Archive for March, 2011

Four reasons to stop looking to your ERP vendor to solve all your supply chain problems.

Published March 31st, 2011 by John Westerveld 2 Comments

I noted an article from IndustryWeek several weeks ago that identified a growing problem with corporate ERP systems;  The article, which referenced a study by IFS North America, shows that companies are going beyond simple make-to-stock, make-to-order models and are instead moving to more complex manufacturing models like engineer to order.  ERP software, however, doesn’t appear to be keeping up.

While I can’t comment on the specifics of what the study authors have found, I have seen many instances where traditional ERP systems simply don’t align with the needs of the business.

  1. Many ERP systems don’t allow you to see forecast and actual customer orders in the same view.
  2. Many ERP systems have an “all or nothing” approach to capacity planning – you need to fully populate capacity planning data and track actual performance at the operation level or you can’t do capacity planning.
  3. Some systems only present views on a part by part basis – so you can’t see aggregated details without running a special report
  4. Most systems make it very difficult to try what-if scenarios and get timely results.

There are many more examples, but what is interesting is what happens when ERP users don’t get what they need from the ERP system; they try to get the information someplace else…typically from Excel.

I’ve talked in previous posts (How are spreadsheets like cockroaches?, Is Excel the right tool for S&OP?) about the dangers of running your business on Excel.  Excel is a fine tool for creating charts and doing one time analysis, but things start to fall apart when you start building business processes on it. Like a foundation for a building, the software you build your processes on is critical.  A weak foundation, and your process will come tumbling down. So why is Excel a weak foundation?

  • Excel propagates multiple copies of “the truth”. How many times have you gone to a meeting where two people presented different versions of what is supposed to be the same data?  Whose data do you believe?
  • Excel allows non-validated business logic. Who created the spreadsheet? How sure are you that the formulas used are correct? In my “How are spreadsheets like cockroaches?” post, I cited a study that showed that 90 percent of spreadsheets in use by businesses today contain serious errors.  Errors that could result in you making a bad decision.
  • Excel has a poor collaboration model. Many processes today require inputs from multiple people.  Excel doesn’t handle concurrent edits well, so often processes must be structured such that edits happen consecutively. This can prolong processes, especially if you have difficulty getting people to make their changes on-time.
  • Complex processes result in complex Excel worksheets. I managed the S&OP process at a manufacturing company in a previous life.  The S&OP spreadsheets for our four product lines were built up from multiple component workbooks.  Macros were used to manage the rolling time window. When something went wrong with the process, I was guaranteed to spend days trying to debug and pick up the pieces.  Things went wrong far too frequently.

So, what’s the solution?  Use ERP to manage transactions but stop looking to your ERP vendors to solve all your supply chain problems.

In our personal life, we wouldn’t go to the same vendor for everything would we? For example, I use my bank’s website to manage my day to day transactions. They are very good at it…they’ve been doing it for years.  However, to manage my budget and to look at my spending patterns, I use Mint.  I looked at my bank’s budgeting offering and while it sounded good…it didn’t fit my needs.

My advice? Look at what your ERP vendor offers, but be sure to look at other offerings that are available. You might just be surprised at how well these tools meet your needs, and with the many on-demand services available, you won’t be looking at a large capital expenditure or an ongoing IT burden.

Are you using third party or best-of-breed supply chain solutions? Comment back and let us know your thoughts.

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Posted in Sales and operations planning (S&OP)


Another couple of software deployment lessons learned…the ballooning wish list and the search for a superuser.

Published March 29th, 2011 by Monique Rupert 2 Comments

My colleague, Duncan Klett, recently wrote the blog titled “Six lessons learned from six failed software implementations.” I completely agree with his lessons learned and recommendations, but I have many of my own!  I want to outline two lessons learned from many software implementations that are currently near and dear to my heart.

