Archive for the ‘Best practices’ Category

The C-suite & SCM

Much has changed over the years since the 1980’s when few knew the term Supply Chain Management (SCM) and even fewer knew what it meant, including me.  The closest one could come to study SCM at university was Operations Research or Industrial Engineering.  Having done this at the graduate level, I can attest that the focus was very much on factory optimization with little emphasis on the inter-connectivity between demand, production, and supply. 

I remember going to a pulp and paper manufacturer in Florida in the mid-1980’s because they wanted to optimize the utilization of their digesters, even though they were at over 90% utilization.  It didn’t take long to discover that there was over 9 months of finished goods and over 4 months of raw material on site.  I had no idea and never bothered to find out how much finished goods inventory there was in the distribution channel.  Clearly, the company’s supply chain problems were not related to the utilization of their digesters.  However we had been brought by the plant manager to optimize the digesters and he had no responsibility for either raw material (Purchasing) or finished goods (Sales) inventories.  The question we were faced with was who owns the problem?  We could have gone to the Sales VP or to the Purchasing Director, but they each only owned a part of the problem.  Notice also the titles of the people responsible for Sales, Production, and Purchasing.  Eventually we managed to get a meeting with the CFO on the pretext of getting data for production costs.  The CFO was a lot more receptive to our message but really didn’t own the problem either, so he sent us to the CEO.  He thought we were a bunch of engineers, and he was right.  We couldn’t really articulate the issue in a manner in which he would understand.  Somehow, we managed to get enough across to the CEO to ensure that project focus changed to profitability rather than capacity utilization.

And yet, in a recent study by SCM World and Aberdeen titled “The Evolving Role of the Chief Supply Chain Officer”, there still appears to be a mismatch between the expectations of the C-suite and the people actually running the supply chain.  There have been a lot of positive developments since the 1980’s including the establishment of university courses and the knowledge of the function and strategic value of SCM within the C-Suite.  The use of the term “chief supply chain officer” is a testament to this change.  While the gulf between the C-suite and operations has narrowed, the very first chart in the SCM World report indicates a mismatch in objectives and perception.

The good news is that the C-suite is focused on using the supply chain as a competitive weapon; however, it reminds me of Peter Drucker’s definition of the difference between being effective and efficient.

“Efficiency is doing things right; Effectiveness is doing the right things.”

Perhaps this is the correct split in which the C-suite focuses on what should be done, while the rest of the organization focuses on doing this in the most efficient manner. The SCM World report indicates that there is a much closer alignment between the C-suite and the rest of the organization when it comes to the areas of efficiency gains.  However, even here it appears that the C-suite has a greater focus on the more strategic goal of restructuring the supply chain organization (effectiveness), whereas the rest of the organization has a greater focus on reducing inventory (efficiency).

I think there is still the need for people in the supply chain to understand the objectives and perspectives of the C-suite and to align themselves with these, and to communicate in the language of the C-suite.  The arrival of the “chief supply chain officer” in the C-suite is certain to close this gap.

Planning & Execution

Some months ago, Lora Cecere wrote a blog post about the gap between planning and execution, what she calls the supply chain black hole. 

Lora states that:

Technologies are evolving to eliminate the supply chain black hole. In this first generation of supply chain applications, we have built a fixed response with very little sensing. 

How can we effectively respond when we cannot sense?

Lora goes on to state that

The first generation of supply chain applications got us started down the path, but they must be cast-off to move forward.  ERP is not the backbone of supply chain management for the future.  The new technologies will not come from the ERP consolidators.

We are at a discontinuity between inside-out and outside-in technologies.  The new technologies will be outside-in. They will help us sense before responding.  They will help drive an intelligent response.

Lora’s statements are supported very strongly by the findings of the SCM World study, with very clear differentiation between the best-in-class SCM companies and those that received an average rating.  In the case of closing the gaps between planning and execution, there is a huge difference of 17%, and 28% to the laggards.  While not as dramatic, there is also a significant difference in the degree to which information from trading partners is included in SCM processes. 

