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 company
leaders 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 the
supplier to the customer and get new products to market is being pursued just as relentlessly as
cost and quality. It is no longer good enough to provide high-quality products at a low costyou
also must be responsive and flexible.
Over the past two decades, programs have evolved to reduce lead times. Customersmostly
retailers such as Wal-Mart, Home Depot, and Krogerhave requested these programs, and in so
doing have tipped the power scales away from manufacturers and toward retailers. While these
programs have had individual identities, they are being absorbed gradually under the umbrella of
supply chain management.
Different game plans
Reducing the lead time from supplier to customer meant cleaning excess inventories out of the
supply chain, enabling needed inventory to flow smoothly and quickly. This method provided
other benefits such as reduced cost, improved quality, and greater flexibility in responding to
changes in volume and mix. Other programs, such as Just-in-Time, lean, total quality
management, and six sigma, also helped to reduce excess inventories; however, their primary
goals 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 apparel
industries hired Kurt Salmon Associates to recommend a program that would reduce their
stockouts by providing a closer match of demand and supply. The program provided a way to cut
lead times for stock replenishment orders from manufacturer to retailer and to cut the lead times
for introducing new products.
There were a number of components to the program, but the essential ingredients were
willingness and capability to more quickly communicate actual demand data from the retailer to
the supplier. As a result, the suppliers had more time to prepare for orders from their downstream
customers. Another goal was to reduce the bullwhip effect by placing orders on a more regular
and 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 progress
despite its well-demonstrated benefits to the apparel industry." According to Hunter, the
expected benefits of quick response programs are reductions in pipeline inventories, greater
probability of garment designs and colors being acceptable to the consumer, ability to
re-estimate stockkeeping unit (SKU) demand, and greater competitiveness for domestic
producers facing increased levels of imports.
Hunter also describes the following problems that have delayed the widespread adoption of quick
response programs.

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

Difficulty creating "partnerships": The retailers got the benefits while the suppliers
incurred the costs.
Structural issues: The project suffered from a staggering number of unique SKUs (1.2 to
1.4 million at a department store every four months); overwhelming effect of fashion,
such as decreasing shelf lives; and the make-up of the pipelineretailers and textile

companies dominate, but apparel manufacturers are small all contribute to poor
structure.
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 product
code and European Article Numbering code compliance and standardization. Plus, the role of
value-added networks must be made clearer, and those networks must become widely
accepted. Lastly, smaller manufacturers must be able to access electronic data interchange.
Kurt Salmon Associates (1997) expanded the scope of quick response programs to include
product development and sourcing, as well as distribution. Despite its slow beginning, quick
response programs provided a model upon which other industries could follow and build.
Closely allied with quick response programs, continuous replenishment programs were
designed to encourage automatic replenishment ordering so the customers would automatically
place 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 grocery
executives formed a voluntary group, known as the Efficient Consumer Response (ECR)
Working Group, and commissioned a study by Kurt Salmon Associates "to identify opportunities
for more efficient, improved practices in the grocery industry."
The consultants returned in early 1993 claiming the industry could reduce inventory costs by 10
percent, or $30 billion (Frankel 2002). In addition to efficient replenishment, this group added the
requirement of category management, consisting of efficient new product introduction, store
assortment, and promotion. The program included collection of demand (sales) data with
point-of-sales terminals and feedback of this data to suppliers with EDI. Suppliers then could
avail themselves of a variety of techniques, such as cross docking, to move the product more
quickly to the customer.
Vendor managed inventory
Some retailers decided that, inasmuch as the suppliers had the consumer demand data, the
suppliers could assume the responsibility of managing their retailer inventory. While the idea of
suppliers managing a retailer's inventory was not newrack jobbers and service merchandisers
did it in the health and beauty aids categories years beforeit did have the added element of
rapid feedback of demand information.
One study reviews the information technology challenges, especially the effects of information
delay and accuracy (Angulo et al. 2004). Another study concludes that, even for products with
stable demand, a partial improvement of demand visibility can increase production and inventory
control efficiency (Smaros 2003).
Sales and operations planning
Sales and operations planning has been around for at least 30 years and was originally intended
to get marketing and production to collaborate on a production schedule within a company. Sales
and operations planning represents a way to get companies to talk with one another and smooth
the 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 develop
collaborative planning, forecasting, and replenishment (CPFR) as an industry standard. The
following year, VICS issued the first document on CPFR: "VICS CPFR Guidelines," which has
been constantly updated since then (see www.cpfr.org, VICS 2000). While quick response
programs and ECR provided the flow of demand information from the retailer upstream to
suppliers, it was the responsibility of the supplier to anticipate demand and the retailer (except in
vendor managed inventory) to actually do the ordering. CPFR attempted to eliminate this
disconnect by advocating that both the customer and the supplier collaborate to plan a joint
demand forecast and replenishment schedule.

