Cheeper than China, bigger that Texas

by Brooke Anderson on 2010-07-04 00:00:00

Brooke Anderson, a director of XM Software, thinks one of the biggest opportunities for better New Zealand business is in supply chain technology. But he would say that, wouldn’t he?

Brooke XM DevelopmentsNever call a software developer an IT guy – it’s like calling a Kiwi an Aussie. Let me state from the outset that I have nothing against IT people – quite the opposite. They are a crucial part of any operating company. That said, my opinion is there needs to be a change in the IT industry approach to supply chain and ‘integration’.

You may find this odd coming from a director of a software company, but let me explain. IT deals with ‘electronically enabling’ the current process, be it software, hardware or both, and implementing processes as business needs change. IT does not create anything new in order to solve a ‘new’ problem. Software development, however, does. It is the creation of new technology by looking at the entire process, refining it and sometimes removing the process altogether as it may no longer be necessary.

New thinking
Supply chains primarily serve the same function: they deliver product from supplier to customer. IT ‘electronically enables’ those processes so they happen faster, all be it with more paper than ever before, but it’s still much the same process as it was during World War II where the concept of ‘supply chain’ has its roots. Purchase orders, pick and pack lists, consignment notes, invoices and receipts have been around for more than 60 years. Due to IT, they are now merely created and filed differently.

Thankfully, the Internet has ushered in a wave of ‘inter-connect-ability’. This wave has until now hit a logistics ‘breakwater’, because making the software in the warehouse talk to the accounting software isn’t as easy as the IT guys would like us to think. This is prompting new thinking in supply chain technology that is long overdue.

The result is real-time, warehouse-direct ordering software that updates both the warehouse management system (WMS) and accounting ledger whenever a client places an order. Full integration is when products and clients that are added to the back office accounting or warehousing system are automatically populated to the website as well.

When you get to this point, wonderful things happen. You supersede the paperwork mentioned above for starters – it’s still there, but rarely called upon. There’s no need for any manual data entry (other than the client’s initial order), and the time taken to service the customer is greatly reduced by making ordering far simpler (less mistakes) and providing clients the means to track their order through every part of the supply chain, including online proof of delivery.

This seamless and paperless supply chain isn’t a Utopian ideal; this is happening with our clients now.

Successful integration
“Don’t they have systems that do that already?” you ask. No, the ones you can afford don’t. The concept of integrating all your systems is far from new. ERP (enterprise resource planning) is meant to. However, according to the Robbins-Gioia Survey (see http://www.it-cortex.com/Stat_Failure_Rate.htm) 51 percent of the respondents viewed their ERP implementation as unsuccessful. Dedicated WMSs, on the other hand, are wonderful purpose-built pieces of software, but their ability to integrate with outside systems is pretty remote. The website portals they offer for direct ordering look like they were written by, well, WMS developers and not web developers (funny that).

This is important, because ease of use is something web developers understand more intimately than software programmers. You need pictures of products and familiar tools like shopping baskets. It has to be easy to navigate, and designed to avoid too many clicks to get to what or where you want to go. It also needs to be available in colours other than blue!

Many managers see the failure of an online system as the failure of the concept, but if it is easier to phone than use a second-rate online system, then customers will do so.

We can streamline, remove the paper trail, and remove manual data entry (which nurtures mistakes, late couriers, miscommunication and wastes customer services time). So shouldn’t we? A hyper-efficient supply chain methodology will reap huge benefits for the New Zealand economy and the environment.

Working with Malcove, a third-party logistics provider that specialises in the distribution of point-of-sale materials, we have managed to reduce pick and pack errors by 97 percent for Nestlé, reduce customer service calls by over 70 percent and speed delivery time by 200 percent – all with less stock than ever before thanks to some clever forecasting systems which we built in order to reduce promotional waste.

The goal for New Zealand businesses should be to put products on the shelves locally and internationally at competitive prices, without having to eat into profit margins or risk quality in order to remain on par with competitors. Hyper-effective and paperless supply chains are our best chance at achieving that goal.

We will never be cheaper than China, we will never be bigger than Texas, and now we don’t have to be.

Author – Brooke Anderson
XM Developments