Archive for the ‘Collaboration’ Category

Found this very interesting article based on research done as a joint effort between CAPS Research, A.T. Kearney and the Institute of Supply Management. The research poses the question “what will a typical supply management organization look like in 10 years?” and concludes that “it’s hard to say for sure, but it likely will be complex, high-tech, supplier network-driven, and spread out across the globe.”

This particularly caught my attention. The report identified four areas future supply managers will be expected to tackle:

1. Delivering more innovation from suppliers
2. Contributing more broadly to revenue generation
3. Anticipating and managing supply risk to ensure business continuity
4. Expanding the breadth and impact of cost management efforts

These are themes I’ve talked about frequently here. The trends are clear; increasing demand volatility, shortening product lifecycles and the increasing globalization of supply chains is creating an environment where collaborative response to unexpected events is required to compete and win.

New research from McKinsey (available here with free registration) does a nice job of outlining the challenges of retaining access to key operational supply chain data when you’ve outsourced manufacturing.

The research accurately identifies that “decisions to select a supplier are seldom coordinated to ensure that they optimize total end-to-end costs and delivery performance. In fact, these decisions are commonly driven by procurement organizations, without attention to delivery performance requirements.”

I’ve seen this repeatedly, where companies go into an outsourcing relationship with costs being the sole (or at least primary) driver. That’s certainly a very important consideration, but how are you going to deliver top notch service to your customers when things don’t go according to plan? To think that’s all on the outsourcing partner is naive, you as the brand owner are the one going to be help accountable by the customer.

In order to thrive in this type of environment you need both the information and tools to enable rapid response to change - where you are actively coordinating an effective response - one that is timely and accurate (meaning, aligned with your business objectives).

Recapturing your supply chain data is a lot easier if you go into the relationship with this broader mindset. By establishing data connectivity at the outset, you’ll not only build the proper relationships and expectations, but you’ll lay the foundation for increased collaboration and responsiveness to ensure all of your objectives are met.

A couple of weeks ago we held our annual user conference. This event brought together market leading brand owners and contract manufacturers to discuss the challenges they face every day. One of the most dominant themes at the event was the issue of managing change across multi-enterprise supply chains.

The move to outsourcing has led to “virtual enterprises” consisting of a variety of third-party specialists. Everyone is feeling the effects of increasing demand volatility and shortening product lifecycles. When you put this all in the mix together, it’s harder than ever to coordinate an effective response to change and ensure the required outcome - something the brand owner remains accountable for.

We took the opportunity to survey the attendees at this year’s event and here is a summary of our findings.

Rank in order of importance your top 3 business challenges (higher equals more important)
Managing customer demand: 2.45
Ensuring reliable supply: 2.06
Attaining supply chain cost savings: 1.88
Improving service to the customer: 1.79
Improving manufacturing efficiency: 1.50
Improving ECO and product launch: 1.88
Driving market opportunity and top line growth: 1.83
Compliance: 1.00
Other: 1.00

Importance of improving supply chain collaboration within your organization
Business critical: 64.44%
Important: 33.33%
Neutral: 2.22%
Not important: 0.00%

According to IDC: manufacturers that cannot effectively share data are less flexible, responsive and productive
Strongly agree: 62.22%
Agree: 33.33%
Neutral: 0.00%
Disagree: 0.00%
Strongly disagree: 0.00%

According to Aberdeen: business processes are transforming from inward facing to outward facing
Strongly agree: 28.89%
Agree: 53.33%
Neutral: 13.33%
Disagree: 0.00%
Strongly disagree: 0.00%

According to AMR Research: the greatest risks to the supply chain are day to day operational risks
Strongly agree: 17.78%
Agree: 55.56%
Neutral: 15.56%
Disagree: 6.67%
Strongly disagree: 0.00%

According to Technology Forecasters (TFI): responsiveness is key to success for OEM and EMS organizations
Strongly agree: 60.00%
Agree: 35.56%
Neutral: 0.00%
Disagree: 0.00%
Strongly disagree: 0.00%

There’s a new article at Supply Chain Digest here talking technologies to support the S&OP process. The article goes through the traditional mix of demand management, supply management and inventory management applications.

A couple of observations. One of the challenges I think organizations face in today’s rapidly changing marketplace is tied to the legacy and heritage of the traditional planning solutions. Traditional demand planning and supply planning solutions are very siloed in nature - focusing on the user communities, information and decisions that need to be made in that particular problem domain. While they may foster collaboration, it is only within the user communities in that domain (for example, collaboration in creating the forecast), and not across demand, supply and product simultaneously. There are multiple problems with this very sequential, siloed approach in today’s climate.

S&OP today requires rapid scenario analysis and cross functional collaboration. There are so many changes going on in demand, supply and product, that failure to integrate these into a holistic process and decisions that weigh all of the issues simultaneously leaves a lot to chance. And, because of the pace of change, there’s an increasing need to move from a purely planning centric view of S&OP to a process that is more operationally aligned - shortening the window to ensure that the pace of change is being factored into the decision making processes.

As market leaders push to become more demand-driven, one of the first challenges they have to deal with is the reality that you can’t plan your customer. The S&OP and all processes need to be oriented around this reality to ensure that the company is positioned to lead in a demand-driven market.

