, than to react simply after the fact of a fashion of fire control. We believe that planning and the execution will become more or less inseparable in a tendency which will see SCP, SCE, the management of event of chain of provisioning (SCEM), manufacturing the tools of decision-making aid of the system of execution (MY), and of the management of the output of analytics/undertaken (EPM) (C. - with-D., and the multidimensional analysis on the aggregate information of all the levels of the chain of trade, and the wide sets of preset indicators of execution, as well as strategic strategic planning/forecasts and the balanced functions of chart of score) coming together in an adaptive system.

The principal suppliers of SCE will thus continue with the mmove beyond their current functionality of SCE to holistic solutions more collaboration and more optimized management of chain of provisioning (SCM), which will include a more formed functionality on all the levels of the organization, including the planning of collaboration, the forecasts, filling (CPFR), the management of ordre/la management report/ratio of customer (CRM), the management of warehouse/yard/transport, the business intelligence integrated (BI) and measures it execution, as well as functions suitable for industry. The suppliers missing of the technical expertise for the development of the platforms of the industrial process control of integration and businesses (BPM), and the analytical engines of planning will find it necessary OEM-of inserting preferably or to partner right slackening for this functionality.

While the chains of provisioning become more dynamic and function in close real-time, the lines between planning and the execution continue to scramble, which predicts well for their functional convergence. The companies need information in real-time of the systems execution develop and adjust optimal plans. The side of execution should draw benefit from the more realistic plans, rather than to react simply after the fact of a fashion of fire control. The exploitation of this technology should lead to supposedly the autocuratif or adaptive provisioning chain-when an engine of software supervises all the provisioning taking place of many events chain-broad, identifies and climbing of the exceptions, sends the opinion, and reacts suitably to these exceptions, ideally without human intervention.

Like validation of principle, the other suppliers making always well in the segment are those which make it possible companies to effectively control the commercial relations, the management of request and the methods for realization. The companies such as the systems prescients, climb, management of request, RiverOne, WorldChain, SoftChain, webplan, Demantra, John Galt, PipeChain, VCommerce, Ortems, SeeCommerce, and Tradec (maintaining part of nimble software) in the management of event of chain of provisioning (SCEM), visibility, and the monitoring of execution can connect the disparate systems to provide to all the parts information of close real-time on the movements and the tendencies currents. While one expects that the market of WMS continues to develop modestly and more quickly than much of other applications, it appears the industrial process control of realization of order of customer because a solution added to WMS will know a growth much higher. At the same time, good-of-multiply the suppliers of SCP had stripped to the bottom and had rationalized whole of product, given their offers cumbersome and muddling in the past, which consequently resulted with an bad image in much case. An approach incipient from SCP embraced by the tastes of Optiant, SmartOps, and LogicTools was to employ the techniques of optimization of inventory which create plans to the minimum to reduce inventories through the network, but with the realization the desired service to the customers aims.

Always, the management of warehouse and transport, traditional the bread and butter pieces of SCE, emerged as two of some rare resident fertile sectors where the companies always on a occasion sufficient to reorganize and optimize, whereas they at the same time less long and are more directed towards the return on investment (KING) in terms of operating costs and possibilities incrmentalement improved of realization. In particular for these disastrous periods, the manufacture and the companies of distribution continue their efforts to answer high hopes of customer for the delivery of active period by carrying out the answer, speed, and the agility general. Still, the SCE gains the increasing conscience among the companies which realize that planning can make only so much without capacity take the good ones and convenient decisions and to be carried out on the floor of store, in the warehouses, and the chain of whole distribution. The contribution in bottom of the costs directly ascribable to the production was a long time a thing which goes without saying for companies independently of economic environment.

The applications of WMS automate activities traditionally belonging to the four walls of a warehouse, such as the reception, put-far, mass production, gathering, packing, and forwarding (see the coexistence of ERP and WMS: When the worlds of system run up and what should know to you before choosing a WMS). However, since the warehouse is not simply any more a static service of storage, and he now must employ data in real-time to match the provisioning with the request narrowly, to eliminate the need for holding the excessive inventory, and for increasing the flow of the goods in all the chain of provisioning. Consequently, the software of SCE the 'possibilities of S to handle complex conditions in the case of does not have necessarily a negative connotation like SCP, since there was a tendency to push many operations centered on the manufacture of light products (for example, together final, packing adapted to the customer requirements, etc) of the floors of store to the warehouses and the host centres of distribution (DCS). This environment encouraged the companies turned towards the future to act, prolonging their solutions to include applications complementary to WMS.

SCP and SCE must collaborate for a better realization Part two: Recommendations of supplier and user.

The suppliers addressing the management systems of warehouse (WMS) recently showed the capacity to provide to their customers a whole of standard product extremely which requires limited modifications, to make it easier and more profitable to improve and to carry out the strong proposal for a value and the new devices in the levelling. The fact that the software of WMS (in particular examples of legacy) tends to being among more adapted to the customer requirements of the applications for company, makes it often more accessible so that the companies give up the process of levelling and for install just newer more of the functional applications of outside-of-the-box WMS.

The following suppliers made cover their products of WMS in recent TECHNICAL articles:

* RedPrairie for a detailed analysis of the products of RedPrairie, see RedPrairie - new name for a new courageous paradigm of proposal for a value

* In height for a detailed analysis of the products in height see that in height develops during one basic time growth by the adaptable and broad products of function

* Provia for a detailed analysis of the products of Provia see that Provia proves its manner with success

RedPrairie, like its Nmsis, associated with Manhattan (see Logistics.com that becomes newest of associated with Manhattan), Provia, G-Notation, systems of the HK, in height obstinate, and Yantra (see the chief of. there from Yantra in the distributed management of order, but await 's more), had thrived partly because it provides much left and parcels component the execution of chain of provisioning (SCE), which apparently had developed more quickly than its counterparts of the planning of chain of provisioning (SCP), since the projects led by logic of in back-with-foundations nowadays had aimed low-hanging the fruits which provide the hard allowances in fast deployments.

While the suppliers above have many common wire in their examples of success, they all have a certain detail to differentiate from the proposals for a value. Otherwise, how much differently one he would explain the continuous difficult situation of certain publicly held suppliers of SCE like technologies of EXE (see the ASS WP to carry out (however) another acquisition), the International one of Industry-Matematik (IMI), and the International one of catalyst (see that the sapped catalyst informs in the wake of the departure of President) so just only one designation of SCE would be a guarantee of success without holding of the products with the current of the most recent tendencies or without good execution?

