Part 2: How retailers can leverage PLM to enhance their sourcing processes
Written by Joydeep Sengupta, Global Practice Head - Retail Consulting for Consumer Products, Hard Goods and Retail, and Hardeep Singh Garewal, President – Europe, ITC Infotech
Supplier selection and on-boarding :
The process of selecting a group of competent suppliers for products and materials, can potentially impact a retailer’s competitive advantage. Hence, supplier evaluation and selection are vital aspects in the performance of global sourcing. The costs involved in identifying, selecting, and evaluating a global expanse of foreign suppliers can be prohibitive. it is critical for businesses to develop and follow systematic parametric criteria’s to select a dependable supplier. PLM helps retailers in their supplier management process by capturing the profile of each supplier to identify a supplier’s capabilities based on critical parameters like capability, quality, cost, capacity- financial and manufacturing, certifications, location, product and process technologies, order cycle time, etc. in ensuring reliability and service.
Supplier compliance and performance analysis :
Increasing pressures from consumers and human rights organizations and government legislations have put pressure on retailers to source products manufactured in factories, which do not employ child labour, maintain safety norms and good working conditions, environment friendly and maintain adequate processes and employ preventive measures to keep shipments from being used for terrorist purposes. Retail companies today have a heightened focus on due diligence in vendor selection to manage social, ethical and environmental risks throughout their supply chains. Further,to continuously improve sourcing efficiency, product reliability and reduce sourcing cost, it is critical to create a strong network of sustained high performance suppliers against set criteria.a PLM system, not only facilitates an integrated audit process to manage supplier manufacturing compliance based on social, environmental and c-TPAT compliance, but also analyzes its performance (sample adoption ratio, cost comparisons to other suppliers, on-time delivery and return rates). On the basis of the audits performed, PLM generates a supplier scorecard to help retailers decide whether or not the retailer should continue sourcing new products from that supplier.
Request for quotation process and sample tracking :
A major activity in a retailer’s sourcing process, is the management of the RFQ (request for quote) activity. It is critical to provide the merchandiser with the right merchandise, at the right time, in the right quantities and at the right price. With shrinking buying cycles it is becoming difficult to manage thousands of products for multiple cycles at the same time. PLM digitally transforms the whole process of product sourcing and retail buying andmakes the RFQ process much more agile and efficient. By using the data available in the PLM, retailers can easily search for suppliers capable of making the products as per required product needs, send RFQs to multiple suppliers, receive, compare and evaluate photo quotes from different suppliers. Makes it easy to choose the right suppliers, request for samples, track samples, communicate, collaborate and negotiate the right product and features at best prices.
Competitive pressures have forced retail companies to look for sourcing globally. today, most retailers are exploring the world for lower landed costs. it comes with the risk from cross-border transaction like currency variations, exchange rate fluctuations, regulatory and import costs, transport and shipment costs, other hidden costs and the risks of delivery delays and compliance. Hence, it becomes vital for retail companies to bake in the above nuances into their costing while evaluating and negotiating costs with suppliers. PLM enables companies to calculate end to end costing including regulatory overheads, import and shipment costs, and do rationalized cost comparisons between multi-currency supplier quotes, helping them to negotiate their costs better.
Product compliance andquality management process :
Though the costs of maintaining compliant products are very high, the outlays of non-compliance are even higher. Non-compliant products not only lead to legal actions, but also result in lost customers, decreased revenue and barring from competitive markets. PLM manages the testing process in collaboration with 3rd party testing labs and maintains all compliance related documents in one place and provides suppliers with easy access to this data, facilitating the compliance process. PLM gives retailers visibility to product non-conformance, better mitigate quality risksandenables them to enhance their quality management processes.
Central repository of most updated product and related data :
most errors, delays, and lapses in the product development and selection process leads to increased costs, quality issues, lost sales and inventory build ups. These are more often than not due to missed mails, iterations and lack of visibility to optimum information. PLM brings all stakeholders - internal as well as external, from merchandisers and buyers, product development, quality, designers to sourcing and suppliers, on the same page. PLM provides a central repository of most updated, version controlled single version of truth with a communication tool that records all communications that simplifies a complex process.
Real time collaboration :
Communicating through mails or updating data on multiple systems can lead to costly errors. To source the right merchandise, within the planned time, in the right quantities, and at the right price requires continuous collaboration on critical decisions in the sourcing cycle. Speeding up the process, requires real-time collaboration between internal as well as external stakeholders, particularly when participants are geographically dispersed. PLM gives a single, access controlled platform for all stakeholders to participate real – time in the sourcing process, right from creating product data, RFQs, sample tracking, evaluating photo quotes and options, supplier selection, cost comparison and negotiation to SKU finalization and forecasts. With authorizations provided by the retailers, suppliers can access, update their product information, have visibility and align their tasks to the retailer’s calendar timelines they own.
