Archive for the ‘Supply chain management’ 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


4 Supply Chain Minds You Ought to Hear at Kinexions

Published October 17th, 2014 by Melissa Clow 0 Comments

As we have mentioned a couple times, Kinexions, the Kinaxis Training & User Conference is taking place later this month. October 28-30, 2014. We have a great speaker line up, but here are 4 supply chain minds you can’t miss!

Alain Huillet SIOP business transformation director Schneider Electric Industries SAS1. Alain Huillet, SIOP business transformation director, Schneider Electric Industries SAS

Session Title: “End to End Visibility and Supply Planning — Schneider Electric”

In Alain’s main stage presentation hear how end-to-end supply chain visibility is key for becoming demand-driven and building value in supply networks. This case study from Schneider Electric will highlight a framework and the key success factors for implementing visibility and collaboration solutions to gain benefits not just for your organization but for your entire ecosystem of partners.

 

 

Daniel Kolacko vice president, global planning Bristol-Myers Squibb2. Daniel Kolacko, vice president, global planning, Bristol-Myers Squibb

Session Title: “Customer Case Study: Bristol-Myers Squibb”

Learn from Daniel Kolacko, vice president, global planning, Bristol-Myers Squibb about key trends transforming global planning in the life sciences supply chain and their successes, challenges and lessons learned on the journey to a proactive, agile global planning function.

 

Benji Green Director Global Sales Operations Planning at Avaya 3. Benji Green, director of global sales, operations and inventory planning, Avaya

Session Title: “Accelerating Vision to Value: Integrating Supply Chain Operations”

Avaya has been on a 4 year transformation to create a Best In Class supply chain with industry leading On Time Ship, Inventory Turns, and Expense to Revenue ratio. The attainment of that Vision has been largely enabled through an aggressive deployment expansion of the Rapid Response platform. Avaya has leveraged RapidResponse to automate low value processes, integrate previous planning silos, synchronize work streams, translate data into information, self-monitor and auto-alert, drive towards exception-based management and accelerate business intelligence. On this journey, Avaya has identified critical success factors that have produced greater value from the RapidResponse investment by establishing a successful methodology from deployment through the application support process.

Guido Marivoet manager supply chain systems EMEA TE Connectivity4. Guido Marivoet, manager, supply chain systems, EMEA, TE Connectivity

Session Title: “Customer Case Study: TE Connectivity”

Over the last two years, the TE Connectivity Automotive EMEA division has successfully implemented RapidResponse in six sites. They have had quick wins and made great improvements in their initial pilot site but now want to better leverage their investment to gain even greater business value.

One key challenge faced by the supply chain planning group is determining how to increase the velocity of rollouts to additional sites across multiple divisions within the company. The EMEA Automotive division also utilizes SAP APO and determining a vision for how best to apply the strengths of RapidResponse and APO across the various business processes is still a work in progress. And as the saying goes, ‘You can’t manage what you can’t measure’ and questions remain regarding what metrics to use to measure the success of new planning solutions within EMEA Automotive.

 

Join these and other insightful supply chain leaders this October in San Diego! Learn more.

 

Posted in Sales and operations planning (S&OP), Supply Chain Events, 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


SMAC in the Middle of Supply Chain Change

Published October 6th, 2014 by Trevor Miles @milesahead 1 Comment

Of course the title is a play of the adverb “smack in the middle”, which Merriam-Webster defines as at the heart of the matter.

smack definition

By SMAC I mean the acronym Cognizant, amongst others, uses for Social, Mobile, Analytics, Cloud. SMAC has the potential to change the manner in which the extended supply/value chain shares data, collaborates in the resolution of issues, and engages in value sharing business processes.

monday cartoonIt is about time for supply chain change. We have been talking about removing the silos of supply chain planning for decades. Not just in supply chain planning, but across the entire enterprise.

Our traditional approach to a person’s function at work, and the required organization structures to control how people work, is based on the work of Frederick Taylor and others. Taylor and others advocated the concept of Scientific Management and focused on standardization of jobs by breaking each job down into small, repeatable steps. People were then trained to carry out each step in a very repeatable, efficient manner. Great leaps in productivity were achieved in its application.

“the fully developed bureaucratic mechanism compares with other organizations exactly as does the machine compare with the non-mechanical modes of production. Precision, speed, unambiguity, … strict subordination, reduction of friction and of material and personal costs- these are raised to the optimum point in the strictly bureaucratic administration.”
– Max Weber (1948): Essays in Sociology

But Scientific Management predates The Knowledge Economy.  And yet we still operate and organize our companies in ways applicable to the Industrial Age, which itself caused huge social and economic readjustment at the time.

Internet of everythingThe promise of SMAC is that we will be predicting the future (Analytics), the results will be available anywhere (Mobile), everyone will be networked (Social), and at a fraction of the cost (Cloud). Gartner predicts that by 2017, SMAC (which Gartner calls the “Nexus of Forces”) will drive more than 26% of the total enterprise software market revenue, an increase from 12% in 2012 – representing over $104 billion new revenue from this stack.

