Editors’ Update, Jan. 27, 2004:
The 11th and 12th paragraphs below have been updated to more accurately describe the contributions of Categoric, Avery Dennison, and Philips Semiconductors, industry partners of Microsoft’s.
COPENHAGEN, Denmark, Jan. 26, 2004 — Drawing on the promise of Radio Frequency Identification (RFID) technology, Microsoft Business Solutions today unveiled a pilot supply chain management (SCM) project it developed for KiMs, a Danish snack manufacturer, to help small and medium businesses better manage their transactions with suppliers and, at the same time, distribution to retailers. The project includes the use of RFID, as well as addressing other business processes that can provide greater visibility into and efficiency across the supply chain.
The pilot project developed for KiMs — which deployed Microsoft Business SolutionsAxapta in mid-2003 — will let the snack-maker more closely monitor distribution activities in order to align with the sales needs of retailers that sell KiMs’ products, while at the same time managing transactions with its suppliers more efficiently.
The KiMs system ties together the strengths of MicrosoftAxapta, the Microsoft Business Network, Microsoft Business Solutions Demand Planner modules, and Event Management templates. The overall goal of the project, according to Microsoft Business Solutions, is to help KiMs become even better able to meet the needs of the retailers that sell its products.
The project is the first venture into RFID for Microsoft Business Solutions. RFID has been widely lauded in manufacturing and distribution circles for its potential to join previously disparate elements throughout the supply chain, eventually linking them to the locations where distribution and actual sales occur.
To shed light on RFID, discuss Microsoft Business Solutions’ strategy for making leading-edge SCM solutions available to small and medium businesses, and gain an in-depth understanding of the KiMs project, PressPass spoke with Satya Nadella, corporate vice president of development, and Bjarne Sch
n , director of supply chain management with Microsoft Business Solutions.
PressPass: When Microsoft Business Solutions and KiMs first teamed up, what did KiMs hope to accomplish with a revamped SCM solution?
Satya Nadella: KiMs wanted a supply chain solution that would give them a higher degree of visibility, both among their trading partners and within the four walls of their company. They also wanted to improve the accuracy of their forecasting. KiMs was using Microsoft Excel for forecasting, which gave them many benefits, but, because there were 10 people inputting data individually, tracking was difficult.
While the primary focus of this project is a supply chain solution, KiMs has been a successful company and market leader for years because of its reputation for delivering excellent customer service. The customers of KiMs are the retailers who sell KiMs’ products, crispy snacks and, ultimately the buying public. With perishable products more so, I believe, than with products such as household items or automobile parts inefficiencies in the supply chain can really impact profitability. If more supply is ordered than is actually needed, those supplies can go to waste. And, if the distribution network isn’t highly synchronized, chances increase that retailers who sell KiMs products won’t get the amount of products they need when they need it. There are really few things worse for a business than being out of a product customers expect to be in stock.
How were certified business partners of Microsoft Business Solutions involved in the KiMs pilot project?
n: Microsoft Business Solutions and its certified business partners work closely together to offer customers access to the highest level of expertise possible. The pilot project developed for KiMs is a compelling example of how collaboration among Microsoft Business Solutions and its partners is beneficial to all concerned particularly customers.
A number of partners were involved in the pilot project for KiMs. One of them, SAMSys, brought an engineering team onsite to do a thorough evaluation of KiMs production cycle and barcode system. Based on their findings, the SAMSys engineering team designed and supervised the hardware installation of a UHF RFID pallet tracking system within the finished goods area of the KiMs factory. The data from the SAMSys reader feeds directly into Microsoft Axapta at KiMs, enabling an increase in visibility into the supply chain. Other partners include Avery Dennison, which supplied the write-able RFID tags to be used in the project, and Philips Semiconductors, which supplied the chip solutions for the project. Categoric provided its Xalerts software and consulting for the Event Management implementation. TXT participated by delivering consultancy assistance to the implementation of the Demand Planner solution.
And Aston Business Solutions, which installed Microsoft Axapta for KiMs last year, was an ideal choice for our project with KiMs. Aston played an integral role in ensuring that several advanced SCM functionalities were properly integrated with the Microsoft Axapta platform and with KiMs business processes. The Aston team facilitated the integration of state-of-the-art RFID technology, worked with Categoric to tailor the Xalerts event management system for KiMs, integrated Microsoft Demand Planner, installed Microsoft Business Network, and implemented two additional modules, Aston Business Solutions – Variance Analysis, and Aston Business Solutions – Invoice Workflow Manager.
