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Relevant Research 

Beating Impossible Deadlines  A variety of methods can help

By Richard E. Crandall 

Global competition is forcing companies to improve or go out of business. Successful companyleaders continue to search for some competitive advantage, whether it is price; quality; flexibility;or, more recently, response time. The drive to reduce the time it takes to get an order from thesupplier to the customer and get new products to market is being pursued just as relentlessly ascost and quality. It is no longer good enough to provide high-quality products at a low cost—youalso must be responsive and flexible. 

Over the past two decades, programs have evolved to reduce lead times. Customers—mostlyretailers such as Wal-Mart, Home Depot, and Kroger—have requested these programs, and in sodoing have tipped the power scales away from manufacturers and toward retailers. While theseprograms have had individual identities, they are being absorbed gradually under the umbrella ofsupply chain management. 

Different game plans Reducing the lead time from supplier to customer meant cleaning excess inventories out of thesupply chain, enabling needed inventory to flow smoothly and quickly. This method providedother benefits such as reduced cost, improved quality, and greater flexibility in responding tochanges in volume and mix. Other programs, such as Just-in-Time, lean, total qualitymanagement, and six sigma, also helped to reduce excess inventories; however, their primarygoals were to decrease cost and improve quality. 

Quick response program In the early 1980s, a group of interested manufacturers and retailers in the textile and apparelindustries hired Kurt Salmon Associates to recommend a program that would reduce theirstockouts by providing a closer match of demand and supply. The program provided a way to cutlead times for stock replenishment orders from manufacturer to retailer and to cut the lead timesfor introducing new products. 

There were a number of components to the program, but the essential ingredients werewillingness and capability to more quickly communicate actual demand data from the retailer tothe supplier. As a result, the suppliers had more time to prepare for orders from their downstreamcustomers. Another goal was to reduce the bullwhip effect by placing orders on a more regularand predictable schedule. 

The potential for quick response programs was high, but how did it do? Alan Hunter (1995)reports, "In the 10 years since its formulation, quick response has made only limited progressdespite its well-demonstrated benefits to the apparel industry." According to Hunter, theexpected benefits of quick response programs are reductions in pipeline inventories, greaterprobability of garment designs and colors being acceptable to the consumer, ability tore-estimate stockkeeping unit (SKU) demand, and greater competitiveness for domesticproducers facing increased levels of imports. 

Hunter also describes the following problems that have delayed the widespread adoption of quickresponse programs. 

• Naivety: Participants didn't realize the magnitude of the task.

• Difficulty creating "partnerships": The retailers got the benefits while the suppliersincurred the costs.

• Structural issues: The project suffered from a staggering number of unique SKUs (1.2 to1.4 million at a department store every four months); overwhelming effect of fashion,such as decreasing shelf lives; and the make-up of the pipeline—retailers and textile

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companies dominate, but apparel manufacturers are small all contribute to poorstructure. 

• Technical problems: Bar codes lack accuracy, inventory and sales data are inadequately stored and manipulated, and electronic data interchange (EDI) lacks

standards. Hunter says, in order for quick response programs to grow, there needs to be universal productcode and European Article Numbering code compliance and standardization. Plus, the role ofvalue-added networks must be made clearer, and those networks must become widelyaccepted. Lastly, smaller manufacturers must be able to access electronic data interchange. 

Kurt Salmon Associates (1997) expanded the scope of quick response programs to includeproduct development and sourcing, as well as distribution. Despite its slow beginning, quickresponse programs provided a model upon which other industries could follow and build. 

Closely allied with quick response programs, continuous replenishment programs weredesigned to encourage automatic replenishment ordering so the customers would automaticallyplace an order when their inventory management system indicated a need for a reorder(Lummus and Vokurka 1999). 

Efficient consumer response Encouraged by the positive results in the quick response programs, in 1992, several groceryexecutives formed a voluntary group, known as the Efficient Consumer Response (ECR)Working Group, and commissioned a study by Kurt Salmon Associates "to identify opportunitiesfor more efficient, improved practices in the grocery industry." 

The consultants returned in early 1993 claiming the industry could reduce inventory costs by 10percent, or $30 billion (Frankel 2002). In addition to efficient replenishment, this group added therequirement of category management, consisting of efficient new product introduction, storeassortment, and promotion. The program included collection of demand (sales) data withpoint-of-sales terminals and feedback of this data to suppliers with EDI. Suppliers then couldavail themselves of a variety of techniques, such as cross docking, to move the product morequickly to the customer. 

Vendor managed inventory Some retailers decided that, inasmuch as the suppliers had the consumer demand data, thesuppliers could assume the responsibility of managing their retailer inventory. While the idea ofsuppliers managing a retailer's inventory was not new—rack jobbers and service merchandisersdid it in the health and beauty aids categories years before—it did have the added element ofrapid feedback of demand information. 

One study reviews the information technology challenges, especially the effects of informationdelay and accuracy (Angulo et al. 2004). Another study concludes that, even for products withstable demand, a partial improvement of demand visibility can increase production and inventorycontrol efficiency (Smaros 2003). 

