Archive for the ‘Control tower’ Category

Part 2: Extending Supply Chain Planning Paradigms Beyond Advanced Planning Solutions

Published October 10th, 2013 by Trevor Miles @milesahead 0 Comments

This post is a continuation from a previous blog: check out part 1.

A Single Rapid Analysis Capability across Planning and Event Management.

A Single Rapid Analysis Capability across Supply Chain Planning and Event Management

Because Intelligent Business Operations (IBO) deals with important exceptions, a very rapid analysis capability is required — something which is not typically associated with supply chain planning solutions.

IBO deals with important exceptions, a very rapid analysis capability is required — something which is not typically associated with supply chain planning solutions.

The speed of cycling through the full set of OODA Loop[1] steps of Observe, Orient, Decide, Act, is the key to gaining sustained competitive advantage. As a result, much faster planning tools based upon in-memory technologies are required to take full advantage of the OODA loop, replacing traditional APS suites made up of loosely coupled applications that try to support both the initial plan creation and the OODA loop. The shortcoming of SCEM was that the Observe and Orient steps were supported by different technology than the Decide or Planning steps. And yet many of the same analytics used in planning are required to evaluate the impact of an event, making the support of these steps by different technologies impractical and ineffective.

Collaborative Decision Making for Complex Environments

Supply Chain Planning Paradigm Collaborative Decision Making for Complex EnvironmentsAnother aspect to consider is the context in which IBO is best used to assist people to make decisions. The Cynefin Framework[2] is very useful for understanding this. As seen from the diagram, the Cynefin Framework splits out the decision context into Simple, Complicated, Complex, and Chaotic, and also characterizes the approach most suitable for making decisions in each of the contexts. The fifth context, Disorder, the worst of the lot, is when a person does not know the context in which they are operating.

The tendency in Supply Chain Management and Operations in general, is to try to force all processes into the Simple context through Lean, Six Sigma, and ISO9000 by deploying Scientific Management methods[3] first developed by Frederick Winslow Taylor in 1911. Key to Taylor’s Scientific Management approach is breaking down processes into several small repeatable tasks that can be distributed across a team of people with little training and skill. APS systems were designed to support this approach by providing application to satisfy specific functional needs, such as Demand Planning, without considering the overall process requirements. However, the rapid increase in globalization, outsourcing, and product portfolios over the past 30 years has added tremendously to the volatility, uncertainty, complexity, and ambiguity in supply chains. Supply Chain Planning Paradigm - When should we collaborate

While Best Practice (applicable for the Simple Context) will always have a role to play because of the scale and efficiency it offers, many of the issues being faced in our global supply chains today require more agile and nuanced decisions, which are more suitable to the Complex quadrant of the Cynefin Framework, and more aptly addressed by IBO.

Complex decisions inherently require a more

collaborative decision approach across functions and trading partners supported by systems defined in IBO that enable rapid what-if analysis and simulation. Of course IBO supports all stages of the Cynefin Framework, including the Simple, Complicated, and, when necessary, the Chaotic. In fact, a key aspect of IBO is to enable companies to manage their business processes (and in the case of this discussion, their supply chains) in the Complex context and preventing them from tipping over into the Chaotic context frequently.

Know Sooner; Act Faster

The tenets of Know Sooner; Act Faster are rooted in both the need to manage the more complex and volatile contexts effectively, and the capabilities required to facilitate more effective decision making. Kinaxis has embedded the concepts of IBO in RapidResponse, enabling companies to establish processes across functions and even across trading partners, addressing both long term and short term decisions. Our focus is on helping companies radically shrink the decision cycles in planning and in response to events. The breakthrough of being able to Plan + Monitor + Respondin a single environment has enabled our customers to know sooner when reality is different from the plan, and to respond quickly and profitably as a result. In other words, they develop the skills and capability to act rather than react.

To learn more about this topic, feel free to view the complimentary Gartner Research report featured in the Kinaxis newsletter: How to Use Intelligent Business Operations to Create Business Advantage (Sinur J., Schulte R., Gartner Research, 20 March 2013).


