Archive for the ‘Demand management’ Category

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


Three Distinct Capabilities of Best in Class – From the suppy chain leadership series

Published April 16th, 2014 by CJ Wehlage 2 Comments

supply chain leadership seriesAs I mentioned in my last post of this series, I am starting a blog series on “supply chain leadership”. I hope to pose thought provoking, and forward looking questions to executives in my supply chain network. This series will provide insights into the most pressing challenges, innovative items in supply chain leader’s budgets, and how these executives have handled talent, complexity, end-to-end S&OP, and technology. Next up is Clarence Chen, Partner at AT Kearney.  I have known Clarence from his days at PRTM as Partner of Electronics & Semiconductors.  His background and opinions on the future of supply chain is truly fascinating.

1. As we enter 2014, how would you describe the most pressing supply chain challenges?

Some of the most pressing supply chain challenges in 2014 continues to be that of delivery, quality and cost.  I think the factors that compound those challenges are changing at a faster pace than most industries are able to cope with, thereby making attainment of the core supply chain objectives even more challenging.

There are two vectors for those factors:

1)  At a geo-demographic level there are the shifting patterns of demand and growth along with cost factors rising quickly in some geographies/countries and inputs into production.

2) At a technological level, the pace of innovation continues to accelerate.  Not only is the pace of NPI increasing in technology, but that same clock speed is now moving into broad sectors as trends such as the internet of things/devices become more pervasive beyond traditional high tech penetrating into industrial, healthcare, automotive sectors, etc.

To cope with these factors, companies have to rethink the core supply chain capabilities of plan, source, make, deliver and the skills and resources required to manage supply chains in 2014 and beyond.   Companies will need to manage with greater precision, tightness, and control over their supply chain assets and partners. Those who don’t master that well will risk high E&O and overall inventories, supply-demand mix issues which impact service levels, and slow response times to changing market demand patterns

2. The End-to-End supply chain strategy has been well documented. What capabilities does your company have that is better in class for integrating end to end?

The best-in-class companies have three distinct capabilities that are more developed than others.  First is a thorough mastery of the demand management process – not just focused on forecasting, but on developing a better “quality” of demand.  This emphasizes factors such as being able to understand whether shifts in demand represent a timing issue driven by big deals, or whether the market is fundamentally at new level of demand, and then driving the rationalization of actual demand against a plan. Second is an ability to propagate demand across an extended supply chain, taking into account the key control nodes and depth of the supply chain, and balancing that against supply, inventory, service and supply chain level constraints. Third is the ability to collaborate with key long lead time suppliers to ensure that they are able to meet the forecast and execute against actual requirements. This direct control of the end-to-end supply chain minimizes bullwhip effects, and enables the responsiveness required in today’s volatile environments.

3. How aligned and connected are you to the many supply chain nodes?  What are the reasons you would want to improve this alignment?

Back in 2010, on the heels of a severe component shortage environment as companies emerged from the 2008 market downturn, I conducted a survey with 14 leading computing and storage companies to better understand how some coped better than others with the upswing in demand, and extreme supply shortages.  The findings validated that those companies with greater visibility and control of their extended supply chain fared much better in recovering supply than those companies that did not.  By visibility and control, it means that those that had visibility at component level, and sometimes at tier 3 level visibility, coupled with planning and orchestration across the extended supply could then proactively allocate precious supply to demand priorities and manage tightly the placement of P.O.s at the extend lead times. In particular, those that modeled what their contract manufacturers and key supplier suppliers (e.g. die banks with silicon devices) and were able to balance S-D at each node fared the best.

I love Clarence’s insights, especially on the main challenge: delivery, quality, and cost.  These are the core objectives from the past 20 years, and remain the core challenges.  However, as he notes, demand demographics and speed of NPI cycles are stressing the core in new ways.  Most people want visibility.  But, a lot don’t drill into the question, “What will you do with visibility?”  As Clarence notes, the quality of demand needs to improve.  What segments are relevant?  You need to propagate this relevance throughout your supply network.  What are the insights to this change?  And, then you need to collaborate with the key nodes to execute the change.

