Archive for the ‘Demand management’ Category

Elephant in the Room: Thoughts on Metrics That Matter in Semiconductor and Hard Disk Drives

Published August 29th, 2014 by CJ Wehlage 0 Comments

Metrics That Matter in Semiconductor and Hard Disk Drives

Supply Chain Insights recently published a Metrics That Matter report covering both the Semiconductor and Hard Disk Drive (HDD) industries. Despite being hit hard by the recent recession, overall the research shows that these two industries have fared well over the last decade and are positioned to continue that success.

Success, provided they monitor the 7 “elephants” in the room.

Consolidation

Notice in the Supply Chain Insights report, there are only two HDD companies.  That industry has already gone through consolidations.  Semiconductor is poised to consolidate, which will have huge impact on the metrics.  It’s already happening with Avago/LSI, RF Micro/TriQuint, Micron/Elpida, MediaTek/MStar and Fujitsu/Panasonic.  Speed to integrate the planning functions during an acquisition is critical.

Profitability

With the OEM’s driving down the price, the semiconductor/HDD companies will have to follow (or innovate new products).  Lower price means lower profitability. This will begin to impact the semi/HDD ability to raise capital and innovate/expand.  Cost pressures and faster time to market in the planning processes will be required.

Global pressure

Consider that the Chinese and India governments are investing in the semiconductor industry.  With China already a source for semiconductor raw materials and the China/India end consumer market growing, there will be pressure to supply chips and hard drives to local China/India OEM’s first.  This could create a shortage in the US/Europe OEM chain.  Understanding inventory planning will take on a new dynamic.

Of course, like any industry, Semiconductor and HDD manufactures are faced with a set of unique challenges in their space that puts their supply chain at risk.  The largest risk being a balance between shrinking product lifecycles in the OEM world versus expensive asset utilization.  We are at a time where consumer electronic brands have a 9 month (that’s 270 days) lifecycle, while Semiconductor & HDD supply chains have 6 month component lead-time, with 3-5 year depreciation of capacity.  After reading the research, I would summarize the main obstacles as follows:

Position in the Supply Chain

As suppliers of technology embedded in more complex products, Semiconductors and HDD manufacturers find themselves further back in the supply chain, often 3-5 levels down. This can make it difficult (compared to those closer to the front of the supply chain) to find balance in what Supply Chain Insights calls the Effective Frontier – growth, profitability, cycle and complexity. The ‘bullwhip effect’ certainly plays a role here, creating wide fluctuations (over and under) of supply and demand – due to disorganization, lack of communication or miscommunication, incorrect demand information, etc. – as information moves down the supply chain to the manufacturer.

Potential for Tightening Margins

Related to their position in the supply chain, competitive and consumer pressures that drive down pricing are often pushed down the supply chain, forcing suppliers to tighten their costs.

Supply Chain Length

Reliance on suppliers beyond the US borders has extended the length of the supply chain, and opened it up to significantly more risk, as demonstrated by the impact of the Thailand flooding on both the Semiconductor and HDD segments.

Growing Complexity

As one of several suppliers contributing to the creation of a single product, Semiconductor and HDD manufacturers are susceptible to issues experienced by others in the supply chain, as explained by Broadcom in the Supply Chain Insights report: “Our products are incorporated into complex devices and systems, creating supply chain cross-dependencies. Accordingly, supply chain disruptions affecting components of our customers’ devices and/or systems could negatively impact the demand for our products, even if the supply of our products is not directly affected.”

Despite these challenges, the Supply Chain Insights dive into financial data shows that these two industries have fared well, thanks to strengths in product innovation and supply chain planning functions. More specifically, the research shows strong year-over-year growth and large (and increasing) operating margins (with minimal impact -so far-on from upstream cost pressures).

On the downside, it appears that these industries are struggling with inventory issues. The research shows the cash-to-cash cycle has increased, as have days of inventory, and inventory turns are on the decline. Supply Chain Insight’s look at four key Semiconductor companies and two key HDD companies indicates these inventory issues are not the result of poor inventory management but rather an industry trend. The research suggests that both product complexity and the length of the supply chain are contributing factors.

