Archive for the ‘Supply chain management’ Category

We reached a major milestone on the Supply Chain Expert Community this month: 5,000 members. As the manager of the community, I’m thrilled to see us reach that landmark. But it’s even more rewarding to see the levels of engagement within the community increase as that membership number has grown.

It’s incredibly gratifying to see the benefits that Supply Chain Expert Community members have achieved by tapping into their collective experiences and knowledge. On a daily basis, the community increases the efficiency and effectiveness of both the individuals who utilize it and the companies for whom they work.

The community has truly become a place where supply chain practitioners can get valuable insights into to their toughest challenges. It’s earned the rightful reputation as a leading source for supply chain thought leadership, thanks to the always compelling and insightful bloggers.

Free and open to the public, the Supply Chain Expert Community was launched by Kinaxis in August 2009 to provide supply chain management practitioners, thought leaders and students with a forum for three key functions:

• Learning: members can ask questions and read blog posts  about the latest trends in supply chain management
• Sharing: members can discuss best practices and lessons learned in supply chain discussions
• Connecting: members can network with other professionals in the supply chain industry

I want to thank each and every member who has made the Supply Chain Expert Community a vibrant, dynamic resource for supply chain professionals. I look forward to seeing what we can accomplish as we gain our next 5,000 members.

To learn more about the Supply Chain Expert Community features and content, check out this recent news release: http://www.kinaxis.com/supply-chain-solutions-company/news/release_view.dbm?id=1712

How can you join?

• Anyone can navigate the community and view its content by visiting the site: http://community.kinaxis.com
• To contribute to the community (rate content, create discussions, add comments) users must self-register.

Short post today to let you know Kinaxis was selected as SupplyChainBrain’s 100 Great Supply Chain Partners in recognition of the significant impact it has had on customers’ supply chain efficiency and performance. This is the seventh consecutive year that Kinaxis has been placed on this list.

What we are most proud of is that this is a customer-driven award – multiple nominations from our customers is what landed us on the list. We are humbled.  A very warm thank you to everyone who submitted on our behalf- whoever you may be!

You can check out the entire listing here.

And while you’re on their site…

…check out a great video called, “S&OP: What’s It Really About?” featuring Trevor Miles, director of thought leadership here at Kinaxis. In this video (free registration required to view) Trevor provides his thoughts on why so many companies seem stuck in the early stages with their S&OP efforts, and how they can move up the maturity curve to realize significant performance breakthroughs.

I came across the following article , ‘10 Guidelines for Supply Chain Network Infrastructure Planning’, in IndustryWeek, which discusses a methodology to reduce supply chain costs through the optimization of the network infrastructure. The authors discuss 10 things to keep in mind when tackling infrastructure optimization, which they say account for 75%-80% of total supply chain costs.

I would like to expand on a couple of these points, focusing on optimizing the supply chain through the use of collaboration, simulation, and scenario comparison utilizing modeling tools.

The supply chain network is composed of many different components acting in concert to deliver the required goods and services at the right time. The better these interdependent relationships are understood, the better the supply chain can be optimized. This raises the question how best to optimize such a complex set of data points.

In order to get an accurate simulation, you must be able to obtain accurate data about each node in the network, and then utilize software to model it. These nodes can include, but are not limited to:

• manufacturing plants,
• supplier plants,
• sub contractor plants,
• warehouses, and
• transportation routes.

This requirement would suggest that any simulation model must be able to incorporate multiple disparate data sources in a relatively easy and timely manner. Important data to obtain would be:

• lead times,
• inventory levels,
• in transit times,
• associated costs,
• quality levels, and
• service levels.

There are many others that could also be included to give a more accurate picture of the network.

Once this data has been obtained (which may require some effort, especially with off shore suppliers), the next question then becomes, what do we do with the data? This is where the requirement for multiple scenarios becomes critical.

Because these networks can be extremely complex with many factors influencing outcomes, we must have the ability to compare many different scenarios in order to determine a path forward. One scenario may give us a lower overall cost, but poorer customer service. Another may result in cheaper raw material costs, but lower quality levels and increased transportation costs. All these outcomes must be weighted in order to determine the most optimal design, -this requires some way to be able to compare multiple scenarios in a clear and efficient manner.

