ESCA | Apr 23, 2006, 16:24
HK Systems is a leading automated material handling and supply chain software total solutions provider, specializing in the design, development and integration of the highly automated equipment and supply chain software systems. In packaged entertainment, companies that benefit from the HK's Transportation Management solution include, EA Sports, Time Warner Book Group (Now Hachette Book Group), Random House and Simon and Schuster.
Doug Metcalfe, Director of Transportation Solutions at HK Systems, will be among the speakers on the June 21 session "Evolving Systems in Supply Chain Management" at the Supply Chain Management Academy conference, of which HK is a bronze sponsor. Metcalfe recently spent some time with the ESCA newsletter to discuss what makes entertainment unique from other industries using his company's products and services:
"Based on our experience in the entertainment industry, we have found that the entertainment supply chain has many unique characteristics that other industries do not have to accommodate.
"The Entertainment Supply Chain is "release" driven. The distribution model for new titles quickly moves from a fully planned, yet time sensitive model, to a reactive, high velocity time sensitive replenishment model and then finally to a regular replenishment model. As most entertainment companies have multiple releases in a given year, the supply chain must operate in manner that accommodates the simultaneous management of each distribution model.
"The entertainment industry distributes its products through multiple channels, including retail, wholesale and Web (business to consumer). In the case of retail, there are channels within the channel. For example, the retail channel consists of customers ranging from Big Box retailers to single-store operations. As a result, entertainment companies can find themselves trying to accommodate a wide variety of channel and retailer specific distribution models in an effort to ensure the product gets into the hands of the consumer, regardless of where they shop.
"Adding to the multi-channel complexity is the determination of who pays the freight and the impact it has on meeting customer expectations. If the shipper is paying the freight (Free Freight or Pre-Paid), the objective is to meet the customer's expectations at the lowest cost possible. If freight is added to the invoice (Pre-pay and Add), the customer may wish to regulate how and with what carriers you are to ship to them. And finally, there is a growing trend by retailers to control their own inbound freight costs by requiring vendors to ship collect. As a result, the shipper is now expected to follow the exactly routing guides and rules of that retailer. So on one hand you are trying to minimize transportation costs and on the other trying to reduce the amount of labor required to ensure compliance with customer requests.
"Add into the mix that this is a high-volume distribution environment and it quickly becomes clear that maintaining cost control, labor productivity and customer service levels is a very challenging task.
"There are a couple of options for entertainment companies. One is to accept increased transportation and labor costs as a cost of doing business. Another is to outsource or pay someone else who specializes in areas of greatest complexity (such as retail compliance). A third is to adopt systems that can automate both the cost minimization and customer compliance requirements.
"Which model you choose is often a factor of size and or relative profitability of the titles being distributed. For example, the cost of customer compliance for a small studio is likely greater than the additional cost of allowing a third part to address it. On the flip side, larger organizations have the economies of scale to in-source distribution and to move one step further, act as a third party distribution organization for smaller companies.
"The solutions we deliver are highly focused on accommodating the complexity of the Entertainment Supply Chain. Not only does this automate complex decision making that rationalizes multiple competing rules (reducing labor cost reduction and errors reduction), it also seeks out and takes advantage of opportunities to reduce transportation costs when and where appropriate. Most importantly, however, our solutions give our customers the infrastructure and capabilities to effectively adapt and respond to the rapidly changing dynamics of the Entertainment Supply Chain and proactively measure the impact of those changes on the company's bottom-line profitability. HK specializes in providing systems that accomplish this task.
"What also makes the entertainment category unique is where the products are sold. It can be anywhere from the corner store, the 7-11, and owner-operator kind of environment up to Wal-Mart and everything in the middle. You now have to be able to work with a distribution model that understands the differences between how you operate with Wal-Mart and how you operate with smaller chains and small customers. Even within those groups you can have different ways of operating. For example, Target and Wal-Mart have very different routing clients, so even though both are major they have a particular way of how they want the product shipped depending on whether or not the retailer is paying the freight, or the shipper or supplier is paying for it. The nuances are in the rules. For example, Target might say, 'If I'm paying the freight and it's going to the Northeast for this particular store you need to ship it this way. Any other store you can ship it the following ways. The Southwest should go this way. These stores are serviced by my DCs (distribution centers) so those should be consolidated.' There's the whole issue of 'not being necessarily in control of my outbound freight, but I'm responsible how that outbound freight happens. If I am paying the freight how do I make sure that I am shipping it a way the best cost for me that still meets my customer's requirements.'
The aggravating factors are that this is a very high-volume business and very high velocity business. A lot of people want to be able to ship the same day or 24 hours within an order coming in and getting it on the road to the customer. So it could be the case of a couple of weeks after release you've got very high volumes going out the door. To be able to handle that kind of volume, which is very spiky. When John Madden's 2006 [videogame] comes out, or November before Christmas, the volumes are massive; for some, the rest of the year can be fairly benign. So you need a scalable distribution model-one that works in both a high-volume capacity but also day-to-day. It's not just seasonality. When you add all those things together, you have large number of customers who are very diverse, combined with a very high volume of orders, a high volume of throughput that is required in order to support them: How do you automate something that is so complex that you're not losing control? How do content owners work with the retail customers, so they understand each other's business, and we both retain our margins?
