Archive for the ‘Control Tower Concepts’ Category

In October, SupplyChainBrain attended our annual Kinexions user conference. At our event they completed a number of video interviews with some customers, analysts, and Kinaxis executives. These videos are loaded with great information and we would like to share it with our readers.

Each week for the coming weeks, we will be highlighting a clip. Next up, First Solar

How An Integrated Supply Chain Enables First Solar’s Business Goals

When integrating its two major business units, First Solar partnered with Kinaxis to provide supply and demand planning capabilities, says Shellie Molina, vice president-global supply chain at First Solar. She explains how the Kinaxis RapidResponse solution enabled First Solar to set common goals and objectives around planning, operational excellence and global expansion.

[Run Time (Min.): 10:43]

I came across an article in Industry Week about a study from IFS North America (with help from Mint Jutras), which shows how traditional ERP vendors are not addressing the needs of project based companies.

The study looked at companies with more than $100 million in annual revenues that engaged in Engineer-to-Order manufacturing, delivered projects as an engineering, procurement and construction contractor or companies involved in batch process (which requires enterprise asset management of plants and equipment).

According to the article, companies find themselves needing to manage projects because  it is part of the way they deliver products (like Engineer-to-Order companies) or because they need projects to manage their capital assets (think about managing a project to replace a major piece of equipment).

There is potentially a third area for project management that impacts many more organizations which the article doesn’t touch on: New Product Introduction.

Most companies in the study (71%) use Microsoft project – so companies are using technology to help manage their projects. The challenge, however, is that for many companies (39%) the project data is not integrated at all with the other systems used to run the company.  Further, only 14% of companies consider their project data to be fully integrated and 4% use embedded project data as a native part of their ERP.

So, you may be asking why should project management data be integrated into the systems that manage the rest of the enterprise? There are obvious ties between project deliverables and financial reporting.  The timing of project milestones can result in penalties and can impact revenue timing.  There are also ties with procurement and with human resources.  The largest impact though is with supply chain.  In Engineer-to-Order companies, for example, where the company builds the components and then installs them, the ability to deliver a project on time depends on the ability of the company’s supply chain to deliver on-time.

Imagine the following scenario.  You are a project manager managing the building and installation of custom heating system for a large institution. As you leave for the weekend whistling a happy tune because the project is on-time and on budget.

You come in Monday morning and see an alert that your project is at risk of missing a major milestone and idling dozens of people poised to move on the next stage. More importantly, this milestone is tied to a penalty clause that will cost your company tens of thousands of dollars.  You look at the project plan to see what happened.  You can visually see the task that is now late.  As you look at the task details, you see that it is tied to the receipt of a manufacturing order that is now late.  With a click, you can see that this order is late because a component supplier several levels down the bill of material, at a different site, has revised a delivery date. A quick call to the planner gets things moving and before you can finish your first cup of coffee. The project is back on time.

Let’s look at what happened behind the scenes: the component supplier revised a delivery date for a component that goes into a sub-assembly (at a different manufacturing site) that went into the main assembly needed by the project.  The supply chain tool recalculated availability for the assembly based on this new date. Because the project is integrated with the supply chain, the impact on the project in terms of milestone dates, resource impact and penalties can be calculated.  Finally, because you set an alert to notify you if a key milestone slips, you got notified in time to resolve the issue before costs were incurred.

Does your company install the products you make?  Do you have significant maintenance projects that need to be managed?  Do you have extensive NPI projects?  In each of these cases there is a direct tie between your supply chain and your project plan. So if that is the case, why don’t ERP vendors do a better job integrating these two capabilities? (Actually, that question can be asked about a lot of ERP offerings…)

How do you manage projects that tie to supply chain?  Comment back and let us know.

I am always amazed at how much supply chain is woven into everyday life. Little did I know that a three year Business diploma in Materials Management and then 15+ years of working in the supply chain industry was all just preparing me for the toughest supply chain job I’d ever face – Parenthood! In today’s world of 50/50 parenting I say Parenthood rather than simply Motherhood because I know that the working men out there know what I am talking about.

