Archive for the ‘Response Management’ Category

Aberdeen recently published their Supply Chain Innovator’s Technology Footprint 2008 report.  One Fast Fact in the report caught my eye:

• 78% of Best-in-Class companies indicate that they have the ability to find (within a reasonable time) and access supply chain data needed for decision making versus 50% of all others.

This is interesting for at least two reasons.  First, if you can’t get your hands on the supply chain information you need to make decisions in a timely manner, then by definition you are not able to respond to supply chain events in a timely manner (well, I suppose you can guess or make something up).  With the growing volatility across global supply chains, your ability to respond quickly and accurately is increasingly critical to your competitive position in the market.  This data suggests a significant number of companies are unable to do this.

The second reason this is interesting is actually not stated here.  I’ve found time and time again that supply chain visibility alone is not enough.  There are two other aspects to this problem that are not discussed here.  First, you have to be sure that you put the right supply chain information into the hands of the right people.  Increasingly, these are your front line decision makers that need to take action in the face of constantly changing circumstances.  If the people “in the trenches” don’t have this critical supply chain visibility, they won’t be able to act and react.  Second, supply chain visibility alone is not enough.  Front line decisions makers need tools for risk tradeoff and response.  It’s not enough to have visibility into an historical perspective on the supply chain.  They need tools to collaborate, simulate various action alternatives and compare them before pulling the trigger on a high impact judgement call.

As the research states, it starts with supply chain visibility - and there’s a lot of work to do there.  But it doesn’t end there - ensuring that the right people are empowered with visibility and tools to respond to constant change is critical in today’s market.

According to new research from Aberdeen, most companies (56%) regard SCM as a market strategy differentiator, a customer service differentiator or a profit center, rather than simply a cost of doing business. Nearly half (49%) indicate that escalating customer service demands are driving their supply chain transformations.

This is certainly a positive trend.  For too long supply chain management (SCM) has been viewed strictly for it’s cost reduction capabilities - a necessary evil where you try to squeeze every last drop of margin out that you can.  While cost pressures continue to be front and center, I do see an increasingly “top line” mentality reflecting the increasing strategic impact solid supply chain management can have.

Aberdeen goes on to identify four key actions companies should take:

I’m seeing strong activity in all of these areas.  In particular, sales and operations planning (S&OP) is getting a lot of attention - but maybe not in the way you would first think about it.  The word planning implies that everyone is strictly focused on building a better plan.  That certainly is a key part of it, but increasingly we’re finding that market leaders are really focused on how they deliver to the plan - how do they meet the objectives defined in the S&OP process.  This is an even more strategic way of looking at the process and factors in today’s reality that volatility is on the rise, making the perfect plan even less likely.

Given this reality, companies are trying to figure out how to respond when the assumptions that went into the plan are no longer valid, which is increasingly the case.  Interestingly, the other actions that Aberdeen identifies support this.  In order to respond effectively to unexpected events that threaten the ability to execute to the plan, you need supply chain visibility and you must have processes to excel at order fulfillment when the orders aren’t coming in consistent with the forecast.

If your busines is static and predictable, focusing on supply chain planning and supply chain execution are the right things to do.  But, if your business is dynamic and increasingly unpredictable, you need to complement these initiatives with capabilities to respond to unexpected events quickly and profitably.

I found an interesting article here at supplychainstandard.com.  Chris outlines a key trend in the market, namely that more and more companies are focused on creating more customer driven supply chains in response to increasing market pressures.  He also does a nice job of outlining several actions companies can take to compete in this environment by creating a more customer driven supply chain.

 

I wanted to add another point.  What I continue to find is that the first problem companies face as they work to become more customer driven is the realization that you can’t plan the customer.  When manufacturers were more push oriented in their model, the focus was more supply than demand/customer centric.  This model works best in a low volatility environment where you can much more effectively plan your supply, capacity and production.  In this environment, your focus is on how to plan and execute to run the business like clockwork.

 

In today’s increasingly volatile environment, as Chris points out, you need to become more customer driven to compete and deal with the market forces.  But because you can’t plan the customer, you have to re-orient your focus for this situation.  In particular, it’s about how to thrive when the business doesn’t run like clockwork.  Doing so requires you to push more decision making out to the front lines.  When things don’t go according to plan, the centralized planning model isn’t the answer – you can’t escalate to senior management all of the decisions that need to be made in the trenches to deal with unexpected supply disruptions, last minute order changes, unexpected forecast changes, etc.  There are literally hundreds of these decisions being made every day.

 

The problem is that most companies don’t have tools to deal with this.  The tools they have were to support the central planning process with a focus on running the business like clockwork.  To respond to changes when the business doesn’t run like clockwork, you need to empower your front-line decision makers with tools for risk tradeoff and response.  They need to be able to act quickly and decisively with actions that are aligned with your corporate objectives as defined in your sales and operations planning (S&OP) process.

