Archive for the ‘Best practices’ Category

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I found this article here at World Trade Magazine to be quite thought provoking.

The basic premise of the article is that we are currently moving into the third era of global supply chain transformation that has occurred within the last 100 years. The article suggests that third era of supply chain globalization–the era of revitalized command–is already upon us.

I’ve talked numerous times about the challenges of orchestrating the desired outcome across a virtual enterprise (see here, here, here and here). With your ability to respond effectively to change being an increasing threat to competitive success, how you’re able to coordinate responses to those changes is essential. There’s no question that the move to a heavily outsourced model, while providing a lot of benefits, has complicated this process. We’ve seen research and heard first-hand how challenged many brand owners are at controlling their own destiny in these situations. This is because they are still accountable for the end result and the virtual enterprise means more players and more potential for hiccups.

This article is interesting in that it not only acknowledges these issues, but takes it a step further to suggest that companies are going to start rationalizing their strategies and actually moving a bit in the opposite direction to improve their ability to deal with the realities of complexity and change. I would be interested in hearing your thoughts - is your company thinking this way?

I found a really great article at the Bangkok Post site here. This article hit home because it talked about several topics that I have found in talking to companies. It’s central theme is one of asking who is involved in supply chain management and that it’s more people than you think.

I’ve absolutely seen this to be the case time and time again. Especially in today’s environment of constant change - the people that end up involved are from various functions in the organization. You’ve got your customer service representatives that are the voice of the customer and have a high degree of interest in trying to please them. Then you have your planners, schedulers, buyers, outsourcing partners, demand managers, etc., etc. - all people that frequently get involved in dealing with the unexpected.

The article accurately states that “tradeoffs between cost and customer service are inevitable, given the geographic reach, product mix, customer and channel variety, and supply variability, the planning process is complex and requires sophisticated information management to support it.” So, think about your organization. When a demand change comes in - maybe a last minute order or a last minute order change - who gets involved trying to figure out the right tradeoff to make at that time. Or, what happens when that just-in-time inventory shows up but its the wrong stuff?

If you’re like most companies, it’s a wide variety of people that get involved and it varies by the situation. All of these people are involved in the demand management and supply chain management processes critical to market success. But, a lot of companies only focus on the more traditional roles - the planners, schedulers, etc.

Once you’ve accounted for all of the people involved in these types of decisions, the next question to ask is how are they going about solving these problems today? If you’re like most companies, it’s a scramble. The key to automating this critical response process is empowering these people with the right information and tools to respond both quickly and accurately - with proactive insight into the impact of their actions.

New research cited here at CNNMoney.com identifies characteristics of supply chain leaders. According to the article, the survey, which was completed by supply chain professionals in 21 industries, identifies collaboration as a major differentiator between leaders and those identified as “followers” and “laggards.” The survey findings also indicate a significant opportunity for financial officer involvement in supply chain efforts.

The focus on collaboration is certainly very positive and consistent with what we see in the marketplace. I’ve written about the importance of collaboration many times (see here, here and here).

I found the focus on financial officer involvement interesting and a potential catch-22. On the one hand, I think this has significant potential in that supply chain professionals too frequently take a unit rather than dollar viewpoint on supply chain management decisions. Involving the financial organization offers opportunities here. The risk is that this drives everything to be too tactically focused with decisions purely based just on the economics. The reality is that you can’t plan your customers today. So, there are a lot of decisions that are going to be high impact/risk to the business where tradeoffs need to be made. Financial considerations should always be a part of that - you need to make decisions that are aligned with your corporate objectives. But so too are customer satisfaction considerations essential to these tradeoffs - factoring in the impact of this one decision on the long-term relationship with the customer and the downstream implications this decision may have on future business opportunities.

There’s a good post here at SupplyChainer.com citing new Aberdeen research on best practices in trade promotion. This caught my eye because promotions are one of the biggest sources of demand volatility that companies face. According to Aberdeen, the current state of the trade promotion management is not satisfactory and 75% of the companies are having problems with their systems.

Promotions represent a significant demand management challenge…and opportunity. Companies that can successfully execute promotions and rapidly respond to the changes that come out of a promotion (good and bad) are going to be at a competitive advantage compared to the market.

A well thought out plan is a requirement before launching a promotion, one that ties together all aspects of the business. But a thorough plan supported by strong execution capabilities isn’t enough. The reality today more than ever is that you can’t plan your customers, so you have to be able to manage at the moment and deal with whatever realities come your way. Customers may not react to the promotion in the way you expected - leaving you with the potential for excess inventory. Or, demand may exceed supply. Or, just as likely, demand for the blue product may outpace that of the red product (this week, but next week that could change too).

If you’re like most companies, you scramble to cope with these situations. Empowering people to respond to change is the key to automating this critical process and ensuring that you optimize customer satisfaction and operating performance.

According to an article here at The Industry Analyst Reporter, new research from Manufacturing Insights indicates that European companies are focusing on transforming their supply chains to be more agile.

The article states that Western companies are trying to balance efforts in reaching contrasting business objectives of:

• Reducing overall cost and improving productivity (64.85%)
• Increasing quality and customer satisfaction (64.24%)
• Innovating in new or existing products and services (64.24%)

On the other hand, firms from Eastern Europe are operating in the global marketplace and, in order to compete, are placing a particular effort in increasing product quality and customer satisfaction.

