INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

Supply Chain Management Assignment

Submitted To :

Submitted By: Eram Khan PG/FW/10-12

1.

Companies today are automating their logistics processes by setting up supply chains that connect them with their customers and suppliers. The challenge for them is to determine how to move people and materials most efficiently between a source and a destination. Explain your understanding of this statement with reference to the role of time and technology efficiency in the supply chain of a company?

Every organisation has to move materials. Manufacturers have factories that collect raw materials from suppliers and deliver finished goods to customers; retail shops have deliveries from wholesalers; a television news service collects reports from around the world and delivers them to viewers. Most of us live in towns and cities and eat food brought in from the country. When you order books from a website, a courier delivers them to your door, and when you buy a mobile phone it has probably travelled around the world to reach you. Every time you buy, rent, lease, hire or borrow anything at all, someone has to collect it and deliver it to your door. Logistics is the function responsible for this movement. The term of logistics - firstly used by the ancient military Greeks as Logistikas referred to all activities of procurement, maintenance, staff materials and facilities to supply the troops, from the base to their farther positions, along with the war necessities. Later, three separate branches of logistics were developed, close connected to army, to business and to production. Furthermore, two other specific concepts took shape in nowadays business environment. Production Logistics refers to those activities where machineries are to be provided with the right raw material in appropriate quantity and quality, at a specific point in time. As the transportation of these products doesnt look to be the main purpose of the logistics, the attention remains focused on the activities of sorting out and control of the flow - through the value adding processes to eliminate the non profitable ones, as the core competence of the entire activity. This way, production logistics provides the means to achieve the customers response and capital efficiency. SmartTruck is working on intelligent vehicles and dynamic route planning. To this point, a new variety of the telematics has been generated to create smart mapping routes, dating management routine and consigning exchange between two couriers in order to have them arrived at the right destination as swiftly and efficiently as possible. This works out the optimization of delivery routes and vehicle capacities, by lowering the resource consumption along with transportation costs and environment pollution. Flexibility and spontaneity have become vital components both in business and in private life. At the time of placing an order it is often not foreseeable where one might be at the time of delivery. The core idea of mobile parcel is the breakup of the established unit of a home address into a delivery address during a potential business trip. These are choices that can only become possible with a new understanding of deliveries. Thus mobile parcel is a logical succeeding stage of already existing innovative solutions - such as pack-station - on the path to more flexible shipping networks solutions.Automotive manufacturers continue to lead the charge in developing innovative methods to squeeze costs out of their manufacturing and production operations."The automotive industry places increasing emphasis on rebates and low-financing packages," says Dick

Lancioni, Ph.D., professor of logistics at Temple University. "That can cost manufacturers up to $3,000 a unit, and they've got to get those costs back from someplace. That's why they go back into the supply chainto gain more efficiency there."Automotive manufacturers establish strong partnerships with their third-party logistics (3PL) providers to help them achieve the efficient metrics they need. By inventing new ways to move materials, manufacturers were able to deal with the cost equation that came about in the 1980s and 1990s due to increased levels of complexity in automotive production processes."These complexities required us to move from whittling away costs a little at a time to inventing new processes to handle density reductions, increases in shipping requirement times, and increased demand for on-time deliveries because of reductions in inventory levels," says Ed Sprock, director of logistics for the Chrysler Group. "Funding inventory became far too big a drain on companies' balance sheets." "The supply chain is an integral part of the entire manufacturing process," says Tim Connearney, materials director for Saturn Corporation, Spring Hill, Tenn. "A large part of that process is running millions of miles to hundreds of suppliers, so a lot of dollars are expended in overall vehicle production. That means we have to find ways to eliminate waste in the supply chain.""Automotive manufacturers deal with what is probably the most complex menu of items of any industry," says Bill Naples, transportation manager for Ford Customer Service Division (FCSD), Livonia, Mich."For example, we see a transmission not as a whole part, but as hundreds of boxes of parts of all different shapes and sizes, each with its own part number and its own location in warehouses we have to manage," says Naples. "As a consequence, we have to be more innovative in maintaining an affordable business structure. In our industry, customers enjoy free delivery of their orders." The biggest change in the industry is how manufacturers and their 3PLs tackle challenges holistically by optimizing pickups between a supplier and several manufacturing plants, says Kevin Mixer, research director for automotive and heavy equipment, AMR Research. "To be more efficient, an auto manufacturer might have more velocity of inbound parts and smaller shipments picked up and delivered more frequently to keep inventory low."Pilot initiatives have already achieved a few million dollars in savings, just through changing the frequency of inbound parts, Mixer notes.Inbound Logistics looks under the hood of three operations to see how two automotive manufacturers and a customer service division use 3PLs to keep them nimble and efficient. The accompanying sidebar outlines a trend in the industrymanufacturers utilizing the particular strengths of more than one third-party logistics provider. Therefore, we can say that Companies today are automating their logistics processes by setting up supply chains that connect them with their customers and suppliers and the challenge to achieved on how to move people and materials most efficiently between a source and a destination.

