Archive for the ‘General News’ Category

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Boy if that title doesn’t catch your attention. There’s an interesting article over at CRMBuyer (here) featuring new research from Michigan State University.

According to the research, “the largest concerns today, in order, are avoiding disruptions, on-time delivery and leadership — evidence of a tactical approach to supply chain management, primarily driven by cost.”

Some of these themes are very consistent with what I’ve focused on in various posts, including this recent one here. I really liked their emphasis on managing relationships and find this to be very consistent with what I’ve been seeing in the market.

The research also stated that “while easier said than done, the MSU study suggests that companies should concentrate less on cutting cost out of their supply chain and more on creating radical innovation.” I’ve actually started to see a shift from a pure cost cutting mentality to one that balances cost cutting (this is not going away) with a drive towards strengthening top line performance (i.e., growth). And, more companies are starting to recognize that supply chain responsiveness and performance are enablers of this growth. As others have commented, companies are starting to compete more and more based on their supply chains.

IndustryWeek has an interesting article here talking about supply chain leadership. The article talks about various approaches companies take to establishing a leadership position and cites some specific company examples.

As we work with brand owners and contract manufacturers, I’m finding an increasing interest in leadership around being demand-driven and responsive to change. And, at the root of the ability to do this is ensuring supply chain visibility and empowering front-line decision makers to respond to change in a quick and accurate manner.

I’m also seeing a change in the relationship between supply chain, or supply network, partners. It seems that when companies first started to outsource there was an implicit “washing of the hands” of that problem as manufacturing was turned over to a third party. Companies have evolved their thinking and now are focusing on closer relationships with their suppliers as they recognize the critical coordination that must take place across the virtual enterprise to respond to change.

This is driving a closer working relationship and greater sharing of information. While I’m not seeing a move back to vertical integration and I don’t see companies wanting to micro-manage their partners, companies are absolutely rising to the challenge that a distributed, multi-enterprise supply network poses by enabling broad supply network visibility and ensuring that the people in the trenches have both the visibility and tools they need to coordinate an effective response to change across the network.

Kinaxis executive John Sicard was recently interviewed on a podcast. You can listen to it here to learn more about the drivers behind Response Management.

The always insightful Charlie Barnhart has a post on the Technology Forecasters Inc. (TFI) blog talking about where OEMs are going to find future cost savings. Charlie states that “after a five-year blitz to outsource as much electronics manufacturing as possible, many OEMs have wrung out all the external costs they can from this model – they’ve harvested most of the low-hanging fruit.” Interestingly, AMR Research has conducted studies that show many OEMs actually see costs increase when they outsource even though cost reductions were a primary motivation behind their outsourcing in the first place.

Our customers that focus on improving their ability to respond to change always see cost reductions as a result. They typically come in two forms: productivity gains and reductions in operating costs. Productivity gains come because their current approach to responding to change is incredibly inefficient (frequently relying on a lot of people who only have their personal productivity tools, like spreadsheets and email, at their disposal when trying to respond to changes across their supply chains). Reductions in operating costs come from the fact that a company’s inability to respond effectively to change inevitably leads to “institutionalizing” costly just-in-case measures like inventory buffers, expediting, rework, etc.

Charlie lists several great options for OEMs to reduce costs by looking internally at how they operate. Response Management should be one of the items on their list. Change is one of the biggest drivers effecting business today. You should challenge yourself to see how effectively you’re responding to change. Improvements here can improve customer satisfaction (and your competitiveness) while simultaneously reducing costs.

It’s been well documented that the manufacturing world is becoming more complex and changing rapidly. Increasingly volatile demand brought on by more global competition and increasingly demanding customer buying behavior combined with globally distributed supply chains and ever shorter product lifecycles are placing incredible demands on brand owners and manufacturers alike.

I’m noticing a change in terminology associated with these trends as well.

As many probably know, several years ago AMR Research started to change the dialog through their focus on Demand-driven Supply Networks (DDSN). This alone represented a change in terminology on multiple levels. It started to place the emphasis on demand whereas historically supply chain management, as the term implies, was very supply centric. The other thing it did was acknowledge that supply chains had become supply networks that have evolved from more linear chains to a much more complex set of interconnected relationships amongst a network of partners (case in point: according to AMR, Cisco, the $28.5B virtual network equipment manufacturer, must coordinate a 331-partner supply network consisting of 43,000 non-employees).

Consistent with this is an evolution in thinking about what it takes to be successful in today’s more challenging environment. 20th century supply chains emphasized a plan and execute mentality because things were more linear in fashion and crisp execution to the plan was the way to compete and win. The added complexities have forced a re-evaluation of what it takes to win in the 21st century and places increasing emphasis on sense and respond capabilities that empower people and leverage human judgment to deal with the large number of unexpected events that occur in between planning cycles and can have a profound impact on a company’s ability to execute.