Reporting…

So many times I work with clients who are scoping out implementation projects and begin asking users what they think they need for reports from the system. The more people who are asked, the more reports make it on the list. Those reports then begin to take on a life of their own. They become a huge wish list of everything users have always wanted.  When it comes time to prototype the reports more light bulbs come on about all the possible reporting capabilities.  This is very exciting! (Unless of course you want your project to be completed on-time or on-budget). Even if the project does end up going live with all the great reports (that will solve world hunger and allow users not to actually have to do any work) low and behold the users determine shortly after go live they want to change all the reports. Why would they want to change all the reports, you ask? Well, because they now actually understand how the system really works and they see the actual production data in the reports so they understand it better; then comes the enhancement phase of the project.  The enhancement list becomes very long and sometimes costly.

Recommendation: I typically try to encourage clients to keep the list of reports to almost nothing, just regulatory, or reports that are required to run business. And even then, don’t involve a wide group of users, but rather stick with true decision makers. Once the system goes live, do a true reporting project to capture and identify all reports. Have a reporting strategy for the life of the system which allows for users to request new reports or enhancements to existing ones. Have a review board to ensure the requests are valid. Review the reports annually or bi-annually to determine usage of reports and anything not used in the last six months get rid of it.  This may seem like basic advice, but why don’t we all follow it? How do you handle reporting during a project?  Do you have any other advice to share?

Super Users…

We’ve all heard the term Superuser.  Wikipedia defines the term as: “The ‘Superuser’ in enterprise programs (SAP, Oracle) often refers to an individual who is an expert in a module or process within the enterprise system.” I think that is a pretty good definition – Each client I work with discusses having Superusers, however not all client’s actually put a name(s) to that title before a project begins. This could mean failure! If the company cannot define who the Superuser will be in particular business process areas during the implementation then who will actually help define what needs to be implemented, and better yet know what is actually implemented at go live? Post go-live is a nightmare of support because no one actually knows how to use the system and client is reliant upon consultants to teach them; which is both costly and inefficient.

Recommendation: Encourage clients to assign a Superuser(s) to a project before the project starts. That Superuser(s) works hand in hand with the consultants and is preferably dedicated to the project. The Superuser would even do some of the development of the system while the consultant oversees. How better to truly learn and adopt the system that “doing it yourself”? That person should also be the ultimate decision maker as it relates to scope and design of system or be the ONE conduit to that ultimate decision maker. By doing this the client should feel ownership of the system and feel it is “theirs” as there is at least one person who lives and breathes the system.  What experience have you had with Super Users on projects, either positive or negative?  Do you have any other advice to share?

Posted in Best practices


Visibility is a start. Collaboration is the goal.

Published March 28th, 2011 by Trevor Miles @milesahead 0 Comments

I’ve got another session presentation coming up that I’d thought I share. Kinaxis will be participating at the Extended Supply Chain 2011 conference taking place on April 5-6 in London, UK. I’ll be presenting the session, “Do you trust yourself to collaborate?”

The presentation is an expansion of a blog post I wrote the other month.  Here is the abstract:

Collaboration can bring tremendous value to outsourced supply chains, such as we see in electronics and apparel.  But what is collaboration? All too often collaboration is viewed in the context of exchanging data.  Visibility to data is important, but collaboration is ultimately about teams of people working together to achieve a shared objective (but perhaps not a common goal). The potential value of collaboration in the supply chain is enormous in terms of both reduced inventory and increased supply chain agility, not to mention the reduced cost of ”policing” supply chain relationships. Visibility is a start. Collaboration is the goal.

Follow me on Twitter at @Milesahead or on the 21st Century Supply Chain Blog to get updates from the event.

For more information on the Extended Supply Chain 2011 conference, visit: http://www.centaurconferences.co.uk/brands/theawarenessgroup/events/extendedsupplychain2011/Overview.aspx

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Posted in Milesahead, Supply chain collaboration


The top ten ways bad software is like an annoying ex

Published March 25th, 2011 by Lauren Bossers 0 Comments

If you’ve never experienced bad software or a bad relationship, I’d like to shake your hand to see if some of your good luck rubs off on me. I think we’ve all had our moments with both, and the creative minds here at Kinaxis realized that failed software implementations and failed romances actually have quite a few things in common.

