Archive for August, 2009

I read the white paper ‘One-to-Many – Establishing a common platform to address multiple supply chain applications’ with interest.

I’m going through a house renovation project right now and quite a few of the points brought out by the author associated with challenges in today’s distributed supply chains reminded me of the issues I’ve come across with the project at home. I can’t do a lot of the work myself (hey, I’ve got a day job), so I have to sub it out to a whole host of suppliers. As with ERP, I’ve only got visibility to what happens locally (i.e. I see what’s been ‘delivered’ every day when I return from work). I don’t have visibility into the sourcing of lumber, cement, nails, and gravel since I’m trusting my subs to do that properly because they have the experience and I can’t watch the work as it’s being done because I’ve got other higher value-add tasks (i.e. go to work) that I need to complete. I do manage the sourcing of certain ‘key components’ (windows, doors and brick) that I feel are the most critical to the quality of the finished product.

So, why don’t I feel entirely comfortable that the project plan and building design will come off without a hitch? We’ll as Burns’ poem To a Mouse (The best-laid plans of mice and men / Go oft awry) points out, no plan is fool-proof and no one can be completely prepared for the future. A septic tank ended up being the wrong size for the type of installation. Do I just cover it in? No, I have to get it replaced with the right one. We had a huge rain storm the day that the foundation walls were back-filled. Do I trust that the new walls won’t collapse from the extra pressure or do I get the contractor to add some bracing? Nobody could have predicted the abnormal rainfall but it did require immediate action to address. You have to treat the plan as ‘best case’ but be prepared to address surprises as soon as they occur. Why would a supply chain plan be any different?

As the author points out, you have to change the mindset of managing based on optimization and control to one of collaboration and coordination. I have set the expectation with my subs that daily status calls will occur and that I should be advised if any serious concerns come up during the day. This ‘foundation’ gives me the key capabilities of visibility, alerting, and collaboration needed to ensure that the lines of communication stay open. The nature of the project is such that the other capabilities - evaluation and resolution - can be worked out through our conversations.

Supply chain management is of course more complex than a house renovation, but doesn’t that speak to a greater likelihood that things will go awry and therefore a stronger argument in favor of the author’s recommendations? It’s folly to believe that one can control and optimize today’s inter-connected supply chains given the variation in cultures (both societal and business), regulations, technological and data standards especially given the amount of change that is occurring in all of these dimensions at the same time. Of course you need to plan, but communication and collaboration are the keys to ensuring that the plan is executed as closely as possible to its objectives.

The latest edition of IndustryWeek’s Manufacturing Business Challenge has been published.  This month’s challenge discusses a company that sees the value of lean but questions if and how it may work in its exceptionally complex, high-volume, high-mix production environment.

The full challenge follows:

I have seen a tsunami trend washing over our customers — they are increasingly moving to tighter windows of delivery for their products as they attempt to streamline all their inventories while maintaining good delivery times to their customers. Praaxton Pressed Metals makes literally thousands of different stamped metal products, many of which are quite complex and rely on our unique proprietary processes. Because of this metal-engineering expertise, we steadily attract customers from all around the globe and in many industries, ranging from electronics to biomed to automotive.

Our delivery and quality metrics are OK — not great. But with business steadily rising and capacity overly tight, lead times are getting longer rather than shorter. Many customers accept our delivery performances because of our process technologies, but a few are getting vocal and demanding improved lead times. One company has pulled its business.

As the CEO, I like to meet first-hand with as many of our customers as possible. Increasingly, my fellow executives have proudly showed me their lean facilities, walking me through all their achievements and citing shorter lead times, lower inventories, improved customer satisfaction, and lower production costs due to less waste throughout the organization (not just on their shopfloors).

I’m no hermit. I’ve been reading about lean for years, and I am impressed with the manufacturing philosophy. I particularly like many of the organizational- and workforce-management concepts, such as aligning the company toward a few simple goals and having all employees engaged in problem-solving and improvement activities. But I’ve been hesitant to apply lean at Praaxton because of its materials-management techniques — such as one-piece flow and frequent, quick changeovers of equipment — unsure of how they can work in our exceptionally high-volume, high-mix production environment with dozens of complex presses. The learning curve seems too great and the potential negative impact on current delivery times too frightening.