Based on the above, it seems clear that putting a focus on optimizing inventory management practices, making risk management initiatives a priority, and building strong collaborative S&OP practices with their customers, will help Semiconductor and HDD manufacturers continue to see success in the coming years.  This comes with a solid planning system of record.  One that will remove manual steps in the process, drive real time information from the semiconductor/HDD testing to the OEM demand, and connecting the end-to-end decisions with the planning model.

P.S. The Supply Chain Insights’ research report covers additional areas than what I’ve summarized here, and supplies comparative financial data. If you’d like to read the Supply Chain Metrics That Matter: Semiconductors and Hard Disk Drives report in its entirety, you can download a copy here, with no registration required.

 

Posted in Demand management, Inventory management, Supply chain collaboration, Supply chain management


Case Study: How Nimble Storage’s Focus on Inventory Management Improved Visibility and Planning Cycle Times

Published August 25th, 2014 by Melissa Clow 0 Comments

Nimble Storage Inventory ManagementOne of the biggest challenges facing data storage companies is demands from enterprises for better performance and protection of their data.

Recently, I had the chance to chat with Stacey Cornelius, vice president of operations at Nimble.

Nimble Storage is a provider of flash-optimized data storage solutions with a powerful support model, unique in their industry. The company has a commitment to deliver the highest level of support and customer satisfaction with around-the-clock resources and four hour onsite parts replacement service.

Stacey spoke about how as their install base grew, the company faced challenges getting visibility into its more than 70 global inventory hubs and spare parts depots for its service parts planning business. Nimble was using a spreadsheet-based process to manage its service parts planning business. Data was imported and copied from a variety of sources and some of the key data was maintained only in Excel spreadsheets.

80% of the processing time included data collection and data clean up with approximately 50 steps to complete the planning process. This resulted in the process being error prone and not as responsive as was required for the growing business.

Here’s a quote from Stacey Cornelius, vice president of operations at Nimble on how they doing today:

“Nimble’s world-class customer service agreements are incredibly important to our business. As a past RapidResponse user, I know the breadth of capabilities and the flexibility of the solution. With RapidResponse deployed, we have the confidence we can keep up with our growing install base to achieve visibility of inventory at hubs, depots and parts in transit. We have the ability to quickly perform many “what-if” questions we face on a daily basis and have already reduced the time to make decisions to help our relationships with our customers.”

We also learned that because of their focus on inventory management the team realized:

  • On time delivery to customers across 70 inventory depots > 98%
  • Inventory availability > 98%
  • Service inventory as a % of installed base COGS < 5%
  • Weekly spare parts planning process went from 5 hours to < 30 minutes

Amazing! A big thank you to Nimble Storage for letting us tell their story.  We love to hear what you are doing with RapidResponse!

If you are interested in learning more about this customer, read the complete case study.

 

Posted in Demand management, General News, Sales and operations planning (S&OP), Supply chain management


The Next Great Disruption Coming to Supply Chains

Published August 18th, 2014 by CJ Wehlage 2 Comments

Next great disruption coming to supply chainsWhat would you say is the next great disruption coming to our supply chain world?

I’ve heard some common themes, such as weather, political changes, even war.   Those are potential, and somewhat out of our control.  However, there’s one great disruption already occurring, which has yet to truly “touch” supply chain.  It’s the consumer.  And, WOW! how they ever already impacted retail and brand marketing.

I watched a TED Talk video by Philip Evans, from Boston Consulting Group and shuddered to think that all our traditional fulfillment and inventory models can be drastically transformed by the “consumer”.

Philip Evans shares how today’s consumer is sharing a colossal amount of data to come to a buying decision. Some people call this “Big Data”.  Others consider how this “data” is used, and use the term “Omni-Channel” or “Internet of Things”.  Google wrote a great book, ZMOT, or Zero Moment of Truth.

ZMOT the next great disruption coming to supply chainsThis is the point where a consumer looks across all the channels in the market, using multiple devices to search reviews, ratings, styles and prices.  That’s before the P&G First and Second Moments of Truth.  They trust other online reviews over the brand. This is how they’ve drawn the ZMOT challenge.

