Retail Applications Vendor Provides a Solid "Platform"
Written By: Ashfaque Ahmed
Published On: October 6 2006
Even though the retail sector in the US is its second-largest industry, technology spending in this sector is still lagging behind other industries. But spending on technology by major players is growing at greater pace compared to other sectors, and it poses some good opportunities (and potential for good business) for those who have been in the market for a while. At the same time, there are some unique challenges faced by these vendors.
One such vendor is One Network Enterprises Inc. (ONE) (http://www.onenetwork.com), which is looking to benefit from such opportunities while tackling the challenges through its new initiatives.
Meet One Network Enterprises
ONE is privately held and is based in Dallas, Texas (US). Founded in 1999 as Elogex in Charlotte, North Carolina (US), the company name was changed to One Network Enterprises Inc. after merging with another supply chain management (SCM) vendor, Transcend Systems of Dallas, Texas, in 2003. Since its foundation, ONE has focused on serving the needs of retailers in the areas of SCM, transportation management, merchandizing management, and store management. Its first application was TMS (Transportation Management System), which was used by retailers to manage their inbound shipping, outbound shipping, distribution center (DC) management, and supplier management. But since its merger in 2003, it has been building a revolutionary application named Platform, which may change the way any retailer uses a retail application. This application helps users to provide a customer-centric focus instead of the usual product-centric approach that users get from most of the applications available in the market today. For this strategy, they have come up with an on-demand hosting service, so that the customer can instantly benefit from the product. Customers can be activated within as little as fifteen days. Otherwise, customers also have the option to go the product-buying route.
Platform was developed to expand the scope of the vendor's TMS offering, by including or enhancing purchase and vendor management, replenishment, order management, distribution and site management, appointment scheduling, inventory management, partner management, radio frequency identification (RFID), a global positioning system (GPS) for shipment tracking, and many other functionalities required by typical retailers. Platform can be integrated with most point of sale (POS) systems, and can be integrated with any systems of partners, as it has built-in service-oriented architecture (SOA). But for most clients, integration efforts are minimal, since the application itself has all the features required to do business with any kind of partner. The application was developed with a top-down approach, and encompasses all functionality—any functionality can be activated in a snap for the client on request. ONE claims that Platform transforms slow-moving supply chains into responsive supply networks. It also claims that its on-demand network services and web applications help companies benefit from advances in supply chain management.
Platform was piloted successfully at Safeway and Argos in 2005, and was subsequently implemented at all sites of these retailers. Now Kroger and all other existing ONE clients are implementing Platform. New customers are also being added, and ONE estimates that more than $100 billion (USD) worth of goods are moving over its global network.
Today, ONE is regarded as an important software vendor for retail industry. To this end, it is trying hard to satisfy and even surpass customer expectations by investing heavily in technology intellectual property (IP) creation, as well as by addressing critical issues faced by customers. It is also creating market awareness by organizing user group meeting events, road shows, and seminars.
After serving the North American market for a long time, ONE started expanding outside North America when it started its European operations in 2003.
The ONE retail network currently serves over one third of the grocery retail market, including suppliers Kraft and Heinz; grocery retailers Delhaize America (Food Lion, Bloom, and Hannaford), Kroger (Ralphs, Dillons, Smith's, King Soopers, Fry's, QFC, City Market, Hilander, Owen's, Jay C, Cala Foods/Bell Markets, Kessel Food Markets, Pay Less, Baker's, Gerbes, Fred Meyer, Fry's Marketplace, Smith's Marketplace, Food 4 Less, and Foods Co.), Safeway (Vons, Dominick's, Randalls, Tom Thumb, Genuardi's, and Carrs); and Argos and Publix, as well as more than 650 logistics and transportation companies. It has also added clients in other segments, such as Arrow Electronics in the electronics retail sector, and the US Department of Defense (for RFID, container management, logistics execution, planning and scheduling, etc.).
To understand the impact of ONE's Platform product, it is worth examining the context of the technology for retail market. Some of the industry trends include global sourcing; cross-docking and floor-ready merchandise; electronic data interchange (EDI) over the Internet; and increased automation at distribution centers. Other important trends are detailed below:
- Speed sourcing
The reduction of cycle time (between ordering and the physical arrival of merchandise) is a critical winning parameter in the retailing industry. With fashion trends becoming all the more evanescent, there is an imminent need to pare down lead times. This is being done in a number of ways. The first is through joint product development—this is especially true for the specialty apparel retail sector, where retailers are undertaking joint product development exercise with their suppliers. The advent of rapid exchange of information through the Internet has established this as a norm. The second way is through collaborative planning forecasting and replenishment (CPFR). This is the advanced version of the efficient consumer response (ECR), and is intended mainly for grocery and supermarket retailing. The aim is for the retailer and the suppliers to undertake joint sales, inventory, and order forecasting exercises. The forecasts should be revised based on actual trends. This not only cuts the cycle time, but also prevents stock-outs and markdowns.
