Archive for the ‘Demand management’ Category

Top 10 Movie Quotes from Kinexions! The Kinaxis Training & User Conference

Published September 26th, 2014 by Bill DuBois 0 Comments

Film poster for Top Gun (film) - Copyright 198...It’s an exciting time of the year at Kinaxis as we gear up for another user conference. Kinexions will take place this year in San Diego with the theme set as Innovation at Mach Speed (with some Top Gun references), a keynote from Navy SEAL Robert O’Neill and Afterburner (actual fighter pilots), along with a unique Customer Appreciation event.

The last couple of years we did parodies on movies, like “The Hangover” and “Back to the Future” so with the movie theme continuing, here are the…

Top 10 movie quotes from Kinexions that were also heard in famous movies.

10. Exchange between a customer and developer after seeing the capabilities in the next release: “Surely you can’t be serious?!” “I am serious…and don’t call me Shirley.”

9. Customer sharing ERP deployment horror stories: “ERP deployment is like a tense episode of ‘Everybody Loves Raymond’…only it doesn’t last 22 minutes. It lasts a lifetime.”

8. Customer talking to his Account Executive: “Keith, since I’ve met you I’ve noticed things I never knew were there before…birds singing, dew glistening on a newly formed leaf, stoplights….(scorecards, dashboards…).”

7. Customer after hearing Doug Colbeth’s opening remarks: “He’s the sweetest guy. Have you ever looked into his eyes? I swear it was like the first time I heard the Beatles.”

6. Prospect after seeing a Customer presentation: “I’ll have what she’s having.”

5. Customer before the Product Management presentation: “Go ahead, make my day.”

4.  Product Management after their presentation: “How’d ya like those apples?”

3. CIO to VP of Supply Chain: With great power comes great responsibility.”

2. Customer running a “what-if” in a training class: “I feel the need. I feel the need for speed.”

1. Attendee leaving Kinexions: “I’ll Be Back”.

 

Can you guess the movies? Hope to see you at Kinexions.

kinexions 2014

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


Your supply chain is costing you money – Reason #4 Making key decisions by modelling the supply chain in Excel

Published September 24th, 2014 by John Westerveld 5 Comments

Reason #4 Making key decisions by modelling the supply chain in Excel

Making key decisions by modelling the supply chain in Excel

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:

In my career, I’ve had the pleasure of working with several top tier supply chain companies. Companies that are household names. Companies that have been in business for decades. Companies worth billions of dollars.  Companies that are forced to use Excel to manage large swaths of their advanced supply chain planning.  Companies that are starting to realize that while Excel is a powerful tool and can be used for lots of things, it isn’t the tool to use to run your supply chain.

Excel excels (if you’ll pardon the pun) at many things.  But modelling complex supply chain relationships isn’t one of them. There are many issues with using excel that have been written about numerous times in this blog.  A sampling are here, and here.

I can briefly summarize the main points;

Companies use Excel because their traditional planning systems don’t allow them to view and understand aggregate data and more importantly, don’t allow them to effectively react quickly to change.  However, because people need this information and because people (especially those in supply chain) are very smart and come up with ingenious ways to solve problems, they extract data from their ERP systems and build complex models in Excel.

So we understand why companies turn to Excel; they can’t get what they need from ERP.  Now let’s look at why Excel shouldn’t be used to run your supply chain.

Errors – Excel is a free form modelling tool – which means anyone can build a spreadsheet for just about anything.  Many of these spreadsheets are not validated or tested, meaning that the model is only as good as the persons that create the model.  Millions of dollars have been lost to Excel errors.

Everyone has their own version – While you can password protect and lockdown Excel spreadsheets it is difficult to do effectively and many companies simply don’t do it.  This means that often there are multiple copies of the same spreadsheet, all slightly different.  I’ve been in meetings where what appears to be the same spreadsheet tell different tales because someone made a data or formula change.  Eventually everyone has their own version and are all going off in different directions.