Sales and operations planning Sales and operations planning has been around for at least 30 years and was originally intendedto get marketing and production to collaborate on a production schedule within a company. Salesand operations planning represents a way to get companies to talk with one another and smooththe flow of goods along the supply chain. In a recent survey, it was ranked as the second initiative

of global companies, following strategic sourcing of direct materials (Poirier and Quinn 2004). 

Collaborative planning, forecasting, and replenishment In 1997, voluntary interindustry commerce standards (VICS) created a subcommittee to developcollaborative planning, forecasting, and replenishment (CPFR) as an industry standard. Thefollowing year, VICS issued the first document on CPFR: "VICS CPFR Guidelines," which hasbeen constantly updated since then (see www.cpfr.org, VICS 2000). While quick responseprograms and ECR provided the flow of demand information from the retailer upstream tosuppliers, it was the responsibility of the supplier to anticipate demand and the retailer (except invendor managed inventory) to actually do the ordering. CPFR attempted to eliminate thisdisconnect by advocating that both the customer and the supplier collaborate to plan a jointdemand forecast and replenishment schedule. 

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Barratt and Oliverira (2001) list several issues they believe were addressed for the first time withCPFR. The issues include the following:

• the influence of promotions in the creation of the sales forecast and inventorymanagement policy

• the effect of changing demand patterns in the creation of the sales forecast andinventory management policy

• the common practice of holding high inventory levels to guarantee product availability onthe shelves

• a lack of coordination between store, purchasing process, and logistics planning forretailers

• a lack of general synchronization (or coordination) among the manufacturer's functionaldepartments (sales and commercial, distribution, and production planning)

• multiple forecasts developed within the same company (marketing, financing,purchasing, and logistics).

Barratt and Oliverira also provide an excellent summary of benefits, barriers to implementation,and enablers of the CPFR process, and conclude that trust and good information technologymust be present for success. 

 A supply chain management program includes all of the good features of the programspreviously described plus other attributes that are beyond the scope of this department. (SeeCrandall 2005.) Supply chain management is the ultimate method for linking entities throughcommunications and collaboration. 

Present status How are companies doing in their quest to reduce response times? A simplistic answer is theprograms work, but few companies are getting the full benefit because of incompleteimplementations. There are three key components to any program of this type: technology,infrastructure, and change management. The technology—primarily in the form of electronic datacollection, with point of service terminals and data transmission with EDI or the Internet— is good

and getting better. The infrastructures, including organization, system, and functionalrelationships, are inconsistent but improving among companies and even industries. 

Managing change is a continuing problem, particularly in the area of company culture and trust.How much do you trust? Which customers and suppliers do you trust? Almost every study findstrust is not only essential for success, but also lacking in many programs. 

Crum and Palmatier (2004) list the following reasons why demand collaboration programs havenot realized their potential. 

• The pace of adopting new ways of doing business is slow.

• Demand information supplied by customers is not put to use in an integrated manner intrading partners' own demand, supply, logistics, and corporate planning.

• Demand and supply management processes are not integrated, and sales and

operations planning is not used to synchronize demand and supply.• There is a lack of trust among trading partners, inhibiting the sharing of pertinent

information and collaboration on decision making.

• The desire to partner exists, but the commitment to execute the communicated plansdoes not.

• There is a common view that demand collaboration is a technology solution, and thecurrent technology is too complex.

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 Another study (Harrington 2003) reports that, while most companies think of CPFR primarily astechnology-driven, it is a business process supported by the internal culture that makes CPFRsuccessful. 

Computer Sciences Corp., in conjunction with Supply Chain Management Review , recently

concluded its second annual Global Survey of Supply Chain Progress. Their findings suggest thatsome companies understand the advantage of leveraging buying across a more strategic supplybase, while others are content to pursue more limited, tactical improvements. 

Overcoming challenges Despite the progress needed in some areas, most companies pursuing the various supply chaininitiatives are generally happy with the results. However, only 28 percent of respondents indicatedincreased customer satisfaction ratings as a main factor in the success of initiatives (Poirier andQuinn 2004). 

One seemingly simple problem is the need for consistency in product data identification andtransmission. UCCnet, a nonprofit unit of the Uniform Code Council standards organization,established a global online registry that requires product data with as many as 151 attributes, ordescriptors, about 40 of which are mandatory. One well-known company found that it wastransmitting information by phone, e-mail, fax, compact disks, EDI, PDFs, spreadsheets, Web

sites, and printed pages. The same survey found that the percentage of company leaders who felt they have the businessprocesses in place to take full advantage of real-time information varied from 20 percent in theconstruction and engineering industry to slightly more than 70 percent in the logistics andtransportation industry, with the overall average of all industries around 45 percent (Sullivan andBacheldor 2004). 

The other nagging question is the relative benefits between retailer and supplier. Corsten andKumar (2005) studied whether collaborative relationships with large retailers benefit suppliers.They found that, while suppliers benefit in the economic sense and in capability learning, theyalso bear more of the burden and receive fewer benefits. 

