Archive for February, 2008

I recently came across this article from Larry Lapide at MIT.  The basis of the article is discussing the need to balance demand and supply at all time intervals.

My experience has been that this is much easier for manufacturers to accomplish over the long-term than it is the short-term?  Why?  Volatility.  So many things are changing at once today that it makes it hard to maintain your balance (no pun intended).

The first challenge is supply chain visibility.  Most people struggle with this.  What is the actual state of demand – right now?  What is our current state of supply – at this moment?  Where do I have gaps and misalignments?

But visibility alone isn’t enough.  Once I’ve gotten a clear picture of things, I need to make sure everyone else has that same set of facts and that we’re armed with tools to develop a profitable response.  What happens if I change order priorities to meet the needs of a given, highly profitable customer?  What other options exist?  Which is the best option?

When things aren’t going according to plan, it becames a set of decisions that rely on human judgment.  In order to come up with the best action to take – the one that balances supply chain risk with rewards – these front-line decision makers need to have both visibility and tools to collaborate with their colleagues to come up with viable options, to analyze available options and to pick the one that appropriately balances all of the metrics critical to the company.  And all of this has to be done quickly, under intense pressures (especially as you near the end of the quarter).

Public service announcement….

Came across this article here saying that a corporate consortium is co-sponsoring an initiative beginning today to gather information on the state of supply chain management education and supply chain talent in the field.  The article contains a link to an online survey and the article indicates that the results are to be made publicly available.

In case you didn’t see, we formally introduced a new on-demand service today called RapidResponse for Demand Management (you can see the press release here and learn about the product here).  This is very exciting for us on a couple of fronts.

For years we’ve gained success selling our Response Management solutions into the manufaturing/supply chain (the “supply-side”) groups within manufacturers.  These groups struggle with daily changes in demand, supply and product inside the sales and operations planning horizon and have to be able to alter supply plans to profitably respond to these changes.  Our users typically end up being planners, schedulers, materials managers, outsourcing managers, etc.

For some time now, we’ve been getting “pull” from the demand management/fulfillment (the “demand-side”) groups within these companies.  They too are struggling with volatile demand and supply.  In their case, they own demand and are struggling to sense true demand quick enough and see an increasing need to collaborate with their customers around demand.  Likewise, they are responsible for allocating finished goods inventory to ensure that the right products are in the right place at the right time.  What we’ve continued to hear is that demand managers, customer service reps and sales operations staff are struggling.  They lack the needed visibility and exception notification systems to understand what the current state of demand and supply is across an increasingly distributed fulfillment network, and they lack the tools to collaborate with their customers on demand and internally with colleagues to resolve problems.

Enter RapidResponse for Demand Management.  We’ve designed this solution with these user communities in mind.  This new service empowers them to sense demand more quickly, to shape demand and to more profitably respond to demand and supply changes to drive greater levels of customer satisfaction and revenue for the company.  They get an integrated view of demand and finished goods inventory so they can quickly spot misalignments and then leverage tools to determine the most profitable response.

And, when combined with our existing RapidResponse for Manufacturing into an integrated on-demand service, you’re able to see from end-to-end, from customer demand all the way down through component supplies in an outsourced supply chain.  Each group is individually empowered to solve problems within their domain of influence, but can now uniquely collaborate amongst the groups to find the best response to changing conditions.

Our on-demand RapidResponse service supports another key trend I continue to see, and that’s an increasing emphasis on the sales and operations planning (S&OP) process.  Interestingly, while we certainly see a focus on improving the planning process, the more urgent need is at an operational level.  Companies are struggling with how they deliver to the metrics and plans agreed upon in the S&OP meeting given how many things are constantly changing.  Response Management solutions like RapidResponse are designed to empower front-line decision makers with tools for risk tradeoff and response to daily changes inside the sales and operations planning horizon.  This is critical since more and more companies are operating in an environment when many of the assumptions taken into the planning process are proven wrong as soon as you complete that process.

Supplychainer.com has a new post talking about supply chain solutions offered as on-demand (software-as-a-service) services.  The ultimate conclusion is that the market will mature for such solutions, but the prediction is it will take about 10 years.  I’m much more bullish than that based on what we see for our on-demand service.  My comment to the blog post below.

** My comment **

Our Response Management solution – which empowers people to respond to supply chain changes – is delivered as an on-demand service today.

We sell to large manufacturers across a variety of verticals.  We’re seeing extremely strong interest in on-demand as companies continue to outsource much of their IT infrastructure.

Very importantly, our on-demand service provides exactly the same full functionality as our prior on-premises offering.  It is not a first generation solution with limited capabilities – so we don’t encounter that obstacle.

You are correct in that some people are initially concerned about data – but when they stop and think about how much data is already outside their walls because of the pervasive outsourcing they’ve done, they get much more comfortable with an on-demand service.  In fact, a huge value that we provide is the ability to actually regain visibility into that outsourced data because that is critical to enabling effective response to change.

I don’t disagree that some vendors will take a different approach to offering an on-demand service and run into issues – but it doesn’t have to be that way.

I think the market will be “mature” much sooner than 10 years, I think we’re at the early stages of a very strong demand that will become mainstream inside of 5 years.