The shoppers multi journey - supply chain disruption

As a supply chain practitioner, do you notice something missing?

Where is the supply chain nodes? 3PL’s, Contract Manufacturing, Suppliers, Logistics providers…

Supply Chains have primarily stayed on the outside of this challenge.  Sure, we’re concerned, and in some cases stocking more inventory at local distribution centers.  But, we continue to see the trend as a sales and/or a demand planning issue; something where we need better visibility to real time demand or a finer cut of demand signals.  Supply Chain Insights has done research on the top trends:

Top 3 supply chain trends

However, I look at these trends as primarily a “consumer to sales” challenge.  Supply chains have yet to digest the impending disruption beyond retail fronts and sales.  The balance of power has shifted to the buyer, but supply chains still see it has a retail issue.

What if the next great supply chain disruption was…

Consumers used multiple devices, internet of things, etc, to check FGI (finished goods inventory) /sub-assembly and raw inventories, build plans, and sourcing options, as they are considering a purchase!

In the book ZMOT, the comment was made: , “We are officially living in a post-Akerlof world – any trace of information asymmetry tipping the balance in favor of the seller is officially gone.”  It’s happened in the consumer to marketing/brand arena.  I would expect it to come and impact supply chain very soon.

How has this happened?  Listen to Philip Evans’ TED Talk about the falling transaction costs. Not just processing time coming down, but communication time shrinking. The time he refers to is the customer’s time to search, analyze and purchase a product.  Mobile devices have not only brought transparency to the buying process, but also have brought down the communication time.  This falling transaction time is impacting the traditional vertical value chain.  In essence, allowing competitors to step into the value chain and disintermediate, ultimately, collapsing the economies of scale, and creating less need for the vertical integration.  He explains it as using the Encyclopedia product. But, it’s happening today with Google in the auto industry, Amazon in the grocery industry, and Apple in the music industry, and many others.

So, imagine a customer going to social media and online communities to consider a product.  Then, they go to the retail store, scan the barcode to check inventory, price, and promotions in their 10 mile radius.  Then, they check online for deals and shipping dates. Since they are brand agnostic, they look at inventories in the supply chain network; they want to customize their purchase. They want to assure the sourcing meets their “sustainable” expectations.  They are mobile, so they want to have it delivered to where they want it and when.  They understand what options make up the end product, so they demand “deals” on these options (such as memory on a PC).   In essence, the consumer is putting a postponement demand on the brand.  From the ZMOT book, they show today’s consumer is looking around for deals, reacting much faster to purchase and effortlessly willing to move from brand to brand.

My thoughts on what supply chain leaders need to do starting TODAY!

  1. Get a method to capture, and USE all this “Big-Data”.  Most of this big-data is demand centric, but supply chains need to capture, segment and analyze these demand patterns – Building a true planning system of record is core to this challenge.
  2. Take these core patterns and create supply chain models. Start with the as-is model supporting the pattern.
  3. Simulate what it would be like if a pattern had access to raw materials and inventory positions in the network.
  4. Test scenarios that would optimize inventory costs, postponement options, shipping costs, etc…
  5. Analyze what these new “costs” would do to COGS, SG&A, operating income and margin.

Yes, this is hard stuff.  But, the pay-off could position your supply chain as an innovative leader.  This isn’t about incremental change to the business strategy.  It’s about a new business strategy to address an impending disruption.  Philip Evans stated, “Technology is driving the natural scaling of the activity beyond the institutional boundaries used to thinking about business strategy.”

The starting point is having a planning system of record, which has fast access to your entire end-to-end supply chain network.  Then, and only then, can you simulate new business strategies.

Posted in Demand management, General News, Supply chain management, Supply chain risk management


What the Analysts Are Saying About…A&D Supply Chains

Published July 18th, 2014 by Bill DuBois 0 Comments

What the Supply Chain Analysts Are Saying About A and D

Are you looking for some reading material to pass the time on your next flight? Even if you’re not you should check out Supply Chain Insights, Supply Chain Metrics That Matter. For the past several years, Supply Chain Insights has been delivering this research series.  What caught my eye is that for each report, they do a deep dive on a specific industry and use a mix of financial data, survey research results and interactions with their clients to help get a better understanding of various industries’ supply chains.