That realization inspired our latest supply chain comedy video series, “New Kinexions.” You can find all six episodes here, and they’re only 90 seconds each, so it’s a quick way to get a good laugh. One great idea often leads to another, and “New Kinexions” served as the spark for our most recent contest on the Supply Chain Expert Community.

We asked community members to complete the following sentence: “Bad software is like an annoying ex because…”

After carefully reviewing dozens of hilarious entries (which you can view here), we faced the difficult task of narrowing it down to just one winner. So instead of trying to name just one, we decided to create a top ten list. Here are the best of the bunch:

Bad software is like an annoying ex because…

10. They are both high maintenance and full of SAP. –Jason Averill

9. Functions fail during execution. –Don Yetman

8. There is NO known cure for the viruses they can inflict on you, except a complete regeneration or replacement of vital parts! –Paul White-Quinn

7. It’s never flexible enough for what you want to do with it. –Olivier Fieux

6. It’s persistent, it leaves you in debt and it’s no longer attractive. –Sarah Lafferty

5. In late December, they’ll both call you to give them one more chance.  –Jay Lester

4. The packaging looks great but it’s filled with empty promises and disappointing performance. –Laura Gilmour

3. They both take up needed space in your memory, talk in code, don’t know how relationships work, and mess with your CPU! –Lew Mills

2. Even though you do not turn them on anymore, you still have a monthly payment! –Tony Ralph

1. They both appeared to be a lot more functional … before they were yours! –Ryan Christie

Congratulations to Ryan Christie, who is the winner of an Xbox 360 console with Kinect bundle! Stay tuned to the Supply Chain Expert Community for more opportunities to learn, laugh, share, connect—and win! And if you’re not already a member, join today to start benefitting from the experience and knowledge of more than 4,300 supply chain professionals.

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Posted in General News


Is Forecasting Fatally Flawed?

Published March 24th, 2011 by Trevor Miles @milesahead 7 Comments

Believe it or not, I didn’t plan the alliteration. But that is my central point: So much of actual demand is unplanned. Which is fine as long as it is near to what was expected in terms of items purchased, period in which purchased, and the customer/region in which the purchase took place. But this does not appear to be the situation in many cases. So is forecasting fatally flawed?

Lora Cecere has been writing about forecasting, principally within the CPG industry for many years. She has worked in industry, for a software vendor, and most recently as a highly respected analyst. In a recent blog Lora states that

 

Mean Absolute Percentage Error (MAPE) for a one month lag was 31 percent + 12 percent.  Data eight years ago for the same companies was an average of 36 percent + 10 percent MAPE.

This made me sit up and listen.  Especially when she went on to quote from her research while at AMR Research that

Based on AMR Research correlations, a six percent forecast improvement could improve the perfect order by 10 percent and deliver a 10-15 percent reduction in inventory.

In other words, there is a lot of benefit to getting the forecast right.  But a range of highly respected CPG companies cannot do better than 31 percent MAPE, with a range of 19 percent to 43 percent?  That caught my attention.  Mostly because I am more familiar with the High-Tech/Electronics industry which has much shorter product life cycles than CPG and therefore more volatile or variable demand patterns. Of course it is difficult to be precise with industry classifications. Does Consumer Electronics fall into CPG, High-Tech/Electronics, or both?  However we slice it, things like cell phones, tablets, cameras, etc have shorter product life cycles, greater seasonal variations in demand, and greater demand variability than do nearly all categories of CPG such as soap, washing powder, etc.  In Consumer Electronics, and more generally High-Tech/Electronics I hear from companies that they seldom get their forecast accuracy, as measured by MAPE, above 50 percent, which is consistent with my observations about the characteristic differences with CPG.  Higher demand variability/volatility would imply a lower forecast accuracy.