New research from Aberdeen sought insights into the importance of supply chain management at companies and found that it is a critical function that can make a strategic difference.  Aberdeen found that companies are struggling with globalization of supply, increasing competitive pressures, and dwindling product life cycles – which is forcing them to look at supply chain transformation initiatives.  Aberdeen found that companies were concerned with cost containment and meeting increasing customer demands.

The and is the key word there.  For years supply chain management was focused mainly on cost containtment.  But more recently, increasing global competition combined with decreasing customer loyalty have forced manufacturers to pay even more attention to customer demands.  Along with this came the realization that supply chain management was not just a tactical necessity, but a strategic imperative.  Done right, huge competitive advantages can be achieved through customer-focused supply chain management practices.

To achieve this, manufacturers need to enable responsiveness.  Responsiveness serves both needs – it enhances customer satisfaction while simultaneously improving operations performance through cost reductions.  Increased responsiveness requires front-line decision makers to be empowered to act quickly and decisively.

SupplyChainDigest featured a dialog with various industry experts (here) on their thoughts on supply chain trends in 2008. A couple of interesting comments that caught my eye:

Gartner’s Dwight Klappich says conditions may force companies back to basics in 2008.

“Supply chain management organizations will be forced to divert their attention away from strategic initiatives like innovation; instead they will have to focus more time and effort on tactical and operational issues driven by economic and competitive pressures”.

Dr. Larry Lapide of MIT agrees – and says this may mean a reversal of some current trends.

“With oil and logistics costs over the past few years, we’ll see more effort in trying to keep these costs down. Many companies will ’slow down’ their supply chains by using less expensive and slower transport modes,” Lapide said. “This will, of course, mean that inventories will increase – especially in-transit and at just-in-time sites.”

He also thinks there may be some return to in-house manufacturing over both quality issues and the need to be more reactive to demand without inventory build-ups.

I’m seeing a shift as well, one to more an emphasis on operational challenges. As the economy slows, most companies will focus more tactically at how they can execute better. How do we execute to the plans we have in place? This is a significant challenge given the volatility and cost challenges that manufacturers face today. Companies need to figure out how to leverage their assets more effectively and people are one of their most valued assets. Empowering people to respond more effectively to change is a key to gaining leverage and driving breakthroughs in operations performance.

Saw a post at The Performance Guys that caught my eye because it talked about “actionable” information and BI tools.  What exactly is actionable vs. un-actionable (is that a word?) information?  To a degree, all information is actionable, its just to what purpose.  Most BI information is historical and best suited as actionable in a planning context.  This is one of the reasons why BI has struggled in operations where operations performance is a function of real time action based on operational, not historical, data.

Actionable information in the context of supply chain management means current and detailed operational data (not a model of operations).  But, more importantly, for supply chain professionals to truly put this information to work, they need not only supply chain visibility, but tools to take action.  Action is required because supply chain professionals are inundanted with exceptions to the plan.  In supply chain management, there is no such thing as a perfect demand plan or a perfect supply plan.  There are plans and there are realities.  Increasingly, the two are not the same.

Action in response to constant volatility requires collective tradeoff and response, where people collaborate and leverage real time analytics and simulation capabilities to analyze the impact of a proposed change and to assess action alternatives.  And, the volume of change and response requires these actions be aligned with corporate objectives, so supply chain professionals need to be able to continuously see how their proposed actions would impact corporate objectives-before they commit to the action.

There’s a lot of talk in the market about actionable information and operational BI.  Before plowing ahead, I would encourage everyone to ask “why” they need access to information, what type of actions do they need to take and what tools do they need to enable these decisions.

AMR has produced its list of 2008 supply chain predictions, as reported here at SupplyChainDigest.  Included in the list are:

• Companies manage risk for business continuity and competitive advantage.  Response Management is all about supply chain risk management on a day-to-day basis.  I’ve written about this many times (see here, here and here) in the past.  The reality is that things are changing so fast today that companies need to be empowered to “manage at the moment” and to respond quickly and accurately to changing conditions as they happen.  If you can’t, someone else will and it’s going to impact both your top and bottom lines as they steal market share and/or your only response is one that is inefficient and costly.
• S&OP technologies – not just processes – take center stage.  This is very much a growth area that we’re seeing, but not in the way that you might expect.  S&OP is a planning process.  And, while companies are looking to improve their planning processes, the bigger challenge is at an operational level.  How exactly do you execute to the plan coming out of this process when everything (demand, supply and product) is changing at an increasing rate?  This is the challenge we see companies focused on.  This is very much an issue of empowering people with the tools for risk tradeoff and response so they can deal with the daily exceptions that are reality.
• What-if analysis and simulation-based tools see growing adoption.  Another area that I’ve written quite a bit about in the past (see here, here and here).  In an environment of constant change, people need to be able to understand the impact of a proposed change and to quickly create options for solving the unexpected problem.  They need to do this in an iterative and collaborative fashion – without impacting the real operations of the company before determining the best action to take.  This is where what-if analysis and simulations come in.  They provide the tools necessary to address these situations.  To work, they need to be multi-user to support the collaboration that the response process requires and they need to be easy enough to use that broad user communities can contribute.  Why?  Because when it comes to dealing with unexpected events, you need to tap into the human capital within the company to make the right tradeoffs and decisions to respond appropriately.