Posted in Control tower, Demand management, Supply chain collaboration, Supply chain management

Extending Supply Chain Planning Paradigms Beyond Advanced Planning Solutions

Published September 30th, 2013 by Trevor Miles @milesahead 1 Comment

“Many business process directors are under pressure to help make the best possible process-related decisions to ensure desirable business outcomes, business differentiation and continuous innovation.”
Sinur J., Schulte R.,

“Use Intelligent Business Operations to Create Business Advantage”
Gartner Research, 20 March 2013

Nowhere is this statement more applicable than in the supply chain.

While the inventive concept of Intelligent Business Operations (IBO) is gaining traction in multiple functions and process areas, the applicability and potential is particularly high within supply chain management.

Intelligent Business Operations Delivers the Benefits Promised by
Supply Chain Event Management

Supply Chain Event Management (SCEM) first emerged as a hot topic in 1999, peaking in interest in 2001, only to fall away into obscurity. It has resurfaced recently, but centers around transportation execution requirements such as track & trace. Several factors played a role in the rapid rise and fall of SCEM as a topic, including the fact that SCEM was part of the .com bubble and that the appreciation of the benefits of sharing information between trading partners was a very new concept. But the major factor in its demise was that it was treated as an add-on to planning systems rather than as an integral part of planning systems. At the time, the generally accepted process coverage of SCEM included measure, monitor, notify, simulate, and control; however, the more difficult parts of simulate and control were never realized because this required them to be integral parts of the planning systems.

supply chain planning - intelligent business operations (IBO)As a result, SCEM solutions were little more than alerting mechanisms flooding users’ inboxes with hundreds of messages which were of dubious importance and provided no mechanism for evaluating the resulting impact of the event on the wider supply chain, nor identifying the people that should be notified about such impacts. And, very importantly, there was no way to generate actionable responses to the events. The reemergence of SCEM within the transportation execution space has been as embedded capabilities within transportation management solutions (TMS), and are providing valuable advantages even though the events being tracked are very limited.

The benefits to be realized from SCEM concepts have not diminished since their early inception in the late 1990s. In fact, because the early solutions never got past the monitor and notify capabilities and the recent reemergence in TMS is so narrow in focus, the benefits remain largely untapped; one of the most significant ones being improved customer service at lower cost.

Even more intriguing though is the emergence at Gartner Research of  Intelligent Business Operations (IBO) which incorporates many of the initial SCEM concepts in the broader context of any process. According to Gartner (Sinur J., Schulte R., “Use Intelligent Business Operations to Create Business Advantage”, Gartner Research, 20 March 2013),

IBO is an emerging style of business behavior that leverages analytics embedded in processes to support better decision making and improved knowledge worker collaboration. IBO-based processes are “smart” about the context in which they run, which is influenced by events external to the process.

supply chain planning paradigms - gartner supply chain IT glossaryInterestingly, all the fundamental capabilities of measure, monitor, notify, simulate, and control of SCEM have been included in IBO. While not directly transferable, the ideas are largely represented (and have been extended) in recent IBO-related concepts such as

  • Business Activity Monitoring (BAM) instead of Measure and Monitor,
  • Complex Event Processing (CEP) instead of Notify, and
  • Business Process Management (BPM) instead of Control.

More important is the application of IBO in the wider contexts of strategic, tactical, and operation planning, not only in execution. In addition, the inclusion in IBO of Constraint Based Optimization (CBO) and Simulation capabilities as core requirements address the initial short comings of SCEM, namely the ability to determine an appropriate response to an event.

What is not captured explicitly in the definition of IBO is the need to create the initial plan against which performance will be measured. If the capabilities used to determine an appropriate response to an event are different than those used to generate the initial plan, then it is unlikely that the response will satisfy the business goals of the organization. (Of course in certain circumstances, the business rules used to address an exception are different from those used to plan and manage operations under normal circumstances.)

The separation of planning from event management was the key weakness of early SCEM concepts, which was exacerbated by the narrow focus on execution, ignoring the rich opportunities in all levels of planning. We should not repeat the same mistakes.

