Eliminating silos from any company’s supply chain planning processes comes with challenges. And those challenges are only amplified the bigger your supply chain is. When you’re a large global pharmaceutical company operating in more than 100 markets across four geographical regions, overcoming operational silos in the end-to-end supply chain may seem like an insurmountable feat. That’s how MSD ’s supply chain planning story began.
Supply chain planning challenges
Known as Merck & Co., Inc. in the US and Canada, MSD was desperately seeking a way to connect its end-to-end supply chain, which spans four planning hubs, over 80 distribution centers and more than 20 internal and external sites. Setting out on a journey to standardize its enterprise resource planning (ERP) platform meant finding a way to sync its supply chain data and enable access across all those divisions and locations to support better business decisions.
Henrik Frojdh, Supply Chain Planning Lead at MSD, quickly realized the only way to elevate supply chain planning capabilities to support that level of synchronization and at the same time optimize inventory levels, was the adoption of an integrated solution – one that enabled end-to-end supply chain planning, visibility and decision-making.
Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money. Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:
Reason #8 Keeping supply chain information in silos (and preventing your users from making the best decisions)
Don’t ask… you don’t want to know. I can’t tell you how many times I’ve heard that phrase from different people in different contexts. Sometimes it’s true. I probably don’t want to know. Sometimes (like when I hear it from my son) I probably not only want to know, I NEED to know. Not because I want to pry (well… maybe a little) but mostly because I care and if I know I might be able to help.
When companies deploy supply chain solutions, they often make the decision for users… “you don’t want to know”. They do this by preventing them from getting (or making it very difficult to get) any more information than they absolutely need to do their specific job. Sometimes this information limitation actually prevents them from doing their job adequately.
Sometimes this is intentional and necessary;
- Some companies (especially publicly traded companies) restrict access to revenue / margin information to prevent unauthorized financial data from getting out.
- Some companies prevent access to data to prevent trade secrets (or in the case of US military manufacturers ITAR regulations prevent foreign nationals from accessing manufacturing data)
Sometimes this is intentional and questionable;
- One company I’ve talked to told me that they limit information to their planners because they wouldn’t know what to do with it… that it would just confuse them. But in my opinion, there are few things more complex than supply chain management. Planners are smart people and if educated (APICS training should be a prerequisite in my opinion), they likely will have no problem absorbing and using additional information.
- In other cases, information is limited because of interdepartmental rivalries, for example, “I don’t want demand planning to see my supply planning information. I’ll tell them what they are getting.”This is just plain wrong on multiple levels. If you hear this rational, then I’d look at your management levels and how people are being rewarded. In today’s competitive manufacturing environment, the only metrics that count are how a change impacts the company’s goals. Departmental goals should be secondary.
This blog is part of a video interview series. Check out the video below as well as links to other supply chain practitioner and Kinaxis executive interviews.
Company processes are disconnected because their supply chain planning has grown up in a siloed manner, says John Sicard, president and CEO of Kinaxis. Consequently, it’s futile to follow that model and think you can optimize the supply chain one link at a time.
Sicard explains how Kinaxis is revolutionizing supply chain planning because it is interconnecting all of the links simultaneously. He analogizes to the human brain what the Kinaxis RapidResponse tool can do. “You have the ability to understand language and math simultaneously. It’s two different parts of your brain, yet you can’t bifurcate those. If I ask you a math question in English, you immediately respond, with no idea how those parts of the brain connected.”
“In our world, if you make a change in capacity, you instantaneously feel the impact that has on demand. Therein lies the key — it’s what we call concurrent planning.”
From designing, sourcing and manufacturing, to distribution and consumption, your supply chain is at the heart of your customer satisfaction levels. It has become a competitive weapon that could help you win the consumerism war. But the sheer complexity of supply chain networks, and the impact design decisions have on operational performance, makes supply chain inventory management aligning inventory investments with on-time customer delivery and margins a major challenge.
The equivalent of 7% of America’s GDP is tied up in inventory, and accounts receivable and payable. That’s $1.1 trillion in cash according to a 2013 US Working Capital Survey. It’s no wonder that number is so high with a lot of companies still struggling with inventory optimization, trying desperately to find that sweet spot between supply volume and customer demand.