Excel is not supply chain software – it doesn’t matter how good your Excel model is, you simply cannot model the complexity of the supply chain in Excel. This means that the best you can do is build an approximation of your supply chain in Excel.  As we know, in supply chain, details do matter and the small detail that is approximated in your model might be the detail that costs you.

So if ERP can’t do it and Excel isn’t the tool, what tool can help you make supply chain decisions?  This tool needs to have the following characteristics;

End to end visibility – To make supply chain decisions, you need to have visibility across your supply chain. You need to be able to see where inventory exists, what capacity is available and what the issues are.

Simulation – The ability to create a scenario, make a change and instantly see the impact of what that change means that you can try things out and know with confidence that it’s going to work.

Full supply chain analytic model – Supply chain planning is very complex and while most vendors have similar basic logic there are many differences between systems, even within implementations of a given system.  To effectively model this logic, you need a tool that can simultaneously model the supply chain logic from all these different systems.

Collaboration - No one person has knowledge of the entire supply chain in their head.  You need to be able to work with others to resolve complex issues.  So an effective supply chain decision tool will need to allow you to quickly identify who you need to work with and then share your scenario with those people.

How do you make your major supply chain decisions? Comment back and let us know!

 

Posted in Demand management, General News, Inventory management, Response Management, Supply chain collaboration, Supply chain management


Your supply chain is costing you money – Reason #3 Not having end-to-end supply chain visibility

Published September 17th, 2014 by John Westerveld 0 Comments

LA freeway is like complex streets of supply chain

Not having end-to-end supply chain visibility

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:

Imagine this scenario.  You are a supply chain leader. It’s Friday afternoon and your thoughts are turning to the upcoming weekend with your family.  The phone rings – it’s your VP of sales. A prospect that your company has been chasing for years has finally agreed to place an order.  It’s a big one and they need it fast.  Really fast.  Inside cumulative lead-time fast.  The question is can you do it.  Can you commit to this order with confidence that you can deliver?

Traditional ERP offers a couple possible options.  1) Load and pray. Accept the order and hope / pray that everything aligns and you actually can deliver on time… maybe event at a profit. The problem with this approach is that very often, you can’t deliver and you lose a customer and worse your reputation.  2) Fire drill (I knew a company that actually called it that). This is where you e-mail each node in the supply chain with the order requirements, have everyone do a feasibility analysis on accepting the order and then wait for the results. The results, however may take several days / weeks to come in.  By that time the customer and their lucrative order have moved on.

Why are there only these two options with traditional ERP systems? It comes down to the disconnected nature of these systems. Companies that have grown through acquisition typically have multiple ERP systems distributed throughout the enterprise. Even if systems are from the same vendor, they will often be at different versions and are not interconnected.  So a scheduler at one plant has no visibility as to the inventory position, capacity or material supplies at another plant.   The only recourse is to pick up the phone or pound out an email to find out…or guess.

There is a third option, one where you can commit to a customer order with confidence. This new approach enables you to simulate the addition of the new order, see the impact across the entire supply chain, try out different options to resolve any shortages and most importantly know that you can commit to and actually deliver this order…and respond in hours not days or weeks.

This option requires a new tool and a new way of thinking. This approach requires lightning fast simulation and, most importantly, visibility to all the nodes of your supply chain. Let’s look at these one by one;

  • Simulation – To simulate the impact of a major supply chain change like a large order you need to have several things; 1) Analytics that model the results from each of the ERP systems involved in your supply chain.  2) An in-memory data model that bypasses the slow read/write cycles used by disk based systems resulting in lightning fast supply chain calculations and 3) the ability to instantly create scenarios – effectively a copy of the entire database within which you can try out multiple approaches to resolve supply chain issues 4) the ability to share and collaborate with other members of your team.
  • Visibility– Imagine trying to drive a car where you have no visibility to the side, none behind nothing out front except through a little 4” by 5” window.  Yes, you might be able to successfully navigate but the chances of you making a very expensive mistake is pretty high. The sad thing is that this is how many of us navigate the complex streets of supply chain. Traditional ERP often are siloes of information locking off other nodes because they are using different versions or worse, entirely different versions. In our drop in situation, you could have sufficient inventory at a different site but never know it because you can’t see it. But visibility goes beyond the raw data.  Many traditional ERP systems limit visibility because they are designed to show one part, one order at a time.  You cannot look at aggregated data without running specialized reports or extracting the data and loading it into a BI tool.Visibility also means understanding the impact of your decisions on key corporate metrics. Knowing that when you make a decision, that it make sense not only from the context of your department, but also for the company as a whole.