The next step would then be to examine each scenario, and determine if the best parts of each can be combined into one ‘super’ scenario. As an example, one scenario may have a supplier with lower cost, but higher transportation costs. What if sourcing is split between a low cost/high transportation supplier and a higher cost/low transportation supplier? By managing the sourcing between the 2, an optimal outcome may be achieved (happy medium). This can only be determined by developing a complex model with multi-sourcing.

If you take this case and apply it across the network, the number and complexity of the inter-relationships can soon become mind boggling. This is why a multi scenario engine which can rapidly calculate the various outputs of the model from its inputs is so vital. In order to implement the optimal supply chain network, it must first be designed as a whole to deliver the optimal results.

Once the supply chain network has been successfully modeled, a powerful tool is now available for what if analysis. The maximal use of this tool can be realized by incorporating continuous improvement into the business development cycle and optimizing the network on a regular basis. But in order to make this an effective tool for continuous improvement, a plan must be generated quickly and easily analyzed, as time and resource constraints limit the amount of time to turn around the results and push improvements to the network. This is why speed and performance matter when implementing complex modeling solutions.

Because the only way to realize the benefits of an optimal network model is to implement it, collaboration among all the players in the network (inside and outside the enterprise), is vital. This leads us to another key criteria for a simulation system - the ability of many users to access and collaborate on the development of the network model.

Once the simulation, model, and collaboration pieces are in place, it raises the question: Can this environment be used to model other complex systems as well as the supply chain? What about the ‘sales chain’, the complex relationship between you and your customers? What about the complex network of relationships that exist between an enterprise’s internal resources (employees) and the enterprise? Financial models? As can be seen, there are a myriad number of networks in the modern world that can be modeled for the purposes of increasing efficiency, and thereby reducing costs or improving service levels.

The headline in this Reuters article jumped out at me. “Big-name brands sourcing from polluting China firms”. Wow. I would hate to be those guys. Why? Because people don’t see the distinction between the company that owns the brand and the company that makes the product. The article named several major companies including Adidas, Nike, Puma, Calvin Klein, Lacoste, Abercrombie and Fitch whose products are sourced through one of two major textile suppliers; the Youngor Textile Complex in Ningbo and the Well Dyeing Factory in the Pearl River Delta. Both of these companies have been accused of polluting waterways with “toxic, hormone-disrupting chemicals banned in Europe and elsewhere” according to Greenpeace.

This incident hammers home the point that the companies we contract to build our products become extensions of our brand. If the company does something unethical, illegal or environmentally damaging, the brand owner is mired by the contractor’s actions. The problem is that as a brand owner you may feel that you have limited influence on your subcontractor as they are a separate corporate entity.

Let’s look at how you can address this;

1) It’s more than just price – Look beyond the price point and consider the total cost of contracting with this company. If they are the lowest cost, perhaps there is a reason. Perhaps they achieve their low cost through shoddy quality, through unethical business practices or through irresponsible environmental behavior.

2) Hold the contract manufacturer to the same standards that you hold yourself. Remember, they are an extension of your brand. If you have environmental or ethical policies, make sure that your contract spells out that they are expected to follow these policies. Further, stipulate that failure to follow these policies would be considered a breach of contract.

3) If you are holding your contract manufacturers to your standards, make sure that you do periodic audits to ensure that they really are adhering to the standards you’ve set. At a minimum, go to the place where your product is being made and observe how things are done.

4) If there are environmental standards or certifications applicable to your industry, look for contractors that have achieved those certifications. This can make life much simpler as the certifying organization is now responsible for auditing.

When we close our factories and have product made for us by another company, we are giving up a lot of control. If you partner with the wrong company, it’s not just cost and delivery that can be hurt; it’s your company’s hard won reputation.

How do you ensure that your contract manufacturer is protecting the image of your brand? Comment back and let us know!

I was reading a blog on the Supply Chain Expert Community by Peter Balbus on How can we make America’s Supply Chains More Dynamic and Innovative, which got me thinking about my own experiences in dealing with supply chains  and their impact on companies I have worked with.

Having spent a considerable time consulting in the SME space (small to medium enterprise), I have seen firsthand how larger companies could harness the innovation and dynamism of these small businesses over here and abroad.