To learn more about this topic, feel free to view the complimentary Gartner Research report featured in the Kinaxis newsletter: How to Use Intelligent Business Operations to Create Business Advantage (Sinur J., Schulte R., Gartner Research, 20 March 2013).  And, be sure to keep an eye out for part 2.

Posted in Control tower, Demand management, Inventory management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

Talent and the 50 Shades of Gray of Supply Chain

Published September 26th, 2013 by Trevor Miles @milesahead 4 Comments

I’m a ‘numbers guy’ and tend to gloss over ‘fluffy’ things like talent. Of course I understand and endorse the three-legged stool of People-Process-Technology and the need to keep the stool balanced by developing all the legs. Consequently when the panel on talent at the recent Supply Chain Insights Summit was introduced I was only paying partial attention.  My bad. You can watch a full replay using this link.

What I found was that the panel was rich is diagnosis and short in insights. There was too much description of the problem and not enough of the solution.  The panel did discuss what some firms are doing to recruit, train, and retain talent, but I was looking for that elusive notion of what is talent and how do we nurture it?  I am sure there were many line managers in the audience who would have found the panel very useful, and Lora Cecere of Supply Chain Insights (SCI) has written quite often about the need for T-shaped people, meaning having the ability to see the ‘big’ or end-to-end picture and deep functional capabilities. But I was still struggling with what is talent and what talents are needed in supply chain.  More on this later.

The raw numbers are sobering: There are 6 open positions for every recruit and the time it is taking to fill positions is increasing.  What I find interesting in this context is how the empty roles have changed over the past 2 years in which SCI has been conducting a talent survey. While there are nuances, the clear message is that it is middle-management where the biggest gaps lie. The biggest change is in the difficulty of finding people to fill an S&OP manager role. To me this is a clear indication of the increased importance of the end-to-end or horizontal capabilities rather than the deep functional capabilities.  Soft skills too, but also hard skills such as Finance.


 Supply Chain Insights Summit: Talent Track

 Supply Chain Insights Summit: Talent Track


My question to the panel was: “given that none of you have a degree in Supply Chain Management, and neither do most of the audience, what training/education is required to be successful in Supply Chain and what inherent capabilities are required for T-shaped people?” The training/education part was answered very well in that there are any number of universities and colleges that now offer courses in Supply Chain Management. Lora has also addressed this very well in one of her blogs: What do we do now?  The T-shaped part was more intriguing in that the answer, curiously, identified more of a mindset than a capability.  And it set me thinking. Way back in in 2011 Lora wrote a blog “Yes, Abby, there is a Santa Claus” about the different generations of supply chain professionals. It is Lora’s contention that we are in the 3rd generation, whereas Lora and I are clearly in the 2nd generation. But I was also interested in the summarized advice Lora gave Abby in her blog:

  • Get good at math
  • It starts with clarity of strategy
  • Take what you have learned in school with a grain of salt
  • Learn to ask the hard questions, but nicely
  • Learn to dance with the world of gray

All sage advice, but not enough for me. I guess what I am really struggling with is an existential moment of my own, rather than having any issue with the content of the panel and the advice given to Abby by Lora nearly 3 years ago. Perhaps the real issue is that I am struggling with a supply chain mid-life crisis. Lora states that

“The second generation of supply chain professional (ages 35-50) is where we are currently seeing the greatest talent issues.  This is the generation that implemented ERP, ecommerce, and Advanced Planning Systems (APS). They were often the boots on the ground for the global supply chain.  Many of them were pioneers:  relocating their families and learning the nuances of global supply chain management the hard way.”

Definitely true for me. I was one of those who moved around the world implementing APS.  And I think the core of my existential crisis is that I no longer believe in the over-stated promise of ERP, ecommerce, and APS. At the time the claims did not seem over-stated. We genuinely believed that science and maths could solve the issue, but we forgot the advice above that Lora gave to Abby, principally that we need to “Learn to Dance with the World of Gray”. We were taught in our Engineering and Operations Research classes that you just needed to refine your model or get better data. There was never any suggestion that the approach itself was wrong. No-one taught us that strategic objectives are very mushy and change frequently. Or that customers change their minds constantly and expect to still receive the same customer service at the same price.  Or many other factors that make the supply chain world very gray.  It is about nuance and ambiguity, but so many of us still believe it is about certainty and precision, about reducing complexity and not about embracing complexity.  I’m hoping the new generation has a more nuanced view.

