Archive for the ‘Response Management’ Category

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There’s a lot of discussion today about improving forecast accuracy. It makes sense since improvements here will yield direct improvements in business performance. There tends to be less discussion about improving demand sensing (although AMR Research promotes this quite regularly) and ensuring appropriate supply-side flexibility and responsiveness to deal with true demand that is quite often not what was forecasted.

Unless your business has very predictable demand (this increasingly seems to be the minority business), then your best efforts at forecasting will never produce a perfect forecast. The question then becomes what are you going to do about the portion of your business that you can’t accurately forecast? This is where demand sensing and supply-side flexibility and responsiveness are critical. As companies seek to become more demand-driven, they need to acknowledge the fact that you just can’t plan the customer. You need to invest in tools and methods to ensure that you can respond as realities unfold.

The biggest concern here is that I continue to hear of too many cases where companies view these as either/or decisions - usually starting with improving forecast accuracy since that seems to be the hot topic today. While this is a worthy investment, in many businesses its actually more important to excel when the forecast isn’t accurate to ensure that you can beat the competition by providing better customer service and a more profitable demand response in response to the unexpected.

Interesting article at the Enterprise Decision Management blog citing new research from Forrester on what they call “The Dynamic Business Applications Imperative.” According to the research, decision management will be at the heart of future enterprise applications. The authors provide insights into how to determine which areas of the business would benefit most from these decision management applications.

We’re already seeing strong validation for this in manufacturing operations. Our Response Management solutions, which are decision management applications, help to empower front-line decision makers with the visibility and tools they need to make faster and better decisions. The driver behind this increasing need is constant change. If you combine increasing demand volatility, shortening product lifecycles and increasingly distributed and complex supply chains, you get an environment where demand management and supply management is significantly more complex than ever before.

Front-line decision makers are inundated with exceptions to the plan that they need to deal with. In doing so, they need to balance the often conflicting requirements of customer satisfaction and internal operating metrics. And, increasing global competition means you need to act now or risk losing your customer to someone else who can deliver what they want when they want it.

For years companies have invested in solutions to plan the business better and ensure it can execute efficiently. But as organizations become more demand driven it’s becoming increasingly clear that you can’t plan the customer. The result is that operations is in need of decision management tools to support their critical need to make rapid and accurate decisions to deal with the pace of change.

There’s a new article at Supply Chain Digest here talking technologies to support the S&OP process. The article goes through the traditional mix of demand management, supply management and inventory management applications.

A couple of observations. One of the challenges I think organizations face in today’s rapidly changing marketplace is tied to the legacy and heritage of the traditional planning solutions. Traditional demand planning and supply planning solutions are very siloed in nature - focusing on the user communities, information and decisions that need to be made in that particular problem domain. While they may foster collaboration, it is only within the user communities in that domain (for example, collaboration in creating the forecast), and not across demand, supply and product simultaneously. There are multiple problems with this very sequential, siloed approach in today’s climate.

S&OP today requires rapid scenario analysis and cross functional collaboration. There are so many changes going on in demand, supply and product, that failure to integrate these into a holistic process and decisions that weigh all of the issues simultaneously leaves a lot to chance. And, because of the pace of change, there’s an increasing need to move from a purely planning centric view of S&OP to a process that is more operationally aligned - shortening the window to ensure that the pace of change is being factored into the decision making processes.

As market leaders push to become more demand-driven, one of the first challenges they have to deal with is the reality that you can’t plan your customer. The S&OP and all processes need to be oriented around this reality to ensure that the company is positioned to lead in a demand-driven market.

New research from Aberdeen shows that leaders in global supply chain visibility report improved performance across key metrics (see more on the report here). The report shows that leaders have reduced lead times from international locations, reduced inventory levels and reduced inventory carrying costs.

In another Aberdeen report entitled Beyond Supply Chain Visibility: Response Management is the Key (available here) their research findings show that supply chain visibility ranks as one of the top two application focus areas for companies as part of their supply chain technology investment plans. The ability to respond to change rapidly is emerging as critical to a company’s success. Just having visibility is not enough to manage this constant change. This research brief outlines the key characteristics of solutions that go beyond visibility toward enabling a flexible Response Management capability.

There’s no question that visibility is gaining more attention as companies struggle with increasingly distributed and multi-enterprise fulfillment networks and supply chains. The demand management and supply management challenges in these environments are complex as companies try to gain an upper hand on constant changes in demand, supply and product. Companies continue to find that their employees face an increasing number of decisions that require human judgment and that, while visibility is a pre-requisite, tools to collaboratively simulate various action alternatives and choose the actions that are best aligned with corporate metrics are required to proactively respond to the literally hundreds of daily changes that must be managed.

I found this article here at World Trade Magazine to be quite thought provoking.

The basic premise of the article is that we are currently moving into the third era of global supply chain transformation that has occurred within the last 100 years. The article suggests that third era of supply chain globalization–the era of revitalized command–is already upon us.

I’ve talked numerous times about the challenges of orchestrating the desired outcome across a virtual enterprise (see here, here, here and here). With your ability to respond effectively to change being an increasing threat to competitive success, how you’re able to coordinate responses to those changes is essential. There’s no question that the move to a heavily outsourced model, while providing a lot of benefits, has complicated this process. We’ve seen research and heard first-hand how challenged many brand owners are at controlling their own destiny in these situations. This is because they are still accountable for the end result and the virtual enterprise means more players and more potential for hiccups.

This article is interesting in that it not only acknowledges these issues, but takes it a step further to suggest that companies are going to start rationalizing their strategies and actually moving a bit in the opposite direction to improve their ability to deal with the realities of complexity and change. I would be interested in hearing your thoughts - is your company thinking this way?

