Global Strain: The Supply Chain Stretch

Extending and maintaining its global supply chain has been a thorny challenge at VF. The company sources finished products from the Far East and Central America, and also uses VF-owned factories plus other manufacturers operating under contract. "One thing about globalisation is that it tends to throw a company into a constantly changing environment," says Ellen Martin, a vice president at the company.

As market demands push operations farther out globally, organisations such as VF are being forced to tweak and stretch their multimillion-dollar supply chain management (SCM) software investments to match the extended supply chains.

Along with globalisation come the pressures of meeting ever higher customer demands, fulfilling tough service-level agreements (SLA) and adding increasingly sophisticated forecasting, tracking and replenishment systems, such as those based around radio frequency identification technology.

These new challenges follow the SCM boom of the late 1990s, when companies devoted considerable resources rolling out and then stabilising complex forecasting, supplier management and replenishment applications, as well as related software, says Kevin O'Marah, an analyst at AMR Research in Boston.

The year 2000 was the high-water mark for SCM spending, he says, but over the past year, there has been some new stirring in the marketplace, largely fueled by fiercer global competition. But buying patterns are more modest than they were five years ago, when business was booming for vendors such as i2 Technologies, Manugistics and SAP. That's because manufacturers and suppliers face overseas rivals that are able to deliver the least-expensive products to retailers like Wal-Mart Stores, which have a seemingly insatiable demand for low-cost goods, says O'Marah.

Companies that want to compete must shave expenses down while becoming more nimble. "If you go back even a couple of years, you could be a bit more supply-driven and push product out to the market, and if there was a drop, fix it with promotions," says O'Marah. "Today, you've got to be more demand-driven."

For VF, it's been especially difficult to establish factories in countries such as Bangladesh, where there is only rudimentary communications technology. Plus, the workforce doesn't speak English and isn't technology-savvy, explains Martin. The US$6 billion a year company, which owns the Lee, North Face and Wrangler brands, needs a growing global supply chain in order to remain competitive. But that makes the accountability that VF's customers demand especially difficult to enforce.

Upgrades and Additions

VF runs i2's Demand Fulfillment 6.04 and Supply Chain Planner as its primary SCM system. To help do things such as share information with offshore planners, VF is rolling out i2's Master Data Management (MDM) application, says Will Shiver, the company's senior i2 analyst. This middleware tool promises to consolidate all relevant information around global manufacturing and supply chain operations and ensure that the information is kept up to date.

VF has wrapped up a pilot of MDM with plans to phase out a green-screen, mainframe-based planning system. Presently, VF has to import data to the mainframe, but after the MDM implementation, it will be able to leave the data in the Supply Chain Planner system without having to reformat it. From there, the data can be easily exported to an Excel spreadsheet and sent overseas to, say, a planner in Hong Kong. With globalisation, VF has recognized the importance of making the full picture accessible virtually anywhere, Shiver says.

In addition, VF over the past two years has been rolling out a sourcing and production management application for tracking and tracing orders over the Web, says Martin. The product, called e-SPS, is made by Miami-based apparel software maker New Generation Computing and requires only a PC and Web access. With it, a supplier and manufacturer can confirm that orders were received and give status reports on the actual production. And if there is a problem, an e-mail notification is sent to the appropriate VF staffer. The application talks to the i2 system via custom-written hooks created by VF, says Shiver.

As supply chains grow, the volume of information generated increases, demanding greater scalability for the SCM applications. VF is in the midst of an upgrade to Supply Chain Planner 6.1 from Version 5.3, which is expected to wrap up by year's end, says Shiver. The new version, which runs on IBM's high-end Unix boxes, will deliver a greater level of flexibility and complexity to rapidly create models of VF's growing international supply chains and produce more accurate forecasting, Shiver explains.

For instance, VF recently completed the Supply Chain Planner upgrade for its line of intimate apparel. When processing the bill of materials for, say, a bra, which will include data for multiple stock-keeping units, the application will factor the relevant information automatically, says Martin. The system uses custom-written hooks to take data from mainframe, ERP and other systems, such as the forecasting application from Logility, says Shiver.

Exploiting business intelligence software to boost planning accuracy is another way VF is fine-tuning its supply chain. The e-SPS software can do vendor report cards and keep track of things such as how many irregular goods a supplier delivered, how efficiently the supplier shipped the goods and how much it costs to do business with, says Martin. Some factories are better at supplying certain garments, and VF wants to pinpoint where contracts should go.

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