You can see those supply chains that can prioritize change, analyze the end-to-end impact, and collaborate in real time are doing so with better margin  and operating costs, capturing more market share, and controlling supply chain risk and disruptions better.

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


Miami Vice, Diapers, SCM World and the Digital Supply Chain

Published April 14th, 2014 by CJ Wehlage 2 Comments

Let me set the scene for you:
It is Sunday, February 23, 2014 at 9:00a.m.  Location: Miami, the Trump National Doral… outside patio. I’m grasping two cups of coffee and wearing all white. I’m sitting with Kevin O’Marah and he has an inquisitive demeanor … do I have your attention?

Now, let’s go back 9 hours. I was north of San Diego celebrating at a local home. The event was the Scholars Circle White Party, to honor the donors of a local public school.  Naturally I wore white shoes, white pants, and a white shirt. I had to leave the event and go straight to the airport to catch my red-eye flight to Miami to attend the SCM World Live conference. I landed at 7am EST – nary a minute of sleep on the plane. I took a cab ride over to the Doral to meet my good friend Kevin O’Marah, Chief Content Office at SCM World (and wondering why I scheduled a 9am and not a 5pm, but that is beside the point).

Kevin and I go way back to our days at AMR Research. I always love catching up with him, sharing stories of supply chain, innovative practices and research concepts.

The first thing Kevin said to me was “you look ready for Miami!” … referring to my all white attire (for all you Millennials, it’s a Sonny Crockett thing…that’s Don Johnson from Miami Vice).

Not only was I ready for Miami and the SCM World Live conference, I was also ready for a very insightful 1+ hour back and forth with Kevin on digital demand and the impacts on supply chain.  I’m sure Kevin was expecting my insights to be on Apple or Bose, where I had worked prior.  However, I was actually captivated by an innovation on digital diapers. Yes, digital diapers.  I had just read a story about diapers that actually tweet you when they are, say, wet or soiled…

There’s a device inside each diaper: a sensor for identifying when the diaper is wet and a blue-tooth to send a tweet.  As a true supply chain practitioner, my main concern was that the cost would be too high for this product. But, when I spent some time thinking about the product and the customer experience, I concluded that the digital diaper cost could not only the same as the regular diaper, it stands a chance to be lower.  As the SCM World report “Demand Management 2020” states, “Value to the customer encompasses the product purchased as well as the complete experience around that purchase (Demand Management 2020, SCM World, Research Report, March 2014).”

Our discussion came back to how a supply chain practitioner can participate in building a “digital” product.  Certainly it takes marketing, engineering, and sales innovation, but also supply chain innovation.

Having worked at Kinaxis for a little over a year, I told Kevin, “one of the main benefits I see our customers achieving is planner productivity”.  Our end-to-end planning with exception based notifications and simulation removes steps from the process and brings significant speed. The result is that planners are more productive.  Or said another way, planners can spend more time on innovation.

The SCM World report states, “It is this translation (across demand and supply), that brings about the ability to evaluate different strategic scenarios (Demand Management 2020, SCM World, Research Report March 2014).”  Our discussion continued along these lines.  In order for supply chains to test innovation, planners need simulation capability to create scenarios.  In essence, test the innovation against operational realities and metrics.  At Kinaxis, our customers do just that. Achieve the benefit of planner productivity and use it to simulate scenarios.  Scenarios improve profit margin, inventory turns, operating costs, value to the customer, new product ramps, revenue growth, capacity, etc.

