Global supply-chain systems can help shorten cycle times and make inventories leaner.

At Ocean State Job Lot, a privately held North Kingstown, R.I.-based retail chain, globalization has hit home. Ocean State sells discounted products from excess merchandise and closeouts, and according to CIO Hisham Aharon, roughly a quarter of these items come from overseas. In the past, bids to sell Ocean State merchandise would come in by fax or e-mail. "Someone had to go through all the offers by hand and decide which ones were good," he says. Once the orders were set, the company would send shipping instructions to the vendor, "and from then on all the interaction we had was through the delivery service," Aharon says. Not the best way to do inventory planning, especially when goods could take weeks to arrive.

Using software from supply-chain vendor TradeStone Software Inc., Ocean State automated the entire process last June. Now, everything is done over the Web. "We get multiple offers from vendors all over the world, and the system compares them side-by-side. Once we place an order, the system does all the conversion for us, figures out the shipping schedule and tracks the order all the way to our doorstep," he says. The company not only benefits from better decisions on sourcing, but the ordering process is shortened as well—from three weeks to three days, on average. This has broadened product diversity and led to increased sales throughout Ocean State's more than 70 locations across New England, says Aharon.

Obviously, the primary goal of global sourcing is to lower manufacturing costs, but putting the necessary systems in place to enable that creates other benefits—such as streamlining logistics, says Ametek's Lawson. "We were using a shipper that was pushing for price increases, but when we started aggregating the data and realized the amount of business we did with that company, we were able to renegotiate prices." The company cut more than $250,000 from logistics costs, which nearly covered its entire global IT supply-chain investment.

But the ultimate goal for any supply chain is just-in-time delivery—meeting demand with virtually no overstocks. At P&G, the goal is to create a supply chain that produces on demand. "We plan to cut our current supply-chain cycle by one-third" in three years, says Cos, saving P&G tens of millions of dollars each year.

It's not an unattainable goal, says CSC's Poirier. In fact, he says, successful global supply-chain management can lead to profit increases of as much as 8 percent. "The first points come from better sourcing and logistics, the next from improved order management and warehousing. The last 3 require you to use technology to take advantage of improved supply-chain visibility to shorten cycle times and build new revenues."

This article was originally published on 03-06-2006
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