The final installment of our seven-part series on collaborative commerce is the second of a two-part case study on how a major cruise enterprise sailed into c-commerce. The first part examined Royal Caribbean Cruises’ manually driven purchasing and logistic processes and the costs tied to its inefficiencies. This article examines how the company embarked on a c-commerce initiative to change that scenario and what it learned along the way.
Before any enterprise considers a foray into collaborative commerce, it must evaluate the business approaches, business systems, and the supply chains used to procure products and services. It then needs to identify the key drivers within the supply chains, and target areas of improvement in efficiencies, effectiveness, and cost reductions.
At Royal Caribbean Cruises Ltd. (RCCL), this up-front work fell to Michael Allsup, the VP of supply chain management. While it can be an exhaustive effort, as Allsup relates, the payoff can be huge: RCCL expects to cut inventory excess by half and save at least $5 million once its c-commerce effort is complete.
Internal prep for external collaboration
Allsup began by evaluating RCCL’s procurement and logistics processes. Because these processes used a combination of homegrown software and package solutions, Allsup decided that a major overhaul was necessary. He also realized that a collaborative, Web-based supply chain management system could streamline the entire process.
“When we talk about supply chain management, it’s really about using demand planning, collaborative commerce, and becoming more advanced in terms of the way you’re managing every aspect of the business,” says Allsup.
Since RCCL ship galleys produce such large quantities of food and beverages (approximately 10,000 meals per day, per ship), they are very similar to factories, but with a gourmet twist.
“You’re making 50-gallon batches of soup, and this requires a lot of manufacturing-type activities,” says Allsup.
For this reason, RCCL looked to implement supply chain management and shop-floor execution and control practices (such as production schedules and bills of material). But first it needed to adapt these practices to the cruise industry in a somewhat hybrid approach.
That’s the primary reason RCCL stayed with its longtime ERP partner, J.D. Edwards, to facilitate the new approach. RCCL has used J.D. Edwards’ WorldSoftware for nearly a decade for financial management, procurement, and some very limited inventory activities. In 2000, the company expanded to a full range of J.D. Edwards solutions, including advanced planning and collaborative commerce.
Phase one: Revamping processes
Phase one of the Web-based c-commerce effort, which RCCL hopes to complete by the third quarter of this year, began in 2001 when RCCL began using J.D. Edwards’ OneWorld Xe ERP suite. The product’s interoperability technology allowed RCCL’s disparate technologies to work together.
“Before we could fully leverage J.D. Edwards, however, we had to do some things internally,” Allsup explains. “We had to really establish new business processes associated with inventory management and demand planning. We had to integrate our disparate procurement systems and collapse them into a single, robust platform.”
Allsup also had to implement a new warehouse management system (WMS) to integrate the complex logistics environment managed on a daily basis. RCCL is using its DS I, a DC Link handheld product, for its WMS and is excited about using the warehouse capabilities via OneWorld Xe in concert with that.
“As a critical prerequisite to supply chain improvements, we also had to concentrate heavily on data cleansing, warehousing, and intelligence,” says Allsup. To facilitate this, RCCL partnered with SoftFace, a provider with expertise in data categorization.
As the final component to phase one, RCCL will use J.D. Edwards’ solutions to ramp up its EDI architecture. The company currently uses Peregrine Systems for EDI and is considering the B2B component from Peregrine’s Extricity. With the J.D. Edwards’ solution in place, RCCL will be able to deliver more finely tuned planning mechanisms that can drive the collaborative process.
Phase two: Integration between land and sea operations
During phase two, RCCL plans to integrate J.D. Edwards’ solutions on its vessels with the phase one components used in land-based operations.
“Then, we want to expand the use of the manufacturing modules to the galley operations and investigate integration of the InfoGenesis POS (point of sale) systems on the vessels,” explains Allsup.
As part of phase two, RCCL plans to expand the use of c-commerce with its vendors, incorporating self-service and vendor portals. At that point, RCCL plans to consider using J.D. Edwards’ Advanced Planning module to boost causal-based forecasting as RCCL gets a better handle on how to manage the business using traditional forecasting methods.
Allsup is interested in how the advanced planning software can help RCCL predict inventory needs, especially in light of new feature capabilities.
“How much beef we’re going to consume on Mondays, with the mix of steak, chicken, and fish for the entire cruise, is important for upstream planning and replenishment cycles. The attractive part of a J.D. Edwards application is that it has a lot of deep integration points with the foundation systems,” he says.
In early December, J.D. Edwards released an upgrade of its Advanced Planning product with new features designed to support collaborative forecasting with input from various stakeholders. The upgrade also includes support for real-time guarantees of order delivery and scenario management features designed to set up business scenarios to compare potential impacts across the extended supply chain.
While RCCL hasn’t yet purchased a CRM application, Allsup indicates that the company is interested in J.D. Edwards’ product potential in this space as well. Although Allsup has no direct need for CRM apps, other business units in RCCL are actively considering potential use.
J.D. Edwards has adopted a unique approach to customer software development: Start with the customer’s business processes, choose appropriate modules from its 110 components, customize them to clients’ needs, create new components if necessary, and weave all the pieces together. This approach could prove beneficial to RCCL as the company tries to adapt c-commerce to the cruise industry.
The much-anticipated ROI
Even if RCCL chooses to stop its efforts short of any CRM implementation, and puts purchasing and logistics efficiencies aside, the Web-based c-commerce solution RCCL is putting in place will have a million-dollar impact on the company’s bottom line.
“One estimate is that we could reduce our excess inventory by as much as half. Even as a one-time reduction, that’s a substantial value, but the potential recurring cash savings would also be significant,” Allsup says. “Overall, we estimate about $5-6 million in one-time and recurring savings enterprisewide for the total supply chain upgrade.”
The c-commerce series
If you’d like to catch up on previous installments in this series, click on the links below:
Part 1: “Preparing the enterprise chain for c-commerce”
Part 2: “ERP: A roadblock en route to collaboration”
Part 3: “CRM integration strategy is critical to c-commerce success”
Part 4: “E-procurement: The link to the c-commerce value chain”
Part 5: “Pave the way for c-commerce by mastering SCM”
Part 6: “A mobile enterprise braves competitive seas by anchoring to c-commerce”