It’s no longer the big that eat the small, it’s the fast that eat the slow.  And small businesses have the ability to react quickly and move fast, as the decision makers are close to the customer and have little to no bureaucracy to slow things down. Larger companies can take advantage of these benefits in the following ways:

1. Data Integration: Smaller companies can be linked into the enterprise’s supply chain through the exchange of data. With the growing sophistication of Web Services, Portals, and other Internet based communication and collaboration tools, the supply chain can now be modeled in almost real-time in a bi-directional manner. However, this requires a greater commitment on the part of the customer to the supplier relationship, as a small supplier does not want to invest the time and money to connect to a customer’s virtual network, just to be dropped for a lower priced bidder. The loss of fully competitive bidding on sourcing must be weighed against the benefits of the virtual network. A connected supply chain gives the large corporation something it desperately needs: the ability to quickly react to changing customer demand  by getting the entire supply chain to work together to make the necessary directional change, and the ability respond to the customer in a timely fashion, based on the speed of the connected supply chain response.
2. Leveraging their Ideas: Smaller companies operate in a different environment than large companies, and so their business practices are different. Setting up a round table with suppliers to get their ideas on performance improvements in the supply chain can yield some significant results. Ideas to better implement virtual networks, reduce component costs through design and engineering for manufacturability, and reduce logistic costs through transportation network redesign, can all yield valuable results.
3. Leveraging Overseas Supplier: Oversea suppliers (especially in developing markets) can face radically different business and regulatory regimes, which forces them to come up with new ways of doing things in order to remain competitive. While most commonly associated with lower labor costs, the very fact they have to operate in a low cost environment can lead them to develop some innovative processes in order to compete. While some of these  practices will not work in our environment, some others may result in significant cost savings to the supply chain as a whole, or allow a faster  response to customer needs. Since the overseas supplier is generally hungry for export business, this gives the customer significant leverage to “pick their brains” for new and innovative ideas.
4. Implementing Quality Improvement Faster:
   With a connected supply chain, information can be disseminated throughout the supply network faster and more reliably. This includes feedback from customers and other links in the supply chain on quality issues. If the connected supply chain also has processes built into to it to resolve issues, quality problems can be addressed in a more timely fashion, leading to reduced costs (scrap, warranty, replacement), and better customer relations.

Of course, all these benefits are dependent on large companies who are willing to spend the time, money, and effort to integrate their supply chains, and then listening to what their supply chains have to say and acting upon it.

Like many things, transitioning your supply chain to be sustainable is not easy.  Looking at all your products, your suppliers, your infrastructure, and your distribution network can quickly become overwhelming. Where do you start? How do we pay for it all? How do we keep delivering to customers while we do all this? These are all good questions. However, the sustainability train is moving and as I’ve pointed out before, you need to be on-board.

In a recent post,  Dave Meyer compared the effort to become sustainable to his efforts to learn the guitar. His approach? Start small – stay focused – keep going. By starting small (in his case, he started with a three string guitar), he was able to learn, yet not be overwhelmed. You need to keep focused. Learning something new (like the guitar or sustainability) won’t happen overnight. You will make mistake and you will go need to go back and fix thing but you will get there. Finally, you will achieve some success.  Don’t stop there, keep going. Tackle the next issue.

In his post, Dave suggests starting with a plan (always a good idea!).  He describes two alternatives.

1)      A systematic framework like the ISO14001 Environment Management System

2)      A Plan-Do-Check-Act Deming wheel approach to continuous improvement.

The Continuous improvement approach might be more manageable, especially for small/medium businesses. It involves seven iterative steps to sustainability. Dave lists them in his post:

Prepare (Plan)

1. Map your impact, set priorities and build the team.

2. Select useful performance indicators and associated data.

Measure (Do)

3. Measure the inputs used in production (primarily materials and components).

4. Assess the impact and efficiency of your facility.

5. Evaluate your products.  Determine how they perform in terms of energy (resource) consumption.

Improve (Check/Act)

6 .Understand measured results.

