6 Factors for Real-Time Integration…Buzzword or Real Need?
Real-time processing implies that processing of data happens upon the completion of an event (request for data for example) and is immediately handed off to the next system that processes immediately and so on. Here, I’m mainly referring to the flow of information through the supply chain and the speed at which that information travels, which helps orchestrate the flow of materials and resources. Access to information in real-time provides business intelligence that allows decisions to be made about any changes that may be needed for the orchestration.
An example always helps so let’s look at something I come across at least a few times a month:
Scenario
You have an E-Commerce store and you want your customers to have immediate access to your inventory levels so you can provide accurate stock levels and shipping dates.
Consideration
Real-time communications between your E-Commerce store and ERP or inventory system can inform the customer that the last pair of sunglasses was sold 2 minutes ago and is now backordered (or shipping in 3 weeks when more are in stock).
What makes this scenario tricky is that your E-Commerce inventory levels are also affected by external functions such as telephone, email or fax orders keyed directly into the ERP system, re-allocation of inventory to another warehouse and discovery of damaged goods to name a few.
Questions
How much transparency do you want your customers to have on stock levels when placing an order and how will this be presented on your E-Commerce store?
What does the customer see if your point-to-point real-time inventory query system is down?
What if your warehouse is outsourced and won’t allow you to connect your E-Commerce store to their systems directly?
How easily will you be able to add, remove or change the way the information flows once the system is running?
The 6 Factors
1. Speed – The biggest benefit and main purpose for real-time integration is speed. If an order is placed on your E-Commerce system and that data is made available to the warehouse to pick, pack and ship within a few minutes, you can greatly reduce your turn-around time and process orders closer to the cutoff time for shipping.2. Transparency – If you can view the key metrics in your business you need to make informed decisions at the very moment things are happening, you can make better decisions earlier, such as forecasting potential inventory shortages so you can contact your suppliers for more products sooner.
3. Cost – Depending on scope, the cost of the infrastructure required need to support a heterogeneous real-time network would probably be prohibitive in most cases. Also consider future costs of updating or changing any system in the process since connections between real-time systems today are more likely to be ‘hard-coded’.
4. Complexity – The objectives for a real-time project should be clearly defined and all systems need to be identified and taken into account. This includes the number and types of systems through which the data travels (both hardware and software) and will likely impact everyone in your organization.
5. Risk – Point-to-point integration means that ANY changes to any system in the process would need to be managed very carefully. Without a processing queue, any failure or hiccup in any system in the chain could result in data loss.
6. Flexibility – The architecture of a real-time system is not usually as flexible to changes as batch-based systems.
Concluding Thoughts
I can’t help but wonder if the desire for real-time integration processing is a bit of a buzz-term, at least partly driven by our almost instant and universal access to information. When you’re the size of companies like Wal-Mart and Ikea, real-time processing is indeed very relevant, but for many small and medium-sized businesses, substantial gains can usually be made by looking at efficiencies in your existing business process.
What are your thoughts on where we are heading with real-time processing in the supply chain? Leave me a comment.
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While Mike raises good points concerning the issues surrounding the move to real time data, that does nothing to mitigate the expectations of the consumer, nor does it really speak to the need vs. want and perceived value to the consumer. I take the counterpoint that it is a real need, at least when it comes to inventory. Once the order is accepted and scheduled for fulfilment, the real time requirement declines a bit, but continued communication is key.
The logistics of doing so are, as usual, just a cost of doing business. Now instead of [or in addition to] the cost of a storefront, companies need to accept the cost of the eCommerce and all its facets to remain competitive and responsive to their customers. In some cases, this can be the difference between staying in business and closing the doors.
While eCommerce has found a home with those who plan and shop early, it is gaining more widespread acceptance rapidly. The economic collapse of 2009-2010 has caused big box stores to reposition themselves. Best Buy for example has eliminated thousands of items from its store shelves and many chain stores now order less than their anticipated sales for holidays like Christmas. Stores that were once the definition of choice and value now offer limited selections and limited quantity – effectively mitigating their exposure and risk. Their online stores often offer products and/or ‘deals’ not available in stores. Those late, last minute, shoppers now are faced not with minimal choice but empty shelves. The internet has become the new master of selection and value – all for the price of a Google search.
I am a net consumer. I have shopped online for Christmas and other occasions since 2002 and usually have my shopping done early. I buy everything from electronics to flowers, clothes to toys online. For birthdays, Easter, Christmas, etc. I can shop in the convenience of my own home and have the goods delivered on my behalf to their destination. When choosing a supplier, if an online store does not offer me wide selection coupled with up to the minute stock status, and the confidence that my order will be filled, I go elsewhere. If they cannot provide tracking information for my shipment, I go elsewhere. I look for communication throughout the transaction right up to the point I open the box in my living room. There are many stores more than willing to provide that instant feedback 24-7 so why would I give up that convenience? The logistics implications for the supplier are not given a second thought by me, the consumer.
Our lifestyle of instant gratification has taken a serious hit because of the cutbacks at the Big Box level, but there is a limit to how much we as consumers are willing to allow that to fall. If you don’t have stock in your store, you better have a backup plan. In fact, I want to be able to search stock in your warehouse and in your store(s). If you can’t fulfil my expectations, your competitor will. I no longer am willing to remain on permanent hold while someone checks stock for me. Many of the online stores I buy from not only have their warehouses’ inventory online, they have their suppliers’ inventory online as well. They happily tell me just when my online purchase can be delivered to either my home or their store. More and more, I am seeing suppliers inventory levels and all items are direct drop shipped to the end user.
In this new eCommerce world, especially in this economy, my outsourced warehouses have to be on board with my corporate needs, or they get replaced. They once could object to exposing their data, but no longer. If they are not willing, there are 20 others that are. Three of the companies I order from regularly have their e-commerce site outsourced to their 3PL warehouse. It’s another revenue stream for the 3PL and a headache removed from the manufacturer/supplier.
If you are not reactive to your customers, they will go elsewhere and in the internet age two realities face every business:
1) The speed of the internet gets the word out faster that you are or are not a company to deal with.
2) The power of the internet makes it easier to find an alternative company to deal with.
You can choose not to embrace this, but the reality is that after the java applets, flashy websites, iPhone apps, and so forth this is another differentiator to make you stand out to the consumer. It will of course be a short lived differentiator since once any company does this, its competitors will have no choice but to follow suit.
It is a case of being perceived as old and antiquated or vibrant and fresh. Failing to embrace the technology your customers will also be left asking company X does this, why not you? I believe that more and more, the consumer is king like never before and businesses who fail to adapt and be responsive will find they increasingly struggle to stay afloat.
*Joel Baines has over 12 years experience delivering integrated eCommerce, EDI, Webstore and ERP solutions and is the Senior Consultant at Phoenix Solution Strategies Inc.
Joel, your comments highlight the fact that as a consumer, you likely don’t care how the system works, just that it does work. When you’re ready to commit to a purchase, the item better be in stock, otherwise you’ll look elsewhere. As a merchant, it’s important to keep focused on the big-picture goal, which is to provide a quality (in-stock) product and great customer service for a competitive price.
Merchants need to balance supply and demand as too little available stock means lost sales and excessive stock carries costs in the form of warehousing and tied-up capital. Whether true real-time processing is required to maintain optimal inventory turnover rates depends on many factors such as how closely you cut the in-stock inventory levels, the volume and velocity of your sales and how quickly you can get more product in stock and update your eCommerce store. You might be able to balance supply and demand without real-time or you might not, it really depends on your specific business operations.