2.

In 10 years, Wal-Mart transformed itself by changing its logistics system. It has the highest sales

per square foot, inventory turnover and operating profit of any discount retailer. Analyse and interpret the Supply Chain strengths of Walmart that helped in its success in the value retail sector.

Wal-Mart Stores, Inc. (NYSE: WMT), branded as Walmart since 2008 and Wal*Mart before then, is an American multinational retailer corporation that runs chains of large discount department stores and warehouse stores. The company is the world's third largest public corporation, according to the Fortune Global 500 list in 2012. It is also the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family who own a 48% stake in Walmart. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America. Walmart has 8,500 stores in 15 countries, under 55 different names.The company operates under the Walmart name in the United States, including the 50 states and Puerto Rico. It operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada. Walmart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, whereas ventures in Germany and South Korea were unsuccessful. Operating divisions o o o o o Walmart Discount Stores Walmart Supercenter Walmart Neighborhood Market Supermercado de Walmart Walmart Express

Over the past ten years, Walmart has become the worlds largest and arguably most powerful retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount retailer. Walmart owes its transition from regional retailer to global powerhouse largely to changes in and effective management of its supply chain.

Walmart began with the goal to provide customers with the goods they wanted when and where they wanted them. Walmart then focused on developing cost structures that allowed it to offer low everyday pricing. The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy, which relied on a logistics technique known as cross docking. Using cross docking, products are routed from suppliers to Walmarts warehouses, where they are then shipped to stores without sitting for long periods of time in inventory. This strategy

reduced Walmarts costs significantly and they passed those savings on to their customers with highly competitive pricing. Walmart then concentrated on developing a more highly structured and advanced supply chain management strategy to exploit and enhance this competitive advantage.

Components of Supply Chain Management (SCM) The main elements of a supply chain include purchasing, operations, distribution, and integration. The supply chain begins with purchasing. Purchasing managers or buyers are typically responsible for determining which products their company will sell, sourcing product suppliers and vendors, and procuring products from vendors at prices and terms that meets profitability goals.

Supply chain operations focus on demand planning, forecasting, and inventory management. Forecasts estimate customer demand for a particular product during a specific period of time based on historical data, external drivers such as upcoming sales and promotions, and any changes in trends or competition. Using demand planning to develop accurate forecasts is critical to effective inventory management. Forecasts are compared to inventory levels to ensure that distribution centers have enough, but not too much, inventory to supply stores with a sufficient amount of product to meet demand. This allows companies to reduce inventory carrying costs while still meeting customer needs.

Moving the product from warehouses or manufacturing plants to stores and ultimately to customers is the distribution function of the supply chain.

Supply chain integration refers to the practice of developing a collaborative workflow among all departments and components involved in the supply chain to maximize efficiencies and build a lean supply chain.

Walmarts Method of Managing the Supply Chain Walmart has been able to assume market leadership position primarily due to its efficient integration of suppliers, manufacturing, warehousing, and distribution to stores. Its supply chain strategy has four key components: vendor partnerships, cross docking and distribution management, technology, and integration.

