InformationWeek
Defining The Business Value Of Technology
November 9, 1998
Killer Supply Chains
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"I'm excited about the improvements we have made with Thomson, especially in terms of on-time, right-quantity product shipments," says Robert Willey, director of procurement reengineering at retailer Best Buy Inc., in Eden Prairie, Minn. "By sharing projections with Thomson, we are able to receive products on a weekly basis, as opposed to a monthly basis."
With the program in place, Thomson expects to achieve forecast accuracy of about 95%, a substantial increase from last year, says Reuland. Thomson will be able to make products only when they're needed, and retailers can cut down on buffer or safety stocks because they know products will arrive in a timely fashion.
"The more we can reduce extra inventory for our customers, the better level of service we are providing," says Reuland. In some cases, he says, retailers have been able to cut their safety stocks in half. Another benefit: The company has decreased out-of-stock scenarios to less than 1%.
Thomson is also entering a new collaborative era with its 400-odd component suppliers. In the old world, Thomson's relationship with suppliers was based strictly on how inexpensively they could provide parts, and not necessarily on how quickly or how efficiently those parts would arrive. "Now we are talking to them about manufacturing flexibility," says Reuland. "We're still focused on price, but we are also focused on reducing lead times."
To smooth the process, global suppliers will soon post their shipping information and order status on the Thomson extranet site. Thomson, for its part, is giving suppliers access to forecast information, inventory levels, and customer orders. That way, when Thomson is running low on, say, a component for its VCRs, the supplier will realize that immediately and replenish the stock without having to be notified first. As a result, lead times and planning cycles are coming down from as long as four weeks to as little as one week.
"The adversarial relationship between retailers, manufacturers, and suppliers is going away," says Reuland. "Instead, we are forming partnerships and working toward a shared goal of reducing inventory. That's the future."
Dayton Hudson
Some retailers pride themselves on having great forecasting software, or a great data warehouse, or a great logistics system. Dayton Hudson Corp. wants to be the best in all three areas--and more. The company claims that its electronic supply chain is one of the most complete in the business.
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Moreover, the components of the system, which was implemented first in the company's Target retail chain and is now being rolled out by the Mervyn's and Dayton Hudson chains, are integrated closely--critical when data has to travel from the storefront to suppliers. A supply chain runs the risk of breaking down if data must be rekeyed at any step along the way.
Here's how it works: A Dayton Hudson buyer analyzes store data with a decision-support tool to determine store trends, for example, and uses the results to revamp unit goals. Point-of-sale data could also indicate that a store is running low on specific items. The change triggers motion in other applications. GMS updates financial systems to account for both additional expenses and revenue, and notifies replenishment systems, which automatically generate purchase orders that go to suppliers.
When the suppliers fill the order, the data passes back to Dayton Hudson's distribution system so the distribution center knows how to deal with the incoming goods and to pass them to other stores if the originating store's demands have changed.
The system also monitors relationships between Dayton Hudson and its hundreds of suppliers. One of those applications is the commitment-management application, which tracks the amount of product a supplier will furnish and its specifications, which evolve over time.
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Photo of Windmeier and Singer by Doug Knutson
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