My son is now 3 years old and from day one I’ve been using my supply chain background to keep my head above water as a parent. Especially since I don’t have a lot of control over the idiosyncrasies of his little personality; it’s nice to be able to ground myself in some hard and fast principles in our daily routine.

To enlighten you a bit on just what I mean….

Those first few weeks and months there was a reliance on precise Master Scheduling to get the feedings down pat and get him into a regular sleep routine. He was bottle fed so there was a lot of planning involved with mixing just enough formula, not so much that I had waste, but ensuring I wasn’t going to run out at 3am (this happened once-nothing like mixing a batch of formula and filling baby bottles in the quiet early morning hours!)

As he grows and becomes more and more active there is a constant need for Inventory Control on clothing and toys. I’ve created a regular ‘cycle count’ routine in his closet and dresser searching out shirts and pants that no longer fit and I have a box at hand to store this ‘obsolete’ clothing until the box (or boxes since I regularly fall behind with removing the obsolete inventory from our house) is full and I ship it off to a friend or relative with a child slightly younger than mine to share the hand-me-downs. And, similarly I have a box of larger size clothing stored in his closet in order to replenish the obsolete with new product! Toys have a longer shelf life than clothing, which means keeping them organized is even more important otherwise we end up with a room full where it’s difficult to shut the door without them all falling out on top of us. And like it or not, the supply is replenished on every birthday, Christmas, Easter, or each time he visits Grandma and Grandpa’s house.

Finally, the older he gets the more prominent the Project Management and Logistics skills become. Early on it is limited to scheduling and attending doctor appointments and the like but it quickly turns into organizing birthday parties with various themes and ensuring he makes it to extracurricular activities like swimming lessons and soon, T-ball and soccer. And, if you didn’t think doing all of this for your own child was enough, throw in the need to get him/her to other children’s birthday parties (present in tow) and outings.

So, if you are a parent who works in the supply chain field, on those days when you are working away and thinking “Wow, what have I accomplished today? I sat in meetings or worked on things that are not even my job,” just remember, you are keeping your supply chain skills current every time you manage to show up on time to an appointment or manage to not run out of milk!

On Tuesday, December 11^th 2012, 9:15am Eastern Time we will be hosting a live webcast with WTG and GT Nexus, entitiled, “Collapsing the time between Planning and Execution across the Multi-Enterprise Supply Chain”.

Speakers:
Andy Stinnes, EVP, Products and Strategy, GT Nexus
Michael Smith, director of product marketing, Kinaxis

In this complimentary webcast viewers will hear how in an increasingly volatile supply chain environment, the ability to rapidly “sense and respond” is often the difference between profit and loss. And the need for rapid response extends far beyond the company’s own four walls to all of its suppliers, customers, and service providers.

In this session, Michael Smith and Andy Stinnes will introduce the strategic partnership between GT Nexus and Kinaxis to combine demand and supply planning with supply chain visibility and execution in order to deliver the industry’s first cloud-based multi-enterprise rapid response solution.

To learn more, or to register visit:
http://www.wtgwebinar.com/webinar/collapsing-the-time-between-planning-and-execution-across-the-multi-enterprise-supply-chain/314

Sign up today to access your complimentary whitepaper: Moving Beyond Suppy Chain Visibility to Multi-Enterprise Orchestration – Virtual Vertical Integration & Supplier Collaboration Combined.

Recently we had the pleasure of reading a blog by Bob Ferrari, Supply Chain Matters where he interviewed our very own Monique Rupert, VP Customer Services.

In the post she made some very good points about the Supply Chain Control Tower, which we wanted to share:

How would you describe the current market and/or customer interest level regarding Supply Chain Control Tower capabilities?
There is a continual and growing interest. We hear more and more customers using “Control Tower” to indicate future initiatives they are considering. Brand Owners are looking to better understand how a Control Tower could benefit them. They want to hear more about the buzz in the industry that everyone is referring to as Control Tower. Most are looking to better understand the building blocks and hi-level processes needed to assemble a CT environment, and what steps need to be taken to construct the foundation.

