For most of us, we’re experiencing unprecedented economic challenges. The implications to the supply chain management profession are profound. We’ve gathered some of the industry’s brightest minds to discuss these challenges and seek innovative solutions. We hope you enjoy the Kinaxis Supply Chain Expert Series as we challenge these experts on these issues.
Colleen “Coco” Crum
Managing Principal and Member of Board of Directors
Oliver Wight Americas
Colleen “Coco” Crum, a managing principal and member of the board of directors with Oliver Wight Americas, is considered a thought leader and innovator in demand management and sales and operations planning. She has helped to develop methodologies for enabling companies to successfully implement sales and operations planning and demand management and achieve quick time to financial benefit. Through these efforts, she has helped companies to think and act beyond their individual enterprise and extend the benefits of demand planning and
sales and operations planning throughout their supply chains.
Coco has co-authored three books that have received excellent industry reviews. The book, Enterprise Sales and Operations Planning: Synchronizing Demand, Supply and Resources for Peak Performance, has been called one of the best books of 2003 by The CEO Refresher magazine. The book, Demand Management Best Practices: Process,
Principles and Collaboration, has been called, by Foresight magazine, a practical and allinclusive, how-to guide that most executives and managers will find invaluable. Coco also co-authored the book, Supply Chain Collaboration: How to Implement CPFR and Other Best Collaborative Practices.
Coco participated in a cross-grocery industry effort to develop a best practice model for supply chain replenishment. The effort resulted in the publication of ECR: Road Map to Continuous Replenishment by Canadian food industry trade groups. As a consultant and educator with Oliver Wight Americas since 1995, she has assisted companies across the manufacturing spectrum, including agricultural chemicals, consumer goods, electronics, entertainment, pharmaceutical, biotechnology, and aerospace and defense industries. In doing so, she has contributed to advancing the methodology of how to successfully integrate demand and supply processes both inside a business enterprise as well as throughout the supply chain.
Kinaxis: We are experiencing a rapid and perhaps long-lasting downturn in the economy.
- What lessons can be learned from the downturn that can be applied to supply chain management in the short term and in the long term?
- What specific supply chain initiatives can be applied in the short term that will have greatest effect on a company’s financial performance and sustainability?
- How can companies balance short-term cost cutting objectives with the need to strengthen their position for an eventual recovery?
Coco: Many companies were slow to respond to the changing economic conditions. Some executives describe the situation as “business was good, and then the bottom dropped out in October.” The warning signals were readily apparent, however.
Other companies with a robust Sales and Operations Planning process were creating models based on different scenarios. They documented the assumptions for each scenario. This gave these companies the advantage of already determining, at the senior executive level, how their companies would respond for each scenario, such as growth will remain steady, growth will stagnate, and growth will decline. The models were reviewed every month to determine which model should be used over what time period.
Sales and Operations planning is formal decision-making process, led by executive management, which provides:
A common operating plan, with accountability for new products, customer demand, supply and the resulting financial plan. Done well, Sales and Operations Planning provides executives with a clear visibility of the current projections versus the company’s business strategy and objectives. Gaps between the latest projections and the business strategy and objectives are and actions are taken to close the gaps, leading to greater predictability. The Sales and Operations Planning process also ensures alignment of goals and key resources to most effectively meet customer needs and the company’s strategies and tactics.
The planning horizon for sales and operations planning is at least 24 months. This gives executives the short-, mid-, and longer-term projections of the business (product, demand, supply, and financial plans). These views enable making decisions on new product priorities, markets and marketing, supply chain tactics, customer service strategies, and optimal utilization of company resources (people and time; equipment, facilities, and suppliers; and financial).
Note: Some companies are starting to use the term Integrated Business Planning and Management in place of S&OP, particularly those companies that utilize the process as an executive management process to align all company plans, not just demand and supply.
During this recession, we have observed companies focus on reducing inventories and other improvement efforts that can be achieved quickly (in a few months) without a substantial financial investment. At Oliver Wight, we call these improvement initiatives a “Fast Track Approach.” We also see companies using a Fast Track Approach to implement Sales and Operations Planning, as they recognize the shortcomings of not having an integrated executive planning and decision making process in these times of economic turmoil. Companies that stay focused on improvement initiatives – and that utilize Sales and Operations Planning as an executive management process (not a mid-management balancing of demand and supply process sometimes called “Real-Time S&OP”) — will be best positioned to rebound quickly when the economy revives.
Kinaxis: Most governments in the developed and developing world have announced stimulus packages, some more ambitious than other.
- Will this prevent the failure of certain manufacturing sectors, such as the automotive sector in the US?