Walmarts supply chain begins with strategic sourcing to find products at the best price from suppliers who are in a position to ensure they can meet demand. Walmart establishes strategic partnerships with most of their vendors, offering them the potential for long-term and high volume purchases in exchange for the lowest possible prices.

Suppliers then ship product to Walmarts distribution centers where the product is cross docked and then delivered to Walmart stores. Cross docking, distribution management, and transportation management keep inventory and transportation costs down, reducing transportation time and eliminating inefficiencies.

Technology plays a key role in Walmarts supply chain, serving as the foundation of their supply chain. Walmart has the largest information technology infrastructure of any private company in the world. Its state-of-the-art technology and network design allow Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics.

Benefits of Efficient Supply Chain Management Wal-Marts supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved in-store variety and selection, and highly competitive pricing for the consumer. This strategy has helped Walmart become a dominant force in a competitive global market. As technology evolves, Walmart continues to focus on innovative processes and systems to improve its supply chain and achieve greater efficiency.

Over the past ten years, Walmart has become the worlds largest and arguably most powerful retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount retailer. Walmart owes its transition from regional retailer to global powerhouse largely to changes in and effective management of its supply chain. Walmart began with the goal to provide customers with the goods they wanted when and where they wanted them. Walmart then focused on developing cost structures that allowed it to offer low everyday pricing. The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy, which relied on a logistics technique known as cross docking. Using cross docking, products are routed from suppliers to Walmarts warehouses, where they are then shipped

Walmarts focus on sustainable business led the company to advocate environmentally beneficial products as well as products sourced from more environmentally responsible sources. This in turn has provided Walmart customers an opportunity to take the environmental initiative. As part of a commitment to reducing energy consumption across the U.S. Walmart has promoted the use of compact fluorescent light bulbs (CFL). The replacement of one traditional bulb with a CFL will save the consumer US $30 in electricity costs over the life of the bulb and reduce green house gas emissions by 200 kilograms. By the end of 2010, Walmart had sold 460 million CFLs. In 2010, the retailer prioritized acquiring its paper and wood products from certified responsibly managed forests. Walmart also recycled 6.5 million kilograms of tyre rubber, including rubber from the companys fleet, into outdoor mats.

Walmart has worked with its suppliers to improve the environmental efficiency of its existing products. Hot water contributes to 90% of a laundry loads energy consumption. So, in conjunction with the U.S. Federal Trade commission and the companys manufacturers, Walmart increased the percentage of clothing labeled Machine Wash Cold from 37% to 74%, cutting both household power bills and energy consumption. The Wall Street Journal piece says that, Amid the country's growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives. The Internet has changed shoppers' preferences and eroded the commanding influence Wal-Mart had over its suppliers. The impact is obvious. While certainly still the largest gorilla in the retail jungle by far, and a huge percent of sales for most consumer goods companies, Wal-Marts overall growth has slowed dramatically in the US; international strategies have had mixed success; and the percent of total sales through Wal-Mart channels for many companies, such as Procter & Gamble, are shrinking.

3.

Analysis of the impacts of Sharing Production Information and Market Intelligence on Supply

Chain Dynamics and an improved and Long-Term Vendor Relation.