I found a really great article at the Bangkok Post site here. This article hit home because it talked about several topics that I have found in talking to companies. It’s central theme is one of asking who is involved in supply chain management and that it’s more people than you think.

I’ve absolutely seen this to be the case time and time again. Especially in today’s environment of constant change - the people that end up involved are from various functions in the organization. You’ve got your customer service representatives that are the voice of the customer and have a high degree of interest in trying to please them. Then you have your planners, schedulers, buyers, outsourcing partners, demand managers, etc., etc. - all people that frequently get involved in dealing with the unexpected.

The article accurately states that “tradeoffs between cost and customer service are inevitable, given the geographic reach, product mix, customer and channel variety, and supply variability, the planning process is complex and requires sophisticated information management to support it.” So, think about your organization. When a demand change comes in - maybe a last minute order or a last minute order change - who gets involved trying to figure out the right tradeoff to make at that time. Or, what happens when that just-in-time inventory shows up but its the wrong stuff?

If you’re like most companies, it’s a wide variety of people that get involved and it varies by the situation. All of these people are involved in the demand management and supply chain management processes critical to market success. But, a lot of companies only focus on the more traditional roles - the planners, schedulers, etc.

Once you’ve accounted for all of the people involved in these types of decisions, the next question to ask is how are they going about solving these problems today? If you’re like most companies, it’s a scramble. The key to automating this critical response process is empowering these people with the right information and tools to respond both quickly and accurately - with proactive insight into the impact of their actions.

There’s a good post here at SupplyChainer.com citing new Aberdeen research on best practices in trade promotion. This caught my eye because promotions are one of the biggest sources of demand volatility that companies face. According to Aberdeen, the current state of the trade promotion management is not satisfactory and 75% of the companies are having problems with their systems.

Promotions represent a significant demand management challenge…and opportunity. Companies that can successfully execute promotions and rapidly respond to the changes that come out of a promotion (good and bad) are going to be at a competitive advantage compared to the market.

A well thought out plan is a requirement before launching a promotion, one that ties together all aspects of the business. But a thorough plan supported by strong execution capabilities isn’t enough. The reality today more than ever is that you can’t plan your customers, so you have to be able to manage at the moment and deal with whatever realities come your way. Customers may not react to the promotion in the way you expected - leaving you with the potential for excess inventory. Or, demand may exceed supply. Or, just as likely, demand for the blue product may outpace that of the red product (this week, but next week that could change too).

If you’re like most companies, you scramble to cope with these situations. Empowering people to respond to change is the key to automating this critical process and ensuring that you optimize customer satisfaction and operating performance.

According to an article here at The Industry Analyst Reporter, new research from Manufacturing Insights indicates that European companies are focusing on transforming their supply chains to be more agile.

The article states that Western companies are trying to balance efforts in reaching contrasting business objectives of:

• Reducing overall cost and improving productivity (64.85%)
• Increasing quality and customer satisfaction (64.24%)
• Innovating in new or existing products and services (64.24%)

On the other hand, firms from Eastern Europe are operating in the global marketplace and, in order to compete, are placing a particular effort in increasing product quality and customer satisfaction.

The macro trends impacting manufacturers - increasingly volatile demand, extended supply chains and shortening product lifecycles - don’t discriminate by geography. All companies, no matter where you reside, are going to feel the impact of these trends. As global competition increases, companies are increasingly left to compete on the same terms no matter which geography they operate in.

These trends are pushing the need for more responsive demand management and supply chain management capabilities in companies. The days of building a great plan and then executing it well are gone. Competitiveness is now very much a function of your ability to respond to change, and that’s a reality for all geographies.

There’s a good article here over on SupplyChainDigest entitled “Do you get supply chain “surprises?”" It’s written by Tom Wallace (to learn more about Tom, see his website here), a noted expert on Sales and Operations Planning (S&OP).

The article talks about the various challenges that companies face in dealing with supply chain surprises. Tom goes on to explain how you can use the S&OP process to deal with these surprises.

What’s not detailed in the article are some of the tools required to deal with surprises within this process. Participants in this process need to be armed with consistent and up-to-date visibility into demand and supply and have tools for rapid scenario analysis to enable sense and respond. When surprises happen, you’re really trying to figure out a way to “re-balance” supply and demand to enable a profitable demand response (Tom’s example is of a large customer sending in a signifcant, yet unexpected, order). If supply and demand can’t be re-balanced, then a compromise is required to determine the best course of action, one that balances all of the metrics the company is driving to, such as customer satisfaction, revenue, margin, inventory, etc.

Supply chain surprises are increasingly becoming the norm. Through the proper processes and by empowering key decision makers with the necessary visibility and tools to sense and respond to such changes, companies can gain a competitive advantage vs. those companies that are slow to react.

There’s a post over at Supplychainer talking about how you can attack supply chain risk. I posted a comment there but wanted to include it here for completeness.

** My comment **

I think the suggestions in the post are quite valid. However, I would argue that more is needed. The reality is that there’s no way to predict all the unexpected events that are going to pop up daily in a globally distributed supply chain that is faced with increasingly volatile demand and shortening product lifecycles.

To be proactive in dealing with these “make or break” situations, companies need to empower people with the visibility and tools (including collaborative scenario modeling capabilities) to act quickly and in accordance with corporate metrics. Why empower people? Because dealing with these high complexity, high risk decisions requires human judgment. By definition these unexpected events were not in the plan that everyone is trying to execute to. So, human judgment is going to be required to figure out the right tradeoffs and compromises to make.