Like city previously, RedPrairie 'solution of S allows for the first time the logistic suppliers of private third and (3PLs) to meet the needs for multiple vertical industries in a simple solution of WMS. These suppliers raise of the special challenges because their user base can include companies in multiple verticals, each one which has single conditions of distribution. For example, the consumer goods and the food and the need for drink companies detailed the advance of the weights of hook, the profiles and the expiration dates of ageing, the catches of covering multiple, and other criteria of ordering of fate while the companies of point are interested by serial numbers, kitting and services Of-kitting nested, and other requirements of assembly or centered on the manufacture of light products. To have a system which can satisfy all these needs could provide a competitive advantage to the 3PL. users

On the one hand, the solution supplies with the principal flows of logistics which function by logically grouped process of chain of provisioning source (logistic of arrival including and collaboration of supplier), make (logistic including manufacture and inventory control) and deliver (realization including order, transport in departure, and management of productivity), with a powerful set of possibilities which can be only stand deployed to solve specific problems, or to solve challenges of complex together and to carry out the advantages of the integrated operations of logistics.

As mentioned in the part, which had possibilities of software to 's of SCE to handle these complex conditions, there was a tendency to give much of operations centered on the manufacture of light products (for example, together final, packing adapted to the customer requirements, labelling, engraving, etc) of the floors of store to the warehouses and the host centres of distribution (DCS), and a package of WMS plays a main role in the company 'the strategy of adjournment of S to delay the personalization of the products until after products, or a number of common components, left the factory. For this purpose, presenting the possibilities of services to added-value (for example, together and disassembling kitting, multiple nomenclatures [BOMs], special instructions and labelling) in the advantage of warehouse, which was suitable response in height 'of S to the assistance its customers reduce the associated costs to their chains of provisioning, where one of facilitating most significant is adjournment, and it is where kitting assistance because it makes it possible companies to maintain their products in a generic state for also late like possible.

Moreover, of warehouse of management system in height the 'full one with function of S also includes a tool of cartonization, Advantage container., to envisage and optimize the organization of the articles in paperboards of forwarding. This device of optimization of packing saves the hour for materials of packing (C. - with-D., paperboards/pallets/containers) and tiny room of the expenditure of forwarding in the gathering and the packing of the orders of customer. The advantage of container improves the effectiveness of gathering by choosing the number and the size of paperboards necessary to pack orders for the forwarding based on each article 'cubic dimensional in S, restrictions of orientation, piling up the factors, the weight and compatibility with other articles.

The supplier offers many of other possibilities in his functionality of WMS such as grooving Advantage., determining the optimal size and the place of slit for any SKU based on data such as the request (C. - with-D., if it is a fast or slow article), the groupings of product and the characteristics physical, to also keep operations of gathering without jolt in spite of promotions and the frequent changes to the mixture of product. To do this is manually almost impossible in the environments where the hundreds of SKUs obtain additional and removed each week. In height provides reactive and the proactives methods of Re-storage and the algorithms for example, optimize space, work, or much of other factors. Also powerful is the support of the possibilities of interleaving of task (C. - with-D., leaving a person carry out one more to reduce of task in order to slowed down time, such as the gathering something to the top while the reference of put-far the task) by using the management of dynamic queue of work, and by the user-configured application, one or the other algorithms priority, of task, or proximity-based.

Another company offering of the solutions of WMS is Provia, which as an element of its strategy of logistics added the products to its continuation. This reflects on Provia 'continuous success by S by attracting new customers and marketing in his base of customer with new solutions. Provia credits part of its success to the fact mentioned above that the software of management system of warehouse (in particular examples of legacy) tends to being among more adapted to the customer requirements of the applications for company, which makes it often more accessible so that the companies give up the process of levelling and for install just new more of the functional applications of outside-of-the-box WMS.

In addition to feedback at the weak points of SCP mentioned in the part, the majority of the suppliers of SCE/WMS must address some of the weak points of the current systems of SCE which automate always mainly and optimize not necessarily operations in short-term calendars of optimization and consequently, the full saving are not often carried out. For example, the supplier will try to offer the products which would determine the optimal flow of order such as the availability ratio maximum of exit, inexpensive, or, and based on the possible constraints like the capacity of work, the complexity of order (kitting, gathering of beam, etc), engagements of availability ratio (C. - with-D. dates of order),/transport availability time cost, and of inventory.

The Blessing and Curse of Global Sourcing and Supplier Management

As discussed in The Gain and Pain of Global Retail Sourcing, for anyone who has not spent the last several years in hibernation or stranded on a remote island, it has become apparent that several market-driving forces have come together to create a “perfect storm,” one that makes control of the supply side more important to overall business success than ever before. Some of these driving forces include globalization (the prospect of new potential markets, but at the price of growing competition), sourcing in low-price and low-wage countries (and even outsourcing of some, if not most, manufacturing or service operations), and continuous cost pressures (that is, ever shrinking margins).

Although global strategic sourcing might be as old as sailing ships and riding on camels, there has been much talk these days about globalization and its effects on business, and there is no doubt that competing corporations are increasingly butting heads in the global playing field. But the same globalization of sourcing, manufacturing, and delivery processes is also making supply chains far longer and more complex than ever before; they require more coordination and collaboration amid trading partners. Indeed, many manufacturers and retail chains have expanded both nationally and globally, creating the need for more formal and structured mechanisms to coordinate supply chain activities.

What's more, market demands are becoming more volatile and harder to predict due to the increasing power and speed of information available to both comparison-shopping consumers and competitors. Global sourcing can be defined as the process of identifying appropriate domestic and far- or near-shore suppliers of goods and services (preferably from countries with significantly lower cost bases), ordering the goods, and arranging for their payment and delivery. Global sourcing has become a standard practice for many businesses. In fact, global sourcing has become increasingly important as a corporate strategy, and is rapidly developing into a survival strategy too—a sharp contrast to its stepchild and “ugly duckling” treatment of previous decades in procurement departments.

Contrary to yesteryears, today there is a growing imperative within organizations to source directly from an ever-expanding global universe of prospective vendors. According to the World Trade Organization (WTO), about 55 percent of all raw materials for American manufacturing are now sourced outside the United States (US) compared to the approximate 12 percent in the 1980s. As another example, not that long ago, the Wall Street Journal reported huge increases in the volume of Far East imports through the port of Savannah, Georgia (US), where the cargo container volume of 1.7 million shipment units per year of a decade ago has tripled.