There seems to be an increasing focus on supply chain collaboration in terms of research, articles, etc. Here’s new research on the topic at ThomasNet. There’s also a detailed review of Boeing’s supplier collaboration model related to the new 787 Dreamliner airplane here.

The ThomasNet article highlights new research by CAPS Research that “found managers are spending more time evaluating supply-chain-enabled business models, but most have not fully grasped the nature of collaboration or the concept of what it takes to achieve a true collaborative capability.” The article goes on to provide insights into best practices.

It’s not suprising that supply chain collaboration is taking center stage. Companies continue to outsource at a fast pace. This is creating more globally distributed, multi-enterprise supply chains at a time where demand volatility and the pace of product innovations are at an all-time high. The result is an environment where coordination and the ability to respond to change are at a premium. This can’t be accomplished with an arms-length relationship with partners.

Brand owners must become more actively engaged and take a more holistic view of their partner relationships to succeed. Gone are the days of simply focusing on partners to reduce costs. The market dynamics demand brand owners excel at both cost management while being swift enough to capitalize on changing market conditions and new opportunities. This can only happen through coordinated efforts with supply chain partners - efforts that place a premium on win-win scenarios, that empower people with the information and tools they need to rapidly make course corrections to deal with the inevitable unexpected events that come up daily.

New research from Aberdeen shows that leaders in global supply chain visibility report improved performance across key metrics (see more on the report here). The report shows that leaders have reduced lead times from international locations, reduced inventory levels and reduced inventory carrying costs.

In another Aberdeen report entitled Beyond Supply Chain Visibility: Response Management is the Key (available here) their research findings show that supply chain visibility ranks as one of the top two application focus areas for companies as part of their supply chain technology investment plans. The ability to respond to change rapidly is emerging as critical to a company’s success. Just having visibility is not enough to manage this constant change. This research brief outlines the key characteristics of solutions that go beyond visibility toward enabling a flexible Response Management capability.

There’s no question that visibility is gaining more attention as companies struggle with increasingly distributed and multi-enterprise fulfillment networks and supply chains. The demand management and supply management challenges in these environments are complex as companies try to gain an upper hand on constant changes in demand, supply and product. Companies continue to find that their employees face an increasing number of decisions that require human judgment and that, while visibility is a pre-requisite, tools to collaboratively simulate various action alternatives and choose the actions that are best aligned with corporate metrics are required to proactively respond to the literally hundreds of daily changes that must be managed.

There’s a good post over at Supplychainer.com asking the question “where should demand management reside?” (see the post here).

I posted a comment and have included it below as well.

** My comment **

This is an interesting question. First, my experience says that the reality is all over the map - I’ve seen it reside in a number of organizations from sales to operations to finance.

One of the biggest challenges I see in an organization is that for too long the responsibilities for demand, supply and product have been organizationally separated and, thus, it further promotes the “silo” mentality of dealing with these issues. Someone creates the demand plan, throws it over the wall to someone else to create the supply plan, etc. The integration of product into this equation is usually the most troublesome and least integrated.

With things changing so fast, the need to integrate these three functions more tightly has never been more critical to the success of the business. Each process along requires a lot of collaboration to derive the right demand plan, for example. Then there’s the critical need for cross-functional collaboration - ensuring that the demand planning participants are actively collaborating with the supply planning and product planning participants.

The historical approach has been to focus on planning the business. Today’s reality forces you to acknowledge that you must be more demand-driven and in doing so you have to realize that you can’t plan the customer. The key to thriving in this environment is through more active organizational integration and by empowering people with the visibility and tools they need to both collaborate and rapidly respond to change.

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.

There’s a post here at the site uyriputyeruit talking about supply chain collaboration. I added a comment at the site, but thought I would post it here also.

*** my comment below ***

Good post - and agreed. In today’s highly distributed supply networks, collaboration amongst people is essential.

With so many things changing - demand, supply, product - every day and at an increasingly rapid and frequent pace, your ability to respond to the unexpected increasingly determines your success with customers and in the marketplace.

Historically, collaboration has focused predominantly on system-to-system collaboration where transactions are automatically shared between two parties. While there’s certainly value in that, the more urgent need is to respond to the situations where the transactiosn represent a problem (for example, a transaction goes out indicating a need for an additional 100 products by Friday, and a transaction comes back saying only 50 can be delivered). Now what?

This is where people come in - to make the right tradeoffs and compromises to respond to the unexpected. An, when the supply network is distributed and made up of multiple parties, it’s going to require multi-enterprise collaboration to coordinate an effective response.

Today’s realities are placing an increasing emphasis on people-centered collaboration to respond to change.

If you’re at all a regular reader here, you know that one of the things I’ve discussed frequently is the growing importance of brand owner coordination of their virtual enterprises. Brand owners today are faced with an increasingly complex supply network, putting them in charge of a virtual enterprise consisting of a growing number of geographically distributed partners.

With direct accountability for their brand, customer satisfaction, quality, compliance, etc. brand owners have significant challenges. Combine that with the fact that changes in demand, supply and product are becoming more frequent and pronounced and you have an increasingly challenging environment.

Here’s a really interesting article in the NY Times that gives some great insights into that complexity as it details the components of the Apple iPod and where they come from. Speaking of Apple, I heard a rumor that they are launching a new phone!