The macro trends impacting manufacturers - increasingly volatile demand, extended supply chains and shortening product lifecycles - don’t discriminate by geography. All companies, no matter where you reside, are going to feel the impact of these trends. As global competition increases, companies are increasingly left to compete on the same terms no matter which geography they operate in.

These trends are pushing the need for more responsive demand management and supply chain management capabilities in companies. The days of building a great plan and then executing it well are gone. Competitiveness is now very much a function of your ability to respond to change, and that’s a reality for all geographies.

Found a good article here at the India Knowledge@Wharton site describing how companies like Nike and Dow Chemical have leveraged their supply chain excellence to gain competitive advantage. I’ve talked about this in the past here and here.

I really believe this is a huge opportunity that companies frequently fail to take advantage of. Too frequently supply chain management is viewed as a necessary evil and the focus is strictly on cost reductions. As the article discusses, though, supply chain management excellence is much more strategic than that, affording a company a significant competitive advantage if they are able to out-execute their competitors by ensuring they have the right product in the right place at the right time and are able to respond to unexpected demand management, supply management and product changes.

There’s a good article here over on SupplyChainDigest entitled “Do you get supply chain “surprises?”" It’s written by Tom Wallace (to learn more about Tom, see his website here), a noted expert on Sales and Operations Planning (S&OP).

The article talks about the various challenges that companies face in dealing with supply chain surprises. Tom goes on to explain how you can use the S&OP process to deal with these surprises.

What’s not detailed in the article are some of the tools required to deal with surprises within this process. Participants in this process need to be armed with consistent and up-to-date visibility into demand and supply and have tools for rapid scenario analysis to enable sense and respond. When surprises happen, you’re really trying to figure out a way to “re-balance” supply and demand to enable a profitable demand response (Tom’s example is of a large customer sending in a signifcant, yet unexpected, order). If supply and demand can’t be re-balanced, then a compromise is required to determine the best course of action, one that balances all of the metrics the company is driving to, such as customer satisfaction, revenue, margin, inventory, etc.

Supply chain surprises are increasingly becoming the norm. Through the proper processes and by empowering key decision makers with the necessary visibility and tools to sense and respond to such changes, companies can gain a competitive advantage vs. those companies that are slow to react.

There’s a post over at Supplychainer talking about how you can attack supply chain risk. I posted a comment there but wanted to include it here for completeness.

** My comment **

I think the suggestions in the post are quite valid. However, I would argue that more is needed. The reality is that there’s no way to predict all the unexpected events that are going to pop up daily in a globally distributed supply chain that is faced with increasingly volatile demand and shortening product lifecycles.

To be proactive in dealing with these “make or break” situations, companies need to empower people with the visibility and tools (including collaborative scenario modeling capabilities) to act quickly and in accordance with corporate metrics. Why empower people? Because dealing with these high complexity, high risk decisions requires human judgment. By definition these unexpected events were not in the plan that everyone is trying to execute to. So, human judgment is going to be required to figure out the right tradeoffs and compromises to make.

It’s not everday you see a respected business journal write about supply chain management (although the Wall Street Journal recently wrote a piece here). Given the strategic importance of supply chains to a business, it continues to perplex me why there aren’t more articles, but I digress. So, it was with some pleasure that I found this article at the Financial Times site (see additional comments on this article at the Solectron blog here).

I’m sure it will catch a lot of people’s attention that the article states up front that “according to Accenture, the consultancy firm, “supply chain leadership” can increase a company’s market capitalisation by between 7 and 26 per cent above the industry average.”

The article goes on to say that “supply chain managers in many sectors are looking for greater visibility of whatis happening in their supply chains and faster accessto more accurate data. This means that if there is an unexpected event, be it storms affecting shipping or a production shortfall, companies can divert stocks or bring in alternative suppliers.”

I’ve long argued here that not only can supply chains play a much more strategic role in organizations than they usually get credit for, but that today’s environment demands a responsive supply chain. To achieve this, companies need to empower people with the visibility and tools to respond to change across their virtual enterprises made up of multiple partners geographically dispered around the globe.

Great to see the increasing coverage of these critical business issues.

I found a post over here over at Business Strategy interesting. The post describes how Lego led a company turnaround by focusing on supply chain transformation.

I really think they are onto something. I’ve written about this before (see here as one example) and believe there is a new opportunity for companies to look at their supply chain management competency as a more strategic weapon. With supply chains becoming more elongated as they become more global, with the pace of demand changes increasing and with product lifecycles shrinking, how responsive your fulfillment network and supply chain(s) are to change is becoming a more substantial determinant of your company’s success.

Far too often when companies struggle they attack the more cosmetic issues - they change personnel, they change pricing, they change product. While all of these may be required, evaluating the need for supply chain transformation as a competitive and strategic weapon seems to be overlooked far too frequently. Yet, these issues are often the true root causes of market problems.

More and more, companies are recognizing the need to become more demand-driven, to oriented everything they do around an outside-in mentality. As soon as you do this, you begin to realize that you can’t plan your customers, so you need to implement supply chain transformation processes to ensure your organization excels at responding to change. Doing so provides you with a competitive weapon against your global competitors.