 

Re-orienting the business from a supply to customer/demand driven approach means ensuring that the organization is armed to deal with the fact that you can’t plan the customer.

We had a great call today with Tom Wallace - the noted author and expert on sales and operations planning (S&OP).  We were talking about the trends we see in the market - increasing demand volatility, shortening product lifecycles, global outsourcing - and their implications on sales and operations planning, particularly a company’s ability to execute to the plan in the midst of all these changes.

The reality is that most companies struggle to live up to the plan as soon as its finalized.  What ends up happening is that a bunch of issues come up that you just can’t plan your way out of and people are required to figure out what to do.  In these situations, time is of the essence, so companies are trying to find ways to make critical business decisions in a timely fashion and ensure that their actions are consistent with the objectives agreed to in the sales and operations planning process.  At this point, Tom observed “there are a lot of seven figure decisions being made by people with five figure incomes.”  Love it - great quote.

The reality is that in most companies there are a lot of seven figure decisions (decisions that have million dollar plus impact on the business) being made in the trenches, where the rubber meets the road (this is not a knock on the people, quite the opposite - these are the people that get things done.  The issue is whether or not you’re giving them the tools they need to do their job).  Volatility is driving this - a lot of things are changing inside the sales and operations planning horizon and the company needs to act, quickly and decisively.  Front-line decision makers need to collaborate to determine what options exist, what the impact of those options would be, the right tradeoffs to make, etc.  And, unfortunately, in most companies this critical process is one of the least automated but happening potentially hundreds of times each day.

Who’s making seven figure decisions in your company?  You might be surprised who is, and terrified to see the tools they have to quickly reach the right conclusions.

IndustryWeek is reporting on new findings from AMR on the projected growth in supply chain software in 2008.

Planned Application Upgrades or Adoption for 2008 (Process vs. Discrete)
Source: AMR Research

 

As a vendor of supply chain software, this is certainly good news.  It’s also consistent with the momentum we are seeing.  I noted the interest in sales and operations planning (S&OP).  As I’ve written in the past (see here), we are definitely seeing strong interest here - but not as you might expect.  Companies are certainly focused on improving the planning process itself, but the greatest interest is in what happens when the planning meeting ends.

The volatility that companies face is increasingly making it hard to live up to the commitments made during these meetings.  The emphasis is on the “O” in S&OP, on the operational implications.  How do you execute day in and day out in the midst of constant change in a way that is consistent with the companies objectives?

Supply chain visibility, another area of investment, is certainly one piece of the puzzle - it’s the foundation of being able to address some of these challenges.  But, it’s never enough.  Visibility can tell you a problem, but visibility alone can’t help you actually solve the problem in most cases.  What front-line decision makers need are tools for collective risk tradeoff and to deliver a profitable response.

I believe we will increasingly see companies invest in solutions that empower people to make faster and better decisions.  In a static world, planning and execution are the priorities.  In a dynamic world, empowering people to respond to change becomes the new priority.

There’s a post here at AlwaysOn asking whether or not demand is finding supply.  The post accurately reflects the shift underway in most companies.  That is, there’s a transformational shift underway from a push-centric business model that is dominated by supply management to a pull-centric model dominated by demand management and the customer.

As the post states, the implications of this are huge.  It was one thing to plan your supply and capacity, it’s another thing to try to plan the customer.  It just doesn’t happen.

What we’ve continually seen is that companies have put in place processes and tools (mainly your traditional demand planning and supply planning systems along with ERP) to manage the old push-centric model, but don’t yet have tools to excel in the new pull-centric, customer-focused business model required today.  The result - a lot of people using spreadsheets to try to cope.

Manufacturers need to evaluate the implications of this transformational shift on their business and develop new processes, supported by new tools, to become more responsive to changing customer demands.Â

In case you didn’t see, we formally introduced a new on-demand service today called RapidResponse for Demand Management (you can see the press release here and learn about the product here).  This is very exciting for us on a couple of fronts.

For years we’ve gained success selling our Response Management solutions into the manufaturing/supply chain (the “supply-side”) groups within manufacturers.  These groups struggle with daily changes in demand, supply and product inside the sales and operations planning horizon and have to be able to alter supply plans to profitably respond to these changes.  Our users typically end up being planners, schedulers, materials managers, outsourcing managers, etc.

For some time now, we’ve been getting “pull” from the demand management/fulfillment (the “demand-side”) groups within these companies.  They too are struggling with volatile demand and supply.  In their case, they own demand and are struggling to sense true demand quick enough and see an increasing need to collaborate with their customers around demand.  Likewise, they are responsible for allocating finished goods inventory to ensure that the right products are in the right place at the right time.  What we’ve continued to hear is that demand managers, customer service reps and sales operations staff are struggling.  They lack the needed visibility and exception notification systems to understand what the current state of demand and supply is across an increasingly distributed fulfillment network, and they lack the tools to collaborate with their customers on demand and internally with colleagues to resolve problems.

