Archive for the ‘General News’ Category

On-demand Recording of Purposeful Collaboration: What It Could Mean for Your S&OP Process

Published October 21st, 2014 by Melissa Clow 1 Comment

Purposeful Collaboration What It Could Mean for Your S&OP Process

Last week Alan Lepofsky, VP and Principal Analyst, Constellation Research and Trevor Miles, VP Thought Leadership, Kinaxis participated in a webcast on ‘Purposeful Collaboration: What It Could Mean for Your S&OP Process’.

The two discussed how even with heavy investments in Sales and Operations Planning (S&OP), many organizations are not achieving material or sustainable breakthroughs. This is often because they are executing a sequential, disjointed process with contributors operating in their narrow functional box.

In this recorded webcast, learn how purposeful collaboration can connect content, conversations, colleagues and communities to drive improved business outcomes.

Topics covered:

  • Harnessing and capitalizing on “working social” in a B2B environment
  • Using the key tenets of purposeful collaboration to enable effective decision-making, resolution and consensus building
  • Capabilities required to facilitate purposeful collaboration in S&OP
  • Changing the mindset away from the individual supply chain / S&OP functions to connecting functions and most importantly, people

If you missed it, feel free to check out the slides or the webcast recording.

 

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


Your supply chain is costing you money – Reason #6 Not effectively managing inventory.

Published October 20th, 2014 by John Westerveld 0 Comments

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:

Not effectively managing inventory.

Reason #6 Not effectively managing inventory

I had to throw out some carrots yesterday. I hate throwing food out but there was nothing to be done for it…all I can say is that I’m glad the carrots were in a bag….and it didn’t leak. That got me thinking about why I was throwing away what had been perfectly good food;

  • I had forecasted needing a certain amount, but the customers (my family) didn’t take what I’d forecasted.
  • I thought we would want carrots, but everyone wanted broccoli…which I didn’t have.
  • I lost track of how many carrots we had and ended up buying more when we really didn’t need any.
  • Spoilage can happen.  In the case of my carrots, there was a limited shelf life – but they could have been dropped or stolen (hey, it could happen!).

That was carrots.  All in all, it cost me a couple of dollars.  Unfortunately, all the same kinds of things can happen to your supply chain inventory.  Except that your inventory costs millions of dollars.

Those of you that manage inventories know how hard it can be to get the quantities just right.  If you maintain too little inventory, you have stockouts, line stoppages and unhappy customers.  If you have excess inventory, it ties up working capital and is at risk of damage and obsolescence.  The worst possible world is when you have too much of something you don’t need, and too little of something you do need.

So what strategies are out there to maintain inventories at the “right” level? There are many but let’s focus on some of the high runners;

  • Sales and Operations Planning – How many times have you seen this scenario play out? Marketing sees an opportunity and plans a huge promotion for Product B.  Operations is going full out building anticipation inventory for Product A because Product A’s demand always goes up this time of year. By the time operations realizes that marketing is promoting a different product, they already have too much inventory of Product A and don’t have enough time to make enough Product B to satisfy the demand driven by the promotion.   If this company had an effective S&OP process, operations and marketing would have been aligned as soon as Marketing had approved the promotion, and would have had the right amount of inventory of the right product.
  • Better forecasts – Forecasts are always wrong! True.  But sometimes they can be less wrong…and the more accurate your forecast, the more likely it is that you’ll be building the right quantity of the right products at the right time.  Forecasting is hard, however, advanced tools like statistical forecasting algorithms, collaborative forecasting tools and forecast accuracy measures and what-if scenarios helps guide demand planners to a more accurate set of numbers.
  • Lead time reductions – Supply chain improvements can actually help improve forecasting!  Well,actually it would reduce the impact of bad forecasting when you are a make to stock shop.  How does that work you ask?   Imagine you were asked to accurately predict the weather for this time next year.  Pretty tough right? What about six months from now….still hard. What about next week? Getting easier.  How about tomorrow?  No problem (usually)!  In a make to stock environment, if I have a 6 month cumulative lead time, my forecast is being used to buy inventory today for something I’m going to sell in 6 months.  If through process improvements, I can reduce my lead time to 2 months, my accuracy will be much better where it really matters; during my cumulative lead time.
  • Better/faster planning – While there are things you can (and should) do to improve your forecasts, you are never going to realize truly accurate forecasts.  For example, a surveyfrom 2012 showed that average forecast error by industry ranged from 15% for retail to 39% for manufacturing/industrial and consumer packaged goods. Forecast error for most other industries was around 30%.One of the problems with poor forecast accuracy is that today’s legacy systems are unable to respond fast enough to satisfy demand that is in excess of forecast.  This leads to a) higher than necessary inventory levels as we maintain higher inventories on those items with the highest variability and forecast error or b) lower than acceptable customer service. Neither are good results.