Supply chain dynamics has been studied for more than three decades. Since Forrester (1961) discovered the fluctuation and amplification of demand from the downstream to upstream of supply chain, there have been considerable literature analysing this phenomenon (e.g. Towill 1991, Wikner et al. 1991, Towill et al. 1992, Wu and Meixell 1998, Helo 2000). This effect can be readily illustrated in the well-known Beer Game in which one can observe the amplification of demand signals and fluctuation of inventory levels along a supply chain which consists of customer, retailer, wholesaler, distributor and factory. Each player makes the ordering decision based on the order received from the downstream player and the players own inventory policy. Due to time delays in order and material transfer and lack of information exchange between players, higher amplification of order and inventory fluctuations are observed in the upstream of the supply chain (i.e. distributor, factory) (Sterman 1989, Simchi-Levi et al. 2000). In this context, supply chain dynamics have been defined as the variation of orders or inventory level. This effect is obviously undesirable as it exacerbates the supply chain costs (e.g. stock holding, backlog, late delivery, under/over resource utilization etc.). The source of such fluctuation and amplification of orders and inventory is mainly due to the lack of timely sharing of production information including delays and feedback in the decision rules between enterprises in the supply chain (e.g. Lee et al. 1997, Simchi-Levi et al. 2000). These factors lead to distortion of actual demand information and cause unnecessary wastes. Lee et al. (1997) have studied this phenomenon extensively and termed it as the bullwhip effect. From the studies of the bullwhip effect (e.g. Lee et al. 1997, Metters 1997), one of the remedies is to share information along the supply chain. It has been reported that benefit of information sharing is significant especially in reducing the bullwhip effect (e.g. Lee et al. 1997, Cachon and Fisher 2000, Lee at al. 2000) and supply chain costs (e.g. Swaminathan et al. 1997, Gavirneni et al. 1996, Tan 1999). By using the shared information, each supply chain entity can make better decisions on ordering, capacity allocation and production/material planning so that the supply chain dynamics can be optimised. Information sharing, however, may not be beneficial to some supply chain entities due to high adoption cost of joining the inter-organisational information system, unreliable and imprecise information (e.g. Swaminathan et al. 1997, Cohen 2000). National Research Council (2000) reported that there are some barriers (e.g. expensive technology investment, personnel training, lack of mutual trust etc.) which hinder small and medium sized enterprises (SME). Moreover, information sharing can be detrimental if the shared information is not used intelligently (Hong-Minh et al. 2000). Regarding technology of implementing information sharing, electronic data interchange (EDI) has been employed as a major tool of information sharing for many years (e.g. Davis and OSullivan 1998, Strader et al. 1998, Lee at al. 2000, Bhatt 2001, Warkentin et al. 2001). As Internet and ecommerce technology continue to evolve, there have been studies on how such technology can improve supply chain performance, especially on information sharing (e.g. Davis and OSullivan 1998, Strader et al. 1998, Conway 2000, Graham and Hardaker 2000, Tan et al. 2000, Croom 2001, Kehoe and Boughton 2001, Warkentin et al. 2001). Given a wide spectrum of information technologies (e.g. Internet, Extensible Mark-up Language (XML), Common Object Request Broker Architecture

(CORBA)), it is unclear which technology is most suitable for enabling the sharing of production information in supply chain. Information sharing and coordination between the buyer and vendor in the supply chain have been considered as useful strategies to remedy the so-called bullwhip effect and to improve supply chain performance. The debate is not about whether or not production information should be shared in the supply chain, but about how to share the right information at the right time in the right format by the right people under the right environment to maximize the mutual benefits of the supply chain as a whole as well as the individual business players.

Supply market intelligence is a current buzz-phrase currently gaining rapid exposure. It is essentially an upgrade of supply market analysis and can be defined as the process of gathering, filtering, distilling and presenting information relevant to a company's supply markets. The specific purpose is to support accurate and confident decision making in the procurement process. A properly executed and insightful supply market study requires that significant and disparate amounts of research materials be collected through primary and secondary research. Traditionally, supply market analysis has included developing a commodity profile, examining cost structures, researching suppliers, and identifying key market indicators. Being able to able to assemble a supply market analysis for a given commodity is a skill that is essential for every supply chain professional to master Primary and secondary research Primary research is information gathered through interactions with other people typically through meetings, one-on-one structured interviews, focus groups, and surveys. Primary research with current and prospective vendors is often more valuable and insightful than secondary research. The deluge of information available on the Internet, both reliable and suspect, can be accessed equally by billions of users. Primary research is an essential element towards creating a competitive advantage.

This is the fun bit. Secondary research is information collected from existing literature, publications, broadcast media, and other non-human sources. This is generally easier to gather than primary and is often valuable in relation to the effort expended. Whether you are studying the market outlook for male personal hygiene products in Southern Africa for the next five years or an in-depth analysis of future capital flows and investment trends in hospital construction, it is all "out there". A recent report on the South African economic environment predicts that the pharmaceutical industry will grow much faster than other sectors due to a strong continuing demand for primary healthcare level drugs, such as generics, antibiotics and over-the-counter remedies. Intelligent steps to take towards really knowing your commodity Develop the Commodity Profile Find out the international product classifications and document the commodity definition. Consult widely and get a clear understanding of the important technical and quality issues.

