SUPPLY CHAIN MANAGEMENT Joining Forces – The power of many

Supply chain management might be complex concept for some modern-day managers to grasp. But it’s one they fail to embrace at their peril. To stay ahead of the competition, New Zealand companies increasingly have to take global view of supply chain management, particularly given this country’s relative isolation.
The good news, however, is that many of these companies readily see the opportunities inherent in maximising their efficiency through smart supply chain management. They are prepared to invest the time, money and effort needed to make it happen.
That’s just as well, because smooth integration of processes and systems is no quick fix. Identifying the right supply chain solution and implementing it can take three or four years. But the rewards and benefits are substantial.
That said, Sandy Gibson, vice-president of Logistics & Transport New Zealand and general manager of Axis Intermodal, maintains e-procurement and web technology has not yet successfully pulled together all the diverse aspects of supply chain processes.
“There is tremendous potential for it to do so, but we have long way to go as an industry before we reach that stage.”
Gibson says one area where cooperation is required is the development of integrated information systems. “Many sections of the supply chain re-key data rather than transferring it electronically in one seamless process.” This re-keying results in higher costs and lower levels of efficiency across the entire logistics industry.
Gibson says there is widespread use of the internet and web technology for information purposes. Importers, exporters and transport companies are regularly updating themselves on the status of their consignments by accessing this information through the internet, he says. This enables them to plan their logistics in greater detail. However, in Gibson’s view, there is much greater scope for these parties to transact their business through internet gateways and make the process two-way experience.
Meanwhile, Auckland-based Sell-Agence, distributor and marketer of Gillette products in New Zealand, has added multinational food company – Italian-based Ferrero (producer of Nutella and Kinder Surprise chocolate) to its client portfolio.
It has also been able to cut its warehousing costs by five percent with help from the Oracle e-Business Suite.
SellAgence distributes shaving and dental hygiene products to 365 supermarkets and 600 pharmacies throughout New Zealand. Executive chairman Kerry Gleeson says showing Ferrero that SellAgence had the systems in place to fit within its reporting framework – which is very different from Gillette’s – was major factor in securing the new business.
Ferrero operates around three financial deadlines year, whereas Gillette closes its books quarterly. SellAgence produces monthly sales reports.
Gleeson says his company can now use up-to-the-minute transactional data and report templates to distil information and feed it to Gillette’s and Ferrero’s disparate reporting systems.
“It also gives us the control to see what SellAgence’s sales of Gillette and Ferrero products are doing by calendar month. Before we adopted Oracle e-Business Suite it would have been impossible to meet the needs of these two businesses at the same time.
“We sit between some very large global clients and some large local customers. That’s why we have to add value or otherwise they’d figure they didn’t need us.”
Gleeson says that, to him, the supply chain management concept is about products always being on the move.
“We had to be able to map upstream to one [customer] and downstream to another and still get the business done. We needed pretty complex set of possibilities within whatever software we used to do that profitably.”
In the past 12 months SellAgence has reduced its inventory by 40 percent, at the same time improving its case fill by 11 points to 96 percent.
“That’s not what people normally think will happen. They think if you reduce your inventory, case fill will drop off. If you get your processes right, you can reduce inventory.” Gleeson says Gillette has just launched new razor. SellAgence got the product into 98 percent of its New Zealand stores within two weeks – about two weeks faster than the products get to about 70 percent of the stores. Compare this with the previous launch, when new razor took five weeks to reach 85 percent distribution.
From pure manufacturing sense, the things that are driving New Zealand companies today are the things that are driving many global companies: how can you squeeze cost out of your operations or out of your supply chain?
Scott Dawes, Oracle’s general manager – applications for Australia and New Zealand, says companies are increasingly focusing on the best way to integrate their processes with their people, their suppliers and their customers.
“They don’t do it all at once because it can be expensive, but they’re moving towards an IT strategy that has at its core concept of integrated systems.”
Dawes says the high cost of operating systems which are not connected or integrated has been the prime driver for this. Oracle, he says, has been able to leverage intellectual property round the world to drive down implementation costs.
Dawes says the “national imperative” to remain competitive is taking on new level of emphasis. “You’re seeing government entities rallying around these concepts to try to make the country – not specific company – more competitive.”
AdvanceRetail, New Zealand developer and exporter of in-store retail management software for the retail industry throughout Asia and Australasia, specialises in transforming retail counter from point of sale to point of service. The system centres on Windows-based in-store solution with management layer capable of handling everyday in-store activity, both front of house at the sales counter (point of sale) and the back office. It has special emphasis on system redundancy, so individual terminals can run by themselves even if the network connection to the server fails.
Mark McGeachen, director of sales and marketing for AdvanceRetail, says New Zealand companies are frantically trying to compete with the likes of The Warehouse, or Tesco and Wal-Mart offshore.
“One of the best ways to combat that and carve yourself niche is through differentiation, predominantly around customer service.
“They talk about the whole goal of retail being having the right product at the right place at the right time. To do that, you need an efficient supply chain with good visibility,” says McGeachen.
Retail is an industry where the product has short life cycle. Fashion apparel is classic example, where product life cycles are measured in terms of few weeks.
The music industry is much the same, says McGeachen, with new release often lasting barely two weeks before it heads for the markdown bin.
“Efficiency is going to meet couple of pieces of that customer service promise. It’s going to make sure you’re taking as much cost out of the supply chain as possible so you can hit price promise to the customer. It’s also about making sure that the product is available. People will come back twice but not three times.”
What about businesses that choose not to efficiently manage their supply chain?
“If they have enough of unique differentiator around their product or some other aspect of their business, they can survive, but they certainly struggle to grow. Smaller businesses which start up find niche and do very well, but they will scale out to few locations and they really hit their ceiling.”
McGeachen says one of the constraints on their growth is that their supply chain management is entirely manual. “They’ve hit the limitations of what they can do on pieces of paper, and maybe the odd spreadsheet if they get little more sophisticated.”
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