When back in July, Infor, the leading provider of business software for midmarket companies, announced that RSA Logistics DWC LLC, the first third-party logistics (3PL) company to operate in Dubai Logistics City/Dubai World Central (DWC), has invested in Infor SCM WMS (Warehouse Management Solution) from SPAN, Infor's leading supply chain partner in the Middle East, it shed renewed light on the importance of such investments in business operations.
The chosen solution was being deployed to optimize RSA's 25,000 square meter warehousing operation at its newly complete facility at Dubai Logistics City, in a bid to ensure the highest customer service levels in its warehouse and stores across the region. It was no rull of the mill software but rather a customized management solution by Infor's partner, SPAN, who worked with RSA to match the latter's requirements and support the customs requirements at the DWC. A designated module now handles the bill of entry, bill of exit and process documentation, among others, between the free zone and JAFZA.
The WMS supports RSA's multimodal integrated transport approach at the new facility at DWC, providing advanced traceability through the supply chain, managing all warehousing processes, including receiving, put-away, replenishments, picking, packing, labeling and shipping. Once deployed, the WMS solution will optimize RSA's inventory; provide efficient labor productivity; and a high degree of inventory and shipping accuracy.
The Dubai market is the region's leader in logistics, having established itself in the early 1980s around the then new Jebel Ali Port and maintaining its dominance through liberal investment and commercial environments. But the world's logistics market, as well as the UAE's has been affected by the world economic slowdown and the construction industry recession though there are now encouraging signs with the warehouse sectors' market leaders looking to improve the quality of their premises.
"Our facility at Dubai World Central needed a top-line supply chain solution to efficiently manage our operations and support our drive towards providing value- added services," said Abhishek A. Shah, operations executive, RSA Logistics. "After evaluating the various warehouse management solutions available in the market, we selected Infor's WMS due to its advanced functionality, remarkable local support and demonstrated success in the Middle East region."
"Infor WMS will enable us to capitalize on value-added services such as packaging, repackaging, assembly, inspection, quality control, better analytics and improved billing for customers. We will be able organize the entire range of our warehouse operations, including critical time-sensitive procedures such as managing inbound and outbound deliveries, and inventory control." Shah continued.
"We worked closely with the RSA team to identify the unique requirements for the Dubai World Central, which is the region's first fully-integrated, multimodal logistics platform in a single, customs-controlled zone. We have been deploying Infor WMS in the region for over 15 years and are confident that RSA Logistics will get their return on investment much earlier than expected," said Kamel El-Ghossaini, regional manager - supply chain solutions, SPAN Group.
"The complexity and global nature of supply chains requires companies to invest in IT solutions that will factor in multiple considerations including both traditional and non- traditional cost sources," Paul Hammond, general manager, Infor Middle East. "Infor WMS allows for unparalleled transparencies throughout RSA Logistics' supply chain, while reducing direct operating costs which will significantly impact its bottom line."
Infor provides more than 70,000 customers a better, more collaborative relationship with their business software provider. Infor software is simple to buy, easy to deploy and convenient to manage. It is software created for evolution, not revolution. We had the following interview with Olivier Rouviere, Regional Vice President, SCM, Infor.
How has recession impacted supply chain priorities and performance around the world?
Three years ago, pre-recession supply chains were focused on supporting business growth. Strategy was designed to add long-term value to the business and increase market share through instilling customer loyalty. In fact, supply chain visibility, business to business collaboration, trade compliance and risk management, were cited by supply chain managers across the world as their four key priorities in 2006. However in the clutches of a recession, back in 2009, we saw a dramatic reversal away from long-term, value-add initiatives, and a move back to the core supply chain principles of operational cost reduction and profitability.
Recession has forced the companies to stop supplies and consume their own inventory for security reasons; they adapted their supply to the reduced demand. But when the demand grew again, these same companies had to manage shortages and new ways of forecasting production and actually produce goods and produce on stocks. When demand is low, clients have to manage inventory and risk of obsolescence. It becomes more important to forecast the right product to face the uncertainty of the market. They also look at what level of inventory they should hold because of demand variability. Supply Chain priorities changed from having sufficient stock for any demand to reduce stock to reduce risk but have better stock per location.
What provisions have companies put in place to counter breakdowns in supply due to lack of endconsumer demand?
According to global supply chain research conducted by AMR, a supply chain management in established and emerging markets, in November 2009, primary business priorities for the global supply chain industry were increasing productivity (13%), increasing profitability (12%), reducing operational costs (11%), and redesigning supply chain networks to improve cost or service (10%). Lower down the priority list were some of those pre-recessional top priorities, namely: improving customer satisfaction (9%), growing market share (7%) and increasing revenue growth (7%). This emphasis on financial and operational control which maximize cost savings, demonstrates a clear picture that manufacturers and retailers were battening down the hatches and going back to basics in order to survive the recession. Arguably supply chain professionals were returning to the fundamental SCM principles of 20 years ago when the discipline first started to emerge.
After their inventory static reduction during recession, companies discovered breakdowns in supply. Facing breakdowns with low stock is challenging.One will try to find alternative sourcing with lower lead time (reallocation of stock in new locations or produce nearer to the end customer). Another will dispatch their stock differently, among their distribution network. Re-designing the supply chain and putting in place multi-sourcing. These have been key assets for performing organizations to keep an acceptable service level. The others disappeared in the crisis.