So, let’s go back to our digital diaper discussion.  How does a customer purchase diapers?  One would likely go to a retail store, buy a box of 100, get home and put 30 in the downstairs bathroom, 30 in the baby’s room, 30 in the travel bag, and the last 10 in the stroller pouch. When the 30 that are downstairs runs out, you steal from the travel bag a few times, and then probably go buy another box of 100.  Never realizing exactly how many you have. You just don’t want to be at Zero   Trust me – I have two young kids…

That’s the customer experience, much more than a spreadsheet of demand numbers for your supply chain planners.  Now, imagine your team using an application to simulate innovative scenarios and gain significant productivity.

Supply chain innovation scenario: Each tweet the diaper sends out can also count the tweets. When you get to 75 tweets, you also get a tweet or email telling you that there are 25 diapers to go, and asking if you would like a new box of 100 shipped direct to your home.  The tweet/email can also suggest other products (such as items in excess) to add to the order, or special price/promotional add-on’s. That data can also go back to the manufacturer, and used for supply chain planning.  As Kevin and I talked, we came to the possibility that the “digital” diaper could actually cost less when looking at the “complete experience around that purchase.”

SCM World And the digital supply chain

The opportunity is in front of us as supply chain practitioners.  Anything can be digital, and digital can change the supply chain significantly.  Kevin and I concluded that current business complexity keeps us so busy firefighting and resolving issues 24/7. As leaders, we need to get to true exception based end-to-end planning, and gain the benefit of planner productivity.  Only then can our supply chain planners take the time to simulate innovative scenarios that bring customer value, revenue growth, and supply chain excellence, even to products like diapers.

 

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Posted in Demand management, Miscellanea, Response Management, Supply chain collaboration


‘Know Sooner, Act Faster’: A Supply-Chain Mantra

Published April 9th, 2014 by Melissa Clow 2 Comments

SupplyChainBrain attended our annual Kinexions user conference, and while there, they completed a number of video interviews with customers, analysts, and Kinaxis executives. And, we’d like to share them!

In this interview, hear C.J. Wehlage, vice president of high-tech solutions with Kinaxis, detail industry’s major supply-chain management challenges in particular, the difficulty of obtaining full visibility of supply and demand, and dealing with the volatility of markets. Know sooner, act faster  is the mantra offered by Wehlage as a key strategy for dealing with growing market volatility. I run into supply chain practitioners who don’t know as much as they think they do, he says.  It’s about responsiveness, and how much you know about your supply chain.

 

Previously, we featured interviews with:

 

‘Know Sooner, Act Faster’: A Supply-Chain Mantra – Interview summary

CJ wehlageIn seeking upstream visibility, many companies don’t look beyond their first-tier suppliers. As a result, crises often devolve into firefighting, rather than being averted through proper oversight of all suppliers, third-party logistics providers and even the retail store.

It’s tough to put a value on the prevention of a crisis that never happens. Still, says Wehlage, that necessary level of responsiveness is the core of supply chain.  It’s the key to how managers can influence the reporting structure within their organizations. Being able to make informed decisions, and acting on them, provides executives with a level of power that isn’t reachable through traditional methods.

Responsiveness isn’t just a tool for managing supply-chain execution; it also bears a strategic element. Decisions can be driven at the C-level, rather than occurring exclusively in the trenches.

A key competency that many companies are missing today is leadership. There has to be somebody asking the end-to-end questions, says Wehlage. What’s my profitability across this?

Yet another key element of modern-day supply-chain management is obtaining the right talent. It used to be sufficient for employees to possess functional expertise. Now, end-to-end skills are critical.

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


7 Life Sciences Supply Chain Processes That Require an Integrated Approach

Published April 7th, 2014 by Trevor Miles @milesahead 0 Comments

The emerging or intensifying industry dynamics that I discussed in an earlier blog post, along with significant shifts in strategy, are having a direct and material impact on the way Life Sciences supply chains must operate. The compounded effect of a host of complexity drivers is creating the need for supply chain transformation. By satisfying the following seven supply chain processes in an integrated manner, Life Sciences teams will be better equipped for success in today’s new, complex world.