Before anyone jumps down my throat, especially Lora, let my state unequivocally that everyone MUST forecast and that all companies should be demand driven.  But …

But where is the discussion about how best to satisfy the missing 31 percent demand in the case of CPG and 50 percent in the case of High-Tech/Electronics?  Where is the discussion about the profitable response to the demand that is not anticipated? I feel as we are only having half the conversation.  The half about forecasting.  But if the best we can do is improve forecast accuracy from 64 percent to 69 percent over eight years in an industry segment with relative stable demand, I think we should be talking about supply chain agility and responsiveness.  What amazes me is that since the early 1990’s we have been applying optimization engines, typically Linear Programming (LP), to the supply side.  Ignoring for the moment the inherent issue of using linear models to represent highly non-linear systems, if you are basing your optimizations on inputs that are best 69 percent correct, are you not focusing on the wrong problem?  Should you not be focusing on systems that enable you to detect true demand early and determine the best way to satisfy the unanticipated demand using the competing requirements of profitability and customer service?  Of course you will need a supply chain that can execute in an agile and responsive manner consistent with your decision.

Here is the rub: All our resources are limited. Time. Cash. People. So in this zero-sum game, where are you going to apply your energies?  Spending eight years to improve the forecast by five percent, or working on the manner in which you satisfy the unanticipated demand in the most timely and profitable manner?

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Posted in Demand management, Milesahead, Response Management


Disaster recovery – dealing with the unknown.

Published March 23rd, 2011 by Monique Rupert 0 Comments

Each day since the disaster in Japan, I wake up to more bad news. It is heart wrenching to continually read and watch videos of this tragedy. One wonders how this society can take much more, but they are resilient.  Our Japanese employees are working every day. They set out each day to visit customers or the office and sometimes come back home due to train failure or power outages. They schedule calls that have to be cancelled due to poor phone service after another aftershock. It seems incomprehensible their determination and fortitude. They are really amazing.

Much has been written in the last few weeks about the impact on the global economy from this disaster. Clearly, it will be a very long time before we know the full impact but there are many realities that companies are dealing with today. “Japan accounts for 14 percent of the global production of computers, consumer electronics and communications gear last year, according to HIS iSuppli.” From an article titled Japanese electronics sector faces extended supply woes. The article also discusses countless factories that are not in production either due to the earthquake or following the tsunami. Many of the companies I deal with are facing this exact problem. In fact, I will be meeting with a customer today who will delay an implementation project due to limited work in their office outside of Tokyo and a destroyed factory in Northern Japan. With tragedies like this and a long recovery ahead, how can these companies effectively plan for the future?

The semiconductor industry has also been extremely hard hit by this disaster. “Japanese suppliers accounted for more than one fifth of global semiconductor production in 2010, when companies headquartered in Japan generated more than a fifth of all chip revenue, $63.3 billion, according to market research firm IHS iSuppli.” From an EETimes article titled ‘Japan quake: Tracking the status of fabs in wake of disaster.’ The article states Japan provides 60 percent of the world’s silicon used to make semiconductors.  So, we are really dealing with all levels of the supply chain in Japan disaster. This impacts electronics companies all around the world and of course the end consumer with possible product shortages or price increases.

My colleague, John Westerveld recently blogged on the topic “Coping with catastrophe. Can your supply chain recover?” In his eerily timed blogged (just two weeks before this disaster), he outlined a few things companies can do to prepare themselves for this type of catastrophe. The customers I am talking to this week who are most effectively dealing with this catastrophe have developed tools that allow them to respond to these types of unplanned events. They have many “what-if” scenarios they are running to determine how to deal with their issues to make the best business decisions.  It may not be perfect, but we all know dealing with supply chain is not perfection.