How can you sense what is happening in your supply chain quickly and effectively if you do not get demand or supply signals from your trading partners?  Or as Lora states, “how can we effectively respond when we cannot sense?”  Sensing is only half of this statement, responding is the other part.  How can you have an effective  response without closed-loop integration between supply chain planning and execution?  As Nick LaHowchic states in an interview in SCDigest,

Companies need to respond much faster tactically. You can’t wait for a monthly S&OP meeting to make most of those tactical decisions any more.

Summary

These commentators and the results from the SCM World survey clearly indicate the importance and benefits of closing the gaps between planning and execution.  The business drivers behind this need start from customer expectations for reduced order-to-delivery lead times and competitive pressures to bring new products to market in ever shorter cycles. 

But the gap is wider than just between supply chain planning and execution.  It starts from the gap between financial plans and supply chain planning.  This is, of course, the primary gap between the C-suite and the supply chain function.  One talks in financial terms and the other talks on operational terms.  One talks effectiveness, the other talks efficiency.

Perhaps the answer is to have a single integrated planning and execution system, from business planning all the way to execution, including S&OP in between.  Only then can we bring these gaps together.  Any change in the business plan will be reflected immediately as changes of goals and objectives for operations.  Equally, changes in planning and execution will give the C-suite visibility in future performance.

What are your thoughts?  Do these gaps exist in your organization?  How effectively do you communicate with the C-suite?

On June 15th, I had the privilege of presenting at the world first Chief Supply Chain Officer Summit alongside a very well-known and respected Supply Chain Leader. I say alongside because Angel Mendez, Senior Vice President of Customer Value Chain Management at Cisco (NASDAQ: CSCO), really did the majority of the work. On this occasion, his message focused on the path he’s taking towards creating the “Next Generation Value Chain to Deliver Customer Value” for Cisco. While still a work in progress, with over 9,000 strong under his influence across 90+ locations and 32 countries, my money is on Mr. Mendez succeeding with his endeavor.

It begins with what he believes defines the customer experience value chain:

“Network of internal and partner processes, people and capabilities that translate innovation into customer value while delivering an unrivaled customer experience”

While closely formulated from Forrester’s definition, loosely defined as “activities through which companies create value, competitive advantage, and superior customer experiences”, what I find unique and interesting about Cisco’s definition is the specific attention and promotion of “people” and their “capabilities”. Perhaps this resonates so much with me because I have long believed that collaboration is the next supply chain “optimizer”, and collaboration is decisively a purpose-driven human activity. To be more precise, it is the unifying of actions taken by uniquely capable people for a common good (more on this later).

Angel identified four legs required to support the creation of strategic advantage; Customer Focus, Agility, Collaboration and Sustainability. At first glance, you might find these to be obvious and perhaps not so unique – and indeed, many companies are talking about these elements in one form or another. What is different about Angel’s message, for one, is the maturity and execution of the model. For example, I’ve never met a company who would say they are “not customer focused”; however, most continue to govern themselves according to traditional, and very operationally focused, metrics (e.g. cost, quality, delivery and speed). Cisco, on the other hand, measures their customer focus by focusing on perfect product launch, perfect order, order-to-invoice cycle time and last but not least “moment of truth customer satisfaction measurements” – thus, redefining their balanced scorecard to align with its customer focus.

A significant portion of Angel’s presentation was spent on the Flexibility/Agility leg. What caught my eye most is a theme I am seeing across multiple manufacturing segments, and is becoming a key requirement for many looking to improve their supply chain management and S&OP processes: the growing gap between Demand Chain and Supply Chain. Today, it is not uncommon to see completely disjoint demand side planning (S&OP) and detailed supply chain planning solutions, and yet, it is in between the two where a significant amount of efficiency and performance can be lost. I believe the gap is widening at a steady rate, and this is what is driving the need for new and innovative solutions to “collaborate and effect change in real time”.

So we’re back to Collaboration – the third leg. In my humble opinion, it will be in this area where excellence will be won or lost. You might look at collaboration as the combination of people + processes + technology/tools, but I was very impressed to see a slight variant of this long standing equation. In Angel’s vision, it is “culture” + process + technology/tools. I admit never having thought about it as a cultural challenge, but having worked with many large organizations on this problem, I’ve come to realize how unique a problem this is… collaboration amongst peers and employees is often challenging enough across departments. The type of collaboration Angel is talking about is inter-enterprise – which means that on a given day, you may very well be collaborating with a complete stranger living on a different continent. Indeed, there are cultural implications to achieving this level of maturity.

