Archive for September, 2005

In case you’re interested, there’s a second webcast coming up focused on Response Management. This one should be extremely interesting as it includes perspectives of how an OEM, working with a contract manufacturer, both leverage Response Management to deal more effectively with change.

The webcast is being hosted by EMSNow on October 19th. Presenters are:

Philip Stoten, editor-in-chief, EMSNow (moderator)
Bill Swanton, Vice President, Research, AMR Research
Bob Kenney, ATE Ops Supply Chain Manager, Teradyne
Cesar Gonzalez, Director Program Management, Solectron
John Sicard, VP Professional Services, Kinaxis

For more information or to register, please see our website.

Case studies tend to be a great way to explain how companies are benefiting from Response Management software. Teradyne is one such company. In their particular case, they outsource much of their manufacturing, which tends to complicate the process of dealing with the demand volatility that is the rule in their market.

Teradyne is a leading supplier of automatic test equipment and interconnection systems that deliver competitive advantage to the world’s semiconductor, electronics and network systems companies. In 2004, Teradyne had sales of $1.8 billion, and currently employs about 5,900 people worldwide.

Teradyne operates in a complex and volatile market. Teradyne’s products comprise 3,000 – 5,000 parts each. As Teradyne seeks cost savings through outsourcing relationships, new complexities are introduced into their global supply chain which now spans five Teradyne and four subcontractor sites. Particularly, long lead-times that can hamper responsiveness to change are a constant challenge.

One of the most significant challenges is the transmission of frequent demand changes and the inability to lock in the supply with “frozen” demand windows. In addition, outsourcing creates new challenges in terms of inventory liability and managing excess and obsolete inventory.

In addition to an increasingly complex supply chain, Teradyne faces significant demand fluctuations. The market has seen significant upswings during good times, while customers are quick to “slam on the brakes” in soft markets. It is not uncommon to see a product’s shipments double in one quarter and be cut in half over sequential quarters.

Teradyne came to the conclusion that they required a solution with global visibility and rapid response capabilities in order to manage changes in demand, understand supply consumption and how to manage supply disruptions, shorten lead times and reduce excess and obsolete inventory.

Teradyne found that Kinaxis RapidResponse had the unique architecture to integrate not only with their Oracle ERP system but also with the ERP systems of their contract manufacturers while enhancing their responsiveness.

Teradyne planners, inventory managers, commodity managers and others utilize RapidResponse to view data across their extended supply chain and to create enabling tools to manage constantly changing business processes and business situations. RapidResponse is a critical tool in terms of helping Teradyne execute the reconfiguration of their supply chain to meet changing requirements.

For example, RapidResponse is used to determine how to manage part suppliers when parts are purchased by Teradyne or subcontractors. And, when Teradyne looks to send more product to a subcontractor, RapidResponse is used to get a detailed list of parts and inventory to be transferred. Teradyne staff utilizes RapidResponse what-if capabilities to compare various action alternatives to determine the best course of action for a given change.

RapidResponse has allowed Teradyne to save money by reducing excess and obsolete inventory and liability to suppliers resulting from unnecessary materials purchases. Teradyne is developing a core competency in Response Management that enables them to meet both customer and internal objectives by being able to respond effectively to ever present changes in our business.

This is a shameless plug, but if you’re interested in learning more about Response Management, there is an upcoming webcast that you should check out.

On September 28th, IndustryWeek is hosting a webcast called “Managing The Bullwhip Effect: Respond Quickly and Intelligently to Demand Swings.”

Attend this Webcast on September 28 to hear a manufacturing research analyst from Ventana Research share his recommendations on the trends and best practices for operating your business in a demand-driven world. Scientific Atlanta, a leading electronics manufacturer will also be on hand to share how they manage the bullwhip effect.

I recently wrote an article on this topic that I thought I would share here as well. With so much emphasis on compliance, accountability and operations performance these days, its a major struggle to proactively manage the key metrics within a company.

Frequent changes to demand, supply, capacity, and product can spread over a multi-site enterprise and global supply chain, creating ripples that may swell to a tidal wave by the time they hit the point of action—the moment just before execution when response decisions must be made.