So, as the weeks continue it will become clear the impact of this disaster on the economy, the human tragedy, and companies’ ability to deal with the unknown. How is your company dealing with this tragedy? Did you have a catastrophe plan?

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Posted in Miscellanea, Response Management, Supply chain risk management


Do you know the key to continuous integrated business planning?

Published March 21st, 2011 by Lori Smith 0 Comments

Just a quick post today to let you know that Kerry Zuber, director of solutions consulting at Kinaxis is presenting at the Integrated Business Planning Summit taking place on March 30–31, 2011 in Atlanta.

Kerry Zuber will be presenting the session, “Continuous Integrated Business Planning.”

Here’s the session abstract:

Businesses are facing unprecedented levels of demand uncertainty.  In order for companies to survive and flourish in this environment, fundamental changes in the methods, frequency, and speed of the Integrated Business Planning activity must be adopted.  This presentation will examine how technology is playing an increasingly important role in improving this important business process, thus enabling enterprises to significantly outperform others in their industry.

For more information in the Integrated Business Planning Summit, visit: http://www.theiegroup.com/IBP/Overview.html

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Posted in General News


With offshoring and outsourcing, there needs to be a broader description of S&OP.

Published March 18th, 2011 by Trevor Miles @milesahead 0 Comments

Here is the final part my interview with P.J. Jakovljevic from Technology Evaluations Centers (TEC) on sales and operations planning (S&OP). If you missed them, check out part one, part two, and part three.

The entire Q&A along with PJ’s introduction and commentary on Kinaxis can be found here (free registration required).

PJ: Do you see a link between S&OP and multi-echelon inventory optimization (MEIO), and what do you offer in that regard?

TM: There is a wider link between S&OP and multi-tier visibility, planning, and control. S&OP has been traditionally seen as an internal process focused on getting consensus among different internal functions. But S&OP was conceived well before the advent of pervasive outsourcing and offshoring: a time when the manufacturing, let alone commodity management and procurement, were just ‘down the hall’—a time when most customers were in the same country and spoke the same language.

The intervening years haven’t reduced the level of visibility needed. In fact, offshoring has increased the need for multi-echelon visibility, while outsourcing has reduced multi-echelon visibility. So I am absolutely convinced that multi-echelon inventory visibility, and of course demand visibility, is closely linked to S&OP. How inventory levels will be set will depend on the contractual agreements between the original equipment manufacturer (OEM)/brand owner and the contract manufacturer. In addition, S&OP is often referred to as sales inventory operations planning (SIOP) and production, sales, inventory (PSI)—both cases emphasizing the inclusion of inventory management in the overall S&OP process.

RapidResponse provides ways to determine ideal inventory levels given the customer service level targets and historical demand and supply patterns. Scenarios can then be used to test the financial and operational consequences of changing safety stock or reorder point (ROP) values.

PJ: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP. How are companies enabling this, and are they doing it successfully?

TM: From a process perspective, it is difficult to get people to work across functional boundaries, let alone across organizational boundaries. In addition, technology is often a barrier when each function has its own data and systems for analysis. Not only are there arguments about the results, but also about the data. Another barrier is that often, particularly in outsourced environments, people don’t even know whom to call in another function or company to resolve an issue.

As discussed above, we enable cross-functional cooperation and collaboration by providing a solution that has a single data model, a single set of analytics, and a single UI. Naturally, we have a full security model and the ability to filter and aggregate the data to make it relevant to the person and their role. If anyone makes a data change that has a significant impact on someone else, the person affected will be alerted immediately and can then collaborate on resolving the issue. Naturally, more than two people can collaborate in a given scenario. Any changes are immediately visible to all participants in the scenario.

PJ: What is your take on the link between S&OP and collaborative planning, forecasting and replenishment (CPFR), and what are your customers doing in that regard?