Again, I might say there is nothing new about promoting collaboration as a key to success; however, it is what Cisco is doing about it that distinguishes them from the rest. They are leveraging many of their own technologies to produce what they call an “Integrated Workforce Experience” (IWE) platform capable of bringing teams together to collaborate and solve ‘moment of truth’ problems that occur in the gap between demand chain and supply chain planning. Unlike social networking platforms, such as Facebook, MySpace and the like, which use friends, family and fun as a hook, I believe platforms like IWE will motivate productive usage and involvement through content, context, and consequence.

Finally, we have Sustainability, which is extremely topical these days as we watch in horror the catastrophe still hemorrhaging under the Gulf of Mexico. Here, we heard some common themes on creating efficiencies and innovations in product design, educating and increasing employee involvement, and a particularly catchy tag line: “Don’t just ‘comply’, lead, innovate, differentiate”. The one resonating message around sustainability, more of a lesson really, is the reminder that sustainability should not be viewed as a factor for competitive advantage, but rather, the one common flag around which everyone can unite and learn from one another. Industry collaboration will be the key to effecting a meaningful and lasting change.

Does Angel’s vision align with yours? Do you see effective collaboration as an emerging competency that will distinguish your company’s performance?

By the way, if you missed the presentation, grab a soda and sandwich and watch the replay of this presentation by registering here.

Our very own John Sicard will be joining Angel Mendez, senior vice president, customer value chain management at Cisco Systems for a presentation on Next Generation Value Chain Best-Practices.

As part of the 2010 CSCO Summit, the free-to-attend virtual event taking place on June 15th and 16th, 2010, John and Angel will co-present the track entitled, “Creating the Next Generation Value Chain to Deliver Customer Value,” on June 15th, 2010 at 9:00 EST (14:00 GMT).

Attendees will learn about Cisco’s supply chain transformation from a cost-centre to a competitive advantage. In response to rapidly shifting business demands, Cisco has focused on integrating previously siloed back-to-front end operations into a single global operations group that covers the extended value network, from downstream suppliers through to upstream customers.  This session will provide critical insights on the lessons learned and the key focus areas to consider.

The CSCO Summit, a two-day event consisting of an agenda of 11 presentations, brings together an influential group of global supply chain, operations and procurement leaders to learn and share best practices around the critical factors driving strategic supply chain and operational agendas across multiple industry sectors. 

To register for this free event, please visit:
http://cscosummit.raptureworld.co.uk/register

Kinaxis was the presenting sponsor of last night’s AMR Supply Chain Top 25 awards dinner.  It was a great event.  Kudos to the AMR/Gartner team and congratulations to the 25 stand-out leaders. We are proud to say that two of the top 5, and all 3 companies that participated in the evening’s panel discussion, were Kinaxis customers. 

The panel discussion was quite interesting.    It consisted of 2 companies from the list – RIM, a newcomer and Cisco, a veteran, and it included NCR, who, given its size is not eligible for the list.   The discussion centered on trends in supply chain and their impressions of the Top 25 listing: what does it mean to them, what do they like about it , what would they change about it.   A few interesting themes emerged:

• Supply chain excellence is defined in large part by a company’s agility.  Their ability to be responsive to volatility and be flexible amid complexity were keys to success.
•  The Supply Chain is no longer the errand boy for Manufacturing.  Innovation in supply chain is what has raised its profile and increased its relevance to the organization.
• In terms of where there is room for improvement for the Top 25 list, there were good suggestions made:  more global representation, include mid-market companies (or provide a separate list), and find a way to capture “customer experience” as part of the evaluation of a company’s supply chain leadership.
• Lastly, when asked who should be on the list that isn’t, the point was raised that there are a number of contract manufacturers that may not have the brand recognition (which feeds into the voting portion of the Top 25 methodology) but are clearly leaders in the supply chain discipline.  I couldn’t agree more. 