  1. Collaborative launch management – clinical, regulatory and commercial
  2. Jurisdictional control to respect regulatory needs during planning
  3. Consensus demand planning across affiliates and countries
  4. Risk evaluation and recovery to deal with shortages and FDA shutdowns
  5. Shortage analysis and reporting for FDASIA compliance
  6. Supply and capacity planning to balance demand across regions
  7. Expiry management to balance long supply lead times and shifting demand

Let’s take a look at each of these in more detail.

Coordinated Launches

The effective launch of a new product is critically important in any industry, but it is of particular importance in the Life Sciences industry given the long time it takes to bring a new drug to market from discovery through clinical trials and commercialization, with regulatory oversight and conformance throughout the process. When the ‘long tail’ trend is coupled with shorter patent protection, the margin and market captured during the early launch period will be crucial to the recovery of the R&D investment, and thus the pressure to streamline and coordinate clinical trials and the regulatory process with the commercial launch has become intense.

Revenue Trends throughout the Product Life Cycle

phamacutical supply chain graph

Jurisdictional Control

In addition, mandates by regulatory bodies require jurisdictional control of demand satisfaction to account for third country sourcing, validation, and shelf life requirements, amongst others. This requires sophisticated attribute based planning to link demand characteristics to supply characteristics while simultaneously analyzing and reducing expiry risk, especially when inventory postponement strategies are used.

Consensus Demand Planning

For tax, legal, and regulatory reasons, many Life Sciences companies establish semi-independent sales affiliates or subsidiaries in some jurisdictions or sell through third parties. Creating a consensus demand plan across all the affiliates and subsidiaries is not a trivial task. Often, each demand region will forecast in different units (doses, standard packs, grams of API, etc.); almost always in different currencies; at a different cadence (quarterly, monthly, weekly); and over different time horizons. However, manufacturing needs to create a single forecast using a consistent unit of measure so that they can net the demand against available supply and determine future manufacturing capacity needs. To make matters worse, the affiliates are often less than fully transparent about their on-hand inventory.

Risk Evaluation and Recovery (including Shortage Analysis and Reporting)

Current technical architectures do not provide the capabilities needed to address new requirements under FDASIA ̶ reporting obligations for drug shortage issues and more active inspection of production facilities for instance. Information flow is typically limited to EDI exchanges with little or no ability to understand, for example, the impact of an API supply de-commit on future treatment —drug or device— availability in a regulatory region. To do this, Life Sciences companies will require much greater visibility and what-if scenario capabilities to both inspect and affect the global supply chain across Third Party Operators and into the supply base.

Tender Analysis and Management

Many manufacturers lack the required process standardization in manufacturing, inventory and expiry management, and other core business disciplines to make the required trade-offs during tender analysis between demand satisfaction, expiry risk, and constrained capacity utilization, ultimately leading to effective supply and capacity planning to balance demand across regions. Collaboration across the players in the supply chain is often insufficient and inefficient to achieve these tradeoffs. Given the harsh penalties imposed for non-conformance, being able to make the trade-offs to maintain profitability span the life cycle of the tender, not simply the tender acquisition phase.

Expiry Management

Streamlining manufacturing and distribution processes in order to satisfy demand while reducing unit cost is therefore becoming increasingly important in order to maintain profitability, reduce inventories and enhancing competitiveness within the industry. This is especially true given the long manufacturing lead times, often as long as 12-18 months in bio-pharmaceuticals, which lead to the need for expiry risk and stop sell analysis capabilities to balance effective demand satisfaction with efficient capacity utilization.

A New Technology Paradigm for a New World

phamacutical supply chain graph #5Legacy demand planning and supply chain planning systems were not designed for today’s complexities, and consequently don’t meet the many challenges that have emerged. As a result, Life Sciences companies are adopting process improvements and new technologies targeted at removing business “silos,” improving collaboration, and increasing productivity.

For a true breakthrough, you need an integrated solution. People must be able to leverage a single system with one set of data, supported by comprehensive analysis and decision-making capabilities, no matter what the process or the problem.