For more information visit:www.hksystems.com
Doug Metcalfe, Director of Transportation Solutions at HK Systems, will be among the speakers on the June 21 session "Evolving Systems in Supply Chain Management" at the Supply Chain Management Academy conference, of which HK is a bronze sponsor. Metcalfe recently spent some time with the ESCA newsletter to discuss what makes entertainment unique from other industries using his company's products and services:
"Based on our experience in the entertainment industry, we have found that the entertainment supply chain has many unique characteristics that other industries do not have to accommodate.
"The Entertainment Supply Chain is "release" driven. The distribution model for new titles quickly moves from a fully planned, yet time sensitive model, to a reactive, high velocity time sensitive replenishment model and then finally to a regular replenishment model. As most entertainment companies have multiple releases in a given year, the supply chain must operate in manner that accommodates the simultaneous management of each distribution model.
"The entertainment industry distributes its products through multiple channels, including retail, wholesale and Web (business to consumer). In the case of retail, there are channels within the channel. For example, the retail channel consists of customers ranging from Big Box retailers to single-store operations. As a result, entertainment companies can find themselves trying to accommodate a wide variety of channel and retailer specific distribution models in an effort to ensure the product gets into the hands of the consumer, regardless of where they shop.
"Adding to the multi-channel complexity is the determination of who pays the freight and the impact it has on meeting customer expectations. If the shipper is paying the freight (Free Freight or Pre-Paid), the objective is to meet the customer's expectations at the lowest cost possible. If freight is added to the invoice (Pre-pay and Add), the customer may wish to regulate how and with what carriers you are to ship to them. And finally, there is a growing trend by retailers to control their own inbound freight costs by requiring vendors to ship collect. As a result, the shipper is now expected to follow the exactly routing guides and rules of that retailer. So on one hand you are trying to minimize transportation costs and on the other trying to reduce the amount of labor required to ensure compliance with customer requests.
"Add into the mix that this is a high-volume distribution environment and it quickly becomes clear that maintaining cost control, labor productivity and customer service levels is a very challenging task.
"There are a couple of options for entertainment companies. One is to accept increased transportation and labor costs as a cost of doing business. Another is to outsource or pay someone else who specializes in areas of greatest complexity (such as retail compliance). A third is to adopt systems that can automate both the cost minimization and customer compliance requirements.
"Which model you choose is often a factor of size and or relative profitability of the titles being distributed. For example, the cost of customer compliance for a small studio is likely greater than the additional cost of allowing a third part to address it. On the flip side, larger organizations have the economies of scale to in-source distribution and to move one step further, act as a third party distribution organization for smaller companies.
"The solutions we deliver are highly focused on accommodating the complexity of the Entertainment Supply Chain. Not only does this automate complex decision making that rationalizes multiple competing rules (reducing labor cost reduction and errors reduction), it also seeks out and takes advantage of opportunities to reduce transportation costs when and where appropriate. Most importantly, however, our solutions give our customers the infrastructure and capabilities to effectively adapt and respond to the rapidly changing dynamics of the Entertainment Supply Chain and proactively measure the impact of those changes on the company's bottom-line profitability. HK specializes in providing systems that accomplish this task.
"What also makes the entertainment category unique is where the products are sold. It can be anywhere from the corner store, the 7-11, and owner-operator kind of environment up to Wal-Mart and everything in the middle. You now have to be able to work with a distribution model that understands the differences between how you operate with Wal-Mart and how you operate with smaller chains and small customers. Even within those groups you can have different ways of operating. For example, Target and Wal-Mart have very different routing clients, so even though both are major they have a particular way of how they want the product shipped depending on whether or not the retailer is paying the freight, or the shipper or supplier is paying for it. The nuances are in the rules. For example, Target might say, 'If I'm paying the freight and it's going to the Northeast for this particular store you need to ship it this way. Any other store you can ship it the following ways. The Southwest should go this way. These stores are serviced by my DCs (distribution centers) so those should be consolidated.' There's the whole issue of 'not being necessarily in control of my outbound freight, but I'm responsible how that outbound freight happens. If I am paying the freight how do I make sure that I am shipping it a way the best cost for me that still meets my customer's requirements.'
The aggravating factors are that this is a very high-volume business and very high velocity business. A lot of people want to be able to ship the same day or 24 hours within an order coming in and getting it on the road to the customer. So it could be the case of a couple of weeks after release you've got very high volumes going out the door. To be able to handle that kind of volume, which is very spiky. When John Madden's 2006 [videogame] comes out, or November before Christmas, the volumes are massive; for some, the rest of the year can be fairly benign. So you need a scalable distribution model-one that works in both a high-volume capacity but also day-to-day. It's not just seasonality. When you add all those things together, you have large number of customers who are very diverse, combined with a very high volume of orders, a high volume of throughput that is required in order to support them: How do you automate something that is so complex that you're not losing control? How do content owners work with the retail customers, so they understand each other's business, and we both retain our margins?
For more information visit:www.hksystems.com