7. Take action to improve performance.

The trick with continuous improvement activities is that you go through a cycle like this and gain a small improvement. Once that improvement has become internalized, you start the cycle over again. I’ll use a different analogy then Dave did (and unfortunately one that hits closer to home…). If you want to lose weight, setting a target of losing 50 pounds next week is unrealistic and will likely result in frustration and disappointment…and could be very unhealthy. However, setting a target of losing two pounds next week, and two pounds each week thereafter is far more manageable much more likely to be successful.

What is your sustainability approach?  Comment back and let us know.

As I wrote earlier, the topic of control towers seems to popping up everywhere lately. But I am sure that there are as many definitions of a control tower as there are analysts and commentators. So I thought I would weigh in with my own definition. 

• Let’s start from the perspective that a control tower is a decision making tool, not merely a visibility tool. Visibility is a precursor, a building block. In optimization parlance, visibility is an adequate but not sufficient definition of a control tower.
• A key requirement of a control tower is that several simulations can be performed to test high level hypotheses at a granular level to determine the potential effect on operational and financial metrics, as well as identify any constraints.
• A control tower by definition must cross functional and/or organizational boundaries. I think we can all agree that the term implies a view across a fairly broad span of operations, not a narrow functional perspective.
• Because a control tower crosses function and/or organizational boundaries it must support collaboration in order for people to be able to share perspectives and arrive at consensus and compromise that balances competing objectives and performance measures.
• Direct people to what is important and alert then to what is critical, and of course within their span of control.
• Identify consequences to underlying events, as well as the people who are responsible for both the events and the consequences, so that they can arrive at a joint resolution.

The analogy of the airport control tower has great deal applicability to supply chains. All of the systems required to manage airplane departures and arrivals, airplane cargo management, bookings, maintenance etc. are interwoven into a real-time mesh of information and decision making in addition to the visibility that an elevated position and radar afford. In contrast company supply chains, by and large, are separate, isolated, data ‘islands.’ The very best of these typically have ‘batch’ type connections to each other. When things go wrong the signals are late to arrive and impacts difficult to estimate. Imagine a supply chain world that is run like the world’s airports, with common standards (like pilot/tower communication always in English) and systems designed to communicate with each other in real-time. This is a very instructive model with standards and collaboration at its heart.

Below is what Sameer Patel wrote earlier this year in a blog titled “2011 Business and Technology Forecast,” with my emphasis:

As organizations increasingly start to see the benefits of deploying social and collaborative initiatives to improve employee, customer and partner engagement, they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised. In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them. And reseller partners are constantly spending time looking for the right answers not available on asynchronous partner portals to keep end customers happy. Silo’d but open collaboration initiatives on activity streams and other enterprise social networking utilities currently being deployed will expose such engagement not historically possible in an ERP or CRM laden design. Consequently, LOB and IT leadership will realize that traditional process approaches and fluid collaborative constructs need to come together to truly accelerate business outcomes.

My definition above focuses on the process and organizational requirements, but also on some key functional capabilities. What is clear from Sameer’s perspective is that by definition the solution will not be coming out of ERP or CRM systems. I think his observation that;

… they will soon begin to realize that the decade old notion of streamlining repeatable processes made popular by ERP and CRM system-of-record deployments was largely over promised.

is particularly important because for years these systems have been sold on the promise that they encapsulate best practice processes. If a process is repeatable isn’t it by definition a standard process and not a best practice process? OK, I concede that the process may be best practice and repeatable in a few organizations, but if everyone deploys a standardized best practice process, is it still best practice? I could go on forever on this topic, but I will leave it to Sameer’s devastating observation that;

In practice, customers and prospects have unique questions not answerable in the knowledge base or by marketing; employees living in rigid ERP systems need to constantly find experts who have the best answers and to collaborate with them.

And I will go further to state that not only should a control tower identify the experts for the employees, but in addition a control tower should allow an employee to suggest a resolution and to test its efficacy against operational and financial objectives. By all means get an expert to validate the assumptions and results, but all too often it will take too long to get expert feedback, especially if the expert must be identified, the problem described to the expert, and then have the expert investigate resolution in a separate system. The customer or prospect will have moved on to other problems by then.

In other words a thin collaboration capability that is little more than sharing ideas without the capability of evaluating the impact of the ideas is not likely to be of much value and is only a slight improvement on using phone, FAX, and Excel attachments. The issue isn’t that humans don’t have ideas, but rather that they don’t have a timely and effective manner of testing their ideas at a sufficiently granular level to ensure both feasibility and value. This is the key to having an effective control tower.

