What Can Manufacturers Do in a Tough Economy? - Part II

Part I of this blog series outlined the first three suggested "winning strategies" by JDA Software Group Inc. that manufacturers (especially of consumer goods) could instantly deploy to drive up margins and protect shareholder value in the current economic climate (malaise). I also took the liberty of mapping, with the help of some current and former employees of JDA Software and former Manugistics (now part of JDA), the appropriate current JDA solutions to each suggested strategy.

The second and final part of this blog series continues with the remaining three pieces of advice, and with my analysis.

Advice #4: "Collaborate with Channel Partners to Promote Products with Bloated Inventories Caused by the Downturn – For the products that have fallen victim to the abrupt economic downturn, manufacturers should work collaboratively with their channel partners to aggressively promote those products, alleviating excess levels of inventory. This action can free up much-needed working capital. Although there may be an immediate impact on margins, the additional capital could be used to invest in areas where growth is still achievable.”

The offered products by JDA in this regard are

  • JDA Collaborate, powered by Manugistics;

  • JDA Marketplace Replenish; and

  • JDA Marketplace.

More information on these products can be found here. Indeed, the former Manugistics Collaborate product was always a fantastic platform for channel collaboration, whereby JDA and i2 Technologies have customarily struggled with collaboration, and were well behind Manugistics' capabilities.

However, this collaborative promotion issue might be a stretch from an impact perspective in some consumer packaged goods (CPG) environments. Namely, what CPG company makes a diverse enough group of products whereby one product will be totally tanking and needs to be liquidated, while others are doing well? Will consumers stop buying, e.g., Hershey’s chocolate bars, Pringles chips from Proctor & Gamble (P&G), or Goodyear tires? CPG is a relatively recession-proof sector as a rule.

And if some CPG manufacturers do have a product that is tanking and they aren't diversified enough from a product perspective, not having supply chain management (SCM) software is the least of their problems. This advice might be better directed to the likes of General Motors (GM) involving, say, gas-guzzling V8 Sport Utility Vehicles  (SUVs) that aren't selling anymore. But again, a collaborative SCM solution is likely way down on the cash-strapped car manufacturing giant’s mind these days.

Advice #5: "Collaborate with Transportation Providers to Receive Preferred Rates -- The high cost of fuel coupled with constrained transportation capacities have resulted in steady increases in freight rates and fuel surcharges. As the drop in factory orders brings the transportation demand back in line with capacity, manufacturers should leverage the opportunity to collaborate with transportation carriers to receive lower rates. In exchange, manufacturers should offer to provide transportation providers with better visibility into their capacity needs, and work with them to identify additional opportunities and to potentially agree to shorten payment terms if feasible.”

I quite like this advice (despite falling gas prices of late), and fully agree with it. The offering seems to be the former Manugistics' transportation management system (TMS) suite. The major product here was NetWORKS Transport, with some of the request for quote (RFQ) and bid management/freight auctioning stuff that Manugistics acquired from Digital Freight in 2002. This also includes modules within the TMS suite like NetWORKS Freight Pay and NetWORKS Routing.

In addition, there are some supply chain event management (SCEM) capabilities thrown in with NetWORKS Visibility and NetWORKS Monitor. Whereas NetWORKS Visibility was mainly used on the transportation side, NetWORKS Monitor could be used for exceptions in any part of the supply chain.

In fact, the offered products by JDA in this regard is JDA’s Transportation & Logistics Management Suite including the following modules:

  • JDA Transportation Planning;

  • JDA Logistics Sourcing;

  • JDA Freight Order Management;

  • JDA Freight Audit & Payment;

  • JDA Shipment Execution;

  • JDA Fleet Management; and

  • JDA Logistics Event Management & Visibility.

More information on these products can be found here. Going back to the "what if" analysis of the once-impending merger with i2 Technologies, i2 has a neat Transportation Modeler tool that can do freight forecasting. Manufacturing customers could use the outputs from this tool to do guaranteed contracts with core carriers that should lower rates if some type of guaranteed demand is promised for a certain time horizon.