Speaking of generations, I came across a really interesting blog through one of my ex-i2 buddies, Amit Paranjape. The blog titled “Why Generation-Y Yuppies are unhappy” clearly identifies the core of why the SCI Summit talent panel didn’t address my existential issue:

Happiness = Reality - ExpectationsI genuinely bought into the hype and promise of the value companies were going to achieve through the deployment of ERP, ecommerce, and APS solutions. I too was taught that

“…there was nothing stopping them from getting to that lush, green lawn of a career, but that they’d need to put in years of hard work to make it happen.

is the grass greener?

Of course I am referring is this context to the lush green lawn of productivity improvement brought about by years of hard work to deploy ERP, ecommerce, and APS solutions. In other words I am suffering from an expectations gap of over promising and under delivering. Supply chain insights expectations, frustrations disappointment, reality

If I got a do-over I would focus much more on helping people understand the limitation of what they can achieve through maths and much more on the value of compromise, consensus, and collaboration. Of course I still advocate having hard facts to back up a decision, I take these as a given, but I would focus more on the trade-offs across competing objectives and across functional silos. In other words I am not suggesting that we all rip out the APS solutions that we have deployed over the past 20-odd years and do everything with an abacus or Excel. What I am suggesting is additive. It is about the social side of making decisions as well as the skills to make decisions under uncertainty.

In summary, I agree that we need T-shaped people, as long as this means that they understand that there is no one answer. That there is no right answer, and definitely not an optimal answer that gets spat out by a computer with little or no human judgment involved.  There is a better answer, which is achieved through compromise, consensus, and collaboration, backed by hard facts which no-one can dispute.  I guess this means that I agree with the advice Lora gave to Abby. But if I had to rank the advice Lora gave to Abby I would use the following order:

    1. It starts with clarity of strategy
    2. Learn to dance with the world of gray
    3. Get good at math
    4. Take what you have learned in school with a grain of salt
    5. Learn to ask the hard questions, but nicely

What is not included in Lora’s list but came out in the panel is “be curious”. Stated differently, learning is a continuous journey, and SCM is still evolving.

Posted in Control tower, Demand management, Inventory management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

Crossing the Pond to Attend Gartner Supply Chain Executive Conference

Published September 20th, 2013 by Melissa Clow 0 Comments

Gartner Supply Chain Executive Conference

We are proud to sponsor next week’s Gartner Supply Chain Executive Conference, September 23 – 24, 2013 at the Lancaster London, in London, UK.

Event Details
Lancaster London, Hyde Park in London, UK

Join us September 23 – 24, 2013 for the Gartner Supply Chain Executive Conference. This conference will focus on how supply networks have reached a critical inflection point that, while unnerving, provides an unprecedented opportunity to rethink the very way supply chains work. The Gartner Supply Chain Executive conference will help you reimagine the supply chain and drive your enterprise to new levels of competitive advantage.

Find out more about the Gartner Supply Chain Executive Conference and this year’s theme of: Re-Imagine Supply Chain: Fast, Forward, Focus.  And, if you’re headed to the conference, we invite you to stop by the Kinaxis booth #S19.

Not attending? Follow the Supply Chain Conference on Twitter at: #GartnerSCC or @Kinaxis to get real-time updates from the event. For more Kinaxis news, follow us on LinkedIn or Facebook.

Happy Friday!


Posted in Control tower, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

We Are On Our Way to LogiPharma in Princeton, NJ!

Published September 16th, 2013 by Melissa Clow 0 Comments

LogiPharma Kinaxis to sponsor present cloud based supply chain solutionWe’re ready for a full conference schedule this fall. And, tomorrow we are headed to Princeton, New Jersey for LogiPharma – held at the Westin Princeton, September 17 – 19, 2013.

On Tuesday morning, the day is started off with an executive panel discussion with our very own Trevor Miles, vice president of thought leadership. This hour long session entitled, “Time to Get off Excel and into the Cloud for Supply Network Planning” starts at 9:00am.