How do achieve supply chain visibility?  Comment back and let us know.

 

Posted in Demand management, General News, Supply chain management


Top 15 Supply Chains to Admire from the Supply Chain Insights Conference

Published September 16th, 2014 by CJ Wehlage 0 Comments

CJ supply chain insights conferenceThe Supply Chain Insights annual conference was held on September 10-11, 2014 at the Phoenician in Scottsdale, Arizona. As an ex-AMR Research analyst, this was my favorite venue. Great memories here, as so much has changed in the supply chain research world these past 5+ years. Reliving the old days was made even more rich, as there was a panel session at the conference with Lora Cecere, Roddy Martin, Mickey North-Rizza and myself. All ex-AMR analysts on the stage, talking about the ‘Top 15 Supply Chains we Admire’.

CJ supply chain insights boardThere has been so much discussion on the “top” supply chain lists.  When we did the Top 25 list at AMR, we mixed a bit of science, art and influence.  While there was always passionate discussions on companies and metrics, the end goal was to raise awareness of supply chain as a practice.  I know the Sales and Marketing folks have lots of elaborate events to celebrate their achievements, and we in supply chain needed to pause from our 17 hour flights to far off places to negotiate a 2% reduction in cost, and celebrate our industry. 

The panel discussed the Top 15 Supply Chains we Admire, as built off the Supply Chain Index.  While other “lists” use ROA, Inventory Turns and Revenue Growth, I find Lora’s science very objective.  She is analyzing growth, inventory turns, operating margin, and return on invested capital, performance and improvement over time. 

The Supply Chain Index methodology was built on the belief that the supply chain is a complex system with increasing complexity. We believe it is the supply chain leader’s role to build and manage supply chain performance to drive year-over-year improvements which are balanced, strong and resilient. We find that most companies throw the system out balance and are able to only drive progress on a single metric, not the metrics portfolio.”

-          Lora Cecere, Founder and CEO, Supply Chain Insights LLC and Abby Mayer, Research Associate, Supply Chain Insights LLC

So, drum roll please…

The Top Supply Chain We Admire are:

  1.  TSMC (Taiwan Semiconductor)
  2.  Intel
  3.  EMC
  4.  Cisco
  5.  Apple
  6.  Seagate
  7.  Colgate
  8.  General Mills
  9. BASF
  10.  Eastman Chemical
  11.  TRW
  12.  Audi
  13.  Nike
  14.  Ralph Lauren
  15.  AB Inbev

Very happy to see two of my prior employers, EMC and Apple, make the list. I would highly recommend you read the Supply Chain Insights report,.  This provides the depth of analysis that created these rankings. With some AMR history on this, I have to say this is a great step in a more objective and mathematical measurement of supply chains. I find it more objective because it is broken down by industry.  I’ve always believed it’s too unfair to compare a life science supply chain (whose primary goal is to manage profitability across the drug lifecycle) against a consumer electronic supply chain (who’s primary goal is market share). 

At the conference, Lora held a session, “The Math Behind the Supply Chain Index” with Dr. George Runger, Arizona State, and Abby Mayer, Supply Chain Insights. This made it fun for us ex-AMR analysts, as we got to talk about our viewpoints and opinions, and Dr. Runger & Abby Mayer had the tough task of going through the methodology.

Some interesting insights:

  •  There were 0 companies from Retail, Paper & Packaging, Pharmaceutical, or Medical Devices.
  • ·Some “big” names from other lists, like P&G, Toyota, Samsung and Walmart didn’t make the lists.