Enter RapidResponse for Demand Management.  We’ve designed this solution with these user communities in mind.  This new service empowers them to sense demand more quickly, to shape demand and to more profitably respond to demand and supply changes to drive greater levels of customer satisfaction and revenue for the company.  They get an integrated view of demand and finished goods inventory so they can quickly spot misalignments and then leverage tools to determine the most profitable response.

And, when combined with our existing RapidResponse for Manufacturing into an integrated on-demand service, you’re able to see from end-to-end, from customer demand all the way down through component supplies in an outsourced supply chain.  Each group is individually empowered to solve problems within their domain of influence, but can now uniquely collaborate amongst the groups to find the best response to changing conditions.

Our on-demand RapidResponse service supports another key trend I continue to see, and that’s an increasing emphasis on the sales and operations planning (S&OP) process.  Interestingly, while we certainly see a focus on improving the planning process, the more urgent need is at an operational level.  Companies are struggling with how they deliver to the metrics and plans agreed upon in the S&OP meeting given how many things are constantly changing.  Response Management solutions like RapidResponse are designed to empower front-line decision makers with tools for risk tradeoff and response to daily changes inside the sales and operations planning horizon.  This is critical since more and more companies are operating in an environment when many of the assumptions taken into the planning process are proven wrong as soon as you complete that process.

Supplychainer.com has a new post talking about supply chain solutions offered as on-demand (software-as-a-service) services.  The ultimate conclusion is that the market will mature for such solutions, but the prediction is it will take about 10 years.  I’m much more bullish than that based on what we see for our on-demand service.  My comment to the blog post below.

** My comment **

Our Response Management solution - which empowers people to respond to supply chain changes - is delivered as an on-demand service today.

We sell to large manufacturers across a variety of verticals.  We’re seeing extremely strong interest in on-demand as companies continue to outsource much of their IT infrastructure.

Very importantly, our on-demand service provides exactly the same full functionality as our prior on-premises offering.  It is not a first generation solution with limited capabilities - so we don’t encounter that obstacle.

You are correct in that some people are initially concerned about data - but when they stop and think about how much data is already outside their walls because of the pervasive outsourcing they’ve done, they get much more comfortable with an on-demand service.  In fact, a huge value that we provide is the ability to actually regain visibility into that outsourced data because that is critical to enabling effective response to change.

I don’t disagree that some vendors will take a different approach to offering an on-demand service and run into issues - but it doesn’t have to be that way.

I think the market will be “mature” much sooner than 10 years, I think we’re at the early stages of a very strong demand that will become mainstream inside of 5 years.

New research from Aberdeen sought insights into the importance of supply chain management at companies and found that it is a critical function that can make a strategic difference.  Aberdeen found that companies are struggling with globalization of supply, increasing competitive pressures, and dwindling product life cycles - which is forcing them to look at supply chain transformation initiatives.  Aberdeen found that companies were concerned with cost containment and meeting increasing customer demands.

The and is the key word there.  For years supply chain management was focused mainly on cost containtment.  But more recently, increasing global competition combined with decreasing customer loyalty have forced manufacturers to pay even more attention to customer demands.  Along with this came the realization that supply chain management was not just a tactical necessity, but a strategic imperative.  Done right, huge competitive advantages can be achieved through customer-focused supply chain management practices.

To achieve this, manufacturers need to enable responsiveness.  Responsiveness serves both needs - it enhances customer satisfaction while simultaneously improving operations performance through cost reductions.  Increased responsiveness requires front-line decision makers to be empowered to act quickly and decisively.

Saw a post at The Performance Guys that caught my eye because it talked about “actionable” information and BI tools.  What exactly is actionable vs. un-actionable (is that a word?) information?  To a degree, all information is actionable, its just to what purpose.  Most BI information is historical and best suited as actionable in a planning context.  This is one of the reasons why BI has struggled in operations where operations performance is a function of real time action based on operational, not historical, data.

Actionable information in the context of supply chain management means current and detailed operational data (not a model of operations).  But, more importantly, for supply chain professionals to truly put this information to work, they need not only supply chain visibility, but tools to take action.  Action is required because supply chain professionals are inundanted with exceptions to the plan.  In supply chain management, there is no such thing as a perfect demand plan or a perfect supply plan.  There are plans and there are realities.  Increasingly, the two are not the same.

Action in response to constant volatility requires collective tradeoff and response, where people collaborate and leverage real time analytics and simulation capabilities to analyze the impact of a proposed change and to assess action alternatives.  And, the volume of change and response requires these actions be aligned with corporate objectives, so supply chain professionals need to be able to continuously see how their proposed actions would impact corporate objectives-before they commit to the action.

There’s a lot of talk in the market about actionable information and operational BI.  Before plowing ahead, I would encourage everyone to ask “why” they need access to information, what type of actions do they need to take and what tools do they need to enable these decisions.