As a sponsor of the event, I had the good fortune to take to the stage for 5 minutes.  My speech was a fitting opportunity to share our recent announcement of the Kinaxis No Risk Deployment offering (there is a quick video clip of me talking about it here too).    I’ve copied my speech here below…now, I must admit, I didn’t stick to it word for word but the main points were the same.

It is our honor to host this year’s AMR Supply Chain Top 25 dinner.  Our ability to host this event is largely due to many of the companies in this room who we are fortunate to call customers.   It is your leading edge practices that are fueling the advancement of the industry.  Thank you for entrusting us to join you on your journey of supply chain excellence. And thank you for being a driver behind our success.

I believe this is a consequential time for supply chain leaders.  Rightfully, supply chain is now a boardroom discussion and is being recognized as a vital part of corporate strategy and competitive differentiation.  This is the moment for supply chain management to shine.  And tonight is a fitting way to honor the discipline, as well as highlight its leaders.

From a technology provider perspective, it is also a prime opportunity to shine. Kinaxis has been fortunate to experience excellent growth during what has been extremely challenging years for software vendors.  I believe that, in and of itself, says something about our unique vision for supply chain management and our forward-looking product development efforts that we’ve been pursuing for the past 10 years.

Kinaxis has taken the approach of developing a single offering which solves multiple supply chain problems. Suites of software modules no longer make sense in today’s environment.  This approach fails because supply chain problems themselves are not “modularized.”  Today’s businesses and processes are multifaceted and interconnected.  Likewise, the supply chain challenges are many, complex, and inter-dependant. What we are consistently hearing from the market is that companies are no longer silo in their thinking and thus, a silo’d technology approach is incongruent with the way businesses need to be run.

I believe this has given way to a rebirth of S&OP.  By its very nature, S&OP crosses operational boundaries. When you have a supply chain that includes contract manufacturers and distributors, S&OP needs to be executed and maintained across sites, systems and partners.  We are seeing a growing adoption and modernization of S&OP processes among our customers and prospects.  Our sales funnel is proof of that, with a large majority of our new opportunities coming from S&OP budgets. Companies are looking to take advantage of more modern technology concepts and capabilities that enable the multi-enterprise supply chain visibility, collaboration and speed that’s required to make a plan and keep it on track.   This requires a different technology approach.

Now, I am not a supply chain expert, but with my years of experience, I would like to think I am a software expert.  And I believe that future success for technology providers will be dictated by their ability to be leading edge, not only in their solutions, but also in how they are delivered. 

We decided four years ago to develop RapidResponse as an on-demand offering. Many said you could not make a SaaS offering for supply chain problems – but that is simply not true. In fact, it has proved to be a much more efficient model.  Only recently are we seeing the non-believers start changing their tune.  The big guys are doing their best, but they are late to the game and have many obstacles yet to hurdle. 

Today, we took yet another step in setting ourselves apart from the stereotype of traditional supply chain software with our announcement of our No Risk Deployment, whereby companies can use our deployed service for 30 days.  If they don’t see value, they can simply walk away. No catch. You heard it right – Kinaxis will deploy its standard service, companies can then use it live in production for 30 days before deciding to start a subscription service with us.  We are telling customers “let us prove it first.”

Billions of dollars and millions of man years have been exhausted over the past decade on SCM and S&OP projects that haven’t delivered the value expected. CIOs and supply chain executives deserve to have more confidence in the success of the solution, more accountability on the part of their vendor, and certainly better ROI.  What better way for our prospects to confirm the merits of our service then to see it for themselves before they invest. 

We are taking the “try before you buy” concept to the enterprise space because we are just that confident in what our service can do. And we are challenging other enterprise software vendors to hold themselves to the same standard.

Enough about us…

My main goal tonight is to say thank you.  What we are most proud of as a company are our customers – which no doubt, will include some from the Top 25 list and many others in this room. We are honored to be associated with your brands and help in achieving your vision.  We are delighted to be able to learn from the best of the best, and our company and product is better off because of our close partnerships.  We hope in the coming months and years many others in this room will join our growing community of satisfied customers.

All in all, it was a great night.  And the Kinaxis team is looking forward to a full day of sessions today.  Stay tuned for more insight and commentary.