 Determine the Cost Structure. Over and above the usual adding up of raw material costs, labour, transport, energy, overheads etc, you can be more innovative. Listed companies are required to publish financial statements and do presentations on their business results. Scour this information for clues to their cost profiles. Research all Suppliers This requires focus and effort and is an on-going process. Establish if the global market is fragmented or consolidated, where the low-cost suppliers are, possible new supply channels and any pending mergers or buy-outs. This is an area is where you may need help from the specialist organizations that provide news and intelligence services, especially where they target unlisted companies. Customized dashboards are available that are designed especially to track activity within your commodity. But at a price! Identify Key Market Indicators. The good news is that most global and regional market indicators are frequent, reliable and free. Economic and indicators track high level commodity prices, production rates, inventories, GDP and employment statistics. You can even set up alerts so that you don't miss any key events or developments. Should your organization be kind enough to provide you with analyst support or if you have excess time on your hands, you can delve into technical and detailed analyses for important commodities using SWOT analysis, Porter's five forces and PEST. PEST stands for "Political, Economic, Social, and Technological analysis" and you can even upgrade it to PESTLE if you add Legal and Environmental impacts Supply market information challenges will always be with us Identifying high risk suppliers is one of the major reasons why we undertake the laborious research into our supply markets. Risks can be mitigated to some extent through tracking and managing supplier performance issues and monitoring the changing financial status of key suppliers but this is not foolproof. It is necessary to have a Plan B ready where you have already identified alternative suppliers to replace or supplement existing suppliers. Avoidance of supply chain disruptions due to supplier failure is vital for business continuity. Information overload is trap that it is easy to fall into, as is analysis-paralysis. Managing key suppliers by exception allows you to use your limited resources wisely. Continuous monitoring of high impact suppliers through the use of scorecards, graphs and charts helps ensure that you can store and share current information and provides an early warning system for senior management. Sourcing managers, especially in Southern Africa, are doubly challenged as they are required to have a diverse supplier base. This can involve a time-consuming supplier qualification and record keeping process. Government regulations and economic development initiatives which are designed to offer supply opportunities to micro-, small- and women owned businesses need to be followed. In most African countries, a percentage of local content is an important requirement. All of these issues add complexity to the maintaining of a good supplier intelligence database. Competitive advantage through knowledge and analysis

One's analysis efforts should be focused on heavily concentrated markets where there a few large suppliers and also on highly fragmented markets where smaller suppliers can cause supply interruptions due to financial instability. Tracking of key market indicators can provide insights in supplier cost structures which helps determine if you are achieving the best possible deal. An in-depth knowledge of the supply market dynamics in a commodity can reduce risk. By developing a comprehensive understanding of the number, type and structure of suppliers you can keep your options
open and lower the risk of supply interruption.

4.

With regard to the increased use of technology and mechanization due to larger volumes of

business in the supply chain define the role and importance of RFID Technologies, Data Warehousing, Data Mining etc and its Supply Chain Applications and implementation issues.