During the panel, I shared my thoughts on Samsung.  They are a supply chain that I very much like, especially from an S&OP practice.  However, they seem to fall under the conglomerate issue, where multiple business units may skew the summary metrics.  Samsung has Visual Displays, Appliances, Semiconductor, Digital Imaging, Networks, PC/Laptop/Printer, Mobile Communications, and LCD panels.  Their S&OP is great across these business units.

  • Demand and supply volatility makes the supply chain “tough”.  And when the going gets tough, the tough get going.  Industrial networks rank highest, followed by consumer.   No healthcare networks made the list.
  • While 12 out of 13 improved resilience, 11 out of 13 lost ground at the intersection of operating margin and inventory turns.

CJ supply chain index

During the Panel, I was asked to comment on the 5 leading factors that make a difference:

  1.  A clear definition of supply chain excellence by leadership
  2.  Strong horizontal processes
  3.  Intentional design
  4.  Value of supply chain planning and analytics
  5.  Development of organizational capabilities

The one that stands out the most is strong horizontal processes.  For years, supply chains have evolved from the Plan, Buy, Make, Deliver model, building Functional processes, with Functional systems.  Each Functional area built “middleware” to bridge the gaps. Most of this middleware was Excel and Meetings.  As we made the supply chain more global and complex (see Supply Chain Insights findings on how we describe our supply chain today), we keep thinking functionally when we should transform to an end-to-end solution. 

supply chain insights lora cecere

 

Speed and Agility will improve dramatically when the process AND solution is focused end-to-end. 

You can see it with the high tech companies on the list.  Each has a story, or driving force behind their transformation to an end-to-end network.

TSMC: driven by a desire to manage the cost and sustainability at their nth tier suppliers, as well as TSMC and their customers, they continually are recognized as a strong partner from both their network as well as external organizations.  Tracking and optimizing costs at all your supply chain nodes requires an end-to-end strategy.

Cisco: for many years, Cisco has led the charge for raising the awareness of supply chain, through their risk management focus as well as their leadership and educational programs. Having a highly outsourced supply chain and managing the risks requires an end-to-end strategy.

EMC: while EMC’s product line is not as complex as, say, Samsung, they are strong at aligning end customers with supply chain with engineering.  One of the best tours is the EMC factory.  You will see how their supply chain is in lock step with test engineering.  This end-to-end focus allows EMC to manage the end customer environment, using manufacturing results to predict customer installed product events, and EMC pre-event resolutions.  It also allows EMC to drive detailed new product introduction success, aligning NPI dates with supply chain plans. 

Seagate: it took a big external event, the Thailand floods, to force Seagate to an end-to-end strategy.  Existence as a company was at stake, and Seagate had to support their suppliers financially.  During this crisis, Seagate leadership rose to the occasion, and created the journey as an end-to-end supply chain.

And, Apple: Having worked there, I would say their strongest ability is leverage. From cash, to product, to dates, to future business, they align end-to-end very tightly to leverage their supply chain network.  Some would call this “demand shaping”.   There’s been many views on the Apple supply chain.  They’ve ranked #1 in the AMR/Gartner list for 7 straight years, since 2008.

Trivia question: Who was the #1 Supply Chain prior to Apple’s 7 Year run?

Answer: Nokia

This brings me to a perfect conclusion: The Supply Chain needs to transform to an end-to-end, business leader role.

Nokia had a great supply chain, focused on the mobile phone hardware.  They failed to integrate software and watched other brands leverage digital content.  They failed to transition to the smart phone era, thinking their brand in mobile will allow them to “catch up”. 

“The high tech era has taught people to expect constant innovation; when companies fall behind, consumers are quick to punish them. Late and inadequate: for Nokia, it was a deadly combination.” The New Yorker, James Surowiecki, September 3, 2013.

Functional excellence is no longer good enough.  Supply Chains are in danger of being punished by consumers, who have the balance of power, if they don’t establish end-to-end control. And, not just for agility & speed, but to leverage the business strategy.


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


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