Calendar management and visibility :
Merchandise delivery delays result in loss of sales as well as inventory cost build ups. the absence of proper assortment on the shelves can have a huge indirect impact on customer walk-ins. with reducing cycle times, increasing seasonal trends, cross continent shipments from far-east, risks of delivery failures are extremely high. PLM provides end-to-end visibility and works as a close monitoring of planned activities, milestones against timelines from planning to execution.
Plan variance tying planning to execution :
The sheer number of products being sourced could lead to over commitment in the rush to get the best deals. Buying spends become lopsided with inadequate selling stock of some product types, or excessive spends on some products resulting in markdowns that yield lower than desired sales and profits. while planning provides direction and serves as a basis for merchandise sourcing, product planning loops in most updated estimated numbers from operations and plan variance report gives buyers, merchandisers and the sourcing teams real-time visibility to OTB (open to buy) and forward planning.
Retailers are currently facing a lot of challenges, making it essential that they have an integrated technology in place to cope with the sourcing challenges of an ever-changing industry, handling a multitude of product categories and sourcing models.
While PLM, in the past, was primarily applicable only to the design and engineering phases of product development, it’s now widely considered to be a critical system across the entire value chain - from planning to execution. PLM eliminates boundaries existing between different departments by connecting people, data, processes and business systems in the product lifecycle process. It allows retailers to harmonize their decisions at each step of the product lifecycle, resulting in a more agile, profitable and efficient process, with fewer product failures or reworks and desired business success.
The companies that have successfully integrated their product development and sourcing processes have gained various business benefits, including:
· faster time to market
· better agility and responsiveness to market changes
· increased operational efficiencies
· lower risks
· lower overall product costs
· higher margins
· excellent financial performance at each stage in the chain
DHL Claim Multi-Sector Collaboration Key to Fighting COVID
Since January, global logistics leader DHL has distributed more than 200 million doses of the COVID vaccine to 120+ countries around the globe. While the US and UK recently rolled out immunisation plans to most citizens, countries with less developed infrastructure still desperately need more doses. In the United Arab Emirates (UAE), which currently has one of the highest per-capita immunisation rates, the government set up storage facilities to cover domestic and international demand. But storage, as we’ve learned, is little help if you can’t transport the goods.
This is where logistics leaders such as DHL make their impact. The company built over 50 new partnerships, bilateral and multilateral, to collaborate with pharmaceutical and private sector firms. With more than 350 DHL centres pressed into service, the group operated 9,000+ flights to ship the vaccine where it needed to go.
With new pandemic knowledge, DHL just released its “Revisiting Pandemic Resilience” white paper, which examined the role of logistics and supply chain companies in handling COVID-19. As Thomas Ellman, Head of Clinical Trials Logistics at DHL, said: “The past one year has highlighted the importance of logistics and supply chain management to manage the pandemic, ensure business continuity and protect public health. It has also shown us that together we are stronger”.
Multisector partnerships, DHL said, enabled rapid, effective vaccine distribution. While international scientists developed a vaccine in record time—five times faster than any other vaccine in history—manufacturers ramped up production and logistics teams rolled out distribution three times faster than expected. When commercial routes faced backups, logistics operators worked with military officers to transport vaccines via helicopters and boats.
In the UAE, the public-private HOPE Consortium distributed billions of COVID-19 doses to its civilians as well as other countries in need by partnering with commercial organisations such as DHL. For the first time, apropo for an unprecedented pandemic, logistics companies made strong connections with public health and government.
“While the race against the virus continues, leveraging the power of such collaborations and data analytics will be key”, said Katja Busch, Chief Commercial Officer DHL and Head of DHL Customer Solutions & Innovation. “We need to remain prepared for high patient and vaccine volumes, maintain logistics infrastructure and capacity, while planning for seasonal fluctuations by providing a stable and well-equipped platform for the years to come”.
How Do We Sustain Immunisation?
By the end of 2021, experts estimate that we need approximately 10 billion doses of vaccines—many of which will be shipped to areas of the world, such as India, South Africa, and Brazil, that lack significant infrastructure. This is perhaps the greatest divide between countries that have rolled out successful immunisation programmes and those that have not. As Busch noted, “the UAE’s significant investments in creating robust air, sea, and land infrastructure facilitated logistics and vaccine distribution, helping us keep supply chains resilient”.
Neither is the novel coronavirus a one-time affair. If predictions hold, COVID will be similar to seasonal colds or the flu: here to stay. When fall comes around each year, governments will need to vaccinate the world as quickly as possible to ensure long-term immunisation against the virus. This time, logistics companies must be better prepared.
Yet global immunisation, year after year, is no small order. To keep reinfection rates low and slow the spread of COVID, governments will likely need 7-9 billion annual doses of the vaccine to meet that mark. And if DHL’s white paper is any judge of success, multi-sector supply chain partnerships will set the gold standard.