The answer lays outside
Manhattan Associates' Dabbiere recognized the need for collaboration to make supply chains hum
By Karen Abramic Dilger, contributing editor -- Manufacturing Business Technology, 12/1/2002 7:00:00 AM
It was 1988. The retail industry was going through a trying time, struggling to hit profit margins and meet customer demand. Instead of striving to follow the ideal just-in-time production philosophy, pundits joked that retailers used the "just-in-case" method, where product was pushed out to stores hoping that customers would buy it. And if they didn't, stores would just keep it and try to sell it at a discount. It was no way to run a business—orders were late and there was either too much inventory or not enough.
As a consultant for Kurt Salmon Associates, a management consulting firm specializing in consumer products and retail industries, this problem concerned and puzzled Alan Dabbiere. He knew that many companies were gaining efficiencies at the plant level, and were making strides in cutting costs and streamlining operations. So why all the struggle?
After investigating the issue, Dabbiere, co-founder of Atlanta-based Manhattan Associates, discovered the problem had nothing to do with inventory management, as most suspected. "It boiled down to a lack of supply chain collaboration," he says. "It was not exclusively a retail issue. Companies had to realize they did not exist in a vacuum, and that they needed to involve all their trading partners, including manufacturers, suppliers, and distributors in the early planning and forecasting stages. It's not about integrating your own vertical silos, but more about what is outside your company. A business only will get so much out of making their own operation more efficient, so they must focus outside the four walls."
While at Kurt Salmon Associates, Dabbiere participated in the original Quick Response pilot studies, which confirmed the disconnect between buyers and suppliers. Collaboration was such a new concept at the time that most simply referred to it as compliance—the ability to meet industry requirements as well as the needs of customers. Headlining the studies were Wal-Mart and Federated department stores, which had gained the clout to make strict demands on their trading partners.
The results of the studies were "amazing," says Dabbiere. The retailers improved gross margins and reduced excess inventory, while their suppliers streamlined operations and were better able to meet demand. But most important, they jump-started closer, mutually beneficial relationships. The research also paved the way for more encompassing initiatives such as today's Collaborative Planning, Forecasting and Replenishment processes.
Taking some clues from the work done by the automotive industry to standardize practices, Dabbiere designed and developed what many say is the manufacturing industry's first packaged distribution management system for the consumer supply chain. "At the time, Dabbiere wasn't sure how he was going to apply the knowledge he had to build a software solution," says Deepak Raghavan, co-founder of Manhattan Associates and a former company vice president. "We talked about MRP [material requirements planning], order management, and warehouse management as possibilities."
Although warehouse management systems of the time were positioned as packaged solutions, they tended to require a high degree of customization, thus making upgrades difficult. What was unique about Manhattan Associates' PkMS solution was the company's vow to guarantee system upgrades to meet evolving industry standards. "We stayed wired to the industry standard boards and hubs like Wal-Mart to keep informed," says Dabbiere.
Dabbiere and Raghavan used object-oriented programming to create a modular and flexible system. "We wanted each user to not only meet their own internal business needs, but their external requirements as well," says Dabbiere. "Twelve years ago, companies were just getting started adopting retail's UCC128 standard and using advanced ship notices. But with traditional warehouse management systems, including these features would be considered a custom modification."
Raghavan says Dabbiere's vision differed from supply chain execution vendors that had roots in material handling and hardware. "We took a more external view and hoped to teach users how to be better business partners," he says. "We wanted to give retail suppliers solutions for what their customers were demanding of them."
In the early days, Dabbiere and Raghavan turned to the company's customers—such as Jockey International, which was Manhattan's very first customer—for answers about how they could improve the solution. "We added enhancements to their system that we thought everyone would need and we left some features as customizations," says Raghavan.
Another Manhattan user—Round Rock, Texas based Dell Computer—has leveraged the solution within the context of an overall supply chain operations approach, employing a more quick-cycle strategy to the supply chain by forecasting raw components instead of finished goods. "Dell opened just-in-time depots next to its distribution facilities and started postponement and merge-in-transit processes," says Dabbiere. "But to move to a make-to-order approach, the company had to collaborate with suppliers to know exactly what was happening in the extended supply chain. It has reduced inventory risk by not keeping huge stocks of complex products in inventory, and has set an example to the rest of the industry by maintaining fantastic customer service."
During the late 1990s, when the buzz of Internet technologies was at a frenetic pace, Manhattan decided to take a wait-and-see approach before fully embracing the latest concepts. "We got dinged a bit in 1998 and 1999 for not going down the Internet path, but the problem was that no one knew what to do with it," says Dabbiere. "For those using it, it was like they had a huge fire hose out of control with water splashing everywhere. Before adopting the Internet, we wanted to be sure about what type of information customers wanted to share with others and how it relates to solving their problems.
"We will not incorporate new technology just for technology sake, but rather, wait to find a truly beneficial reason for using it," Dabbiere adds. He points to the public Internet trade exchange bust of just a couple of years ago as an example of a technology push that lacked sound business reasoning.
Raghavan says Dabbiere's ability to articulate his vision and instill his enthusiasm in others has converted many to follow his line of thinking. "Today's warehouse management market is much different than it was before Manhattan Associates was established," Raghavan says. "The industry used to be services-based, focused on manpower, and vendors handled a great deal of one-off custom solutions. Now the emphasis is on more than just the business itself inside the four walls. It's about what is going on throughout your extended supply chain."