Responding rapidly at the point of action can be difficult, but doing so in a way that aligns with corporate objectives is even harder. This is especially true when hundreds of these make-or-break decisions must be made throughout the enterprise on any given day.

While many organizations are increasing awareness of corporate metrics by communicating them more broadly throughout the enterprise, their focus tends to be historical—i.e., limited to a view of past performance. An inherent disconnect also arises because financial professionals and company management tend to examine metrics in terms of dollars and cents, whereas operations looks at them in terms of units.

To overcome these challenges, manufacturers must not only communicate what the key metrics are, but also link financials to operational metrics. More important, they need to arm operations with tools that facilitate proactive management, not just measurement, of key metrics at the point of action.

By developing a core competency in Response Management, manufacturers empower their staff to respond more quickly, positively impacting customer service metrics. And the ability to review and score multiple “what-if” scenarios of various action alternatives drives greater effectiveness by letting participants choose the response that aligns best with key performance metrics.

Through Response Management, operations can instantly see the impact of a proposed action on revenue, on-time delivery, margin, inventory, material costs, and more. The aggregate impact of these decisions directly affects the income statement and balance sheet metrics that finance and management track on a regular basis.

Today’s hypercompetitive market leaves little room for error. Though companies have invested millions in technology and strategies to drive long-term market leadership, “managing in the moment” remains one of the least-automated processes. Response Management provides the tools and resources crucial to help operations drive performance improvements and directly impact the key performance metrics of the organization.

Michael Bittner has written a detailed piece entitled “Technology Enablers for the Lean Supply Chain” over at Technology Evaluation Centers. The core attributes of a Response Management solution are well aligned with the principles Michael talks about in terms of enabling a lean supply chain. In particular, Response Management:

> Can help you reduce your entire supply chain lead times to improve flow. In particular, Response Management reduces the time it takes you to respond to a change.

> Brings all the data from all the supply chain together into one system for visibility and response. This system can span the entire supply chain to include suppliers, partners, customers, etc.

> Turns planning into a pull-based process, so planning usage lines up with supply chain pull-based replenishment.

> Has all the data, all the calculations and the flexibility to measure and isolate (summary to detail) to get the right information, whatever it is, for the right people at the right time. Scorecarding provides a mechanism to define metrics, respond with them in mind, track them, drill through to the underlying data at any level, and see the projected impact of potential changes/decisions on the metrics.

> Can handle data from different systems, different companies and provide a holistic view of the entire supply chain.

Lean works best when the demand is steady, or at least steady at the component level. It has most problems when demand is very irregular (10,000 units next week, nothing for 6 months). Response Management, on the other hand, excels where the demand is most unpredictable and volatile. Response Management is both an enabler of a lean supply chain and has the ability to fill the gaps in standard lean flow.

Debra Hofman and Lora Cecere at AMR Research have just put out an Outlook piece entitled “Supply chain chaos and the need for agility.” This is a really good piece that aligns very well with what we see in the market regarding Response Management.

It has been our belief that organizations must develop a core competency in Response Management – the ability to proactively drive operations performance by quickly and effectively responding to changes in demand, supply, capacity and product. Today’s market creates an urgent need for OEMs and contract manaufacturers alike to develop such skills – since customers continue to expect greater responsiveness and your operating performance (inventory, margins, etc.) are directly related to this ability. As AMR points out, its about the ability to respond to unexpected events – both positive and negative.

To do so requires a very different strategic solution than what organizations have typically invested in. Most organizations invest heavily in systems to ensure the business runs like clockwork. Yet, managing the business when things don’t run like clockwork is one of the least automated aspects of the business (most companies rely on spreadsheets to make day-to-day decisions in response to change. And, because this doesn’t work very well, they’ve had to “institutionalize” safety stock, excess capacity and other mechanisms to increase responsiveness-all at the expense of operating performance). To do so requires a fundamentally different approach.