The Global Sourcing Allure

In a nutshell, companies source globally for three main reasons: to differentiate their products (in terms of affordability, quality, availability, etc.), to gain competitive advantages through reduced price points, and to realize margin improvements. Many recent studies, surveys, and benchmarking reports have concluded that a well-devised and well-executed sourcing strategy can produce up to a 2 percent improvement in margin (through more efficient trading partner collaboration), reduce cycle times by up to 30 percent, reduce cost of goods sold (COGS) by up to 5 percent, and increase gross margins by up to 15 percent.

The above percentages are achieved through increased international sourcing of low-cost labor and supplies from East and Southeast Asia, Eastern Europe, and South America, with Africa slowly showing signs of becoming the next potential frontier. Sure, expectations are usually much higher than the above figures, since initial savings might provide false gains, but with many costs and risks being hidden (such as logistics complexity and increased lead time ramifications), businesses should always take a long-term view and make the appropriate analysis (but more about the impediments later on).
What's more, trading quotas and other barriers have been disappearing (or are being significantly reduced) globally, while the expansion of the European Union (EU) eastward opens up new potential countries to source from as well new potential markets in which to sell. With the end of apparel import quotas, this sector is growing rapidly in India and the Far East, while the passage of the Central America Free Trade Agreement (CAFTA) promises to bring additional activity into Central America as well. Today, consequently, retailers are, on average, following the top executive mandates to increase imports of both raw materials and finished goods to up to a quarter of total purchases (a substantial increase from the current level of 5 to 12 percent).

Additionally, there has been an increasing awareness of suppliers having more strategic importance; retailers and manufacturers are trying to nurture long-term collaborative partnerships with their trading partners and to leverage the suppliers' strengths and savvy, all with the idea of forging win-win relationships (as opposed to the traditional price- and transaction-based, “buy on the market” encounters that only benefit one side—usually a large channel master). For instance, many organizations have realized significant benefits when they involve suppliers in the early stages of product life cycles. Taking the conceptual design process (new product idea or old product enhancement) as an example, such benefits can include lower costs for development, purchased material, and manufacturing; shorter development times; and better quality of purchased material and in final product feature levels.

Similarly, a strategy for mass customization (also known as postponement or delayed differentiation) should give organizations a competitive advantage, but this requires the quick and efficient delivery of a wide variety of customized goods or services at a low cost. Again, early supplier involvement (as opposed to after the product has already been designed and “thrown over the wall”) is critical to maximizing the potential of the postponement strategy. In this respect, a supplier's involvement typically adds value and improves time to market (that is, getting products into the hands of customers more quickly) while helping to ensure quality, and ultimately increases customer satisfaction and loyalty.

Furthermore, in some industries and markets (pharmaceuticals, for example), strategic alliances, joint ventures, or ongoing partnerships may enable organizations to combine resources and share the burden as a way of overcoming barriers to entry into the market, as well as in searching for and developing new opportunities. In other industries, such as home improvement and appliance design and manufacturing, partnerships between retailers and manufacturers that lead to better advertising or increased access to new market channels are certainly mutually beneficial.

According to the 2004 report from sourcing consultants A.T. Kearney titled Making Procurement a Priority, true market leaders are collaborating more than ever with suppliers—and in a true win-win manner. This collaboration is occurring mostly in the areas of product design (development), supply chain (logistics), merchandising strategy, and strategic and tactical buying. The rapidly changing face of global supply emphasizes the importance of strategic partner collaboration (that is, strategic relationships, differentiated primarily by deeper levels of planning and workflow integration, and sharing of information) and supplier performance measurement in enabling top-notch sourcing operations.

Backed by more recent data from analysts Aberdeen Group and strategic consultants McKinsey & Company, there are many indications that leading retailers gain from working collaboratively with their suppliers to facilitate visibility across the entire supply chain, starting from product concept stage to product delivery—even to the supplier's shop floor. Also, today's leading retailers increasingly try to ensure that their corporate social responsibility (CSR) policies and practices are integral parts of their supply chains, and they are therefore adhering to ever more responsible sourcing practices by harnessing conscientious trading partners' expertise (for example, those that abide by the US Fair Labor Standards Act [FLSA]). For more information, see Global Trade and the Role of Governance, Risk Management, and Compliance Software.
Because of the rise in global competition, mass customization, customer expectations, and price and margin pressures, enterprises are relying more heavily on external suppliers to contribute ever larger portions of parts and components, materials, ingredients, and (sub)assemblies to finished products. Businesses also need reliable suppliers to manage a growing number of processes and functions that were once controlled internally (albeit this change has the potential to create many risks, which will be addressed later on).

While market consolidation has greatly affected both sides of the supply chain, its effects can especially be seen on the supply side (upstream). Namely, producers of raw materials and manufacturers of parts or materials may now have much larger, yet fewer, customers that control a greater portion of the market and that may be better able to mandate terms that will lower their own costs. However, at the same time, these high-and-mighty retailer-customers may have fewer suppliers to choose from and less flexibility in the terms they are able to negotiate. Sure, the expansion of global markets may mitigate some of this pressure, but those benefits must always be weighed against increased transportation costs and the risks stemming from the morass of political instability, currency fluctuations, language barriers, trading quotas, labor laws, regulations, time zones, intermediaries, etc.

In addition to a greater focus on the customer and the downstream side of the supply chain, another major shift in today's business culture is the pervading integration that occurs both internally and externally. To be clear, “focusing on the customer” includes both internal customers (the recipients of another person's or department's output within the enterprise) and external customers (recipients of goods, services, or information who are not part of the company supplying it), and helps to reach the ultimate goal of creating so-called “customers for life.” Internal integration occurs within an enterprise, and is aimed at increasing communication and collaboration among all departments or areas involved in producing what is sold. External integration involves greater sharing of information and processes between parallel departments of supply chain partners.

Pressure on price and profit margins is also conducive to greater integration of manufacturers with suppliers, since one way to respond to a trend toward commodity pricing is to distinguish one's product by adding value to it, and this can be done at many points in the supply chain. Conversely, in the case of commodity products (where hardly any value can be added within the supply chain), the company must compete on price and availability, where cost-effective performance becomes critical. Achieving and maintaining that performance nonetheless requires close integration among the supply chain partners, from planning and goal setting through to order tracking and inventory replenishment.