Gartner has also being weighing in on the topic of control towers, although nearly all the article focus on logistics visibility, hardly a ground breaking areas.  (Any references I make will require access to Gartner materials for full viewing.)  In an article titled “Supply Chain and Manufacturing Outsourcing Discussion with Supply Chain Leaders” published on (Michael Dominy, Hussain Mooraj; Nov 22, 2010), the authors define a control tower, that goes beyond logistics, as follows:

a “control tower” or centralized shared service organization to manage relationships and information between the company and its outsourced manufacturing, logistics and other service providers.

Unfortunately they don’t include a mention of collaborative decision making, but they do go on to state in the same article that;

Even if a partner delivers the supply chain visibility and events across the ecosystem of supply chain partners, the enterprise must control and direct the response across the supply network.

I can only presume that being able to control and direct the response across the supply network implies the ability to reach
a timely and consensus decision on what that response will be.

What I do like about this Gartner article is that it includes a maturity model. I am often guilty of describing nirvana without painting a picture of how to get there and the steps between. Something else that is brought out by the Gartner diagram and article is the applicability of control towers to outsourced environments. In other words when key operational activities are outsourced it is necessary to get on overview of the operations in order to provide the control and direction to the extended supply chain.

So far I have focused very much on the definition of an “operational” control tower. In my next blog I will weigh in on a “corporate” control tower that focuses more on the needs of the executive level. In the meantime please give me some feedback. I’d love to hear your ideas about control towers and the convergence of consumer-led social networks concepts, enterprise 2.0 ideas, and control towers.

Remember back in the day when planners were planners. Late supply only happened because a buyer forgot to place a PO. Your only worry was to make sure your alarm clock was set. Women wanted to be with you, men wanted to be like you. You could plan your way out of anything. Well it wasn’t exactly like that. There were still plenty of issues to deal with when balancing supply and demand but in today’s global supply chains, the unexpected and unusual seems to be more prevalent. I was reading the APICS Operations Management Now article, “The Real Question of Cargo Security.” My first thought was, “what else could go wrong?” In the article Abe Eshkenazi gives an example of cargo theft which in some cases can include “violent hijackings.” The article will certainly get you thinking about risk management and Mr. Eshkenazi also invites you to participate in an extensive practitioner survey to determine how you are applying risk management in your organization. (To access the survey go to https://www.surveymonkey.com/s/6G269QR ) What other risks does your supply chain face? What else could go wrong? In the spirit of the Late Late Supply Chain Show, especially the late part, here are the top 5 responses to “What Else Could Go Wrong?”

5. Cargo Security. Let’s take one from the article that got this list going.

4. Black (and grey) Markets. Here is another form of theft and here comes the quality issues.

3. Terrorist threats. Homeland security, border crossings, and customs issues are only going to get more challenging to deal with.

2. Regulatory delays. FDA, FAA, VUCAT (For explanation, check out this blog post.)

1. Natural disasters. Japan, volcano in Europe, extreme weather conditions, no other explanation required.

Would you add any others to this list to get it to a Top 10? Are there other issues you predict will hit hard in the future? Raise some awareness on risk management and let the community know what you think.

If you attended the Gartner Supply Chain Executive Conference you may remember the term “VUCA” from the keynote on the first day (Trevor Miles also wrote a blog post on VUCA here). It was used to describe today’s supply chain and stands for “Volatility, Uncertainty, Complexity and Ambiguity.” The keynote speaker stated VUCA is a military term but certainly fits when discussing supply chain challenges. Let’s look at where the “T” in VUCAT came from.

The same keynote also described the foundation that today’s supply chains are built on. In particular, there were two analogies that stood out and challenged the audience to think about their own supply chains. The first analogy was having your supply chain foundation built on technology that resembles that of a “picket fence.” In this case, there are gaps where key information may “slip through the cracks” and it becomes difficult to do any meaningful supply chain analysis. If you use Excel this may sound familiar. Supply chain analysis is difficult because those that need to participate are looking at different data, missing data, and there are gaps in the analytics. If your supply chain analytics are built around Excel spreadsheets then you may be bound by the “picket fence.” Excel may be sufficient in an environment where there is little “VUCA,” but when managing today’s supply chain challenges, Excel is not a scalable solution.

