Quick Response

To improve efficiency throughout their supply chains, some companies have turned to quick response processes.

Quick response is a method that allows manufacturers or retailers to communicate inventory needs for their shelves or assembly lines in near-real time. These companies have traditionally communicated with business partners about inventory replenishment via electronic data interchange (EDI) systems, faxes or phone calls. But with the advent of the Internet, a growing number of organizations have been turning to Web-based systems.

High-profile companies that are either are in the process of implementing or have installed such systems to boost the efficiency of their supply chains include Switzerland's Nestle SA, San Francisco-based Levi Strauss & Co. and Toronto-based Canadian Tire Corp.

Advocates claim that quick response systems can help retailers and manufacturers trim the fat out of supply chains, speed up the time it takes to replace depleted inventory, help avoid stock-outs and boost the number of inventory turns (when a retailer or manufacturer turns over its entire inventory).

Companies that offer quick response technologies include SAP AG, Logility Inc. in Atlanta, GlobeRanger Corp. in Richardson, Texas, and i2 Technologies Inc. in Dallas.

Get Real

Quick response takes a variety of forms. "Real time is a different thing to different people," says George Brody, president and CEO of GlobeRanger. "So quick response means different things to different people." For instance, he says, for some folks, asking for data in real time might mean once an hour, for others, it might mean or once a day.

The process requires a company to share what could be seen as proprietary data about its sales and manufacturing operations with its partners. Some executives might be hesitant about this for fear of exposing sensitive information about their companies' products or business strategies to their rivals, say observers.

Nevertheless, when implemented correctly, quick response can be an integral component in helping organizations create lean and efficient supply chains.

"Our supply-chain efforts are based on real-time customer information, quickness and speed," says a spokesman for Dell Computer Corp. in Round Rock, Texas.

On the Cutting Edge

Dell is widely viewed as being on the cutting edge of supply-chain management. For instance, if Dell.com receives an order from a customer for a DVD device, that request is passed along to Dell's suppliers. If the suppliers can't meet the demand for some reason, they will signal back to Dell, which will then notify the customer that the item is out of stock or unavailable.

Procter & Gamble Co. in Cincinnati recently detailed its own plans to establish a quick response system through its entire supply chain. The system is expected to connect a variety of participants, from raw materials suppliers through the manufacturer to distributors out to retailers and on to consumers, says a Procter & Gamble spokesman.

The firm, which makes consumer products ranging from Pampers to Pepto-Bismol, says the system will help it manufacture the right products as needed and get them to the appropriate warehouses and distribution centers, thus reducing bloat in its supply chain.

This should result in happier customers, according to Procter & Gamble. "A key benefit for consumers is that the products are fresher," says the company's spokesman.

Hypothetically, this means that when a consumer buys a roll of paper towels, information about that purchase goes all the way through the supply chain to the lumber company that cuts down the trees to make the product.

Procter & Gamble plans to install its quick response systems over the next few years; the company has pilots scheduled throughout this year.

Quick response systems have been around for about seven years. In the grocery industry, where the use of these technologies has been fairly prevalent, point-of-sale data is collected by a bar-coding EDI-based device at the cash register. The aggregated information is sent each night to vendors who then replenish the depleted shelves, says Karen Peterson, an analyst at Gartner Group Inc., in Stamford, Conn.

Flow Manufacturing

Other companies use quick response during so-called flow manufacturing. Whenever one unit of inventory is sold by a retailer, a signal is sent through the supply chain to replace it immediately, according to Kevin O'Marah, an analyst at AMR Research Inc. in Boston.

That's slightly different from collaborative planning, forecasting and replenishment (CPFR) processes, which are closely related to traditional quick response methods but are Web-based and slightly more sophisticated.

CPFR processes, say industry experts, let retailers and manufacturers examine statistics regarding the flow of products to customers and attempt to forecast how much inventory is going to be required to meet future needs, according to O'Marah.

In fact, some major companies, including Canadian Tire, say that regular quick response is already past its prime. Canadian Tire is currently implementing software from Stockholm-based Industri-Matematik International Corp. that should allow it to locate inventory anywhere in its supply chain at any time.

The Next Big Thing

"Quick response is kind of outmoded," says Art Karrer, project manager at Pharmavite Corp., a maker of vitamins and health-related products in Mission Hills, Calif. The firm used EDI-based quick response techniques between its supply centers and distribution centers for one of its biggest partners, Troy, Mich.-based Kmart Corp., until seven years ago.

Pharmavite has since shifted to CPFR to realize greater efficiencies in forecasting and replenishment and to gain insight into retail sales cycles. The company is now using applications from Logility to establish CPFR links with Kmart.

Certainly, the Web is allowing companies to move closer to establishing real-time systems. In fact, in some industries it's becoming a necessity to do so because the Web allows supply-chain processes to move with greater automation and cuts out the need for phone and fax communications, says O'Marah. The Web also creates a common format for sharing data among manufacturers, suppliers, distributors and carriers, he says.

Moreover, Web-based quick response systems cost less than traditional EDI technologies, which means even more trading partners than before can connect via a quick response system, says Peterson.

Nevertheless, some firms are unwilling to pay to replace legacy EDI systems, so those systems will likely remain in place for some time to come.

Copyright © 2001 IDG Communications, Inc.

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