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

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

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

Another in the continuing series of customer stories that illustrate the impact of Response Management.

Network Appliance (NetApp) has been a leader in storage products for years. With the Internet boom and the move to all things digital, there’s been tremendous demand for storage products. The problem is that this growth isn’t always predictable or smooth. And, the market is cut throat in terms of competition.

NetApp must rapidly anticipate and adapt to changing conditions in the complex global environment. In 2000, during a period of rapid growth, NetApp found itself with a number of disparate systems and processes that could not efficiently scale to support the growing demands of an international corporation. NetApp required visibility across the company in order to automate the scheduling and manage the varying impact of changes in customer demand.

Leveraging Response Management capabilities, a solution was developed that takes a unique combination of information and business rules to determine where an order should be sourced and the appropriate delivery and build schedules for all steps in the supply chain.
Real-time, closed-loop integration with the Oracle ERP system ensures complete automation and rapid response.

NetApp is another company that needed to develop systems capable of responding rapidly to change. Doing so enables a company to achieve two objectives that historically have been at odds with each other: increasing customer service levels while improving operating efficiencies (these have been at odds because historically you’ve had to maintain inventory buffers, as one example, to achieve higher customer service levels).

To learn a bit more about NetApp and their use of Response Management, see the case study here.

There’s a good article on SupplyChainBrain.com (which is sponsored by Global Logistics & Supply Chain Strategies) entitled “Risky Business: The True Cost of Supply Chain Disruptions.”

The article says that while supply chain efficiency is important, companies need to focus more attention on reducing risk to their financial performance resulting from supply chain disruptions. It then goes on to talk about some of the risk factors and some ideas for mitigating that risk.

We see market leaders very focused on these issues. But, instead of just trying to improve their planning and execution, they are also investing in strategies to deal with the inevitable cases where unexpected “stuff” just goes wrong. Specifically, they are investing in building an organization-wide competency in responding to change. This is certainly helped by our software, but it’s an organizational mentality and commitment to first acknowleding that there are many problems today that you can’t plan your way out of and second, that you need to proactively develop the mindset and arm your employees with timely and accurate information and tools to respond to these situations.