Last updated on May 20th, 2019 at 11:23 hrs.
Supply chain management is a strong competitive factor in e-commerce, wholesale and manufacturing. If you do it well, you can deliver just-in-time while retaining higher margins on your sales. If you do it badly, you may not have the right products available when there is demand, or you may suffer the cost of keeping a large amount and variety of items in stock.
Oh, and by the way, Amazon has come to town. If your webshop is going to stand a chance, you’ll need to have an endless product catalog and be able to ship like lightning. Customers’ buying behavior is less predictable than ever. And that shiny object trending in webshops today may be out of fashion by the time your Chinese container arrives in Europe.
Product variety keeps increasing while orders get smaller and product life-cycles get shorter. How to manage your supply chain then in a cost-competitive way? That’s where a supply chain management solution like Expak comes in.
Expak Systems Oy is one of a dozen companies taking part in the internationalisation programme ‘Software from Finland to European Markets’, run by growth consultancy Pro Growth Consulting Oy, sponsored by the Finnish Software & E-Business Association (Ohjelmisto- ja e-business ry) and supported by the Centre for Economic Development, Transport and the Environment (ELY-keskus).
(For transparency: I contribute to the Software from Finland programme on the topics of doing business with the Dutch and digital marketing in the Netherlands.)
While Enterprise Resource Planning (ERP) systems support transactions, finance and operations, according to Expak’s CEO Tommi Hyyrynen, they do not ideally serve companies’ operations.
“In practice, there are two scenarios,” Tommi says. “In the first, a company’s supply chain may not be well-designed for the purpose and they may use Excel to import/export ERP data for calculations and planning. That’s a relatively primitive, static approach and requires considerable manual work, which is error-prone. In the second scenario, the supply chain is well-designed so that the company meets its customers’ needs and Excel is replaced by a supply chain management solution.”
Expak’s solution is a cloud-based extension to the ERP system with dozens of built-in best-practice analytics and visualizations. Plugged into the ERP, transactional data indicating changes in the supply chain are updated and calculations are made automatically at preset intervals.
“Let’s say an inventory manager has to adjust the inventory levels of 5000 products,” Tommi explains. “With a typical ERP user interface the manager may have to edit 5000 entries one at a time. With Expak, inventory management is automatic and inventory levels are often dynamic. You can batch-edit those items in one go.
“In manufacturing, we can set the analytics to run real-time if that’s required. On the other hand, in a business with less velocity it may be enough to check inventory, demand and supply only once a day.”
Statistical forecasting is not enough
“In a traditional setup, when a sales rep learns that a customer stops ordering a certain product, the rep tells his or her manager on the phone or by email,” Tommi continues. “In the digital age, customer tolerance times have dramatically dropped and companies have a lot more products with shorter life spans. The question is how to deal with erratic customer behavior, exceptions and unexpected disruptions.
“Statistical forecasting, meaning, predicting future demand based on past demand, even when empowered by Artificial Intelligence and what have you, is fine if you have big data, professional resources, and clear tasks so that the AI or statistical forecasting system can continuously learn and improve the end results. But in many environments, due to the megatrends in digitalisation, and elongated and fragmented supply chains, statistical forecasting is not sufficiently accurate and the forecasting data is not well used in the fulfillment side of the operations.”
“In e-commerce it may happen that you sell one piece of article X today, one on Friday, 500 the next week, and then nothing for two months,” says Tommi. “The best thing you can do is to combine demand and supply chain data to find a way to proactively sense the demand and adjust your supply chain accordingly. You have to change the forecasting methods, the ways to use the demand data and pay more attention to inventory management methods.
“Someone needs to make a judgment about the right inventory levels. We offer lots of out-of-the-box analytics to help our customers make informed decisions. ERP systems don’t help you make that judgment call. When you have an e-commerce operation with 100,000 items, Expak gives you dynamic calculations of what you have in inventory, the near future inventory levels, and your fulfillment needs.”