Is there a way that I can roll out lean at Praaxton without the fear that I’ll inadvertently bring the whole company down?

Solutions are proposed by Simon Ellis of Manufacturing Insights, as well as Kinaxis.  You can read the latest Challenge here.

Sourcing Innovation summarizes an article by Richard Hackman of Harvard called ‘Why Teams Don’t Work ‘ that speaks about the five secrets of team building.

Richard states:

1. Teams Must Be Real
   People need to know who’s on the team, who’s not, and who has what responsibilities. A virtual team or vague team concept won’t get the job done.
2. Teams Need a Compelling Direction
   Members need to know what they’re supposed to be doing together. Without a clear direction, there is a real risk that different members will pursue different agendas.
3. Teams Need Enabling Structures
   Teams with poorly designed tasks, the wrong mix of members, and un-enforced norms gravitate towards trouble.
4. Teams Need a Supportive Organization
   The organizational context must facilitate teamwork in a manner that is conducive to the team and its members.
5. Teams Need Expert Coaching
   A focus on individual performance does not necessarily improve the team. Teams need to be coached as a group in team processes.

The purpose of a team is to provide a better and faster result that individual contribution. Teamwork is a concept that all organizations say that they value, but as Richard states, their approaches are varied and often flawed. I agree that a clear set of objectives, structure, and support are all important to the success of a team.

While many organizations are not as effective at teamwork as they could be, the effort to improve team collaboration is worthwhile. Having the input from multiple stakeholders will improve your outcome if all the right success factors are in place.

Teams imply collaboration of information and ideas. Let’s address a few questions. What do teams look like? How do they make decisions? How often are teams required?

What do teams look like?  Today the reality is that teams are not always physically together. This represents a whole new risk because you can’t physically gather the team together to focus on making decisions. You need to rely on business processes and tools. You may not even know all of the team members but you require their input.

How do they make decisions?  Collaborative decision making may be synchronous or asynchronous. Synchronous processes require that you capture everyone’s input and allow everyone to view and analyze individual contributions. Many organizations use Excel to capture collaborative input. However, it is very difficult to ensure that everyone is working from the ‘same page’ so to speak, leading to delays, confusion and ineffective teamwork.  Organizations need to look for new ways to solve the ‘Excel dilemma’. Excel was never designed for organizational collaboration. It is a personal productivity tool.

Asynchronous collaboration relies on processes and tools that support sequential decision making steps. One needs to be alerted when others have provided input or others input may have affected their contribution. Collecting input and having the ability to compare your starting point or baseline with new input is also very important. 

How often are teams required? Teamwork and collaboration is an ongoing activity. Daily decisions are made with teams. Very fundamental business processes such as Sales and Operations Planning are team based processes. If organizations are going to embrace teamwork the process cannot impede effective decision making. People need to engage quickly, provide input quickly, solve problems and come to decisions quickly and then disband. As Richard states, the teams need to clearly understand their responsibilities  and the goal of their collective input. Individuals often have conflicting objectives. Therefore visibility to their impact on the team goals is key to success.

Kinaxis executives recently shared their quick takes on business and the supply chain after the recession. Hear what Doug Colbeth, CEO; Richard Monkman, CFO; and John Sicard, EVP; had to say…

Question #1: What has the recession taught us?

Question #2:  What market and business practices have changed?

Question #3:  How has the recession impacted IT?

Question #4: What is important coming out of this recession?

Have you ever had a bad customer experience, poor service or expect delivery of a product and either it was not what you expected or it was late? If so, David Oppenheim” white paper entitled:  “Making the Case for Lean Process Lead-Times: Are your information process flows giving you a competitive edge” will be an interesting read. It touches on the entire order fulfillment cycle and challenges us to view this in the eye of the customer.

If anyone questions where to apply Lean methods and techniques this white paper stresses that it is not just the manufacturing processes but anything affecting the customer. This includes order intake, order promising, delivery, change requests and after market support.