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

the influence of promotions in the creation of the sales forecast and inventory
management policy
the effect of changing demand patterns in the creation of the sales forecast and
inventory management policy
the common practice of holding high inventory levels to guarantee product availability on
the shelves
a lack of coordination between store, purchasing process, and logistics planning for
retailers
a lack of general synchronization (or coordination) among the manufacturer's functional
departments (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 technology
must be present for success.
A supply chain management program includes all of the good features of the programs
previously described plus other attributes that are beyond the scope of this department. (See
Crandall 2005.) Supply chain management is the ultimate method for linking entities through
communications and collaboration.
Present status
How are companies doing in their quest to reduce response times? A simplistic answer is the
programs work, but few companies are getting the full benefit because of incomplete
implementations. There are three key components to any program of this type: technology,
infrastructure, and change management. The technologyprimarily in the form of electronic data
collection, with point of service terminals and data transmission with EDI or the Internet is good
and getting better. The infrastructures, including organization, system, and functional
relationships, 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 finds
trust is not only essential for success, but also lacking in many programs.
Crum and Palmatier (2004) list the following reasons why demand collaboration programs have
not 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 in
trading 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 plans
does not.
There is a common view that demand collaboration is a technology solution, and the
current technology is too complex.

Another study (Harrington 2003) reports that, while most companies think of CPFR primarily as
technology-driven, it is a business process supported by the internal culture that makes CPFR
successful.
Computer Sciences Corp., in conjunction with Supply Chain Management Review , recently
concluded its second annual Global Survey of Supply Chain Progress. Their findings suggest that
some companies understand the advantage of leveraging buying across a more strategic supply
base, 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 chain
initiatives are generally happy with the results. However, only 28 percent of respondents indicated
increased customer satisfaction ratings as a main factor in the success of initiatives (Poirier and
Quinn 2004).
One seemingly simple problem is the need for consistency in product data identification and
transmission. 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, or
descriptors, about 40 of which are mandatory. One well-known company found that it was
transmitting 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 business
processes in place to take full advantage of real-time information varied from 20 percent in the
construction and engineering industry to slightly more than 70 percent in the logistics and
transportation industry, with the overall average of all industries around 45 percent (Sullivan and
Bacheldor 2004).
The other nagging question is the relative benefits between retailer and supplier. Corsten and
Kumar (2005) studied whether collaborative relationships with large retailers benefit suppliers.
They found that, while suppliers benefit in the economic sense and in capability learning, they
also bear more of the burden and receive fewer benefits.
Some activities increase response times, most notably the offshore outsourcing movement. An
Industry Week study (Vinas 2005) observes the route to cheaper supplies from overseas sources
may look like a clear path, but supplier lead times are elongatinga step back from the
improvements wrought from years of lean implementations. "Some companies may find the payoff
worth it. Others may find themselves with cheaper raw materials and components, but fewer
customers."
It takes longer to get product from another country. The costs may be lower, but the response
times 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 of
supply with demand no doubt will continue. Individual programs are losing their focus as they
become 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 of
stocks are their biggest inventory challenge. To combat this, "the best of these retailers [is] poised
to move past spreadsheets and into SKU [and] store-level automated planning and replenishment
systems as their tools of choice. Within the next 24 months, more than 80 percent of retailers
surveyed will have implemented automated systems to support virtually all aspects of their
planning, allocation, and replenishment operations" (Rosenblum 2005). Another study suggests
that retail exchanges, stemming from improved information technology, may provide part of the
answer ( Sparks and Wagner 2003).
Whatever the program is called, companies must integrate their communication systems and
develop sufficient trust with one another to collaborate effectively and gain the benefits of their
efforts. 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. He
may be contacted at (828) 262-2034 or crandllre&.appstate.edu.

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