Archive for the ‘Inventory management’ Category

I think our future supply chain leaders may be playing Hay Day…

Published June 27th, 2014 by Lori Smith 1 Comment

I read my colleague, Jonathan’s, post on Monday about the supply chain lessons that can be learned by playing Angry Birds.  I loved the analogy and have another game to add to the list.  Hay Day.  This is truly a supply chain game.  My 10-year old son is an avid player and, without knowing it, has become a supply chain expert.  In fact, perhaps this is where our future supply chain leaders are starting out!? 

For those of you who may not be familiar with the game, in Hay Day you run a farm. You grow produce and make other products, and then sell them through different channels – order deliveries, customers that come to the farm, boat orders, or at a roadside stand.  The money you make allows you to purchase additional equipment and resources to grow your farm and offer new products.  All the basic tenets of supply chain are present in full force…

  • There are multiple orders coming in from various channels and you have to figure out a way to deliver to the most customers to maximize your sales. And not all orders are created equal. Boat orders, for example, offer the most money, but involve a high-volume of long-lead time products that you have to deliver before a set deadline. And as in real life, you just never know what orders are coming.
  • The bigger your farm, your product offering becomes more diverse and complex.  You have to balance making products to sell, with making products that become a component of another product.  For example, you can sell sugar directly, but you also need sugar for all your baked goods and jams.  If you have an order for 10 cakes, you need to make sure you have all the butter and sugar on hand to make those cakes, and if you use the butter and sugar for that, you have to figure out what other orders you may not be able to fulfill as a result.
  • Capacity is constrained. Equipment can only produce so much in a certain period of time, and the silo and barn can only hold a certain amount of inventory. You want to make sure your storage space is used for ingredients that are always needed so they don’t become your gating parts. Likewise, you need to fill certain machines (again, dairy and sugar machines as example) to full capacity before you leave the game (overnight), so the machines can work in your absence so you don’t have idle or underutilized workstations.

I could go on and on…the examples are endless.

It’s been amazing to see my son build an understanding of pretty significant supply chain principles such as order management, customer segmentation, profit maximization,  capacity constraint management, inventory planning etc..

This past week though, he took things to a whole new level.  Previously, he was focused on his farm alone, but the sly little devil came to the realization that if he used the family iPad and his father’s iPhone, he could make their own Hay Day farms and use them as suppliers.  He made these farms feed his farm with the products he needed to fulfill his own orders.  Pretty cool.   And then he realized, in addition to having the feeder farms work on products for his orders, he could also buy any product off these farms (at crazy low prices because he controlled them) and then turnaround and sell them at his own roadside stand at a huge markup. Ok, so maybe this last part is more about gaming the system and undertaking a total money-making scheme, but it’s still astute nonetheless, and it did have him double his farm in a matter of a day or two.

Anyway, at one point, he was at the dining room table playing on all three devices simultaneously – now that’s what I call coordinating the extended supply chain!

I know computer games can get a bad rap, but in this case, I’m viewing it as hands-on training for his future career as a supply chain manager.  He did eventually turn off the devices to go play outside so he will be a well-rounded supply chain manager at any rate.

Posted in Inventory management, Supply chain management


Part 2: Bold Predictions for the 2014 Top 25 Supply Chains

Published May 14th, 2014 by CJ Wehlage 1 Comment

Yesterday, I posted Bold Predictions for the 2014 Top 25 Supply Chains Part 1 where I gave a brief recap on my predictions from last year and the approach I took for this year’s Bold Predictions for the 2014 Top 25 Supply Chains.

Now I’d like to share with you:

  • Biggest Move Up the Top 25 Ranks
  • Biggest Surprises
  • My top 5 2014 Predictions

Biggest Move Up the Top 25 Ranks
This is the supply chain that will make the biggest move up in 2014 from their 2013 ranks.

And the winner is…

Lenovo has been making news, especially with acquisitions:

  • IBM’s personal computer business in 2005
  • IBM’s server lines in 2014
  • NEC joint venture in 2011
  • ~ 3800 patents from NEC in 2014
  • Medion in 2011, giving them 14% of the German computer market
  • CCE in 2012, giving them a local Brazilian partner for regional growth
  • Stoneware in 2012, to expand cloud computing services
  • LenovoEMC joint venture for network attached storage solutions
  • Motorola Mobility from Google in 2014
  • Nok Nok Labs for implementing voice recognition over passwords for security

All this activity will have a positive effect on both their Peer and Gartner Opinion votes.As well, Lenovo had a 18% increase in revenue from 2012 to 2013, and a 18% increase in gross profit.I wouldn’t be surprise if Lenove went from #20 in 2013 to #10 in 2014.

 

Biggest Surprises

The biggest surprise for the 2014 Top 25 Supply Chain will be the year of the Automotive return to glory.Ford, BMW, Volkswagen, Hyundai Motor, and Tata Motors all had a good 2013.The restructuring phase appears to be behind the industry.Global auto sales have been good, especially in China and Japan (15% y/y), along with Western Europe.While there’s reason to cheer the sales growth, the auto industry supply chains will need to step it up.The pressure going forward will be on profits, through lower pricing and raised incentives to keep up sales.Ford issued a profit warning due to pricing pressures in late 2013.The supply chain leaders in the automotive industry will need to drive the profitability challenge, by lowering costs and developing innovative methods in their supply chain strategies.

 

Top 5 2014 Prediction
#5

Ever since Kevin O’Marah and I sat down with Samsung back in 2008 at their Suwon location, I’ve always admired Samsung’s supply chain.They run one of the best S&OP’s, focusing on market share across their multiple business units : Computing Products, Home Appliances, Semiconductors, Digital Displays, Mobile Devices and Home Electronics.They moved from #13 in 2012 to #8 in 2013, driven by strong revenue growth, peer opinion and good inventory turns.What puts them in at #5 will be continued revenue growth.Going from $201T (won) in 2012 to $229T (won) in 2013.2013 year end net income was $30.47T (won), along with $36.47T (won) in operating profit.A 27% on-year increase.And that’s with an $800B (won) “special employee bonus” to commemorate 20 years since Chairman Lee Kun-hee announced a management strategy, as well as a $700B (won) being knocked off by a stronger won.

 

#4

In the 2012 Gartner Top 25, McDonalds beat out Amazon by 1/100th of a point, 5.87 composite score vs Amazon’s 5.86.I have them coming in at #4, simply because their revenue growth was only 0.2% from 2012 to 2013.From their 2013 Annual Report, I also found it concerning they were challenged to respond fast enough to flat forecasts, competition, pricing and customer facing initiatives.

Don Thompson, CEO, McDonalds – “Though McDonald’s continues to grow, our performance fell short of our high expectations this past year.Challenging conditions – including a flat or contracting informal eating out category in most of our major markets, increased competitive activity and consumer price sensitivity – impacted our results.In addition, some of our customer facing initiatives didn’t generate the comparable sales lift and incremental guest visits needed to overcome external pressures in today’s highly fragmented market.”

These are challenges that an effective supply chain should know sooner and be acting faster.

#3 Unilever

Unilever has been doing a lot of things right, especially to influence their Peer and Gartner Opinion votes.They’ve done a significant amount of keynote presentations:

  • SCM World Live 2013, Marc Engel, CPO Unilever
  • SCM World Leaders Forum 2014, Paul Polman, CEO Unilever and Pier Luigi Sigismondi, Chief Supply Chain Officer Unilever
  • SCM World Live 2014, Jorg Brouwer, Group Vice President, Sales & Operations Planning Unilever
  • Gartner Supply Chain Executive Conference Australia 2013, Dhaval Buch, SVP Supply Chain, Asia, Africa, Russia, Unilever
  • ISMC2013, Pier Luigi Sigismundi, CSCO Unilever
  • Logicon 2014, David Beauchamp, VP Global Logistics Unilever
  • Sustainable Supply Chain Summit, 2013, Dirk Jan de With, VP Procurement Ingredients & Sustainability Unilever
  • Supply Chain West Africa 2013, Adedoyin Ashiru, Manufacturing Director, Unilever Nigeria

I would have been thinking #2, as Unilever posted a 4.3% increase in 2012 to 2013 sales growth.But turnover was down 3% from $51.2B (euro) to $49.8B (euro), largely due to the impacts of foreign exchange and net acquisitions & disposals.Despite an increased spend in advertising and promotions, Unilever’s core operating margin only improved 0.4%.

#2 Apple

Things are still going very well for my previous employer. Revenue went from $156B in 2012 to $170B in 2014. The Gartner vote dropped from 651 in 2012 to 470 in 2013. It may continue to drop, but the Peer vote should stay in the 3000 range, nearly 1200 points above the competitors (excluding Amazon at 3115 in 2013). My main concern about dropping them to the #2 position is that their margins have fallen on an annual basis for seven straight quarters. And the press has been questioning when new products will arrive. I remember the negative responses when Tim Cook said: our teams are hard at work on some amazing new hardware, software and services that we can’t wait to introduce this fall and throughout 2014. Information like this makes for nervous investors, and creates articles like the one in Business Insider, which calls into question the strategic roadmap. Even this week, with the news that Apple is buying Beats by Dre, that is somewhat concerning. Not only is this type of acquisition out of character for Apple for inorganic growth, it begins to show the strategic importance of streaming music, something that iTunes strategy has lacked.

#1 Amazon

It’s going to take a big effort for Amazon to improve their 2013 composite score of 5.86 to the level of Apple’s 2013 score of 9.51. Amazon already compares with Apple in the Peer Opinion vote and Gartner Opinion vote. Net sales continue to grow, going from $61.1B in 2012 to $74.5B in 2013. Where Amazon got knocked in 2013, Three Year Weighted ROA (at 1.9%), is where they stand to improve dramatically in 2014. Amazon was able to reduce the percentage of sales devoted to cost of goods sold from 75.25% to $72.77. This was a driver behind a 2012 Earnings from Continuing Operations loss of ($39M), to a positive $274M in 2013. Finally, Amazon hit it well for innovation when CEO Jeff Bezos announced on 60 Minutes about developing a drone based delivery service called Prime-Air, giving customers their product in only a half-hour after they click “buy”.

Send me your thoughts on my Bold predictions. What other profiles should I consider? What factors should I weight more or less? Send me your Top 5 predictions!

 

Posted in General News, Inventory management, Supply chain collaboration, Supply chain management


Three Distinct Capabilities of Best in Class – From the supply 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


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

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.

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


5 Drivers of Supply Chain Complexity in the Life Sciences Industry

Published March 31st, 2014 by Trevor Miles @milesahead 0 Comments

I’ve attended several Life Sciences events recently (including Biomanufacturing Summit) and it’s quite clear that these supply chain teams are working in a new, complex world. Not only do they need to meet diverse customer expectations, but they need to do so while coordinating an extended supply chain, in an environment that is constantly changing. Additionally, they’re faced with a set of five industry trends that are driving complexity even further.

1.       Exceedingly Distinct Markets

Through accidents of history and industrial capabilities, the Life Sciences industry has developed to satisfy principally the diseases of the affluent West, such as cardiovascular disease, diabetes, respiratory disease, and obesity, while paying less attention to the diseases prevalent in the developing world, such as malnutrition, malaria, HIV/AIDS, and TB. This has led to a drug market segmented by geography and demographics, with companies in the emerging markets focused on satisfying the ‘local’ diseases. But in recent years, with the rapid expansion of the middle class in many emerging economies, many of the ‘Western’ diseases are increasing rapidly in the middle classes of the emerging markets – for example diabetes in India – stretching local healthcare provision while opening opportunities for expansion into these countries. While at the same time innovations by companies in emerging markets are challenging the market leadership of well-established Life Sciences companies in the West.

2.       Increased Outsourcing

With tremendous opportunities for growth in emerging markets, many manufacturers have executed aggressive globalization and outsourcing strategies, while relying increasingly on Third Party Operators (TPOs) in India and China for Active Pharmaceutical Ingredient (API) supply and subcomponents, or even the manufacturing of complete devices. Coming along with these shifts is an increase in business complexity and supply chain risks given the varying regulations across global supply chains and longer and riskier supply chains.

3.       New Regulations

With this rapid increase in the use of TPOs has come added risks to quality and of counterfeiting, leading the US Food and Drug Administration (FDA) to push for the passage of the Safety and Innovation Act (FDASIA), which focuses on the risks inherent in an increasingly global Life Sciences supply chain. Much of the public comment has been on the two user fee reauthorizations, as well as two new user fee programs, and the reauthorization for pediatric research. But buried deep in the text are provisions for supply chain validation – in both domestic and off-shore plants – and drug shortages that will have a profound impact on outsourced and global supply chains.

Stefanie Johns, Ph.D., Program Manager, Xavier Health Initiatives, commenting on conference sessions at Xavier University, states that:

“The new powers from FDASIA will level the playing field between foreign and domestic sites, enhance transparency and collaboration with foreign regulators, and shift focus “away from the border to a global safety net.” FDASIA also provides the FDA with new tools to destroy counterfeit products, misbrand products on the basis of inspection refusal, and deliver criminal penalties for intentional adulteration. In order to streamline resources, the FDA will be moving towards a risk-based inspection system and will work with foreign regulatory counterparts.”

In summary, the impact of FDASIA on the Life Sciences supply chain will come from provisions for:

  • reporting of drug shortage issues, and the penalties associated with not informing the FDA;
  • and more active inspections of production facilities, including sites in other countries, including those belonging to Third Party Operators.

 

Outsourcing in the Pharmaceutical Industry

phamacutical supply chain graph #1Source: Frost and Sullivan Global Bio-Pharma CMO Market Report,“ May 2010

 

4. Shift in Treatment Focus

One side effect of FDASIA is the fast-tracking of approval for treatments that address an ever narrower spectrum of diseases. Of particular importance to rare disease patients, and likely to help encourage further investment, is the Breakthrough Therapies Act addressing the need to provide expedited development and evaluation of potential therapies that show promise early in the research process; and the Therapeutics for Rare and Neglected Diseases which aims to encourage and speed up the development of new drugs for rare and neglected diseases.

Included in the Breakthrough Therapies Act is a voucher system that allows companies developing rare pediatric diseases to obtain a transferable voucher which they can use for the expedited approval of another treatment, whether that treatment satisfies the requirements for priority review or not.

The trend to ever more targeted products is widespread across most industries whether Life Sciences, High-Tech/Electronics, or Consumer Goods. In the past, the limited markets coupled with the fact that many of the patients were in less affluent areas of the world, were a disincentive to major Life Sciences companies that were addressing a large set of diseases with broad spectrum therapeutics. However, with many of the major disease categories covered effectively by existing treatments, combined with the fact that a) many treatments are reaching the end of their patent protection period, b) growing competition from generics, and c) increasing scrutiny from regulatory bodies have all led to a rapid shift in focus of research, as well as mergers and acquisition activity toward rare diseases. (While there isn’t a universally accepted definition of a rare disease, the US government defines a rare disease as one afflicting fewer than 200,000 Americans, while the European Union defines a rare disease as one afflicting fewer than 1 in 2,000 people.)

 

Innovation versus Cost

phamacutical supply chain graph #2

 

A report released by the Pharmaceutical Research and Manufacturers of America (PhRMA) in 2011 emphasized the extent of this shift away from broad spectrum drug research focused on diseases with large patient bodies to narrow spectrum drugs focused on rare diseases. According to the PhRMA report there were a record 460 medicines for rare diseases either in clinical trials or awaiting FDA review at the time the report was published.

To overcome the economic barriers associated with the discovery and development of diagnostic equipment, drugs and devices to treat rare disease, big Life Sciences companies have been pursuing collaborations, acquisitions, and joint ventures, often with companies in India and China.

This search for ‘long tail’ drugs will mean that Life Sciences must also deal with increasingly complex demand patterns. They have to simultaneously deal with predictable patterns for mid-life cycle products and highly unpredictable patterns for new introductions. They typically have to manage both low volume, high mix products that require quick response for clinical trials and high volume products that require ramped production and global delivery capabilities. phamacutical supply chain graph #3

5.       Shorter Patent Protection

An aging product portfolio, along with a future of shorter patent periods in general, with limited opportunities for patent extensions (as demonstrated by the recent challenge by the Indian government of patent extensions based upon reformulation), only serves to reinforce the critical requirement for supply chain efficiency and effectiveness, in order to capitalize fully on the opportunities while they exist.

These industry trends are having a significant impact on the way supply chains must operate. And unfortunately, there is growing evidence that existing technology architectures are not satisfying the capability needs for this new, complex world. In an upcoming blog post, I’ll be looking at seven supply chain processes (including jurisdictional control, expiry management, supply and capacity planning) that require an integrated approach to overcome these complexity drivers.

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Posted in Inventory management, Milesahead, Pharma and life sciences supply chain management, Sales and operations planning (S&OP), Supply chain management


A response to ‘Is Your Supply Chain Glass Half Full?’

Published November 13th, 2013 by Janice Kakazu 0 Comments

I just recently saw Bill DuBois’ blog post ‘Is Your Supply Chain Glass Half Full?’  It tickled my fancy and a few additional one-liners came to mind:

  • Project manager – I know you want to add cranberry juice to your martini glass, but I’ll need to write a change request for that.
  • Potential customer – I’ll order that drink if I can talk to 3 other customers who’ll tell me how good it is.
  • Supply chain consultant– Tell me about your requirements for filling that glass, and I’ll transform your glass-filling process!
  • Research analysts/Thought leaders – You’re at stage 4 of the maturity curve when you can segment all the glasses by fullness (or emptiness), sense how full each glass is with your eyes closed, and collaborate with the bartender to get a refill in real-time.

Hope you enjoyed that!

Do you have any other supply chain, “is the glass half full” one liners?

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


The Two Best Supply Chain Metrics…Influence and Power!

Published November 7th, 2013 by CJ Wehlage 0 Comments

Since I’ve joined Kinaxis, I’ve become so intrigued by the parallels I see between Apple and Kinaxis customers.

When I was at Apple, the joy that customers showed when using our products was so inspiring. They were always quick to say how cool something was.  Strangely enough, despite being in the enterprise software business, I’ve witnessed similar reactions from Kinaxis customers. In my 11 months here, customers are ecstatic when they talk about having RapidResponse. While I see the strategic benefits of using RapidResponse, it’s certainly not a consumer must-have gadget, like an iPad.  Yet, watch some of the Kinaxis videos, and see the passionate ways clients are using to explain what RapidResponse means to them.

 

 

 

 

 

During my time here, I’ve been pretty curious about this enthusiasm and have been investigating the why, and now, after our recent Kinexions conference it has become clearer to me. Here’s what I learned when I asked a handful of clients “What do you love about Kinaxis?” The two most common replies were:

  1. “Once RapidResponse went in, it spread like wild-fire.”
  2. “I wish I would have done this years ago.”

So, let’s analyze each statement:
“Once RapidResponse went in, it spread like wild-fire”, to me, means Influence.

Consider first what RapidResponse is: An end-to-end analytics solution, with incredible speed. Speed from in-memory and ONE code.  Now, I’ve been around the supply chain block these past 25 years, and the only “ONE” code I’ve seen is Excel (and we know, using excel has its drawbacks – see past blogs Hey Software Bullies Stop Picking On Excel and  Yet Another Excel Blooper When Will We Learn).

Everything else is functional modules that take time to stitch together.  Oh by the way, the complexity of supply chain nodes (from the companies I led) has increased from ~ 5-10 to ~ 20-25.  So, imagine gathering relevant data from EVERY node of your supply chain, into ONE code, and having incredible speed to perform analysis and collaboration.  To know what’s happening at every node, and respond before others are aware, brings a huge level of influence in the supply chain network.  People see it, and want it… badly! And, I can see why it spread like wild-fire.

“I wish I would have done this years ago”, to me, means Power

In this statement, customers are referring to using RapidResponse today.  And because of that, they are able to know sooner and act faster. For many companies, this has resulted in inventory and costs savings, margin and profit growth and utilization improvements.  The simulation capability has enabled them to use the supply chain operations to create a supply chain strategy and then align the supply chain strategy with the business strategy. So, when their competitors are fire-fighting disruptions (i.e. giving away profit to make revenues), they are simulating trade-offs in advance of competition, customer demand, industry and business plan changes and supply disruptions. The final result is a level of power in their company that they wish they had years ago.

This influence and power remind me of a great quote I once heard…

Information isn’t power…Informative decisions is power!

When Kinaxis clients are using words like ‘every node in the network’ and ‘total cost’, they are speaking about how they use the information to improve end-to-end decisions.  Functional wins are replaced with value driven wins.  This is what Gartner calls Stage 4 – Value Driven Supply Chain. Gartner’s Christian Titze attended Kinexions and wrote the following article entitled, ‘Kinexions 2013 Shows the Value of Adaptable Planning Systems of Record’. In it, he says that: “Some are now decommissioning their other SCP solutions and even moving material requirements planning (MRP) out of their ERP systems. This indicates Stage 3+ IT maturity for planning, whereby a planning SOR is in place and ERP systems are seen solely as transactional SORs. ” – Titze, C., Payne, T.; Kinexions 2013 Shows the Value of Adaptable Planning Systems of Record; Gartner, Inc.; 31 October 2013 .

A value driven, or market driven, or even a demand driven supply chain is Stage 4 in the supply chain journey.  However, many companies are stuck in Stage 3.  Why?  I think it’s because they grew up functionally, are organized functionally, and make functional decisions.  It’s easy to spot.  I like asking the first question… “tell me about your supply chain strategy”.

The typical response is, “we are working to reduce our costs”, “we have a goal of 98.5% on time delivery”, or “we want to improve our inventory turns by 20%”.  Great operational goals, but not a supply chain strategy.  Lora Cecere from Supply Chain Insight’s has stated, “…over 85% of companies are not clear on supply chain strategy,” in her blog Three Lies and a Truth. The answer starts with the business strategy – what is the company’s goal, what is being offered, when and where?  Then, how does the supply chain iterate and evaluate the cost benefit tradeoffs over time?

Most supply chains do the cost benefit tradeoff at the end of the quarter, or after the disruption has occurred.  Masked with the benefit of “made the revenue plan” is the failure of lost profitability.   It’s even worse when supply chain leaders reward the fire-fighters, enabling an organization that sees expediting more positive than preparation.

Call it Stage 4, call it value driven, call it supply chain strategy, the core is to know and respond across the complete supply chain network, and simulate the tradeoffs that enable the business plan.  You can see what the most important step in getting to stage 4 according to the Kinaxis clients…

GET THE END-TO-END DATA!

Using that data with incredible speed, affords you a level of influence and power across your company and supply chain network, and enables a value driven strategy.

 

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


Extending Supply Chain Planning Paradigms Beyond Advanced Planning Solutions

Published September 30th, 2013 by Trevor Miles @milesahead 1 Comment

“Many business process directors are under pressure to help make the best possible process-related decisions to ensure desirable business outcomes, business differentiation and continuous innovation.”
Sinur J., Schulte R.,

“Use Intelligent Business Operations to Create Business Advantage”
Gartner Research, 20 March 2013

Nowhere is this statement more applicable than in the supply chain.