The applications of Radio Frequency Identification (RFID) and Electronic Product Codes (EPC) in supply chain management have vast potential in improving effectiveness and efficiencies in solving supply chain problems. EPC is the concept of storing product identification on chips no larger than a grain of sand, then placing these chips on tags, which in turn are placed on objects so they can be uniquely identified. RFID technology can track inventory more accurately in real time resulting in reduced processing time and labor. There are many applications and possibilities for RFID/EPC as these objects in motion are traced throughout the supply chain. The complete visibility of accurate inventory data throughout the supply chain from manufacturers shop floor to warehouses to retail stores brings opportunities for improvement and transformation in various processes of the supply chain. RFID technology can help a wide range of organizations and individuals such as hospitals and patients, retailers and customers, and manufacturers and distributors throughout the supply chain to realize significant productivity gains and efficiencies. RFID technology has been promising to enhance support supply chain management efforts future success of RFID and other mobile services will be strongly affected by the ability of businesses to offer the right products and services to consumers [1], [6]. RFID has the potential in other areas of operations, such as manufacturing, after-sales service support, and total product life cycle management [18]. An RFID system can be used to identify many types of objects, such as manufactured goods, animals, and people. RFID technologies support a wide range of applications everything from asset management and tracking to manufactured products and related customer services to access controls and automated payments. Each RFID system has different components and customizations so that it can support a particular business process for an enterprise. Depending on the application in an industry and the enterprise within an industry, A RFID system can be very complex, and its implementations may vary greatly. Conceptually, RFID system may be composed of three subsystems as shown (1) An RF subsystem, which performs identification and related transactions using wireless communication, (2) An enterprise subsystem, which contains computers running specialized software that can store, process, and analyze data acquired from RF subsystem transactions to make the data useful to a supported business process, (3) An inter-enterprise subsystem, which connects enterprise subsystems when information needs to be shared across organizational boundaries.

Excellent supply chain and inventory management is a complex and vital part of retail strategy. Getting this right can make the difference between success and failure, profit and loss, growth and loss of market share. Nothing will send customers across the street to the competition faster than a poor supply strategy that leaves shelves bare of the products they want. Allowing products that do not sell to sit on shelves is also obviously counterproductive. However, getting it right is not easy in this just-in-time world where supply chains typically reach halfway around the world. The products you need may start with components and parts manufactured in China, with precision part finishing and sub-assembly in the United States and final assembly in Mexico before being shipped to the retail outlet, ideally just in time to go on the shelves. Managing such a complex supply chain requires sophisticated data analysis that can allow the retailer to anticipate demand, and particularly shifts in that demand, ahead of time. As with customer-centric data, capturing all the relevant data in a single, central location a data warehouse where it can be mined for vital information is a key to gaining competitive advantage. As with the customer-centric data warehouse, this takes effort, and not all retailers have invested the resources to capture all the data and ensure that the data they do capture is high quality. This, however, creates opportunity for those retailers who are willing to invest that effort.
Analytic Subject Areas

The first question, then, is what main areas and sub-areas should the data warehouse cover? We believe that the retailer needs to focus on five main areas: Inventory Management Inventory management breaks down the basic information on inventory into segments by several metrics to track performance of the supply chain from purchase order to store, allowing analysis and optimization of inventory to meet customer demand. An overall score of the supply chain's efficiency can be determined by assessing metrics such as: The rate of stock turnover for the best and worst performing products Total investment in inventory over time Amount of inventory in each stage of the supply chain (order, shipping, en route to store, on shelves) at a given time Products that are getting returned often (and why) In-stock position

There are a number of different ways to view inventory management depending on the class of retailer, the kinds of merchandise they sell and their brand image with customers. For example, a grocer with a mid-priced brand image selling staples such as milk and bread may offer a limited selection of SKUs and put them on full replenishment, needing only a rate of sale and quantity on hand to trigger automated re-ordering systems. This is inventory management at its simplest. It is also very important to price staple items competitively; thus, an understanding of the competitor's pricing is a vital data point.

On the other hand, a fashion retailer selling seasonal apparel items has a much more difficult set of decisions to make, although the profit on each item may be higher than in our previous example. Analysis of SKUs across a silhouette or class may be applicable in determining whether to mark down or promote the product. Often, a season's worth of merchandise may be purchased in only a few "buys" due to the shortness of the season and the need to clear the merchandise by season's end to avoid massive markdowns. Vendor Management Vendor management looks at the state and value of the retailer's relationship with each supplier. A quantitative measure of each vendor's value to the retailer can be obtained by analyzing areas such as: Actual sales and returns of each vendor's products compared to predictions The vendor's ability to deliver products on time The flexibility of each vendor in handling changes Frequency of product returns for each vendor