Lately, AMR has started to elevate the discussion further by challenging the term supply chain itself. Their point is that this term is too limiting and companies really need to start thinking about the entire value chain to be successful. It will be interesting to see how this plays out and what type of traction this shift gets in the marketplace. I’m guessing that people will gravitate to this as it broadens the dialog to a more strategic, comprehensive discussion about what truly impacts a company’s success.

Came across this article talking about how innovation goes back to the top of the list of IT priorities at Computerworld.

Last week I attended AMR’s Supply Chain Management Exchange in Boston. This same theme was seen in their research. They are seeing that companies are shifting from a purely cost reduction mentality to now focusing on driving top-line revenue growth and realize that technology innovation is critical to making this happen.

This is certainly great to see, not just because I work for a software vendor selling an innovation that helps companies reduce costs and improve the top-line, but because I personally find it depressing every time I hear the stats that says companies are spending in excess of 90% of their IT budgets just to “keep the lights on” (AMR commented that the typical retailer spends only 4-6% of their IT budget on innovation).

IDC’s latest Theory & Practice newsletter includes a summary of early results of a global supply chain survey they are conducting. IDC indicates they have received over 800 responses.

According to the report, the survey has found that “the top priority for supply chain strategies is reducing costs, but responsiveness and collaboration remain key.” It goes on to say “global competitiveness is pushing manufacturers to become more agile to better handle demand variability.”

If you’ve read anything on this blog you know that the focus is on enabling increased responsiveness within global supply networks. To be more responsive, companies need to empower their people with the information and tools to enable them to act quickly and decisively. It’s been my experience that doing so requires collaboration. But this collaboration is people-to-people. When most people write and talk about collaborating with suppliers they are referring about system-to-system collaboration. That certainly has it’s place and value in automating the execution of transactions across a global supply network. However, when things go wrong, people need to step in. It’s people that need to analyze the situation, collaborate with other people and figure out the course corrections and tradeoffs that will get things back on track and meet the goals of the company.

There’s a really good summary of new Accenture research on supply chain disruptions over at BLOGONLOG.

The summary lists some really good statistics and insights into how pervasive disruptions are. This particularly caught my eye: “the vast majority of respondents (94 percent) say disruptions — which are most often caused by problems associated with supply chain partners, raw materials, and natural disasters — impact profitability and the ability to meet customer expectations.”

Disruptions come in all shapes and sizes. Given that the survey was done with executives, I’m guessing their focus was mainly on the “big” disruptions that catch everyone’s attention and make headlines. However, there are literally hundreds of smaller disruptions happening everyday as a result of the incredible pace of change that have a profound impact on profitability and a company’s ability to meet customer expectations. These typically don’t get on the radar unless they result in a major issue (e.g., a lost customer) or add up to a major impact to a KPI that is very visible throughout the organization. The problem is that they increasingly are having such impact because most organizations are ill-equipped to deal with these changes as they occur.

There’s a new post from a new blogger over at EDN with a couple of interesting observations. According to Greg Frazier, executive VP of supply chain services, worldwide, at Avnet Electronics, the supply chain has gone through a transformation that makes it look like its gone from night to day. He said “when I first started…my job was simple, local, and consistent. Today my job is complex, global and changes like the weather.“

If you’re involved in high-tech electronics manufacturing, or many other markets for that matter, you’ve no doubt experienced the same transformation that Greg talks about. You’ve also seen that responding to these “changes like the weather” is really what makes or breaks your company. I continue to believe that some companies struggle with coping with this new reality and continue to believe that they just need to do the same old things better or faster, rather than looking at doing things differently.

I’ve heard this analogy before around here but heard it again today so I thought I would share it. It has to do with changing dynamics in customer expectations and what it means to brand owner and manufacturers.

Customers that take the bus essentially buy what you make available to them. That’s because a bus runs at a regular schedule and customers must align their needs with the service provided. Businesses that have such customers tend to optimize their resources for expected events and build expertise around execution with limited flexibility.

Increasingly, however, I’m seeing that customers want to take a cab. Customers that want to take a cab expect to buy what they want when they want it. As such, businesses that serve these customers need to optimize the usage of their resources around actual events. In addition, they need to be highly flexible with a goal to respond and then execute consistent with the needs of that changing condition.

If your customers expect a cab, what are you doing to ensure your supply network is optimized for your customers’ expectations? Have you built responsiveness directly into the core of your business and into your supply chain management processes? What are the implications of not doing so if that’s what your customers expect?

I find so many companies have been driven by the long-standing metrics associated with running your business like clockwork (which works well if your customers expect to ride a bus) that they struggle to deal with the business when it doesn’t run like clockwork (your customers want a cab now!). And more and more customers are opting for the cab.