Supply chain software: Latin America is the next frontier

When it comes to our print edition, Modern is strictly North American. That’s where our subscribers live and where most of the solutions we write about are located. Online, however, we’ve noticed a huge increase in readers from across the globe. Last year, I received e-mail correspondence and telephone calls from readers in South Korea, Sweden, Poland, Columbia, Brazil and Japan to name a few. They all wanted to talk about automation, software and best practices.

Likewise, equipment and software providers tell me they’re looking outside of the US for growth. For instance, companies as different as Hytrol and Manhattan Associates tell me they’re expanding their efforts in the Americas. So, what’s going on with our trading partners south of the border? To find out, I talked to Jorge Javier Perez, the information technology director of supply chain systems for Grupo Elektra.

With about 500 stores, including 100 in Mexico and 400 in other South and Central American countries, Grupo Elektra is the leading specialty retailer in Mexico. “We sell everything from mattresses to consumer electronics to paint for your house,” says Perez.

In the last ten years, the company has gone through a transformation in the expectations of its customers and the requirements for the performance of its supply chain. “As recently as 2003, we didn’t have people working in our warehouses on the weekend,” says Perez. Today, he adds, customers in Mexico and Latin American are not as accustomed to buying online as they are in America. But the culture is changing. “We have customers in Mexico City who go online and buy something that a family member will pick up at one of our stores 400 kilometers away,” he says. “That’s normal and we have to have a supply chain engine behind the website that can get the right product delivered at the right time.”

A few years ago, Grupo Elektra performed an analysis of its supply chain operations. “We went into the analysis assuming that our biggest issue was labor costs,” says Perez. “What we found was that the major cost of our supply chain division was inventory followed by transportation. Labor was a distant third.”

For that reason, Grupo Elektra chose to forgo automated materials handling solutions, at least for now, in favor of supply chain software solutions (Manhattan Associates). The starting point was a warehouse management system, followed by applications for replenishment, inventory optimization, assortment planning and transportation routing. “We’re looking at the systems that can make our operations more efficient,” Perez says. “But we are also focused on doing a better job of predicting demand. That’s going to allow us to increase our service levels without increasing our inventory.” In addition, Grupo Elektra is using routing tools to get products directly from suppliers to the stores, cutting out the warehouse wherever possible.

At the end of the day, Perez says that supply chain software tools are key to his supply chain success. “My major goal is to buy the product at the right cost and deliver it to the store at the right price and at the right time,” he says. “All of the decisions I make now are based on information coming from the system.”