Company: Astech Consultants LimitedCustomer: Powerhouse RetailSubmitted by: Astech ConsultantsDate: June 2001Powerhouse Retail Limited is the UK’s largest independent home appliance retailer with 127 stores stretching from Stoke-on-Trent to the Isle of Wight and from East Anglia to South Wales. A review of their supply chain management systems led to the adoption of B2B4Retail in preference to EDI or joining a trading exchange. News/400.
uk explores the latest offering in the world of collaborative supply chain management.As stockists of a whole host of appliances from cookers to dishwashers to top of the range digital wide screen televisions, Powerhouse Retail Limited face many of the challenges typical of the modern electrical retailer. From one direction, competitors provide constant price competition. From another, customer expectations of service are steadily rising. These two pressures combine to focus retailers’ minds on finding even more new ways to take costs out of the business.E-commerce initially provided one panacea with the opportunity to sell direct to customers via the Web and reduce retailers dependence on the store.
But as yet few retailers could claim that e-commerce has increased turnover, market share or simply shifted commerce from the store to on-line.E-business is proving more promising. The automation of relationships within the supply chain – from retailer through distributor to manufacturer – theoretically offers the promise of much more than streamlined procurement. Moving a purchase order from the fax machine to the internet is relatively straightforward and not particularly exciting. But it could lay the foundations for real business to business e-business in which the manufacturer makes informed resource planning decisions based upon the information supplied by customers further up the supply chain.Powerhouse Retail is today a thriving private company and the largest independent home appliance retailer.
As it is a relatively young company, the IT Director, John Levicount, is fortunate in not having a collection of legacy IT investments to contend with, particularly EDI. “Our strategy,” he recalls, “is purely pragmatic. We have fifty regular suppliers, 20% of which provide 80% of our business. For these key suppliers we envisaged a move from manual – i.e. fax – processing of outgoing purchase orders and incoming invoices to some form of electronic processing.
So for me, all the hype surrounding complex B2B transactions is overstated. I had a straightforward business requirement to meet.”Powerhouse considered three options: EDI, joining a trading exchange and B2B4Retail, a new collaborative supply chain software solution from Oxfordshire-based Astech Consultants Limited.According to John Levicount, the decision not to go down the EDI route was relatively easy to make:”I couldn’t cost justify EDI. The more business we would do using EDI, the higher the costs would grow and as we’re not a just-in-time business as such I couldn’t see that it offered a great deal over our manual system.
It would also mean investing in technology that is perceived as already on the wane. Most important of all, our suppliers weren’t pushing for EDI; we weren’t losing business because we didn’t have it and I was sure that not all our suppliers would be able to use it if we did.”Commentators often focus on the reduction in head count gained by automating purchase order entry as the primary benefit from investments in B2B e-business. Added to this though, are the improvements in accuracy that can be derived. Integrate back end and supply chain management systems and companies can gain corresponding reductions in customer complaints and returns.
These gains are harder to calculate but no less important. This was of particular value to Powerhouse because of the significant proportion of special one item invoices they process.Powerhouse’s second option was to consider participation in a trading exchange. The concept is simple. Retailers and suppliers subscribe to a centralised web-based purchasing operation that facilitates on-line communication between subscribers.
“The prospect of all suppliers using the same technology was very attractive, ” comments John Levicount, “but there was no back end integration with our JDA enterprise system and it seemed that the real beneficiary was actually the company operating the exchange. In fact, with a growing number of suppliers offering on-line ordering we may as well have followed that route and avoided the subscription. It was becoming clear that what was very important to us was streamlined data transfer to and from our suppliers without the burden of data re-entry. Replacing our fax machine with someone else’s web site really wasn’t a solution.”Powerhouse began to look for a one to one solution to manage its relationship with Dyson, a company that had considered using the same trading exchange.
First port of call was Astech Consultants, a well known consultancy amongst the retail community but now making its first foray into packaged software.In some respects, Astech’s B2B4Retail product is as flexible as the trading exchange except it also offered the prospect of seamless integration with the Powerhouse JDA system and the portal element of the offering is optional. Additionally, “the comfort factor in working with a company that knows the JDA file structures was very considerable,” explains John Levicount. “B2B4Retail simply takes data from JDA, configures it in the correct file format for the supplier, and pumps it onwards. Invoices are returned in the same manner.”Electrolux soon joined Dyson in using B2B4Retail and other suppliers are due to follow.
Mark Ripley, Director of Astech Consultants, says that the product is as easy to use as it sounds:”It is a relatively simple and swift process to configure the software to add further suppliers and there is no limit to the number of supply chain partners that could be involved. The real appeal of the solution though lies in its integration with the customer’s back end system and the variety of file formats it accommodates. These are essentially EDI, fax, email and XML. So it removes the need for retailers to adopt multiple standards and prevents anyone losing business because they don’t conform to the preferred format required by the supplier or retailer.”But to view B2B4Retail simply as a file transfer comms tool for suppliers is to misrepresent its potential application.
Powerhouse is already considering it to manage its credit contracts which are currently despatched by batch overnight transfer. Mark Ripley goes further:”To my mind, providing flexible and reliable communication is the first step on the road to ‘real’ B2B. We have provided this with the core engine of B2B4Retail and customers are already seeing the benefits. The next step is to use the infrastructure for true collaboration – sharing up to the minute information, and making informed decisions based on that information. For example – a buyer providing latest sales and forecast information to a supplier so that materials management, production schedules and stock levels etc.
can be adjusted appropriately.”For Powerhouse’s John Levicount, B2B4Retail has more immediate benefits: “Compared with EDI, B2B4Retail is more flexible with its acceptance of multiple file formats. The major cost savings for us will come as the number of paper invoices we receive is reduced. It won’t take much to reclaim the investment through reduced headcount and improved accuracy. The more we can communicate with suppliers using B2B4Retail, the more it will save and it is not going to cost anymore to run regardless of how many suppliers are on board.”