Talking to 20 ERP systems
“For example, we can use traditional minimum and maximum inventory levels,” he continues. “Minimum indicates how much you want to have available at any time. Maximum is the most you want to order so that your supply chain operation remains efficient. The trick is then to make these levels dynamic. Once you have dynamic inventory levels in place, Expak can automatically adjust the inventory levels according to changes in sales volume.”
Tommi emphasizes that every customer case is unique and has its own requirements. Having been around for ten years, he sees “customer business understanding”, built-in best practices and the agility Expak has built around that understanding, as some of his company’s main strengths.
“Expak is currently in use with over 20 different ERP systems: MS Dynamics, SAP, Oracle, Netsuite and a range of others including vertical, industry-specific systems. As a cloud service, it’s easy to deliver and easy to start using. Typically, new users are well equipped to use Expak after 3 or 4 meetings with us.
“And while our solution is out-of-the-box, we also have the flexibility to tailor and co-develop the implementation according to our customers’ specific business needs.”
35 percent inventory reduction in six months
Benefits, according to Tommi, include (1) improved customer service through better product availability, (2) a faster, more flexible and therefore more cost-efficient supply chain, and (3) higher profitability through reduced cost of inventory, fewer delays in delivery, and less manual work.
A customer case in point is Airam Electric Oy Ab, a family-owned lighting and electrical engineering company established in 1921. After implementing Expak’s supply chain management solution early 2017, the company was able to reduce its inventory value by more than 35 percent, or 4 million euros, in six months, thereby structurally improving its cash balance. It was also able to cut the volume of arriving shipping containers by half and to reduce working hours in procurement, logistics and inventory management.
Expak has been developing its software with one monthly version update on average. Late last year the first mobile version was released.
The company has no physical sales presence outside of its home market yet. Most of its customers are based in Finland and some in other Nordic countries. Those foreign customers have been acquired through word-of-mouth. “Somebody uses it, tells someone else, and they contact us,” says Tommi. “That’s how we’ve found new customers in the Nordics, mainly in Sweden and Norway.”
Internationalization with Software from Finland
Given its capabilities, Tommi sees the solution shine particularly in complex supply chain environments. “We definitely want customers with multi-tier supply chains,” he says. “Production facilities, distribution centers, local operators. Not just a one-country operation. With our solution, a manager at a production facility in the Netherlands can see what’s happening in Sweden, and vice versa.”
Taking part in the internationalization programme Software from Finland to European Markets is part of Expak’s growth planning. “In 2017 and ’18 we defined our goals for the coming years,” Tommi explains. “Internationalization is part of those goals. That’s why we decided to take part.
“What we hope to achieve through the programme is to supercharge our digital marketing and our scalability. We are figuring out where to take our online marketing; how to create a digital environment that helps us to sell and market our product; how to make all the knowledge, data and best practices that we have available to online visitors who are interested in our solution.
“Our aim in marketing has to be to establish a wow-effect online, leading to shorter sales cycles,” he says. “We started intensifying our online marketing efforts a year ago, making blogs, videos, being active on social media, etcetera.
Next stop Holland
“It’s all about the customer experience. How they see us. How they find us. How to keep customers happy and maintain positive word-of-mouth. Reminding potential new customers that there are plenty of opportunities to accelerate supply chain management with Expak. You never know when they come and visit again. It could be tomorrow or a year from now.
“The key to scalability is how we copy our DNA so that consultants and new customers can understand what Expak is, how they can benefit from our solution, and start using it. Making it so easy to use that they need as little expert support as possible.
“Part of our plans for the next three years is to enter new markets in Europe. Every market is unique and the Netherlands seems like a suitable next step for us. There is a large variety of industries with e-commerce, wholesale and manufacturing. And the logistics sector is really big in Holland. Hopefully, we will start our first pilot delivery to the Netherlands in the spring of 2019.”