Trevor Miles speaking at LogiPharma about cloud supply chain solution

Session Details

The panel brings together supply chain executives to discuss how Life Science companies are adopting pr

ocess improvements and new technologies targeted at removing business “silos,” improving collaboration, and achieving significant operations performance breakthroughs. The following topics will be covered during this session:

  • FDASIA compliance for drug shortage analysis and reporting
  • Effect of orphan diseases on portfolios
  • Innovation versus discovery cost
  • Trends in outsourcing
  • Emerging business needs in pharmaceutical manufacturing

If you’re headed to the LogiPharma conference we invite you to visit us at Booth #6.

Unable to attend? Follow the hash tag #LogiPharma or @Kinaxis on Twitter to get real-time updates from the event and stay tuned for our event re-cap blog.

Posted in Control tower, Pharma and life sciences supply chain management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

Jake Barr: Supply chain transformations; Going after game changing change

Published August 30th, 2013 by Melissa Clow 0 Comments

As mentioned in last Friday’s post, we had the privilege of recording three interviews with Jake Barr. In this video, Supply chain transformations: Going after game changing change, Jake says we are on the verge of making a massive step change in supply chain management.

The last two decades has been about investing in infrastructure to run the day to day transactions of the business. The step change will be one about improving decision making.  And this won’t require infrastructure investment – it’s about leveraging existing information, but having a superior way to mine, package and take action on that information.

In Part 2: Supply chain transformations: Going after game changing change, Jake Barr explores the following questions:

  • Do the advancements in the past few years represent incremental improvements or fundamental shifts in supply chain management strategy?
  • What is an example of a company making a fundamental shift in their supply chain strategy?
  • How can companies move from functional excellence to end-to-end supply chain process enablement and alignment?

Jake, a 32-year employee of the Procter & Gamble Company, directed the Global Supply Network Design efforts for the Company, in addition to being the discipline Director for Supply Network Operations. So, as a former practitioner, he has a lot of insight to share.

… please check it out!

Notable passage:

“We’re talking about the last two decades having been spent by and large across most of the industry, from a consumer products standpoint, of investing in infrastructure to run the transactional mass of just the day-to-day business. So being able to deal with simply the millions and billions of units that need to be produced and ordered and fabricated and shipped and all of that. But the step change is one around decision-making. The step change is actually being driven by the fact that there are new techniques now available that don’t require huge infrastructure projects, that don’t require new translations or ripping out of existing processes, that actually can provide an easy way to lift, integrate, and then translate for decision makings. Information that’s available and has been available for years, but the ability to mine it and package it and take action on it wasn’t possible. So that is a massive leap that will reconfigure the way most companies in this industry will compete. So over the next three to five years, that will be massive. Part of that is the advent of cloud computing. Part of that is the ability to bring data out of these very different infrastructures and actually merge them, coalesce them, and package them for decision-making. None of that was possible in as little as five to seven years ago. So it’s transformational in nature. “Incremental” is playing it down. It’s transformational what’s about to happen.”


Happy Friday 21st Century Supply Chain readers!


p.s. feel free to check out the past clip…

Part 1: An executive’s perspective: The evolution of CPG companies and their supply chains


And stay tuned for…

Part 3: Insights for today’s business leaders


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Posted in Control tower, Demand management, Supply chain collaboration, Supply chain management

3 Days in Berlin: A supply chain conference that you want to watch over and over

Published July 9th, 2013 by CJ Wehlage 0 Comments

If you read my last blog, “400 Miles in the Desert”, you would have understood how 5 hours of driving in the desert shaped my view of the Gartner Supply Chain conference.   Well, 9.5 hours of flying from Berlin to Frankfurt and then to Boston gave me a ton of time to reflect on the European SCL Summit.

The World Trade Group held its 15th annual European Supply Chain & Logistics Summit this past week in Berlin, Germany.  Having been around the block with supply chain conferences these past 23 years, I must say that this event was one of the best content-wise.  From the keynotes to the breakout sessions, I thoroughly enjoyed the depth of content, the experience of the presenters and the discussions during the question & answer periods.