Implementing inventory optimization
The challenges of inventory optimization can be immense. The focus with Inventory optimization is often on analytics, but that’s just the beginning. You’ll need to overcome distributed data and inventory, navigate a complex network of locations and bills of materials (BOMs), and manage the configuration of thousands of parts. And if you’re still using dated technologies that don’t support robust and adaptive collaboration, you may even need to make critical decisions without the context of knowing their impact on corporate-wide metrics and objectives. It’s certainly no walk in the park.
The first step in navigating these obstacles is integrating inventory management into the rest of your supply chain planning processes, and the technology solution(s) powering them. Why? Because inventory management will be the backbone of your inventory optimization processes, and has strong interdependencies with sales and operations planning (S&OP), master production schedule (MPS) and supply action management (SAM).
This is the second blog post in our three-part series discussing ways to improve supply chain collaboration.
In my first blog post in this series, I touched upon one of the biggest challenges companies operating global supply chains face today. I’m talking about the disconnect between the data, processes and people in the supply chain and how it inhibits collaboration and the ability to make the best decisions quickly.
My last post focused on connecting data. So today, I’m going to do a deeper dive into connecting S&OP processes.
The challenge: Disconnected sales and operations planning processes
Today’s supply chain processes and functions operate in silos.
What I mean by “silos” is that, across organizations, managers are responsible for one specific department, each with different priorities, responsibilities and objectives. As a result, managers aren’t aware of what other departments are doing in terms of their goals and priorities.
In our digitally connected world – information is easy to access, available on demand, and of varying levels of quality and veracity. While being connected means it might be difficult to escape the latest zeitgeist, it also means that you are aware of your current context and fragments of the world around it. And, if you want to step out of what you passively receive – you can actively chase down countless threads of inquiry to learn more.
Integrated supply chains take advantage of these multi-threaded inquiry patterns by coordinating across supply chain functions, however, how interconnected is communication in your processes? Can you reach across your supply chain to achieve diverse and innovative solutions in just six steps or less?
One way to enhance your communication channels is to engage in group problem-solving. Yes, you might do that currently across teams; you might even engage external stakeholders such as suppliers or distributors when resolving a shipping challenge or similar issue. To truly integrate communication across your supply chain, consider involving both internal and external stakeholders at other stages—not just when there’s a problem to resolve.
It’s that time of year again when Santa’s busy making a list, checking it twice and trying to find out who’s naughty or nice. If you haven’t broken these ineffective supply chain management habits, you’re likely to find nothing but a lump of coal in your stocking come Christmas.
1. Working in silos
When it comes to achieving supply chain success, it can’t just be all about your own results.
That’s unfortunately often the prevalent mentality in siloed organizations. It doesn’t matter what’s happening in the rest of the supply chain, as long as your team is meeting its goals and objectives. Siloed processes, people and functions work toward their own goals in isolation, instead of working towards the health of the overall supply chain. These negatively affect response time, as it can take hours, days or weeks to understand the complete impact of a decision on the entire supply chain. So get out there and collaborate. Your supply chain and your social life will thank you.
Digital supply chain is the “in” thing! Don’t take my word for it, though. Just google the term. You will come across many articles talking about how supply chains are being remade by industry 4.0, internet of things (IoT), 3D printing, big data analytics, cloud computing and so on. But what most of these articles focus on are the means rather than the ends for the digital supply chain. On a day-to-day basis I speak to a number of supply chain practitioners. Most of them tell me they are at some stage of evolution with their digitization strategy. However, much confusion exists in terms of what constitutes a digital supply chain. So, I decided to write this blog to share my point of view on the topic.
Supply chain digitization is not simply taking existing information and capturing it in a digital format. It is not about automating your existing SCM processes. It is not about layering in Sales & Operations Planning (S&OP) as a band aid to connect disjointed processes. It is about having the most current information to run your supply chain effectively, available on demand, so you can service your customers and grow profitably. In other words, think of a Google search for supply chain. You ask questions and you get answers!
Here, I will introduce 6 design principles that make up a digital supply chain. I will lean on the example of Uber, how it digitized the taxi experience, and draw parallels to digital supply chain. Let us take a look at these design principles: