Linking Planning and Execution Systems for Retailers’ Nirvana--Improved Visibility and Fulfillment
Written By: Predrag Jakovljevic
Published On: April 11 2005
Linking an APS System to an ERP System
An advanced planning and scheduling (APS) system offers a mix of design and planning tools that use mathematical procedures to optimize the flow of goods across the supply chain. It generally includes separate planning modules for managing demand, distribution, production, material requirements, purchasing, and fulfillment, all of which have some overlap with the modules of back-office enterprise resource planning (ERP) systems.
APS systems were originally designed as bolt-ons with the idea of plugging into an ERP system's database to download information and then create a feasible schedule within identified constraints, such as finite capacity. The new schedule can then be uploaded into the ERP system thereby replacing the original material requirements planning (MRP) results, which were based on infinite capacity.
These APS systems typically offer simulation ("what if") capabilities that allow the planner to analyze the results of an action before committing it through the ERP system. Some of these systems go even one step further by offering optimization capabilities. They automatically create multiple simulations and recommend changes in the supply chain within the existing constraints. For more information, see Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment and Advanced Planning and Optimization Software: Myths, Facts, and User Perceptions).
Linking an APS system to an ERP system, although simple in principle, is nonetheless a major integration project. Further, APS is a subset of supply chain planning (SCP) applications that are designed to provide forward-looking options for future time horizons, by sitting on top of a current transactional system (most often ERP) to provide planning, what-if' scenario analysis capabilities and real-time demand commitments. SCP typically deals with activities such as developing demand forecasts, establishing relations with suppliers, planning and scheduling manufacturing operations, and developing metrics to ensure efficient and cost-effective operations. It also determines marketing channels, promotions, respective quantities and timing, inventory and replenishment policies, and production policies. Thus, typical SCP modules include network planning, capacity planning, demand planning, manufacturing planning and scheduling, and distribution and deployment planning.
On the other hand, while most traditional ERP software enables the integration and management of critical data within enterprises, companies have increasingly recognized the need to deploy more advanced software systems that manage the global supply chain by enhancing the flow of information to and from customers, suppliers, and other business partners outside the enterprise.
Impact of the Web
More recently, the availability and use of the Web has created a demand for software that operates across the Internet and intranets. This global logistics concept merged constraint-based optimization solutions such as APS and specialized warehouse and transportation management software (WMS/TMS), resulting in a more encompassing supply chain management (SCM). This includes all the processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies (for more info, see The Essential Supply Chain).
Particularly important for retailers is warehouse management and fulfillment, which starts with traditional warehouse functions (such as receiving, put-away or stocking, picking, shipping, and cross-docking), but also includes non-traditional functions such as gift-wrapping. Many retailers' warehouse operations are still designed for wholesale shipping to stores rather than for retail to-order picking and shipping. Therefore, retailers, especially those dealing with multiple channels, must either redesign their warehouse operations (and the IT systems that support them) or outsource the operation, as Wal-Mart has done with Fingerhut.
Other relevant applications include multimodule systems for managing customer relationships and supplier relationships. There are also newer systems for monitoring the chain as a whole and responding to problems as they occur. In other words, at a high level, the SCM software scope could be segmented into SCP and supply chain execution (SCE), while strategic sourcing, procurement, spend management, supplier relationship management (SRM) and product lifecycle management (PLM) components are still considered the extension of the SCM rather than its constituents.
Execution functions manage effective procurement and supply of goods and services across a supply chain to ensure completion of the plans, including creating purchase orders, taking customer orders, updating inventory, managing movement of products in the warehouse, and delivering goods to the customer. Hence, SCE includes light assembly manufacturing, warehouse, and transportation execution systems, and systems providing visibility across the supply chain, given more comprehensive SCE suites have lately evolved consolidating execution components, such as WMSs, TMSs, distributed order management (DOM) systems and supply chain inventory visibility (SCIV), to provide a more unified solution to manage the outbound logistics process. Near real-time information management (such as every fifteen minutes in the Wal-Mart case) is vital for both sides of order management and for reacting to customer demand and inventory issues.