As partnerships tend to use long-term contracts, the length of the relationship creates opportunity for increased understanding of each other's organizations and increased efficiencies through greater communication. Given that demand increase can be achieved by satisfying unmet customer needs or by allowing changing price premiums for the higher value products delivered to the marketplace, all trading partners sharing their knowledge about the market and consumers is necessary for a successful demand enhancement strategy. For example, retailers are often better able to gauge the preferences of consumers because of their close contact with them, whereas manufacturers and suppliers might have a broader perspective thanks to the multiple markets they serve. When manufacturers and retailers collaborate and share information, they can develop products that are better able to meet the needs of the end customer, and they are also better able to communicate the benefits to those customers.

Supplier relationship management (SRM), which is a methodology (and an enterprise software category per se) to structure and support relationships with suppliers, comes into play when a supply chain recognizes the benefits of strategic sourcing. The APICS Dictionary (11th edition) defines strategic sourcing as “the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of a business.” Yet, although collaboration has become a popular buzzword in today's supply chains, it has proven to be much easier said than done, since the relationship between retailers (customers) and manufacturers (suppliers) remains largely transactional and “at an arm's length” (distant) at best—and adversarial at worst. Indeed, in many cases, customers will still place orders in a one-way form of communication (with little or no feedback), whereas two-way communication typically only kicks in when something goes wrong (and is possibly beyond repair).

Web-based Systems Expand Strategic Global Sourcing

What also contributes to today's popularity of strategic global sourcing might be the fact that, for years, many larger companies have had the wherewithal to operate complex and pricey import and export software systems. Conversely, today's technology has leveled the playing field for international trade, given that inexpensive Web-based systems, designed for simplicity and easier deployment, can now enable much smaller companies to engage in global sourcing with a wide range of suppliers.
The unstoppable march of the Internet and growth of online shopping mean that we are all operating in a new, electronic, real-time world (that is, the global village), with inherent visibility into important events. These new systems make it possible for a small retail company to engage, even if just once, with a supplier and still record a profitable and efficient transaction. This has brought about what some experts call "the great leap" in global sourcing—it is no longer the privilege of only a few giant companies; it is becoming a viable strategy for almost any company.

More and more organizations are using affordable and intuitive Web-based applications for a variety of supply chain activities, including procurement, order processing and financial flow coordination, and new product design. Businesses are also using such applications to manage transactions and inventory. The advent of Web-based technologies has given cross-channel teams the ability to interweave common and specialized knowledge, making collaboration easier and more seamless, and optimizing productivity.

Furthermore, data warehousing and analytical applications allow the information gleaned by one application within one company to be used productively by other applications or partnering organizations. These tools can go beyond information sharing to enable information analysis and decision making, and they can increasingly do so across platforms. This means that one department's or organization's choice of hardware, database, and operating system (OS) is no longer an impediment when these tools' outputs can be used by another department, which might run on a disparate system. This cross-functional sharing of knowledge and analysis makes true collaboration much more possible.

Coming back to the benefits of strategic sourcing, while traditional purchasing may benefit from information technology (IT) in terms of effectiveness, it cannot really leverage IT to the same degree that strategic sourcing does. Neither can traditional purchasing increase the visibility of the entire supply chain the way strategic sourcing can via true collaboration.

Historically, the purchasing department's ability to work with suppliers, communicate requirements, and negotiate pricing, quality, and delivery of goods and services has been driven by crude technology tools such as the telephone, the fax machine and, more recently, e-mails and enterprise applications (to a limited degree). But the use of the Internet and compatible software systems, backed by the commitment and trust among strategic partners, allows buyers and suppliers to share information and synchronize demand and supply from virtually any point in the supply chain network, and at any time. Again, potential benefits of this include shorter cycle times, increased inventory turns, and the enabling of purchasing personnel to eliminate low-value, mundane activities so that they can focus on more strategic issues.

Collaboration reveals more information about all the critical points in the supply chain given that when information from suppliers, manufacturers, distributors, retailers, and customers is available for analysis, visibility of the supply chain and opportunities for improvement is enhanced. Demand information, inventory status, capacity status, capacity plans, production schedules, promotion plans, shipment forecasts, and demand forecasts can all be shared and, ideally, accessed by all parties on a real-time, online basis. Expanded information sharing can lessen the upstream bullwhip effect and provide early problem detection, faster response, better contingency planning, and stronger relationships, all because of increased trust. In short, the need for supply chain integration is here, and the means now exist to address that need much more efficiently and cost-effectively.

In fact, collaborative supply chain networks may benefit their participants in many ways. For one, by identifying common goals shared by all participants in the supply chain, and by increasing their ability to efficiently reach those common goals, a company's own (and often conflicting) goals can also be pinpointed and resolved. It is needless to say that information sharing initiatives can increase profitability throughout the supply chain through cost reduction, demand augmentation, and better ability to respond quickly and accurately to market changes.

Distinctions and Benefits of Strategic Sourcing

Global sourcing, despite its inherent risks, offers numerous benefits to enterprises in terms of lower costs for materials and labor. It also requires a much closer integration among the supply chain partners. Supplier relationship management (SRM), a methodology designed to structure and support the relationships between buyers and suppliers, becomes essential when a supply chain recognizes the benefits of strategic sourcing. For more background, please see The Blessing and Curse of Global Sourcing and Supplier Management.

Bundled with the notion of SRM, strategic sourcing (as opposed to traditional sourcing) involves finding and building ongoing relationships with trading partners that will account for the majority of an enterprise's purchasing funds (spend). These close relationships will also provide materials or services that are key constituents in the final product or service, or that can help the buyer meet its profitability and customer satisfaction goals.

Strategic sourcing differs in its focus and execution from traditional purchasing and offers several obvious benefits. For one, traditional purchasing focuses on purchase price, whereas strategic sourcing focuses on the true cost to the customer. One should note the distinction between price and cost, since choosing a component based on the lowest nominal price may not necessarily translate into low cost if, for instance, the low-priced components are not reliable and fail early.

Further, the initial savings in producing the finished goods will be negatively impacted by the costs of reverse logistics (the process of shipping the failed goods back and repairing or disposing of them) and the loss of potential business from a prospective lifetime customer. At the same time, strategic sourcing can reduce costs by consolidating purchases with a limited number of suppliers and by allowing the centralized purchasing departments negotiating leverage via a purchase of increased volumes (economies of scale). By the same token, strategic sourcing can also help reduce the frequency (ordering costs) of purchasing orders (which are often maverick, or “on the spot” in nature), and thus reduce inventory handling costs.