Is the era of blockbuster new products over? Has the balance shifted to a new paradigm of competition based on process and efficiency?

Just a reminder of next week’s webinar:

Part 1: Pharma 2020 – Maintaining competitiveness and operational advantage in a rapidly changing environment
Tuesday May 25th 2010,  11:00am ET
Live Webinar

Speakers:

• Hans Engels, CEO, DSM Pharmaceuticals Inc.
• Thomas Panzer, Vice President Global Supply Chain, Bayer Biotech
• Nari Viswanathan, Vice President, Aberdeen Group

Key topics will include:

• Optimization of inventory and manufacturing capacity across multi-tiered global pharmaceutical operations
• Driving working capital efficiencies
• Enhancing supply chain agility and flexibility to integrate and align supply and demand

Registration is complementary.

As the topography of the global Pharmaceutical sector changes rapidly, alongside an uncertain macro climate, responding and reacting to current and future challenges will be the key to success.

We are delighted to be sponsoring an upcoming webinar that will explore key issues for the global Pharmaceutical Industry and discuss the impact of these trends on supply chain development, response and go forward strategy.

Part 1: Pharma 2020 – Maintaining competitiveness and operational advantage in a rapidly changing environment
Tuesday May 25th 2010,  11:00am ET
Live Webinar

Speakers:

• Hans Engels, CEO, DSM Pharmaceuticals Inc.
• Thomas Panzer, Vice President Global Supply Chain, Bayer Biotech
• Nari Viswanathan, Vice President, Aberdeen Group

Key topics will include:

• Is the era of blockbuster new products over, and has the balance shifted to a new paradigm of competition on process and efficiency?
• Optimization of inventory and manufacturing capacity across multi-tiered global pharmaceutical operations
• Driving working capital efficiencies
• Enhancing supply chain agility and flexibility to integrate and align supply and demand

Registration is complementary.

Your organization has finally accepted the fact that without process change its objectives for performance improvement cannot be achieved.    Furthermore, you’ve also come to the conclusion that your organization may not have the knowledge, experience, or bandwidth to either identify the process changes necessary, or guide the organization to the successful adoption of those changes.    Even when considering the adoption of a documented best practice, there are often organizational and other factors serving as barriers that are just different enough from the norm to create some unique challenges.    So who do you turn to?    Bringing in a consulting firm is an obvious consideration but based on the number of both successes and horror stories, this should be done with the same care you might exercise in selecting a marriage partner.    I’ve personally witnessed disasters and universally acknowledged successes and it would be unfair to lay all the blame or credit at the feet of the consulting companies involved because, like a marriage, both partners have some influence on the outcome.   Still, it would behove any company considering the use of consultants to carefully match needs to capabilities along with a careful consideration of the motivating factors.  

Here are just a couple of key considerations;

1. Are you just looking for strategic advice on what to do?   Some consulting firms specialize on strategic thinking and the outcome of an engagement can be a well articulated change strategy along with the outline of an implementation plan.     More often than not, engagements with these companies can be relatively short (although usually quite expensive), and they may not want the work associated with the lower level deployment activity or system integration.   Deployment work is difficult, and for almost any project, the devil is in the details.    So many things can go wrong during deployment that it seems a lot safer to stay at the advice level.   I’ve also been led astray a couple of times when it proved that the consulting firm didn’t have the implementation experience to deal with the challenges that surfaced.   Even if you only want strategic advice, I still recommend selecting a firm that has a proven deployment track record because their deployment plan recommendations are likely to be more realistic.
2. Are you looking for detailed deployment or system integration guidance?   Some consulting companies specialize in this area and my personal fear (led by my experience) is that they are incentivized to lengthen the project (especially where the project is on a time and material basis).   Does the advice provided by these firms really serve your best interests or theirs?   What if the firm has the option of suggesting a solution approach with a 90 day deployment or one with a 180 day deployment?   Will you even hear about the 90 day option?   I’d suggest two things to make sure you get what you need.  First, get references for the firm where the clients had projects similar to yours and take the time to ask about what they did and did not do well.   Secondly, independently investigate some of the possible system or deployment options and directly question the firm on the advantages or disadvantages of these options.    I’ve seen major consulting firms lose their trusted advisor relationships because they failed to meet some reasonable standards for unbiased advice. 
3. When selecting a consulting partner, do you know who is going to be assigned to the project?  On more than one occasion I’ve seen consultants assigned to project activity who are poorly suited to the project because of either a lack of experience and/or knowledge.  This not only increases the project cost, but introduces risks that are unwarranted.    Some of the companies that have most effectively leveraged consultants perform screening with nearly the same level of scrutiny as hiring a new employee.  While there are certain structures to the consulting process that help to contribute to a successful project, most of the value is delivered because of the skills and knowledge of the individuals assigned.   Meeting with an experienced and knowledgeable consulting executive does not guarantee that the people assigned will meet the standard required.  I would also demand project assignments that will last the duration of the project to avoid consultant rotations. 