Additionally, measuring how long the retailer takes to pay the vendor's invoices and whether delays in payments are causing delays in order fulfillment can uncover problems in the retailer's systems. Sharing up-to-date sales and stock information with vendors is becoming more common, yet this remains an underleveraged method for improving the relationship with each vendor. In previous articles, the concept of a vendorbusiness intelligence (BI) extranet has been discussed, along with the value that can be gained from such a BI-based application. Allowing vendors to see the retailer's view of their performance creates shared visibility into problems in the relationship and minimizes the communication gap that can be created in supplier/retailer collaboration. It can be helpful to have high-level metrics available in a vendor scorecard, along with the ability to drill into order and shipment level detail to look for anomalies. Product Cost Analysis Product cost analysis creates a more granular insight into costs by analyzing markups, discounts and other costs such as shipping, storage and stocking. It should answer key business questions such as: How can product costs be reduced while enhancing product and customer profitability? What is the impact on profit and revenue of changes in sales prices and product mixes?

Cost of goods sold may be the vaguest metric in the entire retail business. While the definition is universally understood from an accounting perspective, most retailers have many different definitions of "cost" that are not always well understood. Most frequently, accounting and merchandising view cost differently, and the store operations function may tack on additional "costs" to incent particular store manager behavior. In this environment, creating an enterprise repository of the components of cost and using that repository as the basis for calculating one or many derived costs achieves the benefit of removing variations from different databases.

Merchandise and Assortment Planning Merchandise and assortment planning valuates performance of assortments, stores and departments. It can support optimization of store clusters and assortment plans based on actual results by analyzing information such as: The open-to-buy position compared to the previous year Profiles of store clusters Performance of clusters in various locations

While not typically thought of as part of the "supply chain," the process of merchandise and assortment planning initiates actions in the supply chain, namely the writing of orders to suppliers for goods to be manufactured and delivered to distribution centers and stores. These two processes are evolving retail disciplines. They are heavily data driven and require reliable information stores and analytical tools to be effective. Many retailers purchase specialized tools for these functions, but the inputs to those tools (SKU sales history) and the outputs from them (assortments, financial targets) become key data warehouse elements to be analyzed historically. Distribution Center Operations Distribution center operations monitors performance of distribution centers. By aggregating employee costs, shipments and receipts, shrinkage and weeks of supply, it can quantify the fixed costs of managing distribution centers, how shipping costs have changed over time and the relative level of efficiency of the distribution centers. That information can support investigation of the potential for reducing costs through employee retraining or reassignment, the use of alternative shipping methods and changes in handling methods to reduce breakage. Merchandise and Assortment Plans (objectives for the business related to inventory and sales) Information on financial plans and targets, open-to-buy data and assortment plans by store should be sourced to compare with actual results. Vendors, Deals, Purchase Orders (vendor-centric data) Contract and deal details, incentives for bulk purchases and baseline inventory costs are vital for creating better strategies for minimizing direct costs of re-supply. Products (specific and general product information) Segment-specific information can provide the basis for reallocating shelf space to product segments (fashion, food, etc.) according to the volume of sales of each segment in each store. Inventory Movement and On-Hand Physical and calculated inventories, inventory receipts and adjusts, supplier shipments and intra-enterprise item movements are obviously vital to ensuring optimal inventory levels. Data on transfers between distribution centers and stores can identify excessive handling issues.

PROS AND CONS OF RFID USE Pros Real-time data on assets and goods. Increased data and knowledge for decision making. Reduced theft and loss. Improved inventory efficiency and management. Reduced labor costs. Increased efficiency and product flow. Goods authentication. Improved risk mitigation. Reduced human error. Cons High implementation cost. Lack of globally accepted use standards. Lack of better middleware. Privacy intrusion. Strain in the IT infrastructure by overwhelming information systems as real-time scans move between multiple applications. DATA MINING ISSUES One of the key issues raised by data mining technology is not a business or technological one, but a social one. It is the issue of individual privacy. Data mining makes it possible to analyze routine business transactions and glean a significant amount of information about individuals buying habits and preferences. Another issue is that of data integrity. Clearly, data analysis can only be as good as the data that is being analyzed. A key implementation challenge is integrating conflicting or redundant data from different sources. For example, a bank may maintain credit cards accounts on several different databases. The addresses (or even the names) of a single cardholder may be different in each. Software must translate data from one system to another and select the address most recently entered.