Traditional purchasing is sporadic and transactional (not ongoing), and treats each purchase as a discrete transaction. Communication typically entails haggling over prices, complaining about late shipments, or disputing the quality of products. To be fair, there may be some exchange of information via electronic communication between parties, if only of a tactical nature (billing or change orders, for example).

Also referred to as "buy on the market," a traditional approach to purchasing is opportunistic in that organizations buy in response to immediate needs, choosing freely from among all the suppliers that can supposedly meet those needs. There is some sharing of technical purchasing requirements (such as specifications, proposal components, certification processes, etc.) between parties, but not strategies or plans. The relationship is transactional, and it is certainly not exclusive; the buyer may be buying from competing suppliers either simultaneously or sequentially.

In contrast to traditional sourcing, strategic sourcing involves ongoing relationships, so an opportunity exists for mutually beneficial collaboration between the buyer and the suppliers. This can result in improved profitability for each partner throughout the entire supply chain, and added value to the final product or service. Under the SRM and strategic sourcing concepts and methodologies, a company shares information with its suppliers in real time (or close to it) with the aim of cutting the cost of materials, minimizing inventory, reducing shortages, and expediting deliveries. More importantly, the suppliers can participate in improving the system, which should result in better products, higher customer satisfaction, and greater customer retention.
Furthermore, while traditional purchasing hardly ever crosses the boundaries that demarcate the two business entities, strategic sourcing allows opportunities for realigned (meaning improved and redesigned) and collaborative business processes, information flows, and workflows to eliminate redundancies and non-value added work. Collaborative design and execution of plans for forecasting and replenishment allow supply chain partners to coordinate work and purchasing plans with customer demands. This helps in avoiding unpredictability in stock levels (the so-called bullwhip effect) upstream. The bullwhip effect, as defined by the APICS Dictionary (11th edition), is as an extreme change in the supply position upstream, generated by a small change in demand downstream in the supply chain. When this happens, inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain.

This coordination of work and purchasing plans by supply chain partners also results in improved service to distributors, retailers, and customers; lower cost; and optimized use of capacity on the downstream side of the supply chain.

Strategic Sourcing

According to the APICS Dictionary (11th edition), a strategic alliance is “a relationship between two or more organizations that share information, participate in joint investment, and develop linked and common processes to increase the performance of all the organizations.” Many companies form strategic alliances to increase the performance of their common supply chains, and these alliances can entail interaction among many counterpart functional departments, such as engineering, marketing, production planning, inventory, or quality management. Goals for these relationships may include cost reduction, quality improvement, better delivery performance, increased flexibility, or faster introduction of new product. Alliances need to be flexible, and each partner must bring value to the relationship relative to the scope of collaboration.

Even from a simple, knee-jerk (reactive) standpoint, companies with certain types of supply situations may be able to manage risk better in close alliance with their strategically valuable suppliers. The most obvious alliance to form is with a supplier offering an expertise that undoubtedly lies outside the company's core competencies. Also, if only a sole supplier (or a few at best) is available in the market to provide the valuable component or service, the enterprise may need to maintain a close relationship with that supplier to ensure availability and opportunities for developing customized components that could provide competitive differentiation.

Complexity (whether referring to the relationship between the bought component and the final product, or to the supply chain itself) and uncertainty are also factors that should compel a company to develop a close relationship with a crucial supplier. The more complex the relationship is between the component and the final product, the more value there will be in collaborative design. On the other hand, more value-added points in the supply channel vouches for greater opportunities for more efficient management of supply and demand. The uncertainty is in terms of changes in raw material or component cost, quality, or availability that can obstruct a business from meeting its goals.

The Promise (and Complexities) of Private Labels

Certainly, the retail landscape is changing, and the market is looking to differentiate through better tailoring the customer shopping experience and introducing private label products exclusive to their retail chains. However, bringing private label goods into the mix adds supply chain complexity, as retailers struggle to shorten the product life cycles in order to react faster to the latest fashion trends. The so-called retail balancing act of creating a superior consumer shopping experience (through better assortment, freshness, and relevance, and without stockouts) while simultaneously improving inventory productivity (optimized inventory levels to support profitable sales and lower supply chain costs) has only been aggravated.

As mentioned earlier, supply chains are getting longer. They need solutions that provide visibility from the early manufacturing process to the store shelf, with the ability to track merchandise throughout its entire life cycle and to reduce time-to-shelf, thus enabling better decision making capabilities during the selling season. In other words, the size and complexity of sourcing projects are increasing because such undertakings involve, in some cases, large teams operating at different remote sites. Moreover, the information itself that is involved in this process is more important than ever, comes in larger amounts than ever, and is more difficult than ever to manage manually with the speed and accuracy that is required.

Some retailers looking to gain a competitive edge in this area have been implementing the cycle time optimization solutions from certain savvy software vendors. Most recently, during its i2 Planet annual user conference in May of 2007, i2 Technologies (NASDAQ:ITWO), a prominent provider of supply chain management (SCM) solutions and services to various industries, announced the i2 Cycle Time Optimization (CTO) product, which was designed to reduce concept-to-store cycle time. The solution aims at creating capacity-constrained product plans to synchronize with in-store assortment plans; prepositioning key raw materials and optimizing inventory (finished and raw material) throughout the value chain; and reducing distribution and handling costs. The entire value chain becomes connected through the CTO solution using an integrated retail and supply chain planning (SCP) process.

Retailers can use i2 CTO to become more customer-centric by making assortment decisions (this is, reacting to fashion trends) closer to the selling season and keeping their private label products in tune with the latest global fashion trends. The idea is to reduce the risk in selection of style and quantity of purchase as well as to reduce inventory, distribution, and handling cost risks through cycle time reduction from store to store—all without sacrificing customer service levels. In addition to shortening lead times, by leveraging this solution, retailers also have the opportunity to optimize and manage spending across the supplier base by analyzing the sourcing spend, negotiating and selecting strategic sourcing partners, and allocating purchase orders to deserving suppliers accordingly. Further, the solution offers the capabilities of contract management to track consumption against contracts and associated SPM.
Can Information Technology Help, Then?

Many companies that have successfully deployed supplier relationship management (SRM) software tools have also discovered certain benefits related to the sourcing process itself, starting with reduced cycle times on sourcing projects. Instead of going through piles of request for proposal (RFP) documents and comparing a wide array of quotes, the software can actually help with bringing all of this data together into a simplified and unified selection process. Another way that SRM software can cut down on the time spent on sourcing is that sourcing projects can be saved and reused at a later time. Meaning, if the enterprise's needs recur frequently or come with small variations, this “copy from and to” capability can save a great deal of time.

