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One bad apple

Thursday April 26 2012

Electronic trading expert Steve Rees argues that retail supply chains need more insight and intelligence

Electronic trading expert Steve Rees argues that retail supply chains need more insight and intelligence

 

Errors in the retail supply chain can be likened to bad apples, in that it only takes one to turn a relationship rotten, according to Steve Rees, product manager at electronic trading systems provider Wesupply.

 

“I believe that fast moving retail supply chains often lack the intelligence and insight needed to seek out erroneous information and settle small issues before they grow big,” Rees stated.

 

He argues that ‘intelligence’ is the means for a supply chain IT system to ‘make decisions’ about transactions, in order to then focus human intervention where absolutely necessary. ‘Insight’ is the access to actionable information and trends about the supply chain’s activity used to measure its success.

 

“With retail businesses now hard wired with technology you’d think intelligence and insight would be a given,” Rees continued. “But, as the frequent over-use of the word ‘panacea’ suggests, big technologies like ERP [electronic resource planning] are too often viewed as ‘cure alls’ for supply chain inefficiency. Despite providing a required core of process automation there are however areas that even the best ERP systems cannot reach.”

 

Accurate insight in real time

 

When asked why, Rees responded: “ERP is largely a ‘historical’ system. It is not its primary purpose to manage and monitor transactions as they happen, even though this is where intelligence and insight is needed most. It’s important that notification of action to solve problems takes place in real time.”

 

He added: “I regularly see three associated gaps in retail supply chain insight and intelligence, namely erroneous transactions, delayed reactions to problems and a lack of common information for disputes.”

 

These ‘gaps’ include erroneous transactions, delayed reactions and establishing a common ground.

 

Thousands of trades and transactions pass daily between retail buyers and their suppliers, from orders and confirmations to shipping notices, invoices and payments. The accuracy of these data exchanges needs to be governed automatically as they happen.

 

“People within the buying and supplying community simply don’t have time to check them,” said Rees. “As I have said there are ‘bad apple’ errors in even the best supply chains. If left unresolved these lead to business problems from reduced retail sales to serious cash flow problems. ERP systems are not focused on sorting out the rotten fruit but Electronic Data Interchange (EDI) services, which sit at the point of transaction are nimble at using intelligence to sort and flag issues which can be corrected before they do damage.”

 

Costly delayed reactions

 

While intelligence within IT systems is important in removing errors, it is also vital that the buyer and supplier know that these errors are occurring. Here, Rees acknowledges that ERP systems are good at providing long-term insight into supplier performance over time.

 

“But here’s the rub; by that time the problems have occurred and the damage may already be done,” he observed. |The customer needs to nip problems in the bud quickly. The supplier needs to know if they are underperforming instantly, to stop simple issues becoming serious ones and this requires instant insight.

 

“Supply chain relationships are an investment made by both parties and immediate understanding ensures that these relationships don’t become a costly waste for all concerned. Managed EDI services provide an on-the-spot view of current performance not past performance to avoid a delayed reaction in resolution.”

 

Establishing common ground

 

Insights drawn from an ERP system have another problem in addition to being ‘old,’ according to e-trading expert. They also are ‘owned’ by either the buyer or the supplier. In cases where both supplier’s and buyer’s ERP systems are part of the process there will be two conflicting versions of the truth. Where one or other party is too small to invest in an ERP system and thus have evidence to hand, it may mean an inability to resolve problems quickly and cleanly.

 

“Settling issues and disputes becomes far easier when just one source of shared information exists,” countered Rees. “In this instance the data must come from the point of exchange, when it is effectively sitting in ‘no man’s land’ between the two parties. Third party EDI services provide this capability and regularly help supply chain partners to review and resolve issues from a more objective and immediate stance.

 

“In pursuit of supply chain efficiency retailers and their suppliers need to focus greater attention on system intelligence which can drive down errors and costly manual intervention,” he concluded. “When errors do occur they must also seek real-time insight to nip problems and disputes in the bud before one rotten apple becomes an entire orchard.”