The second analogy of interest used to describe the technology a supply chain foundation may be built on was that of “bricks and mortar.” In this case, the analytics required to respond to “VUCA” are just not flexible enough. Old processes that are cast in stone, long analytic run times, and user interfaces that are far from being user friendly are just a few reasons to describe this technology as “bricks and mortar.” If you are trying to get your supply chain analytics from your ERP system, which for the most part is the transaction system, this may sound familiar. In keeping with the analogy it would be like getting blood from a stone. This is the reason many people continue to turn to Excel for supply chain analytics but soon run into the “picket fence” problems.

This is where the “T” in VUCAT comes from, Technology that does not support today’s “VUCA”.

So what is one to do with “VUCAT”? Some analysts were talking about “best of breed.” This may mean abandoning your Excel spreadsheets or getting rid of ERP components that are either difficult to deploy or are not doing the job. In these cases “VUCAT” is actually a verb. For example, if somebody asks, “What are we going to do with all these Excel spreadsheets?” You might say, “We just have to VUCAT and replace them.”  Look for this new word in the next APICS dictionary

If you are going to replace the “picket fences” or “bricks and mortar,” what characteristics will allow you to manage “VUCA”? Here are three key requirements for today’s supply chain analytics;

• “Know sooner” by being able to continuously monitor plan versus actual and alert participants not only of the event but of the consequences.
• “Collaborate now” by automatically identifying not only the consequences of change but those individuals impacted by it and thtat can contribute to its resolution.
• “Respond immediately” by evaluating any number of resolution scenarios in seconds with anyone in any place and compare alternative actions against operational and financial metrics.

This means you can embrace “VUCA” and create a competitive advantage by being a “first mover.”

Did you hear the term “VUCA” used at the Gartner conference or anywhere else? What is your take? Is it a new more descriptive term for today’s supply chain or more of the same?

A common supply chain model with North American-based brands will include the outsourced manufacturing of components or even finished goods to Asia.  This outsourcing to Asia can obviously result in significantly reduced costs of manufacturing, but also presents some significant challenges with shipping or transportation - both in cost and also the transit time. 

The trade off is cost versus speed as to how to get the goods from Asia to North America: via air or sea.  In an ideal world, and especially for bulky items, freight by sea is the most cost effective option and is used as the default shipment option.  Shipments by sea can take around a month or even longer to reach the destination.  Therefore, there are times when shipments need to be expedited to meet demand and air freight must be used.  This is a classic supply chain problem: how to balance transportation costs against demand and supply.

Once the decision to put the materials on a boat is committed to, these materials are basically unavailable for a month or more.  This can be a real problem to have this in-transit inventory tied up when these materials are needed to fulfill shortages or customer demand.

Many ERP systems have modules available to help manage transportation, and there are also third party logistics applications or Transportation Management Systems (TMS) on the market that can be “bolted on” as well to assist with transportation management.

However, some companies struggle with the issue of transportation, primarily because there are multiple considerations:

1. Which orders should be expedited to use air shipment?
2. Is the cost of the expedited shipment worth it?
3. How do you effectively communicate to suppliers which orders to expedite?

Related to item 1, we need access to planning information to determine orders that potentially are late to demand.  Adding in item 2, we need to be able to evaluate the cost of expediting against the additional revenue that can be realized in the current period with the expedited order.  This implies that some sort of simulation capability needs to be present to model the change in the supply plan and how that will impact the fulfillment of demand.  Item 3 has to do with the actual execution, purchase orders may need to be updated or at a minimum the change in shipping method needs to be clearly communicated to the supplier.  The considerations or dimensions of the problem can be summarized as

• plan/simulate,
• calculate cost, and
• execute. 

Many of the third party or extended modules available on the market today can only handle one or two of the three considerations.  Therefore, the above considerations require a “one to many” solution. The ideal solution is to have an application that enables all three of the dimensions: determining what needs to be expedited and the resulting impact on revenue and customer service; calculating the cost and benefit; and effective communication to suppliers and execution.

I am curious if you have any insights as to how you have (or suggested approaches) solved this multi-dimensional problem of transportation management?