UK-based supermarket giant Sainsbury’s is well into a major programme to build four new distribution centres. Two warehouses have already been equipped with new automated systems as part of what chief executive Peter Davis calls a business transformation programme. The roll out of electronic point-of-sale systems in stores and filling stations is backing up the logistics overhaul. The company says it has saved $300m as a result of the improvements.
Meanwhile, at Woolworths an ongoing project to upgrade the company’s IT infrastructure yielded $12m-worth of savings in 2002. Woolworths’ main thrust is to improve its planning and range management so that its supply chain is better equipped to meet seasonal fluctuations in demand.
‘This has allowed us to flow seasonal Christmas stock into the stores earlier and increased our delivery frequencies which resulted in a more controlled and timely supply of product to the stores and improved availability for our customers,’ says a company spokesman. In 2003, the company is seeking further improvements in the supply chain by increasing warehouse operating hours and reviewing pack sizes.
No stopping Woolworths
And Woolworths won’t stop there. The company intends to introduce Manugistics software to optimise its supply chain as part of an initiative to improve planning and replenishment so that sales forecasts are better reflected in the company’s fulfilment network. Supply chain director David McInnes wants to fine tune Woolworths’ inventory levels, set the right product mix and appropriate storage capacity in the supply chain.
Sainsbury’s also has its cheque book out for more logistics-improving technology. The company is investing in systems that will alert managers to problems in its supply chain. In a project involving software company Eqos and consulting firm Accenture as well as key Sainsbury’s suppliers, the grocery company aims to chart the performance of all its products.
The Alerts and Resolution Management software will suggest actions to correct potential problems, which will also be shared with suppliers in a collaborative exercise. Sainsbury’s expects the system to improve its ability to respond to customer demand.
Supply chain software does not always deliver, however. At the beginning of this year chemicals company ICI announced a decision to write off $34m in total on a supply chain optimisation project. When a system from a German software company went live last year, an ICI subsidiary called Quest couldn’t locate materials and the company suffered from a build-up of orders. In the end ICI was forced to acknowledge it was not going to make the expected annual savings of $30m.
ICI’s set back has not phased Shell which is pressing ahead with a supply chain management development with projected savings of an extraordinary $35m per day for the entire oil industry. The plans depend on responding to demand for oil products in close to real time.
Instead of planning production up to a month in advance, the system, developed by i2 and Cap Gemini Ernst & Young and called Demand Planner Downstream Oil, will do it ‘on the fly’. It is designed to quickly work out where oil should be refined according to cost, availability of supplies and how near the refinery is to the market.
In common with most large supply chain exercises the Shell project depends on being able to integrate data and business processes from a wide variety of sources.
Gone are the days of seeing integration as a relatively simple task of connecting a handful of data sources, or the process of hard wiring two applications together in order to support data exchange. Integration grips every element of business – from the foundations of data and information, through an IT infrastructure of databases, applications, and network components, to the overarching business processes and procedures.
The integration technology ‘stack’ has become very complex with ill-defined boundaries and a generally poor understanding of what goes where. Taken in isolation, it is possible for an organisation to understand how each technology might fit into its architecture. But achieving a clear overview and understanding how they will work together can still be utterly baffling.