I spread my Supply Chain wings at an Aerospace company and since Aerospace and Defense is a key vertical market for Kinaxis, the recent Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report was downloaded on my laptop to read on my next flight. The research benchmarks A&D companies against other industries and looks at the top five A&D companies over the last decade. Although it didn’t give any suggestions on what to do when you find yourself in row 32, you know the one next to the washroom, it did discuss the challenges the industry is facing as well as offering up solid recommendations for areas of improvement.

From a challenges perspective, here are the highlights covered in this report.

The obvious challenge is the complexity in the A&D industry. The report uses the Boeing 747-8 International as an example. It has about 6 million components which are manufactured in 30 countries by 550 unique suppliers. Think about those design, sourcing and delivery challenges. I always thought getting through security these days was complex.

With such a heavy reliance on first, second, third, fourth and fifth tier suppliers and in some cases having only one or two suppliers for specific components, it’s easy to see how delays and budget overages can happen. A supply chain based so heavily on external sources is susceptible to more risk than catching a flight on time out of Newark. As Supply Chain Insights mentions, this is having a significant impact on the company’s bottom line.

Interestingly, to help address the issue of ensuring materials are available when needed; the research indicates that A&D companies have “developed some of the most advanced sourcing techniques and practices.” Companies like Lockheed Martin, are looking at new strategies for materials (raw or otherwise) that are harder to source, especially in the cases where increased Supply Chain volatility have thrown a wrench in their “Just In Time” approach. The challenge is balancing reduced material delays with rising inventory levels and longer Days of Inventory.

To help address these challenges, Supply Chain Insights makes a few recommendations that I think are spot on. Suppliers, in particular of materials that are sole sourced, play such a large and important role in the A&D supply chain, it’s vital that there be a focus on supplier collaboration and communication at every level.  A big part of this is increasing visibility into the supply chains to ensure they can anticipate and plan for potential disruptions. Focusing in these areas will help reduce supply chain risk, and make A&D companies better prepared to deal with inevitable disruptions when they do occur.

Thanks to Metrics That Matter, not only did I get some valuable A&D insights but it took my mind off of sitting in row 32 on a delayed flight out of Newark. The report covers a lot more ground than what I’ve discussed here, so feel free to download a full copy of Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report here. (No registration required.)

Posted in Best practices, Demand management, General News, Supply chain collaboration, Supply chain management


4 Parallels between Planning a Wedding and Supply Chain Planning

Published July 9th, 2014 by Melissa Clow 3 Comments

wedding-planning-supply chain planningI got married on June 28th. After 7 years together, we decided to make it official. To be honest, I never had much interest in planning a wedding so I had lots to learn. As exciting as it was, at times the task was daunting: venue, guest list, colors, theme, bridal party, transportation, music, photography and of course the dress.

Throughout the nine months we took to plan, I realized there are a lot of similarities between wedding planning and supply chain management. Here’s my top 4 list on the parallels between the two:

4. Disruptions

To no one’s surprise, I learned that wedding planning does not always go smoothly.

Just like supply chain management, there will always be disruptions –it could be a small disruption like your parents invite people that weren’t on your original invite list or a larger one, like what a Saskatchewan couple experienced last week on their wedding day… a tornado! Despite this, their photographer was able to think quickly and capture some breathtaking photos.

Lesson learned: There will be bumps in the road but you can’t dwell on them; they need to be dealt with rapidly and maybe even a little creatively.

supply chain disruptions wedding

For business, competition continues to grow. Responding rapidly to changes is critical, whether it is ordinary daily order changes to large and unexpected supply chain disruptions such as strikes, blockades and regional tragedies. We can no longer predict the future with acceptable levels of accuracy, and so the success or failure of supply chains is dependent on how quickly and effectively stakeholders can understand and respond to evolving situations. Once you know the impact, you need to act quickly to simulate the various scenario alternatives and find the best solution. The timeliness of resolution is a key factor in mitigating any potential damage to your operations.