So how do we respond faster? There are multiple capabilities your demand system must have to allow faster response to demand fluctuations;

  1. Visibility across the enterprise – to be able to respond effectively, your planning system must contain all data across all plants, regardless of the source system. Responding quickly means knowing what you have and what you don’t have.  If you have to wait hours or days to get a report off a remote system, you can’t respond.
  2. Always on analytics – Imagine creating an excel model but every time you made a change, you had to wait 6 hours to see the impact.   It wouldn’t be very useful, right? Yet this is what we accept from our ERP systems every day. To simulate effectively, you need to be able to see the result of a change as soon as that change is made.  Not only must the calculations be fast (seconds not hours) but the calculations must be configurable enough to allow you to model ERP results from any ERP system (what’s the point of figuring out what to do, if you can’t replicate the results in your execution system)
  3. What-if scenarios including scenario comparison – There is never only one answer to complex problems like supply change. Being able to try out multiple approaches very quickly and compare these approaches means that you can quickly zero in on the best answer.
  4. Collaboration – No one person has the knowledge of the entire supply chain in their head.  You must be able to rely on others to help figure things out.  You must be able to determine who needs to be involved, then share the appropriate scenarios and information with those people if you want to respond quickly (and confidently).
  5. Alerting based on impact, not on the event – There are a lot of things vying for our attention today.  So many, in fact, that we don’t have time to deal with items that aren’t truly important.  Traditional ERP systems drown us in frivolous messages; this supply order is 1 day late, this customer added an order, this job finished on time, etc, etc.  This is not important information –and as a rule can be relegated to summarized reports.  What is critical is: what the impact of these events?  For example, if that order is one day late, it impacts $3 million in customer orders. That’s what you want to know.  If the order is replenishing safety stock – who cares?
  • Inventory planning and optimization – Safety stock traditionally has been a pain to calculate – as a result many people didn’t. They either set the safety stock level once – and forgot about it or did a best guess at what the Safety Stock should be.  Inventory Planning is a relatively new area where safety stock is statistically determined based desired customer service levels and on supply and/or demand history. Traditionally, Safety stock was calculated a single level at a time and didn’t consider the stock of the parent or component item when calculating its own stock level.  Multi-Echelon optimization looks at the inventory for a family of parts and determines where it makes the most sense to locate inventory for individual items within that family and potentially lowers the overall inventory for the family.
  • Inventory accuracy – similar to my carrot analogy –  we all have had situations where you go to the store, buy some goods – then discover that you have 6 cans of the thing you just bought hiding behind the peanut butter.  Or worse, you THINK you have 6 cans of thing you need for supper and you don’t pick more of it up – then you discover that someone (maybe you?) ate it and you actually have none.  In supply chain, the same thing happens – but the cause is inaccurate inventory records and the cost can be huge.  How do inventory records get out of alignment?  In a previous life, I used to work with the operations team and track down inventory records. The biggest culprit was human error; incorrect quantities, incorrect BOMs, spillage, waste, etc.There are two approaches to maintaining accurate records;1. Annual physical inventory – This is a traditional inventory management technique where you take several days, tag all of the items in inventory and have some poor guy count the items, write the count on the tag and turn the tag into a central team that updates the records.  If there is a problem, the poor guy may be asked to go out and count the items again.  There are some problems with this approach;
    • While the inventory is being done, the factory cannot run. This means inventory must be done over the weekend or the factory needs to be shut down.
    • Physical inventories are not fun.  It’s tedious, boring, dirty, nasty work (speaking as someone who’s done it). It’s often performed by people not necessarily tied to the inventory function. It’s difficult to be precise counting thousands of different parts in the course of a few days.  It’s very likely that a significant number of the counts will be wrong.
    • The root cause of the error (why the inventory is wrong) is seldom ever caught and as such, doesn’t get corrected.

    2. Cycle counting – Cycle counting is a system where some small percentage of items get counted every day.  Important parts get counted several times per year, while unimportant parts are counted once per year. Every item is guaranteed to be counted at least once. The advantages of cycle counting are numerous;

    • The supply chain continues to function while the cycle count is done
    • The count is performed by inventory specialists that know the inventory, are used to counting and are incented to get it right.
    • Key parts are counted more frequently and therefore will be more accurate.
    • When a discrepancy is found, the team seeks to understand why the error occurred and ideally determines what changes they need to make to prevent the error from happening again.

    Inventory Management is a large and changing topic.  I’ve hit on what I think are some of the top runners in this post, but I know there are more factors that can cause inventory problems.  What issues have you seen?  Comment back and let us know!

     

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


Will the Internet of Things (IoT) Help Eliminate Information Latency and Deficiency in Supply Planning?