To keep a finger on the pulse of the supply chain, today’s solutions must:

  • Embrace the reality that today’s supply chains are multi-enterprise in nature and, thus, must provide comprehensive visibility into the extended supply chain to regain an understanding of the manufacturing commitments and inventory positions throughout the supply network. Visibility is an essential pre-requisite for effective orchestration of the business.
  • Proactively bring to light major variances to plan, identifying not only specific events, but also identifying and quantifying the consequences to customer service, revenue, margin, and a number of other financial and operations metrics, and thereby flagging those that could do most harm to the business.
  • Arm decision-makers with scenario simulation capabilities for risk trade-off and response, to model and compare situations quickly and appropriately to ensure a profitable response is put into action. And it must facilitate and incorporate human judgment, since many of the decision requirements are extremely difficult, if not impossible, to capture in a mathematical model — the foundation of an optimization system.
  • Foster collaboration for team-based decisions that tap the collective insight of the right people in the organization — those that understand the potential impact of any event and proposed action alternatives.

 

Posted in Best practices, Demand management, Milesahead, Pharma and life sciences supply chain management, Supply chain management


Supply Chain Leadership Series: High Tech executive focused on global external manufacturing

Published April 3rd, 2014 by CJ Wehlage 0 Comments

I am starting a blog series called “Supply Chain Leadership”, where I hope to pose thought provoking, and forward looking questions to executives in my supply chain network.  Posted monthly, this series will provide insights into the most pressing challenges, innovative items in their budgets, and how these executives have handled talent, complexity, end-to-end S&OP, and technology.

First up is a high tech executive in the enterprise storage industry. He is leading the global external manufacturing group and based in Ireland. His deep experience in working with the complexity of outsourced manufacturing, to me, is the most extensive I have known.

1.       As we enter 2014, how would you describe the most pressing supply chain challenges?

Supply Chain challenges are coming at us from multiple fronts. The ones we know about are increases in regulations, e.g. BIS, and finding the right balance between cost and the ability to service our customers in the most efficient way from an availability and lead-time standpoint. The biggest challenge, however, is being prepared for the next major Supply Chain disruption. Over the past 3 years we have had many natural disasters including ash clouds, earthquakes, flooding & hurricanes. While these events have had a really terrible impact on people lives within the region where they have occurred, they have also had a significant impact on the supply of materials to many locations world-wide. From a Supply Chain standpoint, our challenge is to prepare as robust a supply chain as possible to deal with other natural disasters that will certainly happen in the future, but we just don’t know where or when.

 

And the data supports his concern:

  • Japan Quake/Tsunami – $210B cost
  • Thailand Floods – $30B cost
  • Volcano Ash Clouds – $5B impact to global GDP

 

Global Billion-Dollar Economic Loss Events by Region

2.       Looking back at the past few years, what parts of supply chain have improved and what have you seen as the contributing factors for that improvement?

Rather than specific processes, applications or techniques, I believe the biggest improvement over the past couple of years is the general acceptance that manufacturing in, or sourcing material from, the lowest cost region is not always the right option. Many manufacturing companies, particularly in the high-tech sector, are focusing on the concept of “Right-Shoring”, which is basically optimizing multiple locations to take advantage of total cost, time to market and other factors such as consumer’s pride in “Made in x” or concerns about worker’s conditions is certain regions.

This general acceptance or mind shift change has encouraged and facilitated a different type of thinking that has driven improvements in many supply chain related areas.

 

3.       In the creation or support of your Budget Plan, what are the new items you see for this year and beyond, things that haven’t been on prior year Budgets, or things that have seen the greatest increase in priority?

One item that is chewing up a larger portion of tightening budgets is the cost associated with complying with importation regulation is many countries. As supply chain professionals, we have an obligation to ensure that our products do not present any risk to humans or the environment. However, over the past few years more and more countries have implemented unique requirements that are costing a lot of money and increased difficulties in the supply chain.