Risk management

wedding supply chain risk managementWe contemplated who we would ask to give a speech. For example, do you ask your husband’s friend to make a toast even though you know there’s a very good chance he will say something offensive? We decided to decrease the risk of any bad behavior by our friends and kept speeches to a minimum by only asking the best man and maid of honour to speak.

In supply chain, it is not just about avoiding risky situations, supply chain risk management has a component that many companies fail to consider; the ability to respond:

  • Even the best thought out mitigation strategy may fail when the time comes to implement;
  • events that you couldn’t have imagined (or considered too low a probability to worry about) during your risk assessment may in fact come to pass; and very importantly,
  • small events, which may be considered insignificant on their own, but that taken in sum become a large risk consideration if not managed effectively.

It is important to be proactively alerted to urgent issues before they turn into major problems.

Collaboration

Because there are so many aspects that go into successfully pulling off a wedding, it’s really important to have a good working relationship with all your vendors. One challenge that we ran into with our venue, is that every time we spoke about our wedding plans we were passed along to a different wedding coordinator to help us… and more often than not, it wasn’t the person that would be there to help us the day of. This was a little unnerving because without telling our coordinator firsthand, it felt like we were playing telephone. Getting on the same page is key since these are the people that are going to help you execute your big day.

Just like collaborating with all your vendors, guests, bridal party, those in supply chain now need to coordinate with a number of tiers in the value chain network. Because of that, supply chain visibility and supply chain coordination has been reduced and often made the brand owners dependent on suppliers for their business and operations performance results.  To be truly effective, supplier collaboration needs to go far beyond the tactical exchange of data. Key suppliers must actively review information and directly contribute to the decision-making process so that companies can exchange early warnings and collaboratively resolve supply chain risk issues. Better supplier collaboration improves the flexibility of a supply chain and the profitability of the enterprise. 

Talent

We hear a lot about supply chain talent and how important it is to build up less experienced supply chain professionals to operate an effective and efficient supply chain. The same could be said for those getting married. We certainly needed and appreciated our friends and family that supported us throughout the wedding planning process. Without their support and advice, we wouldn’t have been able to pull it off, or at least not as well.

Just like we received a lot of sage wedding and marriage advice from married friends, colleagues and acquaintances, many organizations are creating formal supply chain talent-management programs to help transfer knowledge to cultivate growth. Often, these programs aim to engage both the mentors and the mentees by providing opportunities for a connection and growth. And now, more and more colleges and universities are offering undergraduate- and graduate-degree programs in supply chain management to better prepare younger supply chain professionals to enter into the field.

 

All that said, I can officially say we did it! And I can’t wait to give advice to future engaged couple thinking about planning a wedding.

Happy Wednesday!

Posted in Demand management, General News, Response Management, Sales and operations planning (S&OP), Supply chain management


What Angry Birds taught me about supply chain improvement

Published June 23rd, 2014 by Jonathan Lofton 4 Comments

A while back I was watching my youngest son play Angry Birds.  It was interesting to watch because he would start a level and not really spend too much time looking at how things were set up.  He might look at what kind of birds he had to work with, but for the most part he’d just start playing.  Once or twice he got lucky and freed all the birds on the first try.  Mostly he’d play several times and finally figure out how to beat the level.  When he beat it, he went on to the next level.  He didn’t try to get the highest score; he was more interested in completing all the levels in each of the different themes.

I would go back and play the levels he completed.  My goal was to get the highest score and to get all three stars completed for the level.  So I would study the layout, see what kind of birds I had to use and devise my strategy.  Of course it almost always took me a few tries to pass the level (and sometimes lots of tries)!

What I realized was that it’s a lot harder to improve a score than it is to just pass the level, especially if you do a lot of collateral damage the first time you win – that first winning score is high.  It can also be frustrating (sometimes I had to put it down and come back to it later).  The other thing I realized was that I probably could have approached it just like my son … just start playing.  No matter how much I studied the level before starting, I rarely got the highest score on the first try.  Although I didn’t often have to change my strategy, I did have to make some adjustments to what the birds were doing …  and yes, there were a couple of cases where I had to adopt a totally different strategy.  But truth be told, I got the high scores and totally completed the level the same way he got the original win: by seeing how things worked out and making adjustments – trial and error.