Are current interest levels coming from specific industries or specific supply chains?
Not specifically, it seems to be coming from all industries and supply chain. We see the biggest interest – and likely highest potential value of return – from our Brand Owner customers in the consumer electronics industry as well as other customers with high volatility and complex supply chains.
Customers and prospects in the Consumer Electronics industry are seeing that they can no longer support their rapidly moving supply chains on disconnected spreadsheets and email. They need the ability to sense and respond to their customer’s ever changing demands and consumer trends. They are also seeing that the legacy approach of “functional excellence” with best-of-breed solutions targeted at specific business problems or limited geographies as no longer working. To be competitive in the marketplace, they are seeing the need to bring all the supply chain data and decision making into a single Control Tower platform, otherwise, they find out too late and act too slowly.

Read more from Monique’s interview at the Supply Chain Matter’s blog.

Monique Rupert joined Kinaxis in March 2008. With more than 20 years of professional services experience, her primary focus is supporting the company’s expanding customer base through the development of scalable services backed by a strong partner ecosystem. To this end, Monique works closely with the Alliances group in successfully engaging strategic partners to help deliver consulting and integration services as the company continues to aggressively grow its business.

Oliver Wight has long been at the forefront of Sales and Operations training and consulting – even to the point that many companies will tell you very proudly that they have attained Ollie Wight Class A certification for a variety of processes. Oliver Wight has also spawned several off-shoots, including Ling-Coldrick, who has done some really great work in getting S&OP started in many organizations. Oliver Wight promotes the concepts of their ‘Proven Path Methodology’ on a ‘Journey to Business Excellence’, which I have captured below. This is a business process maturity chart, ultimately ending up in integrated business processes.

Maybe it is just me being impatient, but whenever I look at this diagram, I cannot help wondering who is going to embark on a 10 year process. In the current market conditions who can afford to wait that long? Anyway, Ollie Wight has been doing process consulting and change management for a lot longer than me, so perhaps they are correct.  But it must be nice for Oliver Wight to get someone to commit to a 5-10 year project. Wow.

Having been around supply chain management since the early 1990’s, I wonder how many companies have progressed to Phase 3, and are nibbling at Phase 4.  Perhaps the answer lies with a different maturity model promoted by Roddy Martin, formerly of AMR Research, which is now part of Gartner’s Supply Chain Management practice.  Notice how there is a different value trajectory for the companies that are beyond Stage 3, when the focus is more on business value than operating efficiency.

Comparing these two maturity models I would say that Stage 2 of Roddy’s model equates to Phase 3 of Oliver Wight’s model, which is the focus on functional excellence supported by the automation of functional processes. Roddy contends that most companies are at 2.5 on the maturity curve, and some have reached 3.0, with Proctor & Gamble ahead of the pack at 4.7. In other words many companies have reached Phase 3 of the Oliver Wight model and a few have progressed into Phase 4.

It is in this context that I was fascinated by a recent daily email feed I get from George Palmatier of Oliver Wight in which he describes principles he wishes he had understood earlier in his life. (You can sign up for the daily feed here.)

It is the ‘Integrated Planning and Control’ aspect that I find really different and interesting. This equates to Roddy’s notions of ‘Demand Driven’ (Stage 4) and ‘Value Translation’ (Stage 5). Fundamentally it is the recognition that while planning is necessary, planning alone is insufficient. One point on which I disagree with George is that he refers to ‘changes in the market’ without acknowledging that most of these are not changes but rather evidence that we did not have 100% knowledge of the market in the first place, and we never will. The significance is that by using the term ‘changes in the market’ there is an implicit assumption that a perfect plan that captures market conditions exactly can be created. We all know that any plan we create is aspirational, especially the long term plans, which is why, to me, ‘control’ sounds too much like measuring a supply chain’s performance based upon Plan Conformance. If the plan was never 100% right in the first place, why are we forcing the supply chain to follow it? Instead of ‘control’ I would use Gartner’s term ‘Profitable Response’ (see the diagram below), which is the core message of the middle paragraph in George’s principle. The diagram is from a recent Gartner article titled ‘Elevate Your S&OP Process From Traditional to Demand-Driven’ (subscription required) published by Todd Applebaum and Jan Kohler in which they recommend that companies

Create a vision for S&OP that moves beyond operational planning to drive business value by driving profitable demand responses based on trade-offs and conscious choice.

