Automated Store Replenishment (ASR) is by its own definition “an
environment in which a computer is responsible for ordering and maintaining the
proper levels of inventory within an organization involved in the process of
handling goods for its own use, or for resale to a third party.”
In a retail environment, the goal of ASR is to literally
REPLACE manual ordering, specifically the ‘order clerk’ at store level. Ref. “The Art and Science of Computer Assisted Ordering” – Barbara V
Anderson.
Empirical research over the past eight years has proven, “not
only is the process of manual ordering time-consuming, the value of continuing
with such a program is inferior to employing a more sophisticated approach,
mainly utilizing mathematical processes alone”.
But
didn’t you just say, “Experts tend to agree that a purely mathematical approach
to inventory management is impractical?”
Yes I did. However, errors in ASR are rare, IF you adhere to
three, basic principles: These principles involve a strictly defined system for
‘purchasing’, another for ‘sales’, and the most important of all, a means to
provide continuous ‘audits’ of inventory in the stores. Of the three, the most
neglected of these is by far the process involving ‘continuous audits’.
Over the years, retailers strived to lessen the cost of
these processes and done almost nothing toward improving their value. To
further understand the knowledge you have gained so far, let’s expand upon
these principles, and examine each of these as individual processes with the
forthcoming understanding that in the end, they will form a ‘tripod of
stability’ within your organization.
Purchasing
Forming what experts refer to as ‘Managed Supplier
Partnerships’ with vendors, was not exactly a slam-dunk for Walmart. In Marcia
Layton Turner’s excellent book, “Kmart’s 10 Deadly Sins”, she characterizes
Kmart’s 2001, failed attempt to become the lowest priced retailer when she
writes, “When Kmart decided to lower its prices, it did so without even
consulting its suppliers to get their feedback on its grand scheme or to ask
for support”. She goes on to say, suppliers would have been more than willing
to support Kmart’s plans, IF they had been asked.
Walmart, on the other hand, upon hearing of Kmart’s grand
plan, immediately consulted with their suppliers about lowering prices of
products sold to Walmart with assurances of volume increases, meaning more
profit for all. By doing so, Walmart formed a Managed Supplier Partnership with
its vendors, a move that Kmart discounted as ‘unnecessary’.
During the past eight years, we have been working closely
with a customer’s primary supplier in an attempt to, not so much lower his purchase
prices, but to increase the level of integration between this particular
supplier and its retailers. One thing we learned quickly is every supplier has
different ways of communicating with their retailers, and the way they do this
is more or less defined by the back office software the retailer is using.
However, keeping in mind the “tripod of stability” I mentioned earlier,
virtually none of these software providers have developed systems that have
successfully integrated all three. This is by no means a criticism of their software;
it is simply a statement of fact, based upon their abilities to operate within
the limits of their current technology.
More than anything else, technological issues stand in the
way of successful Managed Supplier Relationships. Go to http://industryweek.com/articles/how_to_build_a_better_supplier_partnership_24607.aspx?Page=1
to read a four-page article
on how to build a supplier partnership and you will better understand why the
size of the retailer and its technology play an important role in its success
or failure.
More to come…..
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