But what will get us to this promised land? I do not believe it will be with the Digital Immigrants who run our corporations now. We will have to wait for the Digital Natives to force their way through the corporate hierarchies. As Jeff DeGraff writes

Digital Natives view the world horizontally, in equalitarian terms. Rather than dividing the world into hierarchies, they see everyone as existing on an equal level. They embrace the benefits of sharing things and ideas with each other and, in doing so, they cross boundaries.

I can’t wait. But this is not how our corporations are run now, including supply chains. And SMAC is right in the middle of the change that is coming.

For additional reading on the topic of Digital Natives and Digital Immigrants, check out my recent blog on “Do Supply Chain Planning systems generate any value?” as well as the following presentation by Marc Prensky from the Handheld Learning conference.

Posted in Milesahead, 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


Your supply chain is costing you money – Reason #5 Not having a supply chain risk management process

Published October 1st, 2014 by John Westerveld 2 Comments

supply chain risk management

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:

Reason #5: Not having a supply chain risk management process

In today’s society, unless you are rich enough that you can afford to replace your possessions, pay for your health care, and cover your liabilities, you have insurance (unless you are poor enough that you can’t afford the premiums).  Insurance is a form of risk mitigation. Insurance protects us against theft, fire, accidents, and health emergencies and if this were to happen, it can provide for our family when we pass.   Yet, a surprising number of companies (while they have traditional insurance) do not have a supply chain risk management “insurance” aka a supply chain risk management process. To put it another way, they have insurance to protect them if someone trips on their property and sues, but don’t have a risk management process to mitigate against their top supplier going out of business.  The insurance covers what could be a million dollar risk, supply chain risk management protects against what could be a MULTI-BILLION dollar risk.

Supply chain risk can be broken out into multiple different types;

  • Geographic:  This includes natural disasters and political unrest. These are the types of issues that impact supply for an entire region.  We saw this type of issue over the past several years with the Japan earthquake / Tsunami in and with the Thailand floods.  Political issues can also have a significant impact on supply. Conflicts, government policy changes, regulatory changes and coups can mean that supply is suddenly turned off or that a market is no longer available.
  • Supplier issues: This includes quality issues, delivery reliability, financial stability, reputation, strikes, and pricing changes.  We talked about many of these issues in the first post of this series – “Offshoring without getting the full picture”. The key point here is that in today’s connected supply chain, your suppliers are an extension of your own business.  If your supplier fails financially, it will impact your business.  If your supplier goes on strike or can’t deliver for some other reason, it will impact your business. If your supplier has had a shaky human rights record, your business’s reputation can get tarnished.  If your supplier decides that you need to pay more or global currency exchange rates drive up the cost of a component (and you have no alternatives ready to go) your margins can be significantly impacted.
  • Customer Demand: Interestingly, this is often ignored when people think about supply chain risk however, it can be one of the biggest factors.  If your demand decreases, you have excess inventory or idle capacity.  If your demand disappears completely you are out of business.  If your demand increases significantly, your supply chain can be overwhelmed and delivery becomes an issue.

IT  security: This is also often ignored when thinking about Supply Chain risk.  If you’ve been watching the news lately, you know that hackers seemingly are able to access corporate records at will.  Imagine now, if hackers accessed your design systems…. Your customer records, your accounts payables / accounts receivables.  Imagine if your proprietary designs and customer records were sold to your competitors.  Not a pleasant idea to think about but something that is happening every day despite the billions of dollars spent on IT security.

In the post “Innovate approaches to Supply Chain Risk”  I describe 4 key action areas that companies developing a more systematic, focused and proactive supply chain risk management approach need to address as outlined in a report by SCM World;

  • Identifying and assessing risk – This includes visibility across the supply chain including a good understanding of the companies involved.  Leaders like Cisco and IBM utilize dialog with suppliers and customers as well as visual risk mapping and scenario planning techniques
  • Quantifying and prioritizing risk – Given that all companies operate on limited resources, focus on those areas that will deliver the biggest benefits. One way is to plot likelihood of occurrence against business impact. While this approach can work well for recurring operational risks like supplier performance, it doesn’t work as well for hard to predict incidents like natural disasters.  One approach suggested in the article is that supply chain managers assign financial impact and time to recover factors at a site and component level.  This tends to identify critical but low-spend suppliers that may otherwise be overlooked.
  • Mitigating Risk – inventory tracking and dual sourcing are considered to be the most effective risk mitigation strategies.  Also increasing use of standard components, segmented and regionalized supply chain strategies and business continuity plans
  • Speeding Recovery – Business continuity plans that have been developed and tested with suppliers are key to rapid recovery

Supply chain risk management is like insurance.  You hope you never need it, but if you do, you will consider it the best investment you ever made.

Do you have a supply chain risk management process in place? What risks worry you and how do you mitigate against them? Comment back and let us know!

 

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