The bottom line is that you will pay handsomely for consulting whether it is valuable or not.   You can increase the odds for success but not without some due diligence.   And remember, not all consulting firms are created equal and few if any are suited to solve every problem.

There has been much written about Iceland’s Eyjafjallajökull volcano. It certainly has had a significant impact on the global supply chain. One would need a very good crystal ball to predict this unplanned event, but it certainly exposes the vulnerability of distributed networks.

Here’s the big question:  Will companies think differently after suffering the consequences of this natural disaster?  What will they do different?

I don’t think the answer is building more just in case inventory. In order to stay competitive supply chains have to be lean. (In fact, they are becoming even leaner with late stage postponement to satisfy increasing levels of customization on consumer goods.)

Here are some questions for consideration:

1. Can you proactively analyze and understand the risk of unplanned events?  This may be the upside or downside in demand or supply disruptions. This also includes the identification of sole sourced material.
2. Do you have the visibility and access to information in your supply network that you need? More and more companies are looking for a global view of all of their inventory with the need to rebalance as the demand and supply fluctuate
3. Do you know what to do when you have a problem that you just can’t solve?  When a volcano happens there is not much you can do about it. The question is are you making the best use of the supply that you have? How do you want to prioritize demand and allocate your supply? How quickly are you able to make these decisions?

While there may never be another volcano that disrupts the supply chain, there are daily disruptions that affect companies every day, and that taken in sum can have a material impact to the business. How do you deal with them?  Send in your stories!

Tom Wailgum over at CIO.com wrote a blog titled “Supply Chain Data: Real-Time Speed Is Seductive and Dangerous” in which he quotes from an Aberdeen report by Nari Viswanathan and Viktoriya Sadlovska.  Tom writes about the adoption of real-time data that “Before any company hits the accelerator, it would be wise to ensure that the existing and new supply chain data is sound: Bad data delivered that much faster is still bad data—and can lead to worse decision-making.”  I agree with nearly everything Tom writes, but I don’t buy into this quest for data nirvana.

Let us look outside of supply chain for examples where the data quality is good enough to make sensible decisions.  We know that child mortality is higher in poor countries than in rich countries.  The UNICEF mission is “To reduce child mortality by two-thirds, from 93 children of every 1,000 dying before age five in 1990 to 31 of every 1,000 in 2015.”  I’m good with the first part of the UNICEF mission (reduce child mortality by two-thirds) and will continue to donate to them on this basis.  It’s the second part that confuses me.  Does is really matter that in poor countries child mortality is 93 per 1000 births or 100 per 1000 births?  I would just go with “more than 90 per 1000 births”.  I just don’t see how the precision of the statistics improves the quality of UNICEF’s decisions.  And I think too often we confuse the 2 issues of quality of decision and quality of data.

Before I am misunderstood, let me state quite clearly that data quality can always be improved.  There is no question in my mind that all enterprises should have “data police” that ensure that the data is of reasonably good quality.  But let’s all recognize that data quality is like a sales forecast.  We all need to get better at it, but we will NEVER get it absolutely right, as in complete, correct, and there when we need it.  What we want to avoid is getting it absolutely wrong.