As mentioned earlier, these packages come from many vendors and are built using a wide range of technologies, which further complicates the integration process. Integration problems are gradually being solved, largely through major ERP vendors incorporating SCM applications into their flagship products, but the industry has not yet matured to the point where deploying supply chain software is that simple. In any case, the major ERP players already have offerings or at least sound strategies addressing this important need. However, because they are addressing the drawback of ERP/MRP infinite capacity, they have so far made the biggest dent on the SCP/APS areas, with a raft of ERP vendor long espousing native solutions (for only some examples, see SAP APO: Will It Fill the Gap? , Oracle APS Makes Its Debut, and Mid-Market ERP Vendors Doing CRM and SCM in a DIY Fashion). Lately, the same vendors have encroached into the realm of SCE too (for more info, see ERP Vendors Intrude on SCE/WMS Safe Haven).
To attract and keep customers across many sales channels, top retailers are also backing their customer relationship management (CRM) systems with SCM solutions that satisfy demanding consumers, wherever and however they shop. Multichannel customers typically make more and larger purchases than single-channel shoppers. Often, these customers are more profitable for retailers as well, but, to make things more difficult, they will not be told where or how to buy. Consequently, retailers need to make sure their multiple channels (both the "click" and "brick and mortar" variations) work together.
Fortunately, like in the case of SCM, while not "a piece of cake", it is getting increasingly easier to link CRM with the back-office applications. CRM has gone from a vast field of point solutions to suites of customer care applications covering sales force automation (SFA), field service, telesales, call center, marketing automation, etc. Today's enterprise applications are required, as a matter of course, to address more than the processes taking place within the walls of an enterprise. Almost all traditional ERP vendors (small and big alike) experienced a "wake-up call" and have long been trying to expand their product offering making it in tune with the ever-changing trends and requirements of the new collaborative economy.
To that end, over the last few years, all significant enterprise applications players have been actively partnering or finding other ways to provide solutions that allow businesses to collaborate more effectively. Consequently, the boundaries between ERP, CRM, e-commerce and SCM have blurred so much that any attempt to functionally separate them becomes evermore pointless. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the once-considered remarkable and supposedly, more relevant CRM and e-commerce activity.
Attracting the Customer
The cycle begins with the attraction of the customer through sales and marketing. This hopefully results in an order management and fulfillment process and ends with customer service, which can involve anything from field installations through to enquiry and complaint management. All of these steps have to be executed well without exception; otherwise, the prospective customer will end up on a competitor's list of customers. Therefore, the relative importance of CRM versus ERP, ERP versus. SCM or of any other match-up is irrelevant.
Examples of customers relationship-building include advertising that supports all channels, and branding and pricing that are consistent, where there is no separate on-line presence competing with the physical stores. To identify customers independent of the channel they use, leading retailers like Circuit City for instance use discounts and news to encourage Web-site registrations, and an affinity credit card. An additional set of nifty features also include be channel-appropriate merchandising, which is one a place where Internet has become a source of power with tools like product search, comparison and review, live help by phone, recommended accessories lists, and music clips. Such features should make the retailer's Web site the first stop for many multi-channel consumers.
The demand for near real-time supply chain collaboration will, in turn, place an increasing emphasis on any company's ability to immediately commit itself to promising the delivery date of orders on a global basis and to consistently meet those commitments ever after. This available-to-promise (ATP)/capable-to-promise (CTP) aptitude will be made more complex as companies rely on an increasing number of business partners and suppliers to procure raw materials, and assemble and deliver finished goods. SCE is therefore gaining increasing awareness among companies that realize that planning can do only so much without the ability to make the right and timely decisions and execute on the shop floor, in the warehouses and within the entire distribution chain.
However, it would be too nave to dismiss the need for proper planning, because regardless of how responsive a SCE system may be, waiting for chaos to happen and only then trying to act, is equally as disastrous as compiling nearly ideal plans (through cumbersome algorithms) and never doing anything about executing them or obtaining feedback about their outcomes. As supply chains become more dynamic and operate in near real-time, the lines between planning and execution continue to blur, which bodes well for their functional convergence.
Concurrent Planning and Execution Enable Optimization
Thus, some SCE vendors have started to move beyond pure execution to offer some planning and optimization capabilities, often with the "adaptive" moniker. Companies need real-time information from execution systems to develop and adjust optimal plans, while the execution side should benefit from more realistic plans for some readiness sake, rather than merely react after the fact in a firefighting fashion. Based on such realities, we believe that planning and execution will become much less inseparable in the long term (see SCP and SCE Need to Collaborate for Better Fulfillment).
Additionally, modern networked and distributed order and replenishment management solutions coordinate fulfillment across networks of locations and partners to deliver a satisfying customer experience. When a complex, distributed distribution system is in place, managing the complexity can be daunting. This is the type of environment where the likes of Yantra (now part of Sterling Commerce), i2 Technologies or Manugistics have built their reputations.
A DOM application coordinates the life cycle of an order across an extended supply chain. It works with user companies' (many of which are retailers) existing systems to aggregate and manage orders across multiple channels, divisions, distribution centers and fulfillment partners. Also, it enables companies to incorporate new sales channels with their existing systems, providing them an integrated view of customer purchases across divisions and channels.
The system uses configurable business rules and workflow to automate the manual activities often associated with managing orders in a complex, distributed environment, whereby each order line can follow a unique set of processes driven by any order related information. The system also automatically creates and tracks orders that result from, or depend on, the original customer order. Key attributes of the DOM system include sourcing of orders across divisions and partners; granular management of complex order processes and aggregation of orders across multiple channels.
Companies like Target, Best Buy, Circuit City, DHL, etc. are all customers using Yantra's product. For example, when the customer is ready to order, may it be in-store, at a Circuit City, even at a partner's Web site or over the phone, the "Store of Tomorrow" is designed to present inventory and fulfillment options based on information from every store, distribution center and fulfillment partner. Here, sourcing is optimized and synchronized to avoid wait states and idle stock. Flexible, rules- and workflow-based processes recover fairly elegantly from modifications, cancellations or plain old mistakes, while built-in training bolsters employee confidence and morale with every order. For more information, see Yantra— Leader in Distributed Order Management, but Wait There's More.
To enable multicompany planning and transactions, existing applications for managing local production and supply chain have to be made accessible to Web-service requests so that they can become part of a larger, chain-spanning information system. That is to say, successful multichannel retailing demands integration from the Web site directly to warehousing and shipping, both to handle orders efficiently and to provide realistic availability and delivery dates to customers.
Beyond this, some form of collaboration software is required to coordinate the efforts of planning and production and execution teams across member organizations. At the same time, this will have to be installed, managed, and maintained by teams of IT professionals drawn from different companies and operating out of different locations. To further complicate things, and given the increasing globalization and outsourcing practices, one should never neglect the use of international trade logistics(ITL)/global trade management (GTM) execution systems that are designed to automate the import/export business process. Their whose basic functional components are trade documentation generation and transmission, and regulatory compliance validation, particularly focusing on recent regulations that aim to prevent terrorist attacks in ports and harbors (see International Trade Logistics Challenge Automated Global E-Trading). For more information about these promising, yet still emerging business process integration technologies which are based on service-oriented architecture (SOA), see Understanding SOA, Web Services, BPM, BPEL, and More.
For more information on the modern technologies that retailers might use, such as advanced retail planning that synchronizes merchandise management with demand, or more sophisticated retail lifecycle pricing, see Retail Market Dynamics for Software Vendors.