host posted on July 12, 2010 12:06
Say you're a retail auto supply store. You carry the standard batteries, brake parts, and seat covers along with an assortment of products that meet 99 percent of the requests you get from your daily customers. But then there's that occasional customer, that 1 percent who needs a carburetor rebuild kit for a '54 Buick Super straight 8. It's a $50 part that you don't stock and might bring you $5 in margin. Do you send the customer away, or spend the next hour on the phone placing a special order?
The problem with special orders is that they are, well... special. The items that fall into the category make up a large segment of products that are infrequently ordered. Sometimes they are rarely ordered because they are not in production, or not sold frequently enough to warrant stocking even at the distribution center level. Other products may be too expensive to stock for infrequent sales. But that's really only the beginning of the problem.
Implementing Microsoft's Azure products, supply chain software provider GCommerce has developed its VIC (Virtual Inventory Cloud) that provides an answer to the special order problem on a market-by-market basis.
The issues are still complex, but by focusing on specific industries with highly fragmented processes, cloud infrastructures are being leveraged to lower the cost of filling special orders. In addition to the automotive aftermarket, the plumbing supply industry is also being tackled.
While these two industries share some commonality in their structure (thousands of retail outlets, hundreds of suppliers, and millions of parts) their specifics are different enough that the database structure needs to be customized for each industry, but not for each supplier or retailer.
The real issue is locating the inventory and determining how the order should be placed. And that's why the traditional method involving phone calls and faxes still prevails for these kinds of orders. The problem is that this inventory isn't visible through any of the enterprise-level ordering methods that involve catalogues.
I'm not talking about the kinds of catalogues we mortals use that feature descriptions, pictures, prices, and delivery options for various items. Those all sit in front of the back-end catalogues that link suppliers with retailers and eventually show up on our laptop screens. I'm talking about highly specialized catalogues more concerned with technical product descriptions and availability than with pretty pictures and customer-enticing verbiage (though many of them do also include these elements). The main focus of these catalogues is tying products that are identified by an ID and bar code to their real-world information.
These catalogues are operated by companies like GXS, SPS Commerce, Intertrade, and others that manage EDI services and link the catalogue contents with the EDI-enabled order process. And some are part of the Global Data Synchronization Network (GDSN)), which aims to provide a universal catalogue that can act as a "single point of truth" for retailers placing orders with their suppliers. The issues surrounding GDSN implementations are significant, and a topic for a more in-depth study, but the concept of the catalogue is well established as a viable tool in the global supply chain.
But these catalogues don't provide any information about who has which product where, and how many there are -- something better known as "supply chain visibility." Further, many special order products just don't make it into any of the existing catalogues. And establishing a universal catalogue that can handle every specialty and niche product is a tremendous undertaking, one that is unlikely to be accomplished soon.
What now exists, in the absence of a consolidated catalogue, is a fragmented order process where each buyer may have a different method of contacting each supplier, and in turn, each supplier may have its own preferred method of contact. So, a buyer may need to contact suppliers via phone, fax, email, Website, or even postal mail -- and needs to keep track of which vendors want to be contacted via which method. Confusing to say the least.
By leveraging cloud computing facilities that can provide easy extensibility and robust data handling, products like VIC are making it easier and more profitable to find and deliver the right product to the right customer at the right time.
— Scott Koegler was a CIO for 15 years and has been writing about technology for the last 18 years. He is editor of www.ec-bp.org, a newsletter that addresses supply chain technologies, and EDI in particular. You can contact him at scott@koegler.net.
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