I am not really seeing enough effort to eliminate these unique requirements and move to a global standard. This needs to be a priority for our industry over the next couple of years.  

 

4.       The End-to-End supply chain strategy has been well documented. What capabilities does your company have that is better in class for integrating end-to-end?

A global footprint of fulfillment sources, both our own factories and CM facilities, which allows us to vertically integrate at the most competitive, cost to best service our customers. Selecting the most suitable partners who are as interested in growing a sustainable business as we are, has been one of the most important elements of our end-to-end supply chain strategy. Our supply chain partners provide us the world class service. They totally understand the direction that our business is going and what our future needs will be, sometimes before we do ourselves.

 

5.       How aligned and connected are you to the many supply chain nodes?  What are the reasons you would want to improve this alignment?

I believe we are very aligned and connected with our supply chain nodes. We are also very much aware of alternative supply chain nodes and how quickly we could turn them on if we needed to. Partnering with some of the world’s leading supply chain experts is an integral part of our supply chain strategy. However, we always need to keep improving this alignment. The world is changing at a faster pace than ever before and we need to stay at the leading edge. Technology is improving and the use of near real-time data can provide tremendous benefits. We must embrace these changes and continue to drive further alignment to reap the benefits.

 

I find his answers fascinating.  Would you agree?

When talking about outsourcing, he calls out the real challenge… global decisions.  Connecting trading partner data is a given. What you do with that data – Decision Making – is the heart of successful external manufacturing. When a disruption occurs, whether it’s a supply shortage or a natural disaster, the ability to structure the decisions is critical.  And what makes a decision? = policies.

Visibility into data gives you just a number. The difficult part is determining what that number means. What is needed is visibility into policy, because you can now determine the relevance of what’s impacted, and the insight as to what to do about it.

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Posted in Best practices, Demand management, Sales and operations planning (S&OP)


The Innovator’s Dilemma: How Does it Apply to Supply Chain?

Published March 26th, 2014 by CJ Wehlage 2 Comments

It has been said that the business book that most influenced Steve Jobs was ‘The Innovator’s Dilemma’. Considering the success Jobs experienced in his lifetime, I’m intrigued as to what he learned from it. We all know Jobs was a highly successful businessman, for example, Apple stock increased nearly 7,000% during the time Steve returned to Apple in August 1997 until passing the reins over to Tim Cook in August 2011.  It made me wonder what this book means to the supply chain business. So I decided to read ‘The Innovator’s Dilemma’. But when I read it, I inserted the word “Supply Chain” where “Product” was mentioned.

I’d like to share some insights I gleaned from the book:

Clayton Christensen, author of “The Innovator’s Dilemma’ said,

“The reason why successful companies fail is they invest in things that provide the most immediate and tangible evidence of achievement.”

In ‘supply chain speak’, that means the inability to link strategy with execution.  Most of us get caught in the day–to-day challenge of running the business. For example, planners spend endless hours on finding and resolving exceptions. There’s just not enough time in the day to focus on strategy and innovation.

A very good method I have used when leading supply chain strategies, is to focus on the decisions, rather than the information.   Asking, “What margin do I need this network to have for the first three months of NPI?” is better than asking “How can we get safety stock data to match between systems?”

Why is this better?  I say because of “critical thinking”. Planning is a combination of systems and human judgment. Too many planning organizations rely only on the system output. Yet, with complexity and volatility in today’s global network, critical thinking is just as important to solve the planning challenge.

I have a saying: ‘Information isn’t Power, Informative Decisions is Power’.  Figure 1 shows a very common supply chain decision flow.