SRM software tools also make it easier for companies to select suppliers, since not only can prices be compared quickly, but the software also allows buyers to add the past performance of vendors to the equation. For example, it may be enticing to instinctively choose a certain vendor on the basis of its lower price to deliver raw materials, but since that vendor's last shipment was delayed and of bad quality (which necessitated scrapping most of the parts), the buyer may want to change his or her mind this time around.

Another often-cited benefit is that SRM software makes it easier to standardize purchasing decisions and to instill the structure into the entire sourcing process. Again, most organizations do not have a clear basis for choosing their suppliers, but the software can make the selection criteria more readily apparent. Also, instead of having to deal with hundreds of separate suppliers personally, the software does most of the legwork for the buyers. SRM technology also accelerates communication between the buyer and the seller. Since the transfer of information can be done in real time, the vendor can check the buyer's inventory to determine whether new shipments are needed, and the buyer can instantly submit orders over the Internet without reducing overall productivity. Similarly, questions related to orders can be answered by checking details via the Internet, so no human interaction or human-related delays have to interfere with the work.

In summary, the purpose of SRM technology is to streamline the processes between an organization and its suppliers, and to make these processes more effective. Such software tools have automated many of the business processes that structure supply chains, and with this automation typically comes cost reduction and increased efficiencies. To that end, various SRM products are available from a number of vendors, and a review of the descriptions of SRM products offers a broad spectrum, but not quite a clear consensus yet.

Many vendors refer to themselves as SRM providers merely because of their solutions' Web-based sourcing and e-procurement (over the Internet or intranet) capabilities. While these are significant components, some other common SRM software capabilities include catalog management; service procurement; strategic sourcing; supplier rating and performance management; supply analytics; contract management; collaborative supply management and collaborative planning, forecasting, and replenishment (CPFR); vendor managed inventory (VMI); etc. According to the APICS Dictionary (11th edition), CPFR is a process through which supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. VMI is a means of optimizing supply chain performance in which the supplier has access to the customer's inventory data and is responsible for maintaining the inventory level required by the customer.

Indeed, by better managing interaction with suppliers, an enterprise can have greater control and visibility of the supply chain, improve product and service quality, and drive additional savings through more effective and streamlined processes.
TradeStone Software, a provider of unified sourcing and PLM solutions for retailers, reports many midsized and large North American, European, and Asian companies that have adopted the strategic sourcing approach suggest that a business can reduce expenses by 10 to 30 percent. Eqos touts similar responses from many supply chain managers at the largest North American and European retailers, which indicates that the use of foreign suppliers will nearly double in the next five years. Offshore suppliers are expected to account for nearly a third of the typical company's total supply base by 2008. Most companies have been able to reduce material and service costs up to 35 percent (and thus improve profit margins accordingly) by sourcing from low cost country suppliers.

With strategic sourcing, major manufacturers, retailers, governments, and financial institutions can achieve significant savings while strengthening ties with suppliers that offer the best quality products and customer service. When approached properly and executed meticulously, global sourcing can also result in improvements in time-to-market, customer value, and innovation (via private labels and direct imports), as well as reductions in inventory, stockouts, etc. Last but not least, strategic sourcing can also allow small and medium-sized businesses to compete against larger companies for major contracts.

The Allure Comes with Some Inevitable Hurdles

Competing in supply networks that cross borders inevitably adds many problems when compared to doing business in a single, local market where competitors have to play by the same rules, invoice and pay in the same currency, communicate in the same language, and pay about the same rates for labor wages, indirect supplies, and direct materials. For one, the savings from global sourcing comes with the possibility of steep expenses elsewhere, since a company must prospect regulatory climates; find qualified factories; solicit bids; place purchase orders; inspect factories; monitor quality; handle logistics, customs, and duties; and so on, all on its own—which is no small feat.

All merchants nowadays have to manage numerous details on how private label brands are sourced, produced, and delivered, which can be quite a daunting task, especially when trading partners are scattered all over the world. The momentum of private labels in the retail industry (from grocery stores to major apparel stores) is driving even more opportunistic contracting with small and unknown suppliers in remote countries. This type of contracting is contrary to the concepts of strategic sourcing, as it requires buyers to take their chances when ordering from unfamiliar suppliers, with the hope of keeping total landed costs to a minimum.

What is also required with global sourcing is a mindset change with regards to timing given that most issues with domestic suppliers can be resolved right away (or at least within a week in a worst case scenario). Internationally, though, even with bordering countries, it might take a more special purchase order up to several weeks to be confirmed, let alone be processed and delivered over the ocean and through customs and duties, and multiple intermediaries.

With global sourcing, the challenge has become how to communicate with a factory that is in the wilderness of the Far East or Africa (though we by no means want to sound derogatory toward any third-world region) from a swanky, domestic office in a G8 country, and how to assimilate and communicate multiple data points effectively into a unified operation on a single screen. In the manufacturing process, communication must take place among retailers, manufacturers, brand managers, contractors, agents, brokers, and logistics providers—and many still share product information either over the telephone, via e-mail or faxes, or by other means of physical communication.

The Anatomy of Retail Sourcing Processes

Another complication is the unpredictability of local markets, since what might be "hot" or “cool” in one area may not sell at all in another market. If the retail outlet guesses wrongly on a fashion piece, or if it takes too long to get items into the stores (resulting in the merchandise being considered passé by the consumer), the stock must be moved to the deeply discounted (marked down) sales racks. At best, the retail chain is wasting expensive floor space on items with little or no profit margin; at worst, the items will have to be discarded or transported to other resellers. Profit margins are tight on some lines, since price points (the price at which the young shopper with limited finances shrugs and goes somewhere cheaper to shop) dictate aggressive pricing. In spite of these challenges, competition is growing for this customer segment, and it is becoming more difficult to distinguish the value that the retailer is delivering and to remain profitable.

As depicted in the typical sequence of processes listed above, retail personnel spend up to 80 percent of their time on administrative tasks rather than on their primary job. One could only imagine the mayhem that would result should there be virtually no integration among the above processes and its participants, or even between their core business systems, given that each task has its own Microsoft Excel, Microsoft Word, or e-mail trail, with data in isolated and disparate systems. If the above processes are still heavily segregated, with no visibility and very little control, the overall process becomes painfully slow and inaccurate, with extended processing times as a result.