Sounds to me like they are making the same point that George is making: Planning and XYZ. The important bit to me is the association of profitable response with demand sensing and demand shaping. What I like about the term demand sensing is the implicit recognition that we did not have a complete understanding of demand in the first place, whether in the long term, medium term, or short term. Obviously some of the need for demand sensing can be put down to ‘changes in the market’, not just lack of knowledge.

But what goes into being able to sense and shape demand, and then provide a profitable supply response? The strength of a large organization like Gartner is that there is often some really interesting work going on in multiple related areas. In June 2011 Roy Schulte, Janelle Hill, Nigel Rayner of Gartner published a report titled ‘The Trend Toward Intelligent Business Operations’ (subscription required) in which they address the Sense-Shape-Respond need from techy perspective, but the messages are consistent with what both Todd and Jan write (Gartner), and what George writes (Oliver Wight), and in which I believe. The key findings of the Gartner report on Intelligent Business Operations are

• The adoption of integrated analytics is increasing as business managers and knowledge workers are asked to make faster and better decisions, and thus need improved visibility into their operations and environments.
• “Real-time” operational intelligence serves different needs and uses different design patterns than tactical and strategic business intelligence (BI) and performance management (PM).
• There are two fundamental styles of real-time operational intelligence: analytic services that run on request and active analytics that continuously monitor conditions in a company and its environment.
• Organizations that pursue the business process management (BPM) approach to implementing systems are among the most enthusiastic and successful adopters of intelligent business operations, because business people and analysts can readily see where analytics and decision management should be used, and the project team has a commitment to explicit business process modeling and continuous process improvement.

My conclusion is that Gartner is seeing the need to plan, monitor, and respond in multiple business areas, not just supply chain management.  The necessary technical capabilities they describe are captured in the following diagram.

For the less technically minded, the acronyms used in the diagram are as follows:

• BAM – Business Activity Monitoring refers to the aggregation, analysis, and presentation of real-time information about activities inside organizations and involving customers and partners.
• CEP – Complex Event Processing is event processing that combines data from multiple sources to infer events or patterns that suggest more complicated circumstances. The goal of complex event processing is to identify meaningful events (such as opportunities or threats) and respond to them as quickly as possible.
• CBO – Constraint-Based Optimization, in the context of supply chain management, is essentially what we have called planning, and is focused on functional excellence.
• BPMT – Business Process Management promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology.
• Sim. – Simulation is the imitation of the operation of a real-world process or system over time. The act of simulating something first requires that a model be developed; this model represents the key characteristics or behaviors of the selected physical or abstract system or process. The model represents the system itself, whereas the simulation represents the operation of the system over time.

But we can see all the elements of the integrated planning and control discussed by Oliver Wight and Gartner’s Sense-Shape-Respond. Both capture the essential point that while planning is necessary, it is not sufficient on its own.

Likewise processes and systems, such as event management, that can only alert you when a particular metric is out of whack without being able to tell you the downstream or upstream impact are insufficient. Similarly predictive analytics processes and systems that are based upon statistical analysis without any notion of the underlying model are insufficient.  This is the point brought out in the definition of ‘simulation’. And what better model of the supply chain do you have than the model you used to generate the plan in the first place?

Most supply chain planning systems fail to address the needs for ‘intelligent business operations’ described by Gartner because their entire focus is on creating the perfect plan. The term ‘supply chain planning’ indicates their focus. They do not provide the capabilities to monitor, manage, and control the business once planning is “done”. Where supply chain planning systems fail is in being able to

• identifying the upstream and downstream impacts of events
• directing the alerts to the people responsible for the impacts
• orchestrating the multi-functional simulation of ways to resolve the issues
• incorporating both operational and financial metrics in the comparison of simulations
• incorporate human judgment as the key element of making trade-offs across functions and competing metrics
• doing all of this quickly

Doing some of this is not enough. Doing all of it slowly is not enough. Doing all of it quickly provides the Sense-Shape-Respond capabilities described by Gartner that are required to satisfy the needs expressed by George Palmatier of ‘Integrated Planning and Control’.

