Information-Driven Business Networks

Continued

Measurable Returns

JOAG's VMI program has been well received by its retail customers, many of which have seen their fill rates improve from 70 percent to nearly 100 percent, along with a corresponding boost in profitability. (Fill rate refers to how much of the desired order is actually filled.) "The online links we have established—from the retail point-of-sale all the way through to our order management and replenishment systems—are responsible for increasing our expected sell-through," Clark explains.

These online links also help JOAG coordinate its inventory management practices with the promotions its retailers are running, and to optimize the efficiency of workers in its distribution centers. As an added benefit, fresh information enables managers in the warehouse to level-load the supply chain, so workers aren't scrambling to fill every order. "Instead of peaks and valleys of activity in the warehouse, we have a more measured operation," says Clark. "We are filling customer orders more accurately and efficiently by better organizing products within our warehouse. Correct warehouse slotting means warehouse personnel are less likely to grab the wrong item."

Over time, as more JOAG customers adopt the VMI system, Clark and his team expect to reduce out-of-stocks at their retailers as well as eliminate excess and obsolete inventory. JOAG also expects to reduce price-protection spending by not overstocking products on customer shelves, and to increase revenue through better assortment planning at the local store level, so retailers always have the titles that are in demand. The Demantra software helps JOAG determine which orders to fill first. For example, if a retailer has 1,500 stores, JOAG can prioritize its shipments based on geography, so the farthest stores are sent the earliest shipments. Warehouse personnel select the most economical stocking, shipping, and inventory methods based on when the retailer actually needs each item. "Keeping the shelves stocked is our main priority for the retailer," Clark says. "They're thrilled that we're keeping them stocked with the items that actually sell."

Ripple Effect

While VMI may seem like a very specific type of business venture, it represents a concept that pertains to companies in nearly every industry: the benefit of capturing and exchanging real-time information. The most highly evolved business networks rely on a unified data model to provide a single, accurate view of activities spanning multiple departments, plants, and even companies.

In some cases, companies create centralized databases as a foundation for integrating all of their business processes as well. When properly constructed, every business function—including marketing, sales, manufacturing, customer service, accounting, and human resources—can share the same storehouse of information and leverage a common data model.

Of course, consolidated information is most valuable when all of the associated business applications are engineered to work together. That's why market-leading firms rely on enterprise resource planning (ERP) software such as Oracle E-Business Suite to collect, process, and share information across multiple lines of business. An e-business architecture automates business flows across many departments and provides a single source of accurate data about products, customers, partners, and employees.

For example, in the manufacturing industry, e-business systems can instantly reveal how a supply chain is faring, how quickly inventory is moving, and what orders are in the pipeline. Once all these pieces come together, managers can devise a single source of truth from which to make business decisions.

Market leaders succeed by mobilizing their entire value chain around consolidated information. Value is derived not just by streamlining internal business processes but also by integrating these processes with the systems used by trading partners, distributors, and suppliers.

"Information is a key part of what makes us successful," says Craig Kerney, enterprise business system supply chain and manufacturing systems manager for the North American Rolled Products Division at Alcoa.