The evening was introduced by Andy Banks, supply chain development director at Sainsbury’s. He quickly established that no-one present felt they were close to achieving the perfect supply chain and suggested that the supply chain should aim to make business dreams possible and should never be a constraint. The job of supply chain professionals was getting harder as customers are more demanding and home shopping had exposed that retailers’ supply chains were not as good as they thought. He suggested the supply chain would only be more effective if retailers were able to collaborate with each other and their suppliers, and pointed out that technology can only go part of the way to achieving this. Retailers needed to get the right level of control of their own supply chains.

NM: Can you have too much control?

SF: I don’t think you can ever have too much control. Does anyone round the table think they have enough control of their supply chain? I doubt it.

SH: But it’s not absolute though is it? The more control Tesco and Sainsbury’s have over their supply chains the less you’ll have over yours. If there’s one product left to go and there’s two orders for it, where does it go?

SF: That’s not really control of the supply chain. That’s the weight of the buying power. I don’t think that’s the case with own brand products and I genuinely believe the excuse that the big players always get what they want is not valid.

MO: I don’t think control and ownership are the same thing though. You can still be in control whilst outsourcing and at the end of the day we are the definition of that service.

SH: Do you mean control or just visibility?

MO: I mean control. We set the parameters, the criteria and the budgets. We just don’t get involved in the day to day tasks of picking, delivery and inbound vehicles.

GW: There’s always a suspicion that if the vendors expose their business practices the big guys will change things and deprive them of the chance to make money. There aren’t many supply chains or systems which can deal adequately with the challenge of suppliers who can decide who they’re going to allow to sell their products.

DN: We have purchasing windows and to work out how much you want in means you have to have your planning and stock levels right.

AB: I think it’s a bit of a myth about how much power we have over our suppliers. You have more of a relationship with own label brands, but otherwise it’s not us saying ‘do that’ and it’s done.

GW: But if suppliers share information with you is there no danger, in their view, that they would be challenged for doing so and their prices brought down? Factory gate pricing is a great example.

AB: Any collaboration is like a human relationship – you’ve got to have a level of trust and some common goals. It’s difficult to have a relationship with someone and be going out with their sister at the same time. You’ve got to choose who your partners are and work with them. It’s not about saying you either collaborate or you don’t. It’s about the level of collaboration.

MH: I want a closer working relationship with brand owners to raise the profile of Londis within that supplier. Forty suppliers represent 80 per cent of our volume, so we’re working with 20 of those and have 24 per cent of our total volume going through on collaboration. My service levels have all increased tremendously, my lead time delays have dropped by up to 60 per cent and my stock holding is reduced by four, five or six days. I feel we mean more now to those suppliers because of that relationship.

CP: We hooked the brands on something that was an issue for them and got them to invest in IT which would make that better. There was one supplier where they flagged the issue that we were 20 per cent of their business but 80 per cent of their administration work so there was clearly something wrong. Between us we came up with a way of doing things better which did involve them doing some IT work. But if you had to invest that amount of time with every brand you would never get anywhere.

AB: You can invest quite a lot of time and money in collaboration, but if you don’t have clear, common goals that can be wasted.

SP: But supplier-retailer collaboration shouldn’t be a competitive disadvantage to the retailer. The more information you share around technology and standards the cheaper it should be.

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Human touch

CP: It’s more the people and processes which give you the advantage. You can have two retailers with the same system but who use them very differently.

SF: I totally endorse that. I’ve seen people with exactly the same system which we’re using but they’ve decided to adapt and customise it. If you’re going to buy a best of breed system just do it and then concentrate on your own internal business processes, culture changes and expectations.

SA: The culture at Virgin was when users asked for a change they tended to get it. But we’ve now introduced a process mapping procedure where you analyse why they want it. For example, they may be asking for changes in the returns process, but if the purchasing side was done better there would be fewer returns so it would be better to concentrate your efforts in trying to buy the right quantities. We’ve progressed in leaps and bounds as a result of that process management rather than changing the system.

AB: When Sainsbury’s decided to outsource their IT to Accenture it was given that we would be going with a Retek core system but we still needed to come up with a forecasting and planning system. We found little difference between the major players so we decided to go with Retek and they’re building a lot of functionality for us.

SP: We implemented Retek RMS 9 last year with the idea of buying a best of breed package that should meet most of the processes we have. But we ended up with something like 350 man days’ worth of changes around the functionality. You could argue ‘Well, why make those functional changes?’ But there may be some good reasons in terms of being more efficient with our own processes once we have made those changes. But I would expect Retek to take on board anything that Selfridges builds in so other retailers could take advantage of that. Similarly I’m sure that other retailers will be able to take advantage of some of the things Retek are doing with Sainsbury’s in future versions.