- Are there some existing manufacturing sectors that will not require stimulus?
- Will the stimulus packages spawn new industry sectors, and how soon will these have an effect on the economy?
Coco: Many people have different views on the stimulus package and the financial bailout of certain businesses. Companies that operate in certain manufacturing sectors will be the beneficiaries of the stimulus money – either directly or indirectly. These include companies involved in infrastructure development, such road and bridge construction. Some of the beneficiaries of infrastructure development, such as steel-producing companies, are actively lobbying for stimulus money to be directed to their industry segment.
One purpose of the stimulus package is to reduce unemployment. If it truly results in job stimulation, other companies, particularly in the consumer goods sector, will be better able to hold their own during this deep recession.
As for spawning new industries, it will all depend on how the stimulus money is spent as well as other local, state, and federal government programs. The development of a U.S. energy strategy has long been needed and long neglected. If a meaningful strategy could be developed that would create a new commitment to energy conservation, a multi-faceted green industry could be created that would survive beyond this economic crisis. It remains to be seen whether we will have the political and social will to address our long-term energy challenges.
Kinaxis: We have seen the globalization of demand, especially in the BRIC (Brazil, Russia, India, China) countries.
- Notwithstanding the current economic downturn, will this trend continue?
- How will this impact the supply chain, especially with respect to outsourcing, which has tended to look at the BRIC countries as cheap(er) manufacturing centers?
- How will this impact product development, and by extension the products available in the developed countries?
Coco: Outsourcing will continue as long as it is economically viable to do so. The genesis of outsourcing was to take advantage of inexpensive labor. If energy prices continue to increase, the cost of transporting goods long distances will also increase significantly. This situation will cause companies to reconsider outsourcing the production of goods that require physical movement to go to market. For those products and services that are created and delivered digitally, outsourcing will continue to the countries with the skills and lower costs in delivering those skills.
Kinaxis: Ford a century ago used to have a fully integrated supply chain from steel manufacturing through to the sale of a car. Now other companies make the steel, most of the components are manufactured by other companies, and yet other companies sell the cars.
- Will this trend in supply chain specialization concomitant with outsourcing continue at the current pace?
- What will be the effect on the supply chain if this trend continues?
- Is there a “natural” number of actors in a supply chain which gives greatest flexibility while limiting complexity?
- What will this mean in terms of systems requirements to support supply chains with many actors?
Coco: Whether the supply chain is fully integrated within one company or operated by multi-enterprise supply networks, supply chains are difficult to control and achieve flexibility without the following:
- Integrated planning and control processes
- Lean manufacturing
- A knowledgeable and skilled work force
- Effective executive decision making
- Supply chain collaboration
- The tools, including information technology, that enable the work force to operate the processes effectively.
Supply chains, both fully integrated within one company and multi-enterprise networks, need to return to the fundamentals (well designed processes that utilize best practices and are operated by knowledgeable people). They also need to leverage the advances of information technology in communicating information across a supply chain to aid in better decision making and collaboration.
Inefficiencies, poor customer service, and other waste in a supply chain are inevitably the result of: 1) poor decisions made by people, and 2) poorly designed processes that lack integration (although many people incorrectly blame the information technology).
An excellent white paper on this subject has been written by a colleague, Rick Burris. The white paper titled, “Guiding and Improving Lean Manufacturing and Other Initiatives with Integrated Business Management,” is available at www.oliverwight.com.
Kinaxis: “Cloud” computing is the hot topic in the IT world, and is a superset of on-demand/SaaS.
- Will there be a wide adoption of “cloud” computing in the SCM world?
- What role will standards adoption play in the overall adoption of “cloud” concepts in SCM?
- Are the existing SCM application architected to take advantage of “cloud“ computing?
- What are the key technology innovations that will lead to a wide adoption of multi-enterprise business applications?
Coco: I will comment on cloud computing as a user rather than an information technology professional. I use Apple’s mobile.me cloud to save files from my MacBook Air. I use Amazon’s cloud to retrieve books that I have purchased using my Kindle. I have a need to retrieve files and books and always hold my breath when doing so. But there they are!
Cloud computing is upon us. For the business arena, it must be secure and reliable – that will be the big test. It has the ability to reduce the IT investment in hardware (servers and computers). The cloud should provide access to an amazing amount of data. The challenge will be in ensuring access to perform specific tasks in support of specific business processes. This means that business processes must be well defined and people need to be well educated and trained on the business processes and practices as well as their specific tasks in which they will perform utilizing the cloud.
The challenge for information technology businesses will be delaying as long as possible cloud computing from becoming a commodity and an expectation that is taken for granted by users. Commoditization occurs at an ever quickening pace.
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