How do supply companies downsize their operations during a recession in terms of storage/warehousing capacity, direct or indirect merchandizing, risk insurance, personnel, logistics/delivery/ transportation, etc.?
Looking at product distribution efficiency is one of the objectives of Supply Chain optimization.
During the recession, companies lowered the finished product inventory taking care not to disrupt the delivery of end product. They encouraged their distributors to hold the stock and transportation is entering into a new collaborative area. But the key has been to understand the customer demand in order to adjust all logistics activities consequently. Some companies decided as well to delay new projects such as warehouse and supply chain extensions in new territories or areas. A possible evolution in warehousing organization is putting emphasis on smaller, flexible warehouses - this I think is more of a western European initiative in line with the 3PL sector. The Middle East will continue to focus on being a major distribution hub.
How is the quality of products and services affected during a recession?
Quality is a 'must have' during a recession; companies could not survive with lower quality today. When the market gets tough, companies that can make quality have an efficient service level and are customer focused, which will be recognized in the market and limit the impact of the recession. Service can vary product to product; its cost has an impact on the bottom line, but it can be as well a good source of revenue when new sales are not there.
How is customer service to suppliers, distributors and end users affected?
Customer service is affected mainly by product shortage or longer lead time causing dissatisfaction when companies are reducing their overall inventory to take less risk during recession. As a paradigm, the lower the demand, the longer the customer has to wait for a product.
What happens when supply chain destabilizes and what is its short-term and longterm effect on suppliers, distributors and end users?
Suppliers will try to stabilize the production plan by asking their customers for a forecast plan for visibility purposes. They also have to put in place some stock to regulate uncertainty. They must focus on the most valuable business and reconsider the others as complementary but not strategic to their core business. Distributors will aim to deal with almost no longer lead time and short delivery from the customer. This situation is creating unsatisfied demand, and change in sourcing. Companies not financially stable will have a hard time running their business for two reasons: Stock Shortages and diminution in sales. On the customer side, the choice is to source elsewhere; it can be done through cost impact simulations when another supplier exists.
What are the latest trends to ensure sustainability of supply chain regardless of economic storms?
Do more with less. The latest trends would be to have flexible supply chains capable of lowering stocks in a few weeks, re-deploy network easily, and partner with 3rd party logistics in order to keep a good distribution network. Another trend would be to organize a multi-drop distribution supply chain, where the number of distribution centers (DCs) affects the transport costs. This strategy will be chosen for the replenishment of the DCs which will be by efficient full truckloads while smaller less well-filled vehicles incurring higher costs per ton, executing the final delivery legs, which tend to shorten if the number of DCs is increased.
What are the major risks businesses face with their supply chain at any phase of their initial growth and later when reaching maturity?
Disruption and cost increase. Also finding the appropriate Supply Chain sizing link to year to year organization and business increase. These companies should own/use tools to re-think permanently their network, their stock or spending during their initial growth. Adaptation is key to the future of such organizations.
What could have companies done to whether the financial storm had they anticipated its coming?
Hindsight is always 20:20. But let's be fair, at that time, nobody could predict that it was coming. However these companies, through accurate forecasting tools, could have seen the ramp down of some products. Reconsidering their stock levels, and stock at locations, they should have been looking also at alternative sourcing. Placing the company in low level activity is easier if transport is not yours. A change in demand is translated into a change in supply and in transport. If transport is through a 3PL it can be adjusted. Optimizing the number of depots is also a part of supply chain adaptation.
What IT systems are being used to implement a fully integrated and automated system of supply chain? What is the cost/benefit of these systems?
- IT systems like Voice picking benefits are fewer errors, time saving
- Radio Frequency
- Barcoding
- Slotting optimization in warehouse
- Sales & Operational Planning
Cost depends on the scope and perimeter of these application and ROI is less than a year's time. ROI is key to these supply chain applications.
What is the latest innovation with supply chain and what does the future hold for this management technique?
Integrated business planning, risk analysis, and scenario analysis. According to research from IDC Manufacturing Insights, the biggest gap between manufacturers' current performance and the standard expected in the next two years is demand planning and forecasting. Given that the primary business concerns highlighted in the survey include demand volatility, changing customer requirements, and global competitiveness, it's easy to see why this gap exists. But while demand planning is crucial in helping to overcome these concerns, it is by no means a silver bullet. In fact, in isolation, it can fall short of achieving these challenges entirely.
This is because the traditional approach of demand planning is based on retrospective analysis of sales figures, which in some cases, is akin to having no meaningful analysis at all. Past performance is no guarantee of future trends, as we've seen in the recent financial crisis, therefore historic information is limited in its ability to support cohesive planning. So what is the answer to effective planning? The silver bullet exists in the form of strategic sales and operational planning - the next generation of demand planning.
Strategic sales & operational planning is focused on understanding long-term demand, against both internal and external factors. Using information from all departments across an organization maps a number of 'whatif ' scenarios to ensure any eventuality is captured, and either mitigated against, or planned for. Only through taking this kind of holistic approach to planning can challenges such as demand volatility and changing customer requirements be proactively achieved, driving operational excellence, and boosting profitability - both in the short- and long-term.
About the author
Olivier Rouviere is Regional Vice President, SCM, Infor.
© Capital ME 2011