So what does this have to do with Control Towers and Supply Chain Optimization?  Before I get to that, there are a couple of other pieces of the puzzle for this particular “what I learned” lesson.  One came from watching a TED video, “Tim Harford: Trial, error and the God complex”.

What Harford set out to show is that the common link among successful complex systems is that they all evolved through trial and error.  The other came from participating in a “Human Centered Design” course that emphasized being willing to experiment; being okay with not having the “right” answer, trusting that you’ll find one.  And what was the method of finding that “right” answer?  You guessed it, brainstorming/collaborating and prototyping … iteratively!

The dots that were connected and what I learned from this as I thought about Control Towers and Supply Chain Optimization was:

  • You need maximum visibility when you’re planning your next move – you can have what you think is a great strategy, but if you can’t see how all the pieces fit, you’re going to churn for a while.
  • You may not have to totally change your strategy, but you do have to be flexible enough to make adjustments to how you configure and execute your supply chain.
  • It’s hard to improve your supply chain performance if you are starting off with a decent score but the faster and more agile you can be at adapting your supply chain, the better chance you have of maintaining and improving its performance, even when there are disruptions.
  • Supply chains are continuing to get more complex with more players that need to collaborate, and if the success of complex systems inevitably comes down to trial and error, then you need a way to speed up the trial and error process to become a lot more successful a lot sooner (“Knowing Sooner, Acting Faster”).

No matter how well you’ve blueprinted your processes (“studied the level”), you’re probably not going to totally hit the mark (“get the highest score with all three stars”) on the first try.  So it’s important to stay flexible and ready to adjust, remembering that when you’re trying to be optimal (get the ‘high’ score), it will probably be less frustrating if you follow the example of a child:  Just try a bunch of stuff and see what happens, knowing that’s how most successful complex systems come about anyway.

Undoubtedly I’m biased, but this all confirmed for me that RapidResponse is ideal in terms of giving you the ability to see your supply chain end-to-end, collaborate with the various players and perform a slew of what-if scenarios to determine in real-time what the impact of adjustments would be.

Oh, the other thing I learned … Angry Birds, like supply chain improvement can be addictive!

 

Posted in Control tower, Demand management, Supply chain management


Part 3: My thoughts on Gartner’s Magic Quadrant for Supply Chain Planning System of Record

Published April 22nd, 2014 by Trevor Miles @milesahead 0 Comments

I was recently asked three questions on Gartner’s Magic Quadrant for Supply Chain Planning System of Record. As I said earlier, I want to share these videos with our readers…

The three questions I was asked were:

  1. What do you think of the Gartner Magic Quadrant for supply chain planning system of record?
  2. In your opinion, how does RapidResponse differentiate itself as a supply chain planning system of record?
  3. From your experience, what is the level of understanding of planning systems of record in the market?

Here’s my response to question #3. If you haven’t checked out my response to question #1 and question #2, you may want to view them first. Enjoy!

The report positions vendors based on completeness of vision in the supply chain planning system of record market and on their ability to execute to that vision. If you’re interested in reading the full report, the Gartner document is available upon request at http://kinax.is/Gartner.

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


Part 2: My thoughts on Gartner’s Magic Quadrant for Supply Chain Planning System of Record

Published April 17th, 2014 by Trevor Miles @milesahead 0 Comments

I was recently asked three questions on Gartner’s Magic Quadrant for Supply Chain Planning System of Record. As I said last week, I want to share these videos with our readers.

The three questions I was asked were:

  1. What do you think of the Gartner Magic Quadrant for supply chain planning system of record?
  2. In your opinion, how does RapidResponse differentiate itself as a supply chain planning system of record?
  3. From your experience, what is the level of understanding of planning systems of record in the market?

Here’s my response to question #2 (if you haven’t checked out my response to question #1, you may want to view that first).

Hope you enjoy!

In your opinion, how does RapidResponse differentiate itself as a supply chain planning System of Record?


 

You can also check out my responses to question #3 as well:

 
The report positions vendors based on completeness of vision in the supply chain planning system of record market and on their ability to execute to that vision. If you’re interested in reading the full report, the Gartner document is available upon request at http://kinax.is/Gartner.

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