It sounds almost like sacrilege to hear True Value Company’s Steve Poplawski say that tools alone won't solve your supply chain problems. “For me, it is really people, process, and tools,” says the senior vice president of logistics and supply chain management for the world’s largest retailer-owned wholesale hardware cooperative.
True Value, as an organization, certainly understands tools. One quote in its annual report offers some insight into how it sees its role. People don’t buy quarter-inch drill bits because they need a quarter-inch drill bit, it says, they buy a quarter-inch drill bit because they need quarter-inch holes.
In supply chain terms, Poplawski’s quarter-inch hole is a common mission. He recites the standard “right product in the right place, at the right time, in the right condition, and at the right price” mantra, but points out that common mission doesn’t change if you are a distribution person, a transportation person, a planner, or any of a number of other functions.
“You have to have a clear idea of how a tool is going to fit into your processes,” Poplawski points out. Recalling the first time he put together a replenishment logistics operation, Poplawski says when he tried to get the various functions to work alike he discovered that people don’t really understand the upstream and downstream process across the supply chain. “We didn’t grow up like that,” he says. “We were either planning people or we were transportation people.” Poplawski realized everyone had to share that common mission, then the tools could support their efforts in achieving that larger goal.
There are no silver bullets, he adds; supply chain management is about getting visibility to manage your supply chain. “You’re really trying to identify those conditions that are going to improve your supply chain over time. Those people who buy a product [tool] and turn it on expecting there’s going to be magic are disappointed.
With a few bruises and battle scars to show for past efforts serving retail supply chains, Poplawski recognizes the importance of getting the right tools and having the processes and people in alignment. “We have a very short lead time on the front end,” he notes. If a store gets a delivery on Friday, “we understand their demand on Wednesday afternoon,” says Poplawski. “So, we’re forecasting on wholesale demand that isn’t true consumer demand in a very short order cycle. It’s an unforgiving supply chain.”
Being part of a coop doesn’t guarantee loyalty, so the pressure is on for that supply chain to perform. Many of his member/customers are convenience hardware stores, explains Poplawski, and they have to have product on the shelf. His network of 12 distribution centers that operate as full stocking locations actually act as the retailer’s back room. They are small operations and typically don’t have storage areas, he points out. Sometimes, their level of patience is as short as two weeks. “If it misses the first truck, they’re out looking.” That translates into tight control and visibility all along the supply chain.
Poplawski knew he didn’t want to treat everyone in the supply chain the same. When he sat down to talk to Sterling Commerce (www.sterlingcommerce.com), they said the person that’s the receiving clerk or manager is looking for something different from the planner or the replenishment person. And, Poplawski, as an executive, was looking for other information and levels of granularity into the data to manage the different processes. Everyone was operating from the same database, but with different functional and detail requirements.
True Value’s legacy system could provide information on one variable, says Poplawski. “I couldn’t say, ‘let me see all the late purchase orders from this part of the country and from these carriers.’” Poplawski needed more than a fire-fighting tool that would let him react to problems close to when they were going to hurt him, he needed something that would help him recognize a problem sooner in the supply chain and allow more flexibility to respond proactively and recover at a much lower cost.
True Value's members and their customers like brands, says Poplawski, so much of True Value’s purchasing is from manufacturers who are importing, but True Value is not buying a direct import, it is being replenished from the supplier’s domestic distribution center.
True Value does do some direct importing and it has some consolidation activities in Shanghai and other locations in Asia (along with the companion deconsolidation activities in the US). “We’re going to maintain visibility of all of those throughout this process,” he says.
Where True Value is providing private label products, it may be the direct importer. This varied fulfillment model means True Value is monitoring shipments from domestic distribution networks of its own and its suppliers along with activities of freight forwarders, customs brokers, and some overseas consolidators on occasion.
For imports, True Value has up to five different defined flow paths. Some will call for product to go into a direct container shipment, others will go to a consolidation center where they are married to other shipments, all of which will be broken down in a deconsolidation center when they reach the US.
Once in the US, goods are moving to 5,600 locations, some in relatively rural areas, explains Poplawski. Unlike larger retailers who might fill a truckload to drop ship to a store a few times a week, True Value may be scheduling a “milk run” with 10 or 12 stores on a run. Those types of deliveries are often street deliveries to stores that don’t have a dock, so Poplawski uses a private fleet operation, which is very member friendly and cost effective. For the larger or longer runs, True Value is able to contract the moves. But in addition to the routing, Poplawski points to the complexity of the freight mix. They can be loading pitch forks and bow rakes along with swimming pools and paint for a retailer.
All of this, and they’re basically doing the planning the night before. Visibility is not just important, it’s critical. Here, Sterling Commerce helps connect the various trading partners by providing a value-added network (VAN).
The complexity and changes in supply chains make it difficult for enterprise systems and legacy systems to keep up, say Richard Douglas and Josh Hardy of Sterling Commerce. One of the goals of Sterling’s on-demand systems and VAN is to bring together the trading partner community and provide management integration as well as multi-channel and multi-tier applications that bring those applications together and help fill the “white space.”
“You hear a lot about the perfect order,” says Douglas, director of global industry marketing, “but many companies can deliver on time and intact and still have trouble delivering profitable orders.” The orders still get out on time, but dealing with all of the exceptions along the way is eating away at margins. As True Value’s Poplawski reflects, visibility along the supply chain helps identify where those problem areas are and lets the trading partners deal with them proactively.
It’s becoming a cliche that supply chain execution is the key to success and the best supply chain wins, but Sterling’s Hardy and Douglas point out that business relationships and trade partner management are keys to those strong supply chains. In a manufacturing context, they suggest the “community” is comprised of four groups: The suppliers and customers, The third party logistics companies (3PLs), forwarders and other service providers, Contract manufacturers (outsourced production), And, finally, the financial institutions who manage the order-to-cash element.
Manufacturers have automated transactions, say the Sterling executives, but typically this is true with only a minority of suppliers. They may still be receiving faxes or written documents from some suppliers. In those cases, they’re rekeying the information, which has implications on visibility and timeliness of information as well as accuracy.
Sterling is among a number of suppliers offering visibility options. It’s hosted network of applications support access in forms that suit the levels of technology at the various trade partners along the supply chain. They claim to be able to receive data via fax, in Web forms, electronic data interchange (EDI), and XML and from other networks besides Sterling’s own VAN. Sterling has 19,000 partners, say Douglas and Hardy, including 9,000 transportation companies using its transportation management system (TMS) and 90 public and private interconnects which spell access to 270,000 EDI IDs.
Sterling’s reputation and its applications are part of Poplawski’s decision. He has a certain comfort level with the major banks and stock exchanges who entrust data to the VAN, but he admits that value added networks have become commoditized, and there are a number who would be happy to facilitate a transfer for any user who wanted to change networks. Reliability, security, the services provided, and the relationship with Sterling Commerce have helped Poplawski and True Value achieve many of their supply chain management goals. His approach of aligning the people, processes, and tools to achieve a common goal help ensure the efficacy of that supply chain.