Eqos cites that one major retailer calculated that it took 48,000 spreadsheets to launch just one new product line, which means lots of dreaded manual processing, re-keying, data conflicts, extended processing times, and so on. Further, nowadays, a vast majority of retailers manage inbound logistics processes across a variety of in-house enterprise resource planning (ERP) and supply chain management (SCM) systems, supplier data bases, and outsourced logistics providers' systems. They do this in an environment where it is difficult, if not impossible, to have a single view (version of the truth) of the entire sourcing and delivery process from a single vantage point.

In a more sophisticated scenario, though, all the members of the supply chain communicate through a coherent Web-based system. This means that when, for example, a vendor makes a change in the status of a product, everyone in the supply chain instantly sees the change. The key in global sourcing today is to minimize the overall cycle as well as disruptions, and the most effective way to do this is to have live, accurate, and immediate information available to all parties of the supply chain. New Internet-native sourcing software applications give users visibility of current product or order status at any point in time, anywhere in the world. These applications eliminate almost all duplication of information, thereby allowing all trading parties to collaborate on more rewarding issues rather than having to constantly put out fires.

Prior to implementing a contemporary Web-based automated solution, contacting multiple vendors at once for pricing was a tedious manual process for the sourcing group. In contrast, by using a Web-enabled infrastructure, user enterprises should be able to better integrate globally with their supply bases and broaden the scope of vendors they can locate
Lately, such technology has streamlined many retail firms' ability to obtain estimated pricing from several vendors simultaneously. Also, when the design team comes up with a new fashion concept and wants a sample of that concept, such a system allows information on the design to flow into the sourcing organization. This allows the sourcing team to acquire estimated costs as well as time-and-action (that is, normalized or synchronized calendars within the entire production cycle) information. The sourcing team can then better determine where it may want to place the production, depending on volume, possibly integrating with the merchant organization to give it a feel for how much product the firm will be sourcing of a given style so that it can review capacity constraints.

The next step is to use the software tools to break style data down by more variables in preparation for placing the purchase or production order. For instance, the software could provide suppliers with answers to questions such as the following: How much does the retailer want to order by color and by size? What is the final pricing? What is the final time-and-action calendar?

More and more, the standard order confirmation and customary ASN procurement practices cannot provide enough of a guarantee that everything is going smoothly with any order placed. This is particularly true of the internationally sourced, custom-made purchases that are common in the consumer goods manufacturing and distribution industries. Here, the difficulties of communicating across time zones as well as long lead times make for lengthy recuperation periods (if recuperation is even possible) when problems occur. That is why buyers benefit from visibility and supply chain event management (SCEM) systems that inform and alert them to the following production scenarios: orders were (not) started on time; orders were (not) placed on the boat on schedule; the design team has changed (yet again) specs on the color or fabric for a particular planned merchandise; and the order was (not) properly documented to clear customs without a glitch.

Landed Cost Calculations Add Fuel to the Fire

While many companies have either made (or are in the process of making) the transition from regional, build-and-sell business models to a global sell-anywhere, build-anywhere, and buy-anywhere model, the current, mainly manual systems still typically require information to flow via spreadsheets, phones, faxes, snail mail, and e-mails within the retailer's different groups. When it is time to place an order, the data is usually no longer current and accurate. The information then has to be revised during the ordering phase, where the vendor might respond with actions based on incorrect assumptions, and one has to go through the vicious cycle again.

Determining the true costs of these activities can also become more complex since, in addition to a nominal purchase price, one has to add freight, taxes, duties, intermediaries' fees, cost of inventory, cost of quality issues (if any), and buyers' time. Landed costs also vary tremendously depending on how the merchandise is shipped, since many supply chains today originate in countries that can provide low-cost manufacturing capabilities, often thousands of miles away from the end market.
In a regional model, companies make parts-sourcing decisions based primarily on per-piece cost and traditional supplier scorecards. In a global model, though, with lengthening supply chains and increasing risk, companies must choose suppliers based on additional factors, such as inbound lead times and associated variability, protection of supply, logistics costs and risk, and inventory expense. Only a thorough analysis of potential scenarios reveals the total landed cost, and poor sourcing decisions could turn out to be counterproductive and may result in increased costs, decreased supply chain flexibility, and customer dissatisfaction.

In other words, an apparent bargain price on paper may not be quite as attractive in reality, since there may be hidden costs to consider in addition to the purchase price of components or per-hour wage rates. Landed cost refers to the total price that the importing company has paid for a resource once it "lands" at its appointed location, such as the incoming dock at the production facility. Imagine the possible, startling differences that might be brought to light with a thorough comparison of the prices of raw materials available in several regional markets around the world.

Again, while the landed cost of domestic items includes the component price plus domestic freight, the landed cost of the same or similar components in a foreign market may include all of the following: purchase price; import duty; international freight; special packaging, travel, and other communications costs involved in acquiring the component; fees and commissions for intermediaries (typically not necessary in domestic purchases); currency exchange and interest costs; costs of hiring or training personnel to deal with export-import complexities, and so on.

Further, determining the relative costs of manufacture and assembly in different markets can be as complex as comparing landed costs for goods. To that end, some vendors provide tools to help companies uncover the true costs of global sourcing to better manage this new business environment. The most recently unveiled i2 Total Landed Cost Sourcing software tool by i2 Technologies is designed to help companies analyze and determine sources of supply for parts, components, and finished products based on all conceivable factors that might contribute to cost and risk. Leveraging this solution with the closed-loop capability to capture all relevant cost elements, represent them in a model, compute and analyze multiple what-if scenarios, and make the best decision, businesses can drive the process with a complete picture of the factors impacting the total cost of a product. Total Landed Cost Sourcing delivers the following capabilities:

* analysis and decision making;
* definitions of cost targets and sourcing constraints;
* automated data management and cleansing of cost, transportation, lead time, inventory, service variability, and network data;
* the ability to make informed sourcing decisions based on supply chain modeling and corporate objectives;
* solid reporting and analytics capabilities for continuous learning and ongoing compliance management;
* supply chain network optimization to calculate variable supply chain costs through strategic network design and inventory optimization;
* the ability to issue RFQs and collect supplier-quoted costs; and
* estimation of total landed costs for all sourcing scenarios while considering optimal transportation routes.

