In anticipation of his presentation at JDA’s Innovation Day in Chicago on September 10, Supply Chain Nation sat down with Rick Blasgen, President and CEO of CSCMP, as part of our Expert Insight series to get a preview of his presentation on the State of Supply Chain Management. In part one of our conversation we covered the evolution of supply chain management, how supply chain practices vary around the world, and what has driven the near-shoring trend.
SCN: Supply chain segmentation is a hot topic right now. How widely is segmentation being done today and what benefits are the early adopters experiencing?
Blasgen: When you say segmentation, I think of multi-channel distribution—the idea of order anywhere and fulfill from anywhere. E-commerce revenue is a lot less than from traditional channels so far, but it is growing substantially. Early adopters are spending money on understanding and satisfying the needs of individual consumers. When it is scaled, how big can it be and will consumers be willing to spend for that kind of service? Right now everything is free shipping, but we know better. There is no free lunch—it’s baked into the price of the product. As we scale that up, will the consumer be willing to pay for that? In some cases they will and in some cases they may not.
And what happens to the real estate? Shoppers are going into stores and looking at a television and then going home to order it online for less. What does that mean for all of the real estate out there and the fact those locations are not going to be traditional “cash and carry” stores any longer?
It’s fascinating; you can go online today and order virtually anything you can get in stores. What does that do to traditional distribution networks? I think that kind of segmentation is going to evolve and then we’ll scale it according to what I call best of big/best of small—scale when it makes sense and customize it when it doesn’t.
It is going to come down to cost efficiency and how much market share we can drive. If you look at Amazon, they are starting to compete in areas where they never would have thought about competing because they have such an expansive network. And portions of Macy’s 500 stores are becoming e-commerce centers because they have the inventory and it may be less expensive to ship a piece of apparel directly to the consumer. Also, most of these companies have return policies. Shoppers may buy 5 or 6 of the products, try them on and return 4. Once you scale that up, will retailers be able to absorb that cost, or will we end up with a model that is a little more restrictive? It’s an interesting time right now and it will be really interesting how this evolves over the next five years. The early adopters are winning now because they are learning so much.
SCN: With supply chains evolving from traditional “push” models to demand-driven models that focus on “sense and respond,” how has the role of forecasting and planning changed?
We have more information at our fingertips than ever before—scanner data and information on what is going on locally at stores. This is being rapidly pushed upstream in the supply chain to help with forecasting. We still need that information. If you look at certain industries such as the food industry and consumer packaged goods, a lot of their manufacturing facilities were designed for long runs and few change-overs. Yet we are pumping many more SKUs through them, so how we access actual demand rather than forecasted demand is still critical in many ways. Because this data is more accurate and timely now, it can be used by planners to deploy inventory more accurately than ever before.
You also have CPFR [collaborative planning, forecasting and replenishment], where retailers and manufacturers are exchanging good promotional information to understand where the lifts will be in markets where they apply promotions. Item-level RFID is also being piloted at many retailers, particularly in garment and apparel centers. This mitigates theft and other inventory problems.
There is no shortage of visibility tools or the ability to extract data to use for better decisions. So the role of forecasting and planning for production and distribution is still critical because there is so much opportunity there.
SCN: The lack of supply chain talent is a limiting factor for many companies trying to meet today’s supply chain challenges. How are companies trying to address this challenge? How can CSCMP help?
It is squarely in CSCMP’s wheelhouse. We exist to educate, develop and connect the world’s supply chain professionals. We think about life-long learning and develop content and connections so that talent can be increasing important to companies in this burgeoning field.
If you think about it, we are one of the few countries that are increasing population not only through birth rates, but through immigration. We need talent to support our growing economy and we have the tools and the wherewithal to educate our burgeoning talent. We just need to get them to the table and engaged on an on-going basis.
It’s one of the reasons we developed one of the most relevant certification programs, SC-Pro. It’s not just getting the certification; it’s all of the education you get leading up to certification that really allows companies to elevate the efficiency of their organizations. The training is fresh, modern and teaches eight interconnected building blocks and how they relate to a company’s business and customers.
There is no shortage of need for talent. Even in the recession, supply chain talent was needed to help control costs and grow revenue. Companies today understand that, and we as a discipline are becoming much more of a core competency. Talented folks are becoming not only supply chain leaders, but general managers and leaders of organizations. It is a truly remarkable time to be in this profession and I think organizations like JDA and CSCMP, that recognize how important supply chain is to the companies and economies we serve, will be the winners in the long run.
SCN: Thanks for your insights, Rick. To learn more about and register for JDA Innovation Days, click here.
JDA Software Senior Vice Presidents of Manufacturing, Distribution & Retail, David Johnston and Wayne Usie, invite you to the upcoming JDA Innovation Forum’s in Chicago, New York and Santa Clara.