As one of the ‘go to’ people for supply chain practitioners when it comes to defining supply chain strategy and determining what tools to use to support the strategy, it is important for us to understand and internalize the Gartner perspective.

For many years now they have been using the term DDVN. I believe the definition is very close to the Kinaxis Control Tower perspective.

Demand-driven value network (DDVN) is a business environment holistically designed to maximize value of and optimize risk across the set of extended supply chain processes and technologies that senses and orchestrates demand based on a near-zero-latency demand signal across multiple networks of corporate stakeholders and trading partners.

My suggested edit to this definition is that it should include a supply signal too, not just a demand signal. The supply signal is important for when you need to respond because supply does not match demand, or when supply changes after the initial demand/supply balance.

However, the key DDVN message is that an end-to-end process capability is required in order to achieve supply chain transformation. Satisfying individual functional needs – demand planning, supply planning, inventory optimization etc – will not get you there. What companies need is a single end-to-end solution rather than a hodge-podge of functionally-focused applications loosely tied together with SOA technology.

Remember the days when you had a cell phone, a separate calendar device, a paper-based address book, and you could only email from your laptop over dial-up? Remember synching all those devices? Each app had its own device and own UI, and you usually needed multiple synch apps because the synch apps were point-to-point. That is what we have for most SCM solutions today.

I like to think of RapidResponse as the smart phone of SCM, bringing this all together into a single solution with no synching required.

Unfortunately most companies are still approaching SCM technology from a functional selection perspective. And as a vendor, the challenge is to fight for the opportunity to tell the end-to-end story to those that care about the end-to-end story.

A Gartner S&OP MarketScope was recently published (Payne, T., MarketScope for Stage 3 Sales and Operations Planning, Gartner Inc., 23 August 2012). This report focuses on evaluating S&OP vendor solutions in terms of how well they would support a full deployed global Stage 3 maturity S&OP process. Per the report:

Increasingly, companies will look to establish well-designed and effective Stage 3 S&OP processes to help manage more-global and unpredictable operations, as well as revisiting existing, lower-level maturity S&OP processes in a bid to improve their effectiveness. As companies find that their operating environments become more complex and unpredictable, the need for superior supply chain performance increases.

We believe Gartner’s vendor ratings confirms our leadership position in the market for providing customers with a modern-day solution to their modern day S&OP challenges. Today’s reasons for needing S&OP are the very same reasons S&OP needs to evolve — while the end objective of operational and financial alignment remains the same, in an environment of volatility and complexity, how you achieve that alignment (and maintain it) is very different than ever before.

Here is what we think S&OP should look like:

• Demand and supply in a single application. Use a single software solution to tie the highest level demand signals (e.g. product family forecast) to the very lowest level raw material component, while simultaneously supporting near term planning (days & weeks) and long range planning (months & years). Having all demand and supply data in one place (including data from contract manufacturers and suppliers) enables faster and more reliable plan development as well as clearer, quicker insight into the impact of changes. When the whole organization works from one data source, there is increased consensus and fewer surprises.
• Alignment between volume and mix. Make changes to the plan at the volume level and disaggregate it to the mix level, ensuring that execution of the plan is feasible.
• Inclusion of related corporate functions into the S&OP process. Tie adjacent functions like project management, profitability management or workforce optimization to the sales and operations planning process to understand and manage the cross-functional implications of your actions.
• S&OP alignment with corporate and financial goals. Ensure that decisions are made in the context of corporate targets, so when changes happen at the operational level, their impact can be seen and understood at the corporate level.
• Rapid creation of “what-if” scenarios. What-if versions of the entire sales and operations plan can be created in seconds and can be revised as needed during S&OP review meetings, thus accelerating process times. Simulations should be able to be made on any type of change — demand, supply, product, policies or assumptions.
• Continuous S&OP. Continuously monitor plans and act on events that will put the plan at risk. Respond quickly with mid-cycle adjustments as required.
• Parallel planning and collaboration. Fully integrate supply chain planning and operations personnel, so you can bring together people across the organization best able to contribute to the resolution of a particular issue into a collaborative environment. Not only does this greatly speed up the decision process, it also ensures consensus among all stake holders—internal or external to the organization.

Disclaimer:
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.