In addition, I think that data latency is a key element of data quality. So I don’t agree with Tom Wailgum. The speed with which you receive data is a big part of its quality. I would much rather have partially correct data quickly than precise data slowly. One of the most important insights that can be gained from data is trend. Trend is often more important than the actual value, and trend is totally absent from Tom Wailgum’s discussion. In other words, data should have 3 major measures of quality:

• Completeness
• Correctness
• Timeliness

In case we forget, people are operating supply chains right now with the quality of the data they have right now. They are making multi-million dollar decisions in the long term based upon the current data. They are making 1000’s of decisions on a daily basis – expedite this PO, cancel that PO, promise this date to a customer, … – based upon the current data.  In many cases they are using paper and pencils and gut-instinct to make these decisions, and more often than not they are the right decisions. Maybe not precisely correct, but still correct. I am sure many of you have horror stories of when bad decisions were made using bad data. I am equally sure that you have horror stories of bad decisions have been made on good data.  And, by the way, I am sure you have many stories of good decisions having been made on bad data.  Above all, I am sure that many of your horror stories will revolve around having known about something too late, and many of your good stories will revolve around having known about something quickly.  The value of knowing sooner is the central lesson to be learned from the famous Beer Game that illustrates the Bull-Whip Effect.

Also, let us not confuse the quality of the decision with the quality of the data. In other words, the decision might be directionally correct without being precise, and infinitely better than doing nothing. For example, it may be correct to split a purchase order (PO) for 1000 units and expedite part of the quantity in order to meet unexpected customer demand. We may chose to expedite 500 when it would have been better to expedite 600, but expediting 500 would be a lot better than not expediting any of the PO.  The decision to split the order and expedite part of it is 100% correct.  The quality of the data may mean the difference between expediting 500 and not 600.  I can accept that imprecision better than the inaction caused by waiting for “better” data before making a decision.

Naturally, we all want to avoid the situation where it would have been better not to split the order, but because of poor data quality a decision is made to split the order. In general I think the quality of supply chain data is a lot better than that.  The reason to have “data police” is that of course no-one knows which incorrect data will lead to disastrous decisions.

If the current data says “go North East” that is good enough for me. Leave it to the “accountants” to decide to “go 47 degrees 28 seconds”, especially if it takes 2 minutes to decide to “go North East” and 2 days to decide to “go 47 degrees 28 seconds”.  By the time the “accountants” have reached their conclusion, the entire demand and supply picture will have changed anyway.

In closing, I think we should all take a word of advice from Warren Buffet when he wrote in the Washington Post that “… it is better to be approximately right than precisely wrong.” I argue that most of the time waiting for precise data is precisely wrong, and that acting quickly based upon the existing data is approximately right.

 This month’s IndustryWeek’s Manufacturing Business Challenge discusses a manufacturer of commercial and industrial lighting fixtures  that embarked on an enterprisewide software implementation.  Need I say more?

Our very own, Monique Rupert (vice president of professional services) offered her solution to the case-study challenge.  And to our great delight, so did Kevin Hume, a principal at Tompkins Associates.

Does the following situation sound familiar? 

One year ago my company embarked on an enterprisewide implementation, selecting an ERP system and a suite of software to address our primary business functions. This decision was not made lightly. Lestornia Lighting is a $120 million manufacturer of commercial and industrial lighting fixtures and components (e.g., sockets, lampholders, wiring harnesses, reflectors). We’ve grown incrementally over the past two decades, and our business practices and processes — and the information technology (IT) that supports them — has grown piece by piece as well. I finally concluded that the Frankenstein IT infrastructure we had cobbled together needed to be destroyed. Now I greatly regret my decision.

Literally from the outset of our enterprise implementation, the scope of functionality, customizations, and departments and personnel engaged in the effort have spread like wildfire. Lestornia expected to be operating with our new systems six months ago; now we cannot get a projected date for when we will hit the switch. The escalation of costs specific to software licensing and the implementation have blown beyond anything I’d ever imagined. And with the infectious spread of applications and department-specific functionality and customization, our training and maintenance costs are doubling by the day.

I swear that every person in the company is working on this system and software implementation in some way or another, and no one is focused on making lighting products or focused on our customers. I am afraid that this project will, quite simply, kill Lestornia before we ever see a dime of return from our investment. How can we subdue the new monster we’ve created?

Find out what Monique and Kevin recommended….  Better yet, share your stories of hard lessons learned…