Some activities increase response times, most notably the offshore outsourcing movement. AnIndustry Week study (Vinas 2005) observes the route to cheaper supplies from overseas sourcesmay look like a clear path, but supplier lead times are elongating—a step back from the

improvements wrought from years of lean implementations. "Some companies may find the payoffworth it. Others may find themselves with cheaper raw materials and components, but fewercustomers." 

It takes longer to get product from another country. The costs may be lower, but the responsetimes and uncertainty of supply are higher. Balancing the trade-offs requires a great deal of skill(Hutchison 2006). 

The pressure to clean out excess inventories in supply chains and gain a better matching ofsupply with demand no doubt will continue. Individual programs are losing their focus as theybecome a part of more general programs, such as supply chain management and integrated,demand-driven collaboration systems. 

 A survey of more than 60 retailers in the United States, Europe, and Asia found persistent out ofstocks are their biggest inventory challenge. To combat this, "the best of these retailers [is] poisedto move past spreadsheets and into SKU [and] store-level automated planning and replenishmentsystems as their tools of choice. Within the next 24 months, more than 80 percent of retailerssurveyed will have implemented automated systems to support virtually all aspects of theirplanning, allocation, and replenishment operations" (Rosenblum 2005). Another study suggeststhat retail exchanges, stemming from improved information technology, may provide part of theanswer ( Sparks and Wagner 2003). 

Whatever the program is called, companies must integrate their communication systems anddevelop sufficient trust with one another to collaborate effectively and gain the benefits of theirefforts. If they do, they can succeed. If they don't, they face an uncertain future. 65 

Richard E. Crandall is a professor at Appalachian State University in Boons, North Carolina. Hemay be contacted at (828) 262-2034 or crandllre&.appstate.edu. 

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References 

1. Angulo, Andres, Heather Nachtmann, and Matthew A. Waller, "Supply Chain InformationSharing in a Vendor Managed inventory Partner-ship," Journal of Business Logistics. OakBrook: 2004, Vol. 25, No. 1, pp. 101-120.

2.Barratt, Mark and Alexander Oliverira, "Exploring the Experiences of Collaborative PlanningInitiatives," International Journal of Physical Distribution & Logistics Management. Bradford:2001, Vol. 31, No. 4, pp. 266-285.

3..Corsten, Daniel and Nirmalya Kumar, "Do Suppliers Benefit from Collaborative Relationshipswith Large Retailers? An Empirical Investigation of Efficient Consumer Response Adoption,"Journal of Marketing . Chicago: Jul 2005. Vol. 69, No. 3,pp. 80-94. 

4. Crandall, Richard E., "Dream or Reality? Achieving Lean and Agile Integrated SupplyChains," APICS magazine, Nov/Dec 2005. Vol. 15, No. 10, pp. 20-23.

5. Crum, Coleen and George F. Palmatier, "Demand Collaboration: What's Holding Us Back?"Supply Chain Management Review ; Jan/Feb 2004. Vol. 8, No. 1, pp. 54-61.

6. Harrington, Lisa H., "9 Steps to Success with CPFR," Transportation & Distribution .Cleveland: Apr 2003, Vol. 44, No. 4, pp. 50-52.

7. Hunter, N. A. and P. Valentino, "Quick Response—Ten Years Later," International Journal ofClothing Science and Technology. Bradford: 1995. Vol. 7, No. 4, pp. 30-40.

8. Hutchison, Charles J., "Balancing Act," APICS Extra : February 2006.Vol. 1,No. 1.

9. Kurt Salmon Associates, "Quick Response Mandates Today," Online Viewpoint, March 1997.

10. Lummus, Rhonda R. and Robert J. Vokurka, "Defining Supply Chain Management: AHistorical Perspective and Practical Guidelines," Industrial Management and Data Systems.Wembley: 1999. Vol. 99, No. 1, p. 11.

11. Rosenblum, Paula, "The Business Benefits of Advanced Planning and Replenishment," Aberdeen Group 2005 White Paper.

12. Smaros, Johanna, Juha-Matti Lehtonen, Patrik Appelqvist, and Jan Holstrom, "The Impactof Increasing Demand Visibility on Production and Inventory Control Efficiency," InternationalJournal of Physical Distribution & Logistics Management. Bradford: 2003, Vol. 33, No. 4, pp.336-354.

13. Sparks, Leigh and Beverly A. Wagner, "Retail Exchanges: A Research Agenda," SupplyChain Management. Bradford: 2003. Vol. 8, No. 3/4,pp. 201-208. 

14. Sullivan, Laurie and Beth Bacheldor, "Slow to Sync," Information Week, June 7, 2004. Iss.992, pp. 55-64.

15. Vinas, Tonya, "IW Value-Chain Survey: A Map of the World," www.lndustryWeek.com,

September 1,2005.

16. Collaborative Planning, Forecasting & Replenishment (CPFR) Committee, www.cpfr.org.