DN: I find it interesting listening to the conversation about getting best of breed packages and then changing them. Isn’t that a bespoke development? What’s the point in buying a best of breed package for something which you know is going to change very quickly? You may as well build a new system from scratch.

SH: Isn’t it about maximum fit and minimum risk? Anything that’s less than 70 per cent fit is a No-No. Then it’s about minimum risk of the alternatives – Oracle might be expensive but are going to be a long term player. If they take something out of every business and put it into their core code that is going to provide a long term solution which is going to put you at the cutting edge, providing you don’t fall more than two upgrades behind.

GW: It’s as much about your people being able to keep up as the systems themselves. There are so many changing influences that to concentrate on systems alone is inadequate. When do you actually decide to leap in and make a purchase?

MC: Sometimes the most courageous decision you can make is that you don’t want to be best of breed. There’s no point in having best of breed IT if you’ve got shoddy physical distribution or if your people can’t keep up with it. I think one of the best selling techniques which I don’t hear very often is ‘You don’t need this at the moment’, and doubtless then they can come back to us in a couple of years.

AB: But where do you go for that advice? Do you go to the vendors or consultancy services?

MC: We’ve gone to a few consultants and we’re just trying to weigh up the best way forward. But I know we’re going to have to rein them back in to get the balance right between that utopia and what I can actually get into the business.

TF: You do still get retailers who believe they have certain components of what they do which give them a huge competitive advantage, which they have no desire to share with us. The challenge is to give people as broad and straightforward a package as we can so they can add bespoke functionality, without compromising the idea of a package with which we can all move forwards.

DN: That comes back to percentage fit.

MC: But it also comes back to the percentage use, which can be as low as 20 or 30 per cent. That’s maybe because the rest of the organisation isn’t up to the same speed.

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Rotten at the core

GS: The other thing to consider with a package is whether it’s a core competency that’s taking so long to build in. As a food retailer with something like satellite forecasting the answer is no. If you’re buying a package that has been tried and tested it doesn’t really matter where you buy it from. We’re also hearing a lot about legacy systems and best of breed, but how much time do you actually spend looking after your assets going between those systems?

TF: We’re often asked to find mechanisms where retailers can choose their method of deployment, so they can try out the business value quickly. People are interested in how they can replenish better, forecast better and add to the bottom line. The infrastructure change is in their long term interests but isn’t really a discrete project because it’s a big cost with relatively low return.

SA: We were looking at a new forecasting and replenishment system. But when we went to a best of breed vendor we fell over at the cost. We’d have to have had a lot of stock in the wrong place at the wrong time to make it worthwhile. And we sucessfully wrote a reasonably simplistic system on our own. I do question some of the complexities vendors go through and whether retailers actually get a return on that investment.

DN: It’s the 80:20 rule. If you buy something that’s going to give you 80 per cent, by the time you’ve struggled to get the other 20 per cent in something new will be on the horizon and you’ll be wanting that.

AB: I’ve often wondered whether in industry you could have an extension of the Linux model for operating systems where everyone contributes their ideas and thoughts into the public domain.

NM: One way of collaborating with suppliers and sharing information with technology companies is the Internet. How good could that be if it were to be used to its full capacity?

DN: What is its full capacity? We’ve got around 1,200 suppliers of which only some have adopted full EDI. So the first thing we’re going to do is to e-enable the 400 or so suppliers who still get a fax order so we can talk to them in as close to real time as possible. The drive to getting a critical mass of e-enabled suppliers and partners in the supply chain is going part of the way to that utopia.

AB: What’s been the challenge in getting them e-enabled?

DN: It’s a case of making it a win for them too. We’ve got a zero cost solution for them other than a PC and a web browser. You’ve got to have that carrot rather than a stick. When you get down to the last few, that’s where the stick comes in.

SP: But how can suppliers cope with these different types of requests? Do they need a different system for each retailer or a common system for all retailers?

MC: Department stores have a huge range of suppliers and just trying to introduce any kind of collaboration is difficult, and this is where I think the Internet is brilliant because of its flexibility. It’s finding the appropriate tool for the kind of entity that you are communicating with, but also having the ability to be flexible enough yourself to be able to demand one of a number of different options.

SH: It’s the interface at warehouse level that’s important. It’s how you put orders into your own supply chain where you get the areas of conflict. We’re going to be totally e-enabled within 12 months with our suppliers and our retail outlets so they can place orders on us and we can send orders off. But the problem we’ve found is managing the bit in the middle, between orders in and orders out.

AB: You can just imagine suppliers getting different views about how to use the Internet, one day from Sainsbury’s, the next from Tesco, the next from Somerfield. Why don’t we get together and commission a group of people to go round and work with suppliers to adopt a common approach?