Published October 14th, 2014 by Prasad Satyavolu 5 Comments

Last week, Trevor Miles wrote “SMAC in the Middle of Supply Chain Change” and it made me recall the dozen or so articles I’ve read recently on the Internet of Things (IoT). I find that most have a similar opening – 30 billion or so devices will be connected by 2017 and more “things” will be connected than human beings on the earth. More and more sensors are getting embedded in the “things” and leading to an explosion of information availability.

devices internet of things

But in all fairness, this is indeed an unprecedented opportunity to leverage IoT for a transformation of the supply planning paradigm.

A multitude of challenges are emerging from a rapidly evolving supply & demand environment that warrant a fresh look at planning – really to assess the level of entropy! So when I started to think about planning processes in the context of IoT, I was wondering if we can conquer those two old enemies of planning effectiveness: information deficiency and information latency. The prospect seems exciting – new offerings targeted to finely segmented markets customized to individual customers, and movement of goods providing continuous visibility. Will IoT design enable us to get demand signals from the products and sensory information from the entire set of physical infrastructure for planning?

It is evident that this is crucial, as most manufacturers are still citing incidents of supply chain disruptions resulting from the lack of information visibility. In a 2013 survey by Business Continuity Institute  of over 500 business continuity professionals from 71 countries, 75% of respondents reported that they did not have full visibility of their supply chains.

From the proceedings at the Intelligent Transportation Systems World Congress in Detroit earlier this month, it certainly appeared that the green shoots are in sight. Mary Barra, GM’s CEO, announced a partnership for the development of a 125 mile long corridor of Intelligent and Connected Infrastructure in collaboration with academia, government and industry. While it by no means provides complete coverage, it is a bold start to create a truly interconnected ecosystem that will generate information efficiencies and not information overload for extreme planning.

sensors mobile internet of things

Umberto Eco writes that “Any fact becomes important when it’s connected to another.” Perhaps a philosophical underpinning to the possibilities from convergence of physical and digital supply chain? The path to realization certainly lies in synchronous orchestration of multiple technologies.

Applying Systems Thinking to all aspects of planning in supply chain will therefore help to improve the “input” and create better “closed loop feedback”. The developing IoT ecosystem certainly has the potential for eliminating the information latency and deficiency that we see today in the planning processes.

What do you think? Comment back and share your thoughts.

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


Remembering: Turning Visibility into Possibility by Don Gaspari, NCR at Kinexions

Published October 9th, 2014 by Melissa Clow 0 Comments

As we countdown the days until Kinexions (18 days!). I’m remembering our fascinating customer videos. Today I’d like to share the interview on ‘Turning Visibility into Possibility’ from Kinexions.

In this video hear, Don Gaspari, Director, Materials & Inventory, Global Operations and Logistics, NCR, speak about his time at NCR and their vision to leverage it’s market leadership in self service devices and applications to transform the way that business does business with consumers. To support the company’s vision, NCR’s Global Operations team has developed a “Next in Class” supply chain strategy to enable it’s manufacturing and distribution network to efficiently and effectively respond to customer requirement’s.

To view the video in its entirety, watch it below or here.

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


Throw Back Thursday: Remembering ‘Meeting Customer Demand in a Complex Industry’ from Kinexions

Published October 2nd, 2014 by Melissa Clow 1 Comment

Kinexions is in 26 days! As we countdown the days, I’m remembering our fascinating customer videos. Today I’d like to share the interview on ‘Meeting Customer Demand in a Complex Industry’ at Kinexions.

In this video hear, Gary Dietz, Manager, Global Logistics and Supply Integrated Supply Chain and Logistics, Kennametal, as he discusses the challenges his company faces in gaining full visibility of supply and demand, and in dealing with increasing supply chain volatility.

This global manufacturer of surface-cutting tools, with headquarters in western Pennsylvania. Customers include the aerospace, surface mining, oil and gas and machine-tool industries. Dietz says the company operates in “a very demanding industry,” characterized by highly unpredictable demand. The challenge is becoming even more daunting as Kennametal moves into the developing world, its most promising source of new business.

The company’s biggest pain point, he says, is managing assets. Kennametal strives to meet customer demand for customized products, while also manufacturing to stock. Accuracy in the making and placement of items is essential, says Dietz.

To view the video in its entirety, watch it below or here.

Kennametal realized that their past supply chain capabilities were not sufficient to support growth, he says. “We’re looking for flexibility in our supply chain to adapt.” The company needs to be able to perform “what-if” analyses of future demand, while possessing the ability to quickly scale up in line with demand.

Dietz says the company is currently implementing systems to provide it with more visibility to supply and demand. The effort requires cooperation from planning, production, marketing and sales.