PressPass: What are some of the main challenges that small and mid-market businesses face when it comes to SCM?
n: The main challenge is the same one facing larger businesses a lack of visibility into the supply chain. Without it, effective decision making can be a challenge in several areas, including setting inventory levels. While larger companies address that challenge with huge solutions that can be tremendously expensive, smaller companies don’t have the resources to do that. Our customers need to address the same problems but with fewer resources.
Over the course of a year, Microsoft Business Solutions interviewed more than 85 mid-market companies to identify what their particular business challenges were. The six overarching challenges we identified are a lack of visibility, effective inventory management, an inability to accurately plan future demand, poor base data in their systems, a shortage of tools for detecting and handling exceptions, and a need for simpler and lower-cost data interchange operations. Microsoft Business Solutions understands the value of time to KiMs and other mid-market businesses. Every hour our customers spend focusing on working out technology problems or searching for critical information is an hour that they’re not focusing on running their business which can very quickly lead to a dramatic impact on profitability.
PressPass: How will the SCM solutions offered by Microsoft Business Solutions help address those challenges?
Nadella: Our solutions can offer businesses a total overview, from raw materials through the point of sale. Our strategy is to incorporate the critical elements a business needs to manage its supply chain: demand planning, event management, trading partner collaboration, and hands-free warehouse management. This drives efficiencies and provides individuals and organizations with access to the information they need in order to make decisions that drive profitability.
We have found that the vast majority of mid-market businesses spend more than half of their time reacting to operational challenges. With that in mind, we’ve developed this pilot, featuring solutions that work individually but also, with Microsoft Axapta at the center, work together to address the pains associated with lack of visibility. Categorics Xalerts software, which provides the event-management component of the Microsoft Business Solutions SCM offering, for example, can send a notification to a supplier seven days before the delivery is due as a reminder. The demand planning functionality can help different people in the business collaborate on planning and forecasting, which will lead to greater efficiencies and higher profitability. And Microsoft Business Network helps expedite and lower the cost of data interchange among trading partners. With RFID as part of the mix, there will be improved visibility in all of those areas. Finally, Microsoft Business Solutions has a worldwide network of certified business partners who expertise can be drawn on to guide customers through the selection process, customizations, training, deployment, and system maintenance.
PressPass: What are other potential benefits you expect KiMs to realize as a result of the pilot project they recently implemented?
n: We expect KiMs to realize a number of benefits as a result of this pilot project. Microsoft Business Solutions developed this pilot project to help KiMs more easily, effectively and collaboratively work with its network of trading partners; leverage highly accurate sales forecasting capabilities in order to improve customer satisfaction, maintain optimal levels of inventory, and reduce operating costs; and respond quickly and effectively to unplanned changes in their supply chain by enabling them to closely monitor for exceptions in an environment best characterized by constant change. Long term, we believe that this project is the start of our developing out-of-the-box RFID implementation assistance. We expect our other customers to benefit from this pilot project. When it comes to developing and delivering solutions, having the chance to have a learning experience such as the pilot project at KiMs is tremendously valuable.
PressPass: Why did Microsoft Business Solutions approach KiMs a relatively small, Denmark-based company to do this pilot project?
n: In the future, we believe that mid-market manufacturers and distributors are going to become similar to one another. Manufacturers continue to expand outside of their local market, and at that point they need to offer more distribution capabilities. The distribution businesses, in turn, need to add light manufacturing capabilities in order to add value bundling products, for example, or customizing that makes the products exactly what they want. Based on these trends, there is a greater demand for outsourcing into high-growth markets.
KiMs is a very compelling example of a company on the leading edge of some of these trends. And, with 270 employees and US$67 million in annual revenue, they represent the mid-market nicely. Another key factor is the spirit of innovation at KiMs. We were very impressed with their passion for the future of technology and the future of business. KiMs is a visionary company that believes in potential. KiMs is led by individuals who are very comfortable being on the leading edge when it comes to new ways of managing a business. Another reason is that in 2003 KiMs very successfully deployed Microsoft Axapta in order to manage several of its business processes and procedures. We believe that Microsoft Axapta has strong potential to accommodate the innovations that are emerging throughout the supply chain. One of them, of course, is the adoption of RFID technology. Finally, Microsoft’s Center for SCM Excellence is based in Vedbek, Denmark, and, since KiMs is also headquartered in Denmark, the geographic proximity was a great benefit throughout the development process.