DN: A lot of the suppliers we deal with today have different paper-based systems for every company they deal with, so if we can get that down to four different ways of doing things then that’s a bit of progress.

AB: We’re embarking on a big programme a key part of which is to scan products into the warehouse so we knew exactly what’s on that pallet. We spent a lot of time with suppliers making sure they could do this. We didn’t want to be different to anyone else, we just wanted to make the mechanics of the supply chain work as easily as possible.

SP: But if we could say to those suppliers that this is going to be the same process, tools and standards between retailers then there should be some advantages for them.

GW: I think that’s quite a big if though. The Worldwide Retail Exchange was meant to standardise the way we communicated to provide a relatively cheap method of standardising information flows and it hasn’t delivered.

SP: We do have to start somewhere though because you can’t have different standards and systems because you’ll just not get the take-up. The Americans are probably a bit ahead of the Europeans in terms of standardising.

GW: I wonder about the catalyst though – there’s been lots of discussions about collaboration in the supply chain but it’s never really kicked off. The challenge for vendors is to respond to an anachronistic and fast moving environment.

CP: I agree. Everyone’s been talking about utopia for a long time, but the reality is that we’ve not really moved forward. And doing things on our own initiatives is probably slowing each other down.

MC: There’s a very distinct difference between processes which give competitive advantage and systems which provide some element of standardisation to give a win win situation for all people involved.

AB: What’s really important is how quickly I can plug and play a relationship with a supplier. I may want to exploit a sourcing opportunity for a vase, which I’m going to put in the middle of my floral display that’s going to give me a big sell of a high margin item. Taking that opportunity, by connecting with a supplier and then disconnecting is where there’s going to be real competitive advantage, particularly in grocery retail.

GW: The idea that in the future we will be able to go to a software supplier or a third party logistics provider and be able to see a diverse range of products, without some form of secondary activity around collaboration, emerges as one of the big dilemmas. Vendors are all competing with one another for software solutions and best of breed but actually that’s not enough any more.

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Delivery dilemmas

NM: I'd just like to move on to e-fulfilment and home delivery. Is this still an area which is holding retail back?

SH: You’ve got to differentiate between home delivery and groceries. They are totally different markets. If you’re ordering groceries you’re going to consume them, but if you’re ordering household goods you might consume them but you might not. You’re buying them on approval.

MC: I slightly disagree because if customers are buying them they will consume them at some point. You still have to match people’s expectations. But just going back to on-shelf availability, I think one thing we would all share is our concerns over the last fifty yards or so.

AB: Over the last year we’ve done a lot of work to be more store friendly. We currently deliver about 200 roll cages to stores everyday and when we first discussed requirements with the stores they equated to a five fold increase. They wouldn’t have been able to move for roll cages. So they don’t always know what they want either. To help overcome this kind of issue, our supply chain director is accountable for the last 50 yards in terms of process definition. Not in terms of delivery, that’s clearly a retail responsibility.

GW: I’m not sure it needs to be. There are some interesting experiences with some of the third party logistics providers. The challenge is both system related in terms of the accuracy of the on-shelf reporting, but also about the process in the stores and what happens back stage. And if you can professionalise that operation the prizes are enormous and I have no difficulty with the idea of outsourcing that. The challenge of expecting retailers to do this and do it well is in my view too great. It’s ripe for change.

MO: Who has got a good measure of on-shelf availability?

AB: We use the rate of sales data to predict availability. This gives us a view of on-shelf availability and an indication of whether this is due to a real stock shortage or a failure of in-store processes.

GW: It’s about defining what good availability is. Woolworths always wanted to have Christmas trees on Christmas Eve but we couldn’t afford to do that. It’s also about availability at certain times of the day. And retailers, the buyers, the supply chain people and the chief executive all have different perspectives.

MC: What about the consumer’s perspective?

AB: The only way you can find out is to ask them. We do a lot of mystery shopping and exit interviews. I don’t think there’s any smart technical solution for that really.

GW: But then can we deal with the exceptions? In some areas it may be getting a product to a customer in 48 hours is quite sufficient. But with soap powder it’s a completely different issue. But equally if I go in after a brand of soap powder and it’s not there then I may be quite happy to substitute. I don’t think we ever really know the impact of substitution on availability and lost sales.

MC: So we don’t really know what the utopia is, let alone how we’re going to get there.

NM: Is this going to change in the next ten or 15 years?

DN: It will change, but the goalposts will shift again. We’ll always be chasing a changing utopia.

AB: I think for once technology has got ahead of how we can think of using it. We’ve got to come up with the ideas for the technologists rather than have them try to sell us stuff. The challenge is there.

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Retail Systems will be holding similar events in the future. For more
information, please email alison.rawstron@retail-systems.com

Information on 2003 roundtable