In most organizations, planning is done by a small number (at least in proportion to the employee base) of highly trained individuals. Yet, responding to change is done on the front lines – by literally hundreds or thousands of buyers, customer service representatives, planners, managers, etc.

These front-line decision makers need the ability to respond quickly. They need immediate access to relevant and detailed information and collaborative “what-if” capabilities to rapidly evaluate various action alternatives with others across the extended supply chain. To ensure the right decisions are being made, decisions that align with corporate objectives, alternatives need to be scored in real-time.

The key to responding effectively to change, which is at the heart of having an agile supply chain, is the ability to empower front-line decision makers to quickly drive the appropriate action.

In today’s rapidly evolving and increasingly consumer driven marketplace, product innovation—and the ability to get new products to market rapidly and efficiently—can make the difference between success and failure.

Yet the challenges involved in transitioning new products from development to manufacturing often make effective product introductions difficult. Frequent engineering changes during the highly fluid product design process require ongoing collaboration among design engineers, manufacturers, and suppliers as products move towards larger-scale production.

Incongruent spreadsheets, miscommunication, and ad hoc planning strategies often result in poor execution and failure to accurately align procurement with each phase of product ramp-up. This in turn
creates problems and delays that devour margins and eradicate anticipated market gains.

A new approach is warranted—one which provides the visibility and control that design engineers and manufacturers need to effectively
co-manage each step of a new product release. Industry leaders are turning to Response Management for the answer.

Response Management helps companies effectively manage in situations where changeis the norm and collaboration across organizational
boundaries is critical. By directly integrating with product lifecycle management (PLM) systems, ERP, and planning tools, Response Management applications provide a single, cohesive solution through
which engineers, manufacturers, and suppliers can:

> Exchange critical information and collaborate in real time to effectively share continually changing responsibilities from product inception to launch.

> Instantly model multiple product revision scenarios to accurately
pinpoint procurement needs and optimize use of existing inventory.

> Simulate various cut-in dates for incremental product revisions to
enhance timing and meet customer and market demands.

> Identify and order scarce and long lead-time components on a timely
basis to ensure go-to-market deadlines are met.

As products continue evolving at an ever-faster pace, the need to
capture critical demand windows through rapid innovation and product
release becomes more critical than ever. Companies that seek core competence in the capabilities provided by Response Management will dramatically enhance their ability to manage the transition process—enabling them to seize new market opportunities and gain competitive advantage.

(source: IndustryWeek column by Andrew Gort, former EVP of global
supply chain management for Celestica)

By John Sicard, vice president of services

In 1992, Peter Drucker wrote an article that was published in the Wall Street Journal called “Planning for Uncertainty”. In this article, he said:

“Uncertainty—in the economy, society, politics—has become so great as to render futile, if not counterproductive, the kind of planning most companies still practice: forecasting based on probabilities.”

Peter was likely one of the first to recognize the significant shift in consumer buying patterns and the resulting implications to how manufacturers run their businesses. For many manufacturers, the ability to predict your demand using mathematics was going to be a thing of the past, if it were ever a “thing” to begin with. There certainly is enough evidence to support this position in the high-tech consumer market, where products vie for the fashion of the day, and usually only have a couple of quarters to do it in before the latest-and-greatest hits the street.

Stephan Haeckel coined the phrase “sense and respond” late in the 90’s, and drew attention to the growing trend that business performance would soon be governed more by a organizations ability to respond to unpredictable change then it would be through forecasting. In his article “Beyond Demand Forecasting: Sense and Respond Organizations” (free registration required) under the paragraph heading “From Forecasting to Anticipating Customer Needs and Preferences”, Haeckel states “Sensing and responding to individual customers’ current requests, as opposed to making and selling offers they are forecasted to want entails a transformation–not just a reformation–of what the business is and does.”

Today, we are seeing growing evidence of global manufacturers that ‘embrace change’, and are learning how to leverage their ability to rapidly respond to any changing supply chain condition, either with demand, supply, capacity or product design, and turn it into a competitive weapon. Companies that transform themselves from “make and sell” organizations to “sense and respond” organizations will become tomorrows “great” companies.