PressPass: What is Microsoft Business Solutions’ position on RFID?
Nadella: Microsoft Business Solutions believes that RFID is truly the wave of the future, and we’re positioning ourselves to offer what was previously available to large companies to small and medium businesses. We believe RFID will revolutionize the way manufacturers and distributors work by removing barriers and optimizing business processes and ways of working by infusing the supply chain with visibility. Microsoft Business Solutions recognizes that RFID represents a growing trend, so we are committed to enabling our business applications so that our customers can benefit. Our goal is to demystify RFID by offering out-of-the-box, plug-and-play applications that are affordable, easy to use, and don’t require several consultants and a year to deploy.
PressPass: Can you give an example of how RFID-enabled technology might alter the way the supply chain is managed in the future?
Nadella: The key to the strength of the RFID-enabled link many experts say could become commonplace is a tag that can automatically and instantly convey information from retailers to distributors, then to manufacturers, and, finally, to the manufacturer’s network of suppliers all without a single piece of paper. Companies can lose measurable revenue due to cumbersome inventory procedures. They have to shut down, which consumes time and ultimately affects profits. Plus, manual inventory counting is prone to errors. But with RFID-enabled technology working together to monitor the supply chain, a phenomenon we call
warehouse management occurs. People who manage inventory will be able to see levels as they rise and fall without having to manually count stock. In an RFID-enabled world, a distributor shipping a pallet that contains cases of chips, for example, enacts a chain of events: an inventory notification is sent to the distributor, which in turn alerts the manufacturer of impending demand. That notification is then passed along to the businesses that supply the manufacturer, informing them of the upcoming need for potatoes, oils, and salt the ingredients needed to produce a bag of chips to replace the one that was purchased only moments earlier.
PressPass: Does RFID present privacy issues specific to small and mid-size businesses?
Nadella: While RFID is emerging in the manufacturing and distribution arenas, it’s not new technology. It’s currently used in the automotive industry, the cattle industry, and amusement parks just to cite a few examples. What Microsoft Business Solutions is focused on is drawing on RFID’s strength and innovation to deliver benefits to our small and mid-market manufacturing and distribution customers. Our goal is to help them more optimally manage their supply chains not interact with consumer data. We have spent a year talking to our customers about the ways they’d like to manage their supply chains, and increased visibility is at the top of their wish list. RFID can facilitate an increase in visibility in ways that are revolutionary. The approach that Microsoft Business Solutions plans to take is to introduce RFID strategically, in a way that works best for our customers. Specific to the KiMs project, the RFID capabilities have an impact on KiMs, its suppliers, and its distributors not customers.
PressPass: How does Microsoft Business Solutions plan to add RFID capabilities into its product lines?
Nadella: We plan to add RFID capabilities strategically, in accordance with industry demand and, most importantly, the needs of our customers. The conditions of the marketplaces in which our customers must retain their competitive edge change daily if not hourly. With that in mind, Microsoft Business Solutions intends take a highly flexible, agile approach to RFID. Microsoft Business Solutions has a strategy in place that will help customers leverage the technology, using both new and existing Microsoft Business Solutions ERP solutions for manufacturing and distribution. Our current plan is to add RFID capabilities to upcoming releases of Microsoft Axapta and Microsoft Navision in 2005. We are also planning to release a version of Microsoft Retail Management System that is RFID-enabled in the 2006 timeframe.
PressPass: What is Microsoft Business Solutions’ overall strategy for supply chain management?
n: Our overall strategy for SCM is to offer integrated solutions that work together in support of the goals and aspirations of small and medium manufacturers and distributors allowing them to focus on core competencies. We recognize and respect the fact that different businesses operate differently. What Microsoft Business Solutions is committed to is empower its customers on their own terms, on their own schedules, and within their budgets. Worldwide, the marketplace and the competition is intense. Customers have an unprecedented range of choices, manufacturing and distribution processes are increasingly complex, and small and medium businesses are more vulnerable to large corporate conglomerates with significant IT budgets. Not surprisingly, the supply chain is more critical to our customers now than ever before. Accordingly, we’re fully engaged in researching ways that technology can manage their supply chains with as much flexibility and agility as possible. Bottom line is that we have a vision and a mission of making complex things simple. That’s what we try to do every day help customers by making complex things simple through software solutions.