Among the biggest challenges associated with the initiative is the management of “big data.” Kennametal produces some 12,000 combinations of products and SKUs, “so moving data between systems is a major challenge,” according to Dietz.

Like most companies, Kennametal had been highly dependent on spreadsheets to drive its planning function. With its business topping $3bn in revenues, it can no longer depend on that capability to handle future demand, Dietz says. The company has embraced technology that will allow it to improve both customer service and internal processes.

 

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


Unleash Pixar-like Creativity in Your Supply Chain Management Organization

Published September 30th, 2014 by Jonathan Lofton 3 Comments

pixer creativity in your supply chain management organizationI recently read “Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration” and it got me wondering about creativity within supply chain management organizations. There’s obviously a level of ‘magic’ at Pixar, for them to be able to create 14 No. 1 movies in a row.  Evidence that the principles they’ve developed has merit is easy to see as Disney Animation Studios, led by Pixar’s Ed Catmull (President) and John Lasseter (Chief Creative Officer), has now started producing blockbusters again (e.g.  Frozen, the top-grossing animated film of all time, surpassing the $1.063 billion earned by Toy Story 3) after a long period of so-so animation movies.

I’m always curious if success in one area/industry can be translated to generate similar success in other areas/industries. In this case I do believe there are learnings that can be applied to supply chain management.

So what makes Pixar so creatively successful?  How do they get from a movie that “sucks” to a blockbuster?  And more importantly, can supply chain management leverage these learnings?

“What I’ve learned running Pixar applies to all businesses.  I apply the term ‘creativity’ broadly … it’s problem solving. We are all faced with problems and we have to address them and think of something new and that’s where creativity comes in.”

 – Ed Catmull, FastCompany article, “Pixar President Ed Catmull On How To Run A Creative Business”

At the back of the book Catmull has a lot of bullet points around thoughts for managing a creative culture, which at the end of the day isn’t exclusive to ‘creative’ businesses, including:

  • Give a good idea to a mediocre team, and they will screw it up.  Give a mediocre idea to a great team, and they will either fix it or come up with something better.
  • Failure is a necessary consequence of doing something new.
  • The healthiest organizations are made up of departments whose agendas differ but whose goals are interdependent.  If one agenda wins, we all lose.
  • The process of problem-solving often bonds people together and keeps the culture in the present.
  • A company’s communication structure should not mirror its organizational structure.  Everybody should be able to talk to anybody.
  • Imposing limits can encourage a creative response.
  • Engaging with exceptionally hard problems forces us to think differently.

What stands out foremost in the book as the underlying factor of Pixar’s success is what they call the “Braintrust”.  The Braintrust brings together a bunch of smart, passionate people to review a movie as it goes through its lifecycle.  The folks that make up this group naturally include directors, producers, writers, and animators but it could also include individuals outside the typical ‘creative’ areas.  They use this Braintrust to create a healthy culture where people feel free to share ideas and to constructively criticize.  There are a few principles of the Braintrust that are vitally important:  The individuals must be sharp and passionate; the team has to put a lot of solutions out in a short amount of time; there has to be absolute candor – this is the premier guiding principle.   I think the ‘magic’ comes via another key tenant of the Braintrust – this group has no authority.  The group can’t make the director change the movie.  It’s their job to get to the essence of what’s wrong (Catmull says all Pixar movies “suck” at some point); it’s the director’s job to figure out how to address the feedback.

OK, so how does this relate to supply chain management?

Well, these periodic Braintrust sessions remind me a lot of Consensus Demand Planning and Sales & Operation Planning (S&OP).  Consensus Demand Planning incorporates various organizational views and possible biases on what the forecast looks like.  Others in the organization are required to collaborate and creatively determine how to best balance supply & demand while optimizing company objectives (margin, inventory, revenue, etc.).  At the end of the day, the S&OP team may have several suggestions on what to do … but it’s the Executive S&OP (the “movie’s director”) that has the ultimate responsibility for absorbing the options and deciding how best to drive the company forward.  So what if Consensus Demand Planning and S&OP looked and felt more like a group reviewing a movie’s “dailies” using Pixar Braintrust-like principles to collaboratively solve problems?

I tend to subscribe to “The Wisdom of Crowds” and believe that if we can leverage tools that give end-to-end visibility to the strong, passionate professionals in our supply chain organizations and break down walls to encourage & support real-time collaboration, we can also unleash Pixar-like creativity (and success).  In support of the Braintrust principles, below is what I currently see on the creatively collaborative SCM continuum.

creative braintrust supply chain collaboration
I’d appreciate additional wisdom from the supply chain crowd out there (I’m sure there are other applications, approaches and principles out there that are really creative and bleeding edge). Do you have a formalized ‘Braintrust’ type process and the supporting tools for creative SCM? What are you doing (or seeing) in terms of SCM creativity!?

 

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


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