Advice #6: "As a Post Mortem: Assess the Flexibility of the Supply Chain Based on How Quickly New Strategies Can be Deployed – Manufacturers need to take the opportunity to quickly assess the flexibility and competitive advantage that their supply chains provide by evaluating and scoring their readiness to enable a rapid change in product and inventory strategies. The score should be penalized if any of the following are discovered in this assessment:

  • Many of the adjustments required to deploy the new strategy have to be performed manually or in spreadsheets;

  • The only way to coordinate the deployment of strategy changes across the supply chain processes is through meetings and e-mail exchanges;

  • It takes days or even weeks for the forecast changes and demand shaping activities to be reflected in the distribution, production, procurement and transportation plans;

  • There is no way to quickly evaluate how the change in strategies would impact revenues, margins and the resulting operational plans; and

  • There is no sales and operations planning (S&OP) process, or the S&OP process in place is not adequate to accurately evaluate the change in strategy prior to deployment.

It is difficult and needless to debate the need for measuring results and success. Thus, the offered products by JDA in this regard are:

  • JDA Reporting;

  • JDA Analytics; and

  • JDA S&OP (slated for availability in December 2008).

More information on these products can be found here. Former Manugistics had no out-of-the-box sales S&OP solution. Instead, the vendor would bundle NetWORKS Demand, NetWORKS Fulfillment (replenishment planning), with a reporting/analytics dashboard to perform some S&OP actions. I suspect the upcoming JDA S&OP product will leverage those bundles, or perhaps JDA has meanwhile come out with a unified full-fledged S&OP product?

Moreover, coming back to the "what if" of the ill-fated merger with i2, this strategic issue could have been a good fit for some type of i2 services (know-how) engagements, which had been i2’s focus some time prior to the merger agreement (and subsequent termination thereof). In other words, here we are talking about ascertaining a client’s supply chain flexibility/maturity framework.

A Word from a Competitor

James LeTart, Director of Marketing at RedPrairie Corporation concurs that the six basic facts outlined earlier on are hard to argue with, and JDA’s assessment of the areas for manufacturers to consider seems sound. As background here, from its original warehouse management system (WMS) and labor management system (LMS) roots that I have covered in my series of articles from several years ago, RedPrairie has since quite expanded its offering to cater to store operations, manufacturing process, and supply chain networks.

RedPrairie’s existing E2e suite (standing for end-to-end) aims to synchronize people and products throughout the customer buying cycle to ensure that goods reach the right place at the right time. At the point of sale (POS), this means consumers can have access to desired products and that the store is staffed with the right people to help them make their purchases. In the production cycle it means suppliers and manufacturers can time and synchronize shipments and production based on demand signals from the retailer. Finally, in the back room of the store and/or in the warehouse/distribution center (DC), it means having the least amount of inventory, thus solving the “last yard” problem of the retail supply chain.

RedPrairie points out some additional things that manufacturers should think about. For one, JDA might have missed the point under transportation management, which is that there is a great deal of cost that can be taken out of transportation operations by optimizing the entire global supply chain transportation process. This would include leveraging preferential trade agreements and minimizing duties and fees. Transportation managers need global visibility to the process to identify the lowest cost mode and carriers while ensuring service levels are met. They can also use the TMS to identify potential savings in transportation costs associated with supply network design changes such as moving some production back to near-shore suppliers.

Another factor for manufacturers is reducing materials carrying costs and being more flexible by going to a just in time (JIT) delivery schedule for their raw materials and component parts. This requires close coordination between manufacturing, the WMS to track and deliver materials/components to the production line, and the TMS to economically schedule the inbound transportation. RedPrairie's TMS [evaluate this product], WMS [evaluate this product],  Build-to-Order, and Sequence Delivery systems handle all of this for their customers.

Manhattan Associates, another possible fierce competitor to JDA and RedPrairie, and with a similar product scope, was also offered to comment, but chose not to due to its focus on finished goods distribution (rather than on manufacturing).

At the end of the day, dear readers, what are your views, comments, opinions, etc. about the current economic climate in your region/industry and about the above-mentioned experts’ recommendations? What are your best SCM practices as well as experiences with particular abovementioned applications?
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