- Lean retailing
Retailers are looking at ways to cut their inventories. The most common facilitator is an accurate demand and sales forecast as well as rapid replenishment. Cutting down inventories is now seen as a more effective margin builder than a cost-plus pricing model, which is fast becoming obsolete. This has been manifested by food retailers which are shifting the burden of inventory cost onto the suppliers. Vendor-owned inventory (VOI) entails a raising of invoice on retailers subsequent to the actual sale of the merchandise. Whenever an item is checked out at the POS counter, the item gets automatically invoiced to the retailer. Lean retailing adds to a retailer's profitability and enables a quick shift in merchandizing policies based on changing consumer perceptions.
- Retail purchase order generation by vendors
This is the acme of the retailer-vendor relationship, and is a manifestation of the tight coupling of the two entities. It is possible only through seamless data flow between them. The manufacturer's material requirements planning (MRP) and distribution resource planning (DRP) are governed here by the retailers' POS data. Hence, this represents the ultimate form of integration, where the movement of the first cog of the value chain is governed by the movement of the last cog.
Some of the technology trends include wireless local area networks (LANs); universal point of sale (UPOS); electronic article surveillance; and extensive use of RFID, as well as others worth mentioning in detail:
- Asynchronous transfer mode
Asynchronous transfer mode is the only standards-based technology which has been designed from the beginning to accommodate the simultaneous transmission of data, voice, and video. This is a big help to retailers in transferring huge volumes of data across stores and headquarters, and to suppliers. This is an imperative in today's world, where there is an immense need for immediate data sharing, to make accurate merchandising possible.
- Application service providers (ASPs) and outsourcing
Most of the requirements of the retailers are changing so fast that if they buy a package today it will be obsolete in two years or less. To avoid the risk of obsolescence, many of the retail software vendors have taken over the mantle of ASPs, and are providing web-based packages which are updated in real time. Retailers are also looking to process outsourcing with best-of-breed partners.
Benefits of Platform
A key element of ONE's product strategy is seeing transportation management as a sub-process of the much broader and higher-impact category of replenishment management. The four critical dimensions of replenishment are demand, supply, logistics, and enterprise resource management. ONE's architecture unites planning, execution, control, and analytics together on a common platform, which enables them to manage the four dimensions and move beyond visibility to "actionability."
As companies outsource more business functions and expand partnerships, they face a significant challenge managing operational processes that span well beyond their internal organization and information technology systems. ONE solves this problem with an innovative, process-driven architecture, combined with a powerful, scalable global network that unites all organizations into a single trading community, a concept the company terms business process networks.
Whatever business objectives and processes the retailer may be following, Platform has built-in functionality to simulate them so that the retailer can keep doing its business the same way, instead of changing its processes to suit application-specific functionality. Moreover, integration with many legacy systems makes a retailer's system lethargic, and in today's dynamic business environment, legacy systems prove to be a liability and too expensive to maintain.
Challenges for Platform
Some functionalities such as yard management, global positioning system (GPS) mobile applications, and order prioritization are not available in the current release (6.8) of Platform. These features will be added to Platform in its 7.0 release. Out of these functionalities, some GPS functionality was added to the 6.7 release, and is available in current offerings. Outbound shipment functionality still needs to be thoroughly tested. Supply chain management (SCM) analytics are missing so far. To this end, ONE acquired Palo Alto, California (US)-based Valdero Corporation in 2005, and ONE will now be integrating the analytics capability of Valdero's product to Platform. It remains to be seen how far ONE succeeds in integrating the two products.
Apart from technical functionality, the most important challenge for ONE is to scale its market efforts to penetrate other segments in the retail industry, such as electronics retail, home improvement retail, office supplies, furniture retail, pharmacy, etc.
Today most retailers and their suppliers face the daunting task of managing their combined supply chain network—not only do geographies now encompass countries and continents, but the scale of business has also grown exponentially. This has led to a condition where fragmented systems belonging to partners fail to provide adequate support to day-to-day business needs (even after extensive integration). Again, they create added problems whenever business structure or business goals change, as changing all these diverse systems to meet business objectives becomes a liability to all partners.
Platform is based on the concept of using one system to serve all partners. Changing the system settings to meet changed business requirements is a snap in Platform. Moreover, Platform is offered as a hosted service, and clients do not need to wait for months or even years for getting onto the system once they decide to implement it. Platform can be configured in as little as fifteen days in many cases and in most cases within three months.
About the Author
Ashfaque Ahmed is a seasoned consultant and business analyst in the areas of advance planning and scheduling in SCM. He has worked with many large and medium clients in the retail, distribution, and manufacturing industries. Some of these industries include the food, automotive, consumer packaged goods (CPG), pharmaceutical, food, textile, steel, and packaging materials sectors. He holds a bachelor's degree in engineering and an MBA in information systems. He can be reached at email@example.com.