The event centered around five key themes: Supply Chain Strategies for Growth, Supply Planning, Global Logistics & Distribution, Global Sourcing Transparency & Agility, and Performance Management.   I was honored to speak in the Supply Planning track on “Delivering on the S&OP promise for the 21st Century”.

The memorable standout for me was Barry Gibbons’ presentation.  Barry Gibbons is the former Global CEO of Burger King, and I definitely understand why Fortune magazine gave him the title “Turnaround Champ”.  I came from Apple, where they teach you how to minimize the words on your slides and use pictures and references.  You are taught to understand your audience, look at them and read how they are capturing your message.   There was a “goal” at Apple to have a presentation where there were zero words on the slides.  Well, Barry Gibbons accomplished what I thought was a fantastic presentation.  His title slide went up, and Barry walked across the stage engaging the audience with insightful stories and a captivating message of staying ahead by keeping yourself, your products and your company fresh.  At the end of the hour, Barry had not shown one slide.  The title slide was still there, and the audience wanted another hour.

Barry asked each of the supply chain leaders in the audience to take an exercise back to their companies.   They were to pull their team together and have each of them write one or two words on the back of their business cards that describes what the company stands for.  Then, collect the cards and see how many words match.

Barry was making the point that companies need to understand the fundamental questions of: ‘Where do our customers see us going forward? What do we stand for? What are the principles guiding our business?’  This is what he believes will separate the winners from the losers in the coming years.  I loved it when he described this time as the “Age of Alienation”.  With where the world is today: social and political unrest, high consumer and government debt and complex globalization, we have become alienated from the customer.

I agree 100% with what Barry stated.  From a high-tech perspective, online consumers are so integrated that “consume” has become a “node” in the traditional plan/buy/make/deliver model.  Online customers are changing the structure of supply chain planning, inventory models, network designs and overall KPI’s such as pricing, cost to serve and segmented profitability.  I plan to blog more about this concept going forward and provide a high level value proposition on this shift below.  Suffice it to say, Barry Gibbons is hitting directly on how companies and supply chains need to connect with the customer in a whole new way.

“3 Days in Berlin: A supply chain conference that you’ll want to watch over and over”

I also loved Barry’s humor in sharing stories about taking a “commodity” and making it different — so different, that what was once a common service becomes memorable for a lifetime.  Barry talked about the airline industry, and after years of flying, he became numb to the preflight speech.  We’ve all heard it, and most of us, like Barry, tune it out and go about reading emails, texting or listening to iTunes.  But on a Southwest flight, Barry’s head looked up.  The Southwest flight attendant was singing the preflight announcement.  This person took what had become a commodity, and made it a memorable service.  That’s how we need to view our business and understand how the customer sees us as memorable.

There were two other sessions I would highly recommend watching the recording on the WTG site when they become available next week:  “How we can improve the competitiveness and future resilience of European supply chains” and “Inside the strength of Lenovo’s supply chain: Building resiliency and risk management strategies into your network design”.

During the “Future resilience of the European supply chain” session, the panel included Edwin van der Meerendonk, VP European Operations for Walt Disney; Ivanka Janssen, Supply Chain Director for Diageo; Julie Maes, Director Supply Chain Support for Volvo Powertrain and Marcel Mourits, Supply Chain Optimization Lead for AIMMS. They shared insights on European supply chain talent and unique challenges.  Then, they spoke about methods to improve collaboration for both short term & long term stability.

The Lenovo session was eye opening for understanding the impact of supply chain disruption.   Mick Jones, Vice President Global Logistics Worldwide at Lenovo shared how their supply chain managed the impact of the Japanese earthquake & tsunami.  The Lenovo team is not only going after a robust risk management plan, but also considering the speed of response and the profitability of the ‘return-to-normal’ state.   Now, coming from Kinaxis, I was especially interested in Mick’s use of end-to-end supply chain visibility to manage risks.