Information isn’t Power, Informative Decisions is Power

Reactive supply chains manage right to left, meaning the majority of their time is driven by the impact (low profitability, excess inventory, shortage, etc).  Predictive supply chains manage left to right, meaning they simulate the plan for desired impact, and then execute.  The majority of their time is doing critical thinking and collaborative scenarios.   All supply chains bounce between reactive and predictive.  However, a heavy focus on reactive makes a more efficient supply chain, and solves today’s issue. However, it doesn’t make for a more effective supply chain or solve forward looking issues such as profitability, total cost to serve and market share.

Another good book to read is ‘Profit Mapping’.  A quote I really like is:

“We see many instances where a company may have become more efficient when viewed through a process improvement lens, but not necessarily more effective as far as the business is concerned.”

Being more effective at operating margins and inventory turns (two very good supply chain metrics) only occurs with predictive planning and critical thinking.  And, while efficient supply chain leaders can improve their KPI’s, most industries find it difficult to sustain that improvement. See the research table from Supply Chain Insights LLC presented at their 2013 Supply Chain Insights Global Summit.

 

 

Pretty much across the board, sustaining growth in turns and operating margin beyond three years is not likely to happen. Typically, progress stalls after two years.

The three reasons found to stall progress

1. Functional leadership

Today’s supply chain continues to focus on functional fixes, such as purchasing, logistics, etc.  With the network so complex, global, and outsourced, the greater impact is on your ability to manage the end-to-end process.   This requires not only visibility of end-to-end, but also, the ability to simulate and collaborate end-to-end.  It has less to do about your ERP system, and more to do with the entire network’s planning capabilities.

2. Complexity of systems used

Many companies have multiple systems, multiple ERP instances, and in many cases, functional systems bought for functional purposes.  Middleware is everywhere, and spreadsheets rule the day.  I’m not talking about the number of systems, because when you think about “end-to-end”, you now include all your 1st and 2nd Tier suppliers, 3PLs, distributors, etc.. Face it, there are a lot of systems.  I’m talking about the justification of the landscape.   It’s difficult to justify a functional system for an end-to-end process.

3.       Lack of a supply chain strategy

Lack of a supply chain strategyI’ve seen many supply chain leaders, while working on a supply chain strategy, get caught in the idea that data needs to be cleaned before innovation.   Don’t get me wrong, clean data is a good thing. But, how you go about getting there is the innovation.  Rather than spending countless hours of data cleanup, look at your most critical end-to-end processes, ask what knowledge is needed to plan and execute, and pareto the data needed to execute and fix.

 

The Roadmap to Sustainable Progress

Clayton has a statement in ‘The Innovator’s Dilemma’, “great managers…must first understand what has caused those circumstances and what forces will affect the feasibility of their solutions.”  I believe there are three core steps a supply chain can take to achieve end-to-end control.

Step 1: Collect end-to-end data, and the policies that drive the data

  • Data is good, but the policies that drive the data, especially when considering the time/events that drove the rules, like beginning of the month, last quarter, etc.
  • With the end-to-end data, set control limits to the policies.  When an issue arises, effective alerts go off, keeping the planners focused on core priorities

Step 2: Improve planning by launching what-if capabilities

  • With end-to-end data, you will have exposed the bad data.  Start your first simulations around what policies are most impacted with that bad data.  This will drive the pareto of what data absolutely needs to be fixed.
  • Yesterday vs today: run what if scenarios that tell you each morning what has changed from yesterday, and what are the most critical actions for today.
  • Informative decisions: simulate what it would take for higher profit, better turns, less excess inventory, better COGS, etc…

Step 3: Segment your end-to-end priorities

  • Segment your products and customers. Simulate various supply chain policies against those segments.  Test the attributes that make up each segment

Great supply chains need to align a strategy with the execution.  Putting an intense focus on simulation in Planning allows you to prepare in advance of the impacts.  And that’s summarized well in the book Profit Mapping:

“a wise manager knows that success only comes with operational excellence that is properly aligned with strategy.  The challenge is knowing what actions to take and when to take them – navigating without knowing the impact of your actions on the bottom line is a risk you can’t afford to take.”

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