The administrative functions with this process can be considered a necessary evil since it is nothing that adds value to the product but as David points out, reducing cycle times outside the manufacturing process is just as important in enabling you to deliver on your commitments sooner. The order intake process is also the first point of contact where you can create an exceptional customer experience. Lean is not just about shorter cycle times but also “ease of use”.

The part of this process that will dramatically impact your reputation and the trust of the customer will be the promise date you communicate. You likely have heard “the truth will set you free”. This is truly the case when giving promise dates. It is called a “promise” for a reason. It is your word and reputation at stake. Accurate promise dates, even at times when it may not be what the customer wants to hear will drive more value than giving false expectations. I remember ordering some kitchen cabinets that ended up being 4 weeks late from the promise date I was given. I did much work in preparation for the delivery of the cabinets, so for 4 weeks it was much more disruptive than just not having cabinets. I could have managed much better if I had just known the truth.

The customer experience does not stop when the product is delivered. As David alludes to, lean can apply to all processes that affect the customer and this includes after market service. Is your aftermarket experience a positive one in the eyes of the customer?

As we all know, the customer will change their mind. David’s “line of the white paper” has to be the following: “Change is the only constant and yet our processes treat change as the exception instead of the rule.” It seems like when some organizations receive a change request it is the first time it has ever happened. Given today’s volatile supply chains, applying Lean techniques to the processes used to deal with change will separate you from your competitors and leave your customers coming back for more.

I came across a discussion titled “One Number Planning” & S&OP on demand-planning.com that contends that “… S&OP has to execute against one number, the demand plan/forecast” and that “Too many times that one number was driven by finance and in actuality the budget”.  While having sympathy with the authors perspective,  I think one of the key business problems today is too little integration between Finance and Operations.  My full reply is below.
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I agree that the S&OP process has to execute against the demand plan/forecast. We only have to look at the recent economic downturn to understand the fallacy of driving the S&OP from the budget.

But I think that this is only true in the “near term”, where near term will depend on the industry. I know of some companies that run a 3 month S&OP in weekly buckets and others that run a 10 year S&OP in monthly buckets. Typically the longer the term the more companies use “range” forecasting (optimistic, pessimistic, realistic) rather than “single number” forecasting.

In the longer term though, the S&OP plan should focus not only on risk, but also on demand shaping activities which can range from new product introductions, to promotions, and should also include risk factors such as legislative changes. There is a lot of uncertainty this far into the future, which is why companies use range forecasting. The S&OP process in the longer term should be focused on determining how to execute at an operational level to meet the corporate financial objectives. Many in the analyst community refer to this activity as Interated Business Planning (IBP).

But I agree that the demand/supply balancing aspect of S&OP should be driven by a realistic forecast, not the budget.

There is also a great need to reconcile the forward looking plans of all planning activiities, but particularly the S&OP process with the corporate financial goals, typically contained in the budget. Too much of Corporate Performance Management is focused on analyzing what has happened using BI tools. IBP can provide the projected financial performance of the company, which is of course a lot more valuable than analyzing what has happened. One of the key outputs of IBP is the variance between the budget and the plans using financial metrics. To do this effectively requires the seamless integration of financial and operational information. It also requires projections of average selling price, component costs, and operating costs. In the not too distant future it may even require carbon footprint calculations.

In summary, while I agree that the near term S&OP should be driven by a realistic demand plan, I think the budget is a better number to use in the long term as it encapsulates corporate financial goals. In the longer term the purpose of the S&OP should be, as you point out, to identify the gaps and the risks involved in reaching the corporate financial goals.

In a whitepaper entitled ‘One-to-Many – Establishing a common platform to address multiple supply chain applications’  Trevor Miles writes about multi-enterprise supply chains.

Outsourcing has created new challenges. One of these is visibility and retaining accountability when companies do not have access to the right information. As Trevor states in his paper, much of the data required to make informed decisions is residing in Excel spreadsheets. 

Companies that do not outsource are also faced with distributed supply chains where inventory may be managed by a 3rd party or product is manufactured in different locations of the organization without the ability to synchronize demand and supply across multiple systems.