While the inventive concept of Intelligent Business Operations (IBO) is gaining traction in multiple functions and process areas, the applicability and potential is particularly high within supply chain management.

Intelligent Business Operations Delivers the Benefits Promised by
Supply Chain Event Management

Supply Chain Event Management (SCEM) first emerged as a hot topic in 1999, peaking in interest in 2001, only to fall away into obscurity. It has resurfaced recently, but centers around transportation execution requirements such as track & trace. Several factors played a role in the rapid rise and fall of SCEM as a topic, including the fact that SCEM was part of the .com bubble and that the appreciation of the benefits of sharing information between trading partners was a very new concept. But the major factor in its demise was that it was treated as an add-on to planning systems rather than as an integral part of planning systems. At the time, the generally accepted process coverage of SCEM included measure, monitor, notify, simulate, and control; however, the more difficult parts of simulate and control were never realized because this required them to be integral parts of the planning systems.

supply chain planning - intelligent business operations (IBO)As a result, SCEM solutions were little more than alerting mechanisms flooding users’ inboxes with hundreds of messages which were of dubious importance and provided no mechanism for evaluating the resulting impact of the event on the wider supply chain, nor identifying the people that should be notified about such impacts. And, very importantly, there was no way to generate actionable responses to the events. The reemergence of SCEM within the transportation execution space has been as embedded capabilities within transportation management solutions (TMS), and are providing valuable advantages even though the events being tracked are very limited.

The benefits to be realized from SCEM concepts have not diminished since their early inception in the late 1990s. In fact, because the early solutions never got past the monitor and notify capabilities and the recent reemergence in TMS is so narrow in focus, the benefits remain largely untapped; one of the most significant ones being improved customer service at lower cost.

Even more intriguing though is the emergence at Gartner Research of  Intelligent Business Operations (IBO) which incorporates many of the initial SCEM concepts in the broader context of any process. According to Gartner (Sinur J., Schulte R., “Use Intelligent Business Operations to Create Business Advantage”, Gartner Research, 20 March 2013),

IBO is an emerging style of business behavior that leverages analytics embedded in processes to support better decision making and improved knowledge worker collaboration. IBO-based processes are “smart” about the context in which they run, which is influenced by events external to the process.

supply chain planning paradigms - gartner supply chain IT glossaryInterestingly, all the fundamental capabilities of measure, monitor, notify, simulate, and control of SCEM have been included in IBO. While not directly transferable, the ideas are largely represented (and have been extended) in recent IBO-related concepts such as

  • Business Activity Monitoring (BAM) instead of Measure and Monitor,
  • Complex Event Processing (CEP) instead of Notify, and
  • Business Process Management (BPM) instead of Control.

More important is the application of IBO in the wider contexts of strategic, tactical, and operation planning, not only in execution. In addition, the inclusion in IBO of Constraint Based Optimization (CBO) and Simulation capabilities as core requirements address the initial short comings of SCEM, namely the ability to determine an appropriate response to an event.

What is not captured explicitly in the definition of IBO is the need to create the initial plan against which performance will be measured. If the capabilities used to determine an appropriate response to an event are different than those used to generate the initial plan, then it is unlikely that the response will satisfy the business goals of the organization. (Of course in certain circumstances, the business rules used to address an exception are different from those used to plan and manage operations under normal circumstances.)

The separation of planning from event management was the key weakness of early SCEM concepts, which was exacerbated by the narrow focus on execution, ignoring the rich opportunities in all levels of planning. We should not repeat the same mistakes.

To learn more about this topic, feel free to view the complimentary Gartner Research report featured in the Kinaxis newsletter: How to Use Intelligent Business Operations to Create Business Advantage (Sinur J., Schulte R., Gartner Research, 20 March 2013).  And, be sure to keep an eye out for part 2.

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