All this brings me to my closing thought …my presentation, “Delivering on the S&OP promise for the 21st CenturyCertainly I’d love to have you watch the entire replay of my speech.  As an ex practitioner, I know you have limited time, so take a view of the first 5 minutes (which will be available on the WTG site shortly). In it, I share a story about my old CEO, who provided a memorable piece of advice.  I asked if he had any guidance for me as a new employee.  And, Steve Jobs told me this…..

“Know what you know, and know what you don’t know….and surround yourself with people who know what you don’t know…”

I challenge people to consider what you truly know in supply chain.  When you are doing demand and supply balancing, how far back in the network do you know the impact? When you are consolidating demand plans, how much do you know about the segmented customer demand?  When you are publishing the margin plans, how much do you know of the tradeoffs across business units?   Mick Jones is right when he says “visibility” is critical.  Do you have visibility, real time, to all the nodes of your network?  The expert panel was dead-on when they said “collaboration” is required to make it through this difficult time.  You may collaborate, but how well do you know the margin and profit impact to all your partners when you make a change?  And, finally, Barry Gibbons asked the audience “what do we stand for?” Our customers want to know.

Take his challenge, and ask every partner in your supply network to write down what they believe this supply chain network stands for.  You would be amazed at the varying responses.  If you write down profitability, your contract manufacturer writes down cost avoidance, and your retailer writes down inventory reduction, you better get to “KNOW” your supply chain…..

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Posted in Control tower, Demand management, Inventory management, Response Management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

What ails the pharmaceutical supply chain?

Published July 8th, 2013 by Trevor Miles @milesahead 1 Comment

It is always dangerous to draw too many parallels between companies, and yet benchmarking is one of the most effective ways of expressing comparative performance. The Gartner Supply Chain Top 25, which was started by AMR nearly 10 years ago, is an annual ritual that draws a great deal of attention. The Garter Supply Chain Top 25 also draws some criticism because it tries to compare companies across industries.  Nevertheless there are a few supply chain insights we can draw from the list in general and for the pharmaceutical supply chain manufacturers in particular.

gartner supply chain top 25 2013

The list tries to balance aspects of product innovation through revenue growth, efficient use of capital through return on assets (ROA), and efficient supply chain practices through inventory turns, balancing the various aspects of Operations that will lead to long term profitability and market performance. It is important to note that only one pharmaceutical manufacturer is on this list, namely J&J, at number 25. Gartner also publishes a Healthcare Supply Chain Top 25, but even this list compares manufacturers, distributors, and providers, each of which have very different supply chain characteristics, making an apples-to-apples comparison difficult.  Even within the manufacturers the list does not distinguish between small molecule and biological manufacturers, which have very different supply chain characteristics. So I set out to look at just the small molecule manufacturers with the greatest revenue, which are based in the US or Europe.

It is not a pretty picture. Perhaps what surprised me most was the inconsistent performance over the past 10-15 years across the metrics used by Gartner to evaluate performance. We all know Wall Street rewards consistent, and positive, performance. Potentially, the greatest surprise to me is the manufacturers inability to reduce inventory levels, which have remained flat at a little over 2 turns, and the most disappointing is the large drop in return on assets, from about 14% in 1999 to about 8% in 2011.  While the average revenue growth has been consistent at about 5%, the annual fluctuations have been huge.

Pharmaceutical Supply Chain: Revenue Growth

supply chain revenue growth

Pharmaceutical Supply Chain: Inventory Turns

pharmaceutical supply chain

Pharmaceutical Supply Chain: Return on Assets

pharmaceutical supply chain return on assets

My view is that these metrics reflect relatively immature supply chain practices in large pharmaceutical companies. It is little wonder given the attention paid to R&D and their high gross margins.

But there are some pharmaceutical supply chain industry trends that I hope will encourage pharmaceutical companies that they can combine their expectations of high customer service with more efficient supply chains that require less cash to operate.  I will be discussing the industry trends and the concept of a control tower to drive much greater supply chain effectiveness with Roddy Martin of Accenture, formerly of AMR Research, this coming Wednesday July 10th, 2013.

Please join us to hear our point of view and share your ideas. You can register for the webinar by clicking on the following link.

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Posted in Control tower, Demand management, Inventory management, Pharma and life sciences supply chain management, Response Management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management