 The inherent nature of today’s supply chain requires a rethinking of the technical architecture required to support these new business processes.

Trevor speaks of collaboration. Collaboration is required in all areas of your business where you may have competing objectives and need to reach a decision that is in the best interest of your company. Best in class companies are also collaborating with their customers and their suppliers in reaching consensus forecasts, as an example. Forecasting has been an issue for years and years! Companies have tried numerous complex forecasting tools which may improve their forecast accuracy slightly, but ultimately collaboration is a key component of forecast generation.

Companies are struggling with latent data, inaccurate data, and poor decision making which is resulting in missed revenue opportunities and increased costs. 

Knowledge workers are the backbone of any company. Empowering the knowledge workers with a 21st Century Supply Chain Architecture where they can quickly be alerted to situations, analyze the facts, collaborate with others and apply human judgment to problem solving while reaching resolution quickly will support the multi-enterprise challenges of today.

Well, they say laughter is the best medicine, so for an industry that has certainly had its share of headaches, we present to you the entertainment section of our recently announced Supply Chain Expert Community.

We believe part of building any kind of on-line community should involve fun. Just because supply chain problems are serious does not mean we have to be serious all the time. This sub-community will offer comical videos and other amusing content that bring out the lighter side of supply chain. 

To start things off, we have contributed three video series to the entertainment section.  The most recent is The Late Late Supply Chain Show with host, Bill Dubois, Kinaxis consultant and resident comedian.  There are two episodes up right now – I encourage you to check them out.

And if that doesn’t give you enough reason, here are 10 more…..

Top 10 reasons to join in on the fun…
10. Because there are still a few people that aren’t using RapidResponse that have some really awful stories worth a good laugh

9. Because Bob Ferrari , author of the Supply Chain Matters blog, might do a post about it, and you can finally say you knew about it first

8. Because it will make you feel a lot better about that time you ordered 57,000 semiconductors instead of 5,700

7. Because until now, your only source for entertainment news has been related to Hollywood’s worst plastic surgery botches and the latest update on Brangelina

6. Because you too can finally have something funny to share with the family related to your job

5. Because if we can’t laugh at ourselves, at least we can laugh at other people

4. Because who says supply chain professionals can’t bring on the funny

3. Because crying and laughing both burn about 1.5 calories per minute, but laughing is much less embarrassing to do in your office 

2. Because your boss will be impressed that you’re embracing this whole ‘social media’ thing

1. Because the last time you laughed with your co-workers, you also shopped at your local Circuit City store

Enjoy!

Today is a really exciting day for us as we announce our new online community.

The Supply Chain Expert Community, which  is free and open to the public, offers supply chain professionals, industry analysts, consultants, media and others a place to convene online to learn, share and connect in a meaningful way.

The main goal of this blog has been to offer valuable industry information and resources to our supply chain audience (which, by the way, I am very proud of its success in that regard).  Likewise, I see the Supply Chain Expert Community as an extension of the mission to facilitate knowledge sharing, discussions, debates…. which ultimately leads to the overall advancement of the industry.

We anticipate the site growing more and more robust as industry professionals discover the benefit of sharing their experiences and resources there.  We hope the community will become a ‘go-to’ resource for those who eat, sleep and breathe supply chains. 

Why Join?

• You are a supply chain practitioner looking for perspectives from others facing similar challenges
• You are a supply chain consultant wanting to offer insight and advice
• You are an editor or blogger looking for fodder on hot topics and practitioner opinions
• You are an industry analyst looking for an audience to poll on a particular research question
• You are an IT or supply chain manager researching technology solutions
• You are a RapidResponse user looking for best-practices and new ways to leverage the service
• Overall, you know the value and enjoyment networking groups can offer and are looking for a tailored community for your particular areas of interest.

Anyone can navigate the community and view its content by simply visiting the site: http://community.kinaxis.com  To contribute to the community (rate content, create documents, add comments), users must self-register.

For more details, read today’s news release.

See you online!

Douglas  Colbeth

CEO