Like its i2 CTO counterpart mentioned previously in The Promise (and Complexities) of Private Labels, i2 Total Landed Cost Sourcing will be available in the i2 Business Content Library, a repository of process and technology solutions based on i2's extensive supply chain domain expertise. The idea here is for organizations to use these solutions without modification and to help accelerate the customization and deployment of composite solutions when necessary.

The Anatomy of Retail Sourcing Processes

Another complication is the unpredictability of local markets, since what might be "hot" or “cool” in one area may not sell at all in another market. If the retail outlet guesses wrongly on a fashion piece, or if it takes too long to get items into the stores (resulting in the merchandise being considered passé by the consumer), the stock must be moved to the deeply discounted (marked down) sales racks. At best, the retail chain is wasting expensive floor space on items with little or no profit margin; at worst, the items will have to be discarded or transported to other resellers. Profit margins are tight on some lines, since price points (the price at which the young shopper with limited finances shrugs and goes somewhere cheaper to shop) dictate aggressive pricing. In spite of these challenges, competition is growing for this customer segment, and it is becoming more difficult to distinguish the value that the retailer is delivering and to remain profitable.

As depicted in the typical sequence of processes listed above, retail personnel spend up to 80 percent of their time on administrative tasks rather than on their primary job. One could only imagine the mayhem that would result should there be virtually no integration among the above processes and its participants, or even between their core business systems, given that each task has its own Microsoft Excel, Microsoft Word, or e-mail trail, with data in isolated and disparate systems. If the above processes are still heavily segregated, with no visibility and very little control, the overall process becomes painfully slow and inaccurate, with extended processing times as a result.

Eqos cites that one major retailer calculated that it took 48,000 spreadsheets to launch just one new product line, which means lots of dreaded manual processing, re-keying, data conflicts, extended processing times, and so on. Further, nowadays, a vast majority of retailers manage inbound logistics processes across a variety of in-house enterprise resource planning (ERP) and supply chain management (SCM) systems, supplier data bases, and outsourced logistics providers' systems. They do this in an environment where it is difficult, if not impossible, to have a single view (version of the truth) of the entire sourcing and delivery process from a single vantage point.

In a more sophisticated scenario, though, all the members of the supply chain communicate through a coherent Web-based system. This means that when, for example, a vendor makes a change in the status of a product, everyone in the supply chain instantly sees the change. The key in global sourcing today is to minimize the overall cycle as well as disruptions, and the most effective way to do this is to have live, accurate, and immediate information available to all parties of the supply chain. New Internet-native sourcing software applications give users visibility of current product or order status at any point in time, anywhere in the world. These applications eliminate almost all duplication of information, thereby allowing all trading parties to collaborate on more rewarding issues rather than having to constantly put out fires.

Prior to implementing a contemporary Web-based automated solution, contacting multiple vendors at once for pricing was a tedious manual process for the sourcing group. In contrast, by using a Web-enabled infrastructure, user enterprises should be able to better integrate globally with their supply bases and broaden the scope of vendors they can locate
Lately, such technology has streamlined many retail firms' ability to obtain estimated pricing from several vendors simultaneously. Also, when the design team comes up with a new fashion concept and wants a sample of that concept, such a system allows information on the design to flow into the sourcing organization. This allows the sourcing team to acquire estimated costs as well as time-and-action (that is, normalized or synchronized calendars within the entire production cycle) information. The sourcing team can then better determine where it may want to place the production, depending on volume, possibly integrating with the merchant organization to give it a feel for how much product the firm will be sourcing of a given style so that it can review capacity constraints.

The next step is to use the software tools to break style data down by more variables in preparation for placing the purchase or production order. For instance, the software could provide suppliers with answers to questions such as the following: How much does the retailer want to order by color and by size? What is the final pricing? What is the final time-and-action calendar?

More and more, the standard order confirmation and customary ASN procurement practices cannot provide enough of a guarantee that everything is going smoothly with any order placed. This is particularly true of the internationally sourced, custom-made purchases that are common in the consumer goods manufacturing and distribution industries. Here, the difficulties of communicating across time zones as well as long lead times make for lengthy recuperation periods (if recuperation is even possible) when problems occur. That is why buyers benefit from visibility and supply chain event management (SCEM) systems that inform and alert them to the following production scenarios: orders were (not) started on time; orders were (not) placed on the boat on schedule; the design team has changed (yet again) specs on the color or fabric for a particular planned merchandise; and the order was (not) properly documented to clear customs without a glitch.

Landed Cost Calculations Add Fuel to the Fire

While many companies have either made (or are in the process of making) the transition from regional, build-and-sell business models to a global sell-anywhere, build-anywhere, and buy-anywhere model, the current, mainly manual systems still typically require information to flow via spreadsheets, phones, faxes, snail mail, and e-mails within the retailer's different groups. When it is time to place an order, the data is usually no longer current and accurate. The information then has to be revised during the ordering phase, where the vendor might respond with actions based on incorrect assumptions, and one has to go through the vicious cycle again.

Determining the true costs of these activities can also become more complex since, in addition to a nominal purchase price, one has to add freight, taxes, duties, intermediaries' fees, cost of inventory, cost of quality issues (if any), and buyers' time. Landed costs also vary tremendously depending on how the merchandise is shipped, since many supply chains today originate in countries that can provide low-cost manufacturing capabilities, often thousands of miles away from the end market.
In a regional model, companies make parts-sourcing decisions based primarily on per-piece cost and traditional supplier scorecards. In a global model, though, with lengthening supply chains and increasing risk, companies must choose suppliers based on additional factors, such as inbound lead times and associated variability, protection of supply, logistics costs and risk, and inventory expense. Only a thorough analysis of potential scenarios reveals the total landed cost, and poor sourcing decisions could turn out to be counterproductive and may result in increased costs, decreased supply chain flexibility, and customer dissatisfaction.

In other words, an apparent bargain price on paper may not be quite as attractive in reality, since there may be hidden costs to consider in addition to the purchase price of components or per-hour wage rates. Landed cost refers to the total price that the importing company has paid for a resource once it "lands" at its appointed location, such as the incoming dock at the production facility. Imagine the possible, startling differences that might be brought to light with a thorough comparison of the prices of raw materials available in several regional markets around the world.

Again, while the landed cost of domestic items includes the component price plus domestic freight, the landed cost of the same or similar components in a foreign market may include all of the following: purchase price; import duty; international freight; special packaging, travel, and other communications costs involved in acquiring the component; fees and commissions for intermediaries (typically not necessary in domestic purchases); currency exchange and interest costs; costs of hiring or training personnel to deal with export-import complexities, and so on.