Magazine Article | February 1, 2000

Electronic Supply Chain Management Defines Retailers' Success

Source: Innovative Retail Technologies

Do you need a consultant to help you identify the
best possible approach to implementing technology?

Integrated Solutions For Retailers, February 2000
The ability to respond quickly to customers' needs and reduce operating costs has become a necessity in today's increasingly competitive retail marketplace. Retailers need to work closer than ever with their business partners to help ensure timely delivery and optimal use of resources. To do so, many retailers are using e-business technologies to better manage their supply chains.

By extending their supply chains online, retailers and their suppliers can communicate in real time and reduce costs. According to a recent Pittiglio, Rabin, Todd & McGrath study, companies with the best-in-class online supply chain management have 50% to 80% less inventory, reduced cash-to-cash cycle time by 40% to 60%, improved on-time shipment performance by 30% to 50%, and gained a 7% cost advantage.

Achieve Business Breakthroughs
When considering electronic supply chain management, retailers and their business partners should focus on two major areas: advanced planning and replenishment systems (APS) and supply chain execution (SCE) systems. APSs enable retailers and suppliers to forecast their sales and inventory needs, so they can plan and schedule their orders efficiently. SCE systems deal with the management of distribution centers, transportation of goods, routing, warehousing, and other logistics. Companies with best-in-class online supply chain management have achieved breakthroughs in three areas:

Business integration includes integrating internal business processes and information to streamline and improve business performance. An electronically integrated supply chain encapsulates diverse business functions such as forecasting, merchandising, point-of-sale, distribution, manufacturing, and logistics to meet customer demands. For retailers, business integration can improve their customer service and inventory management, and reduce cycle times and production costs.

Business-to-business collaboration involves working with trading partners to reduce total supply chain costs and improve services. Collaboration efforts may include forecasting and replenishment, business planning, supplier management, and product quality management.

Electronic commerce involves serving customers and selling on the Web. Many retailers are already establishing their presence online to form an additional sales channel and collect customer data. They also use their Web sites to receive online requests and respond quickly to improve customer relationships. For retailers to sell on the Web, they need to have an efficient electronic supply chain system that enables them to fulfill customer orders and offer a wide variety of products and services.

What Can A Consultant Do For You?
As retailers begin to offer their products and services on the Web, the ability to fulfill orders becomes crucial. The Web allows retailers to reach customers on a global basis. Therefore, retailers need to improve their supply chain to enable delivery outside of their usual business areas. Many supply chain solution providers, including IBM, hold regular seminars to help business managers better understand issues associated with electronic supply chain management.

The implementation of electronic supply chain management requires a high level of technical expertise. Many companies choose to seek outside experts to help integrate their supply chain systems and to determine specific needs. They often rely on these experts to plan and execute the undertaking step-by-step, to ensure that the project will meet their business objectives.

Typically, consultants first assess the efficiency of clients' existing supply chain processes. Then they help companies determine how to use their supply chain to meet their business objectives. Based on the business plan, consultants recommend solutions to meet specific needs. They may recommend extending certain supply chain processes online to improve communications between business partners. They may recommend consolidating or expanding companies' distribution networks to improve order fulfillment. The goal is to establish an integrated supply chain that will improve productivity and customer service while reducing operating costs.

As customers continue to demand service that is both quick and cost-effective, managing the supply chain electronically helps retailers keep their customers satisfied and reduces their own costs. By communicating electronically with their business partners, consultants can also improve their procurement, inventory management, and distribution networks to gain a competitive edge.

Jonathan Kates is the leader of IBM Consulting's Retail Supply Chain practice. He has more than 15 years of consulting and IT project experience.

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