TM: CPFR, in the strictest terms, has been a failure largely because it was a burdensome process and because of the expectation on the part of consumer packaged goods (CPG) manufacturing companies that it would improve the forecast accuracy of the retailers. If instead we take CPFR to simply mean a more collaborative and inclusive planning process between trading partners, then I would say it is on the rise. As already discussed, outsourcing of manufacturing has led to the need for CPFR between the OEM and the contract manufacturer by extending internal cross-functional cooperation and collaboration to contract manufacturers in particular.

PJ: If you had to name the top three priorities for a company looking to evolve their S&OP process, what would they be?

TM: I would say the following:

  1. Do S&OP more frequently, preferably continuously.
  2. Do S&OP collaboratively and consecutively, not sequentially through a traditional five-step process.
  3. Understand that S&OP is one step in a planning continuum, and that all steps need to be synchronized constantly.

PJ: What role does exception management play, or should play, in S&OP?

TM: All planning, let alone S&OP, should be governed by the principle that execution against the plan should be monitored continuously. In addition, if there are major market shifts, a company must react quickly by regenerating the S&OP plan. But exception management is important not only in monitoring execution of the plan and market shifts, but also in detecting big changes in the plans being generated. But the exceptions need to be relevant to the person receiving the alert, and the supporting data needs to be packaged in a manner that is relevant to that person.

PJ: How and where do ‘what-if’ capabilities fit into the S&OP process? Is it a priority capability for an effective S&OP process?

TM: I don’t see how S&OP can be carried out effectively without strong ‘what-if’ capabilities. It is more than a priority—it is a core requirement! Humans are so much more creative than machines. What they need is a rapid way of testing alternatives and evaluating the consequences in a timely manner. If they have an effective manner to understand the effect of the decisions on financial and operational metrics, they will inevitably make the right decision, particularly when several alternatives can be compared side-by-side.

PJ: What is the role of master data management (MDM) in S&OP, and what is Kinaxis doing in that regard?

TM: Because of our long history in the outsource high-tech/electronics space, we have had to deal with MDM-like issues for a long time, particularly equivalent item numbering, including bill-of-materials (BOM) structures. We focus a lot of attention on data quality and have a number of workbooks that identify missing and incomplete data. Without a doubt, MDM systems do increase the quality of data, but I do not see any reason to delay the deployment of RapidResponse until the MDM system is in place.

Clearly, the business is being run with the existing data, and using the existing data in a more effective manner would only be beneficial. However, I would not recommend waiting for perfect data. If an MDM system or data warehouse already exists, we can integrate it.

PJ: Some S&OP/IBP players offer functionality (often via acquisitions) for DP, trade promotions, financial consolidation, strategic network optimization (SNO) (‘what-if’ simulations of networks), and even PLM capabilities for NPI/PPM. What is your plan of action for successfully competing with these much broader and strategic-level S&OP offerings?

TM: As stated above, we provide a single solution to satisfy many supply chain processes using a single data model, a single set of analytics, and a single UI. We believe we already have a broad and strategic-level offering. Our analytics either currently covers all of the capabilities you list above or will shortly.

We have a fundamental issue with the concept that S&OP can be satisfied effectively using an overlay solution that has a separate data model and analytics from other planning tools. How can NPI be separated from DP/forecasting, supply planning, and capacity planning? By extension, how can you finance these other functions? The relative importance of these adjacent capabilities will depend on the industry, and clearly we have broader coverage and deeper capabilities for the industries we focus on, namely high-tech/electronics, aerospace, industrial, and pharmaceutical.

PJ: Do you have any other observations and trends related to S&OP that haven’t been mentioned in the previous questions?

TM: Without a doubt, there is a trend to a broader description of S&OP, particularly in outsourced environments where the contract manufacturers, at the very least, need to be included in the S&OP process. But, this is not only broader in ‘geographical’ coverage, but also in departmental function and time horizon.

That’s it! Thanks for following along.

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Posted in Milesahead, Sales and operations planning (S&OP)