Hi, my name is Alexa and I am a chocoholic. It’s been less than a day since my last indulgence.
There’s no two ways about it. When it comes to the cocoa-laden confectionery, I’m hooked. It doesn’t matter if it’s milk, dark or white. Anything with even a hint of chocolatey goodness will suffice – and sadly for my waist line, one little taste is never enough.
What’s even more unfortunate than the effect on my figure is that it’s about to get a whole lot more difficult to feed my addiction thanks to a lack of insight into supply chain risk. The Wall Street Journal (WSJ) recently posted an article about the huge shortfall in the cocoa crop in Ghana. Dry weather coupled with the late application of vital pesticides to cocoa trees has caused the crop to shrink significantly, and sparked fears growers may not be able to deliver enough cocoa to fulfill their contracts. That means manufacturers will likely be scrambling to find enough cocoa to satisfy their chocolate producing needs.
Skyrocketing prices aside, this latest news is enough to send any chocolate lover to the store to stock up, and really puts the spotlight on a major supply chain risk in the $7 billion cocoa-futures market. As the WSJ points out, there is a drastic over reliance on the Ivory Coast and Ghana when it comes to the global cocoa supply chain. Together they account for more than half of the world’s cocoa supplies!
With that much of the world’s supply coming from one region, it’s no wonder the price and availability of chocolate fluctuates as wildly as it does. Natural disasters, poor growing conditions, pandemics, war, political and social unrest, terrorism and accidents can all have huge consequences on supply chains relying on either a single supplier, or suppliers who are all in the same geographic region.
“Sense and Respond”, or as we position it, “Know Sooner, Act Faster”, is a favorite topic on the Kinaxis blog. Many have had a lot to say on the topic (see here, here and here as examples). And now, so do our customers.
Before we get to that, let me ask you, do you know what the first step is that leads to being able to sense and respond? Acceptance – a recognition that you can’t plan perfectly. I suspect you are thinking to yourself, “everyone knows this and accepts this already”, right? Well, in theory and in their words they might, but in execution… not so much. For example, at a meeting with a prospect recently the team talked at length about their need to be more responsive and flexible. They said they needed to advance their processes and bring them together to be able to be more agile and effective in their planning, analysis and decision making. Awesome… music to our ears! And when the conversation turned to the capabilities they were seeking, guess what happened? They presented a series of feature checklists for each individual function, primarily focused on planning capabilities. Hmmm.
When an organization truly recognizes the difference between planning better and knowing sooner, acting faster, it means they are looking at the problem differently. And equally important, they start looking at the solution differently. The conversation changes from looking at ways to optimize the plan, to looking at ways to optimize decision-making processes when there are variances. They consider a set of capabilities that are fundamental to creating a competency in “sensing and responding” – from getting harmonized data, to being able to do quick simulations, to bringing teams together to make informed risk decisions and business tradeoffs.
We’ve posted a series of Kinaxis customer clips, among them are a few that speak to this theme. There are some pretty good insights that are definitely worthy of a listen.
“…we haven’t been able to accurately forecast for a long time, and it was just fooling ourselves, and so years ago we really embraced this philosophy that, “No we can’t, so what can we do about it?”…and so what we began doing was… ”
Bill Dubois, host of our Late Late Supply Chain Show, had the opportunity to sit down with Jeff DeGraff, a well-respected innovation thought leader dubbed “The Dean of Innovation” to find out what you can do to get those creative juices flowing. And yes, it does involve stepping outside of your comfort zone.
DeGraff says it really takes three main things to become an innovator, and all of them relate to diversifying your thinking.
Be Self Aware
The first stop on the journey to a more ‘innovative you’ is to become aware of your thinking patterns. DeGraff says that while many of us continually work to improve ourselves, we rarely take the time to examine our dominant logic, which is a set of tenets or beliefs that determines what we value and what we don’t. This dominant logic is often what gets us stuck in grooves that can be hard to get out of. By recognizing your dominant logic, and finding a way to rise above it, you’ll have a better chance at innovation.
Feed Your Head
DeGraff says it’s critically important to “get different things in your head.” He suggests reading something you wouldn’t normally read, encountering something you wouldn’t normally encounter, and looking for the good in those experiences.
Change the Guard
Surrounding yourself with the same people day after day may be a way to make you more socially comfortable, but it could be killing your innovation process. DeGraff says he routinely sees people only hang out with those who have the same thoughts and beliefs as they do. He recommends expanding your intellectual horizons by going to different places and taking part in different groups. You never know what you’ll learn!
Watch the entire interview below to see what else DeGraff has to say on innovation.
As you can probably guess, this is the last step in reaching Stage Five for your Supply Chain Planning System of Record (SCP SOR).
Why can’t we predict everything?
Predictive analytics are one way to forward think. Quantitative analysis has really become popular and there is no lack of data. Data scientists are the new generation of supply chain planners. However, the assumptions and variables can be wrong… leaving you with a lot of data, but zero visibility. How do you manage the risk?
Supply chain is a risky business!
Risk management is being seen as a strategic imperative in supply chain. Events like natural disasters, world economic issues, regulatory changes, demand volatility all wreak havoc on your supply chain. With shorter lead-times and fierce competition, a missed delivery can result in losing customers and missing financial projections. A generic pharmaceutical company I worked with told us that when they miss a delivery to Walmart for a SKU they can loose the sales for the entire product line.
On the other hand, I have worked with a company that within a few hours after learning about the Japan earthquake and tsunami of 2011, were able to determine the impact of supplier late deliveries and very quickly find alternate sources of supply. How was this done?
They already had a risk management strategy in place using what if scenarios. When they modeled the impact of the tsunami, they created multiple versions of the data with different variables and assumptions. The scenarios were compared and quickly the best course of action was agreed upon. A recent Forbes article said ‘the more paths travelled the greater the likelihood of coming up with the best answer’. That is really what risk management is about. In a study completed by Accenture, they found that more than 75% of the 1,000 plus executives they interviewed consider operations risk management to be very important in addressing supply chain risk issues. They also learned that various industries have their own approach. The levers that they value for trade off decisions were different.
Our own Trevor Miles, VP of Product Innovation and Thought Leadership, had the chance to sit down with Bob Ferrari of Supply Chain Matters to talk about multi-industry supply chain challenges. Their in-depth interview touched on the challenge multi-industry sales and operations planning (S&OP) teams have when it comes to various cross-functional information and decision-making silos.
Trevor relayed how he often sees businesses looking to gain “a more detailed understanding of the various tradeoffs of decision-making, especially related to various competing metrics.” Adding that for many the most significant technology focused supply chain challenge often relates to data – making sense of it and providing proper context. RapidResponse is aimed at harmonizing those needs, providing a single data model for planning and decision- making.
Today there is a focus on supply chain analytics and the automation of decision making. However, this does not preclude the need for humans and collaboration.
A quote from a Forbes article read ‘humans evolved to survive and collaborate to ensure survival’.
In my first blog I wrote about talent management. The millennial generation thrives on working in a social collaborative manner. In supply chain they need to share plans, assumptions and recommendations with others.
The good news is that working in the cloud makes collaboration that much easier. It is estimated that the market for cloud-based supply chains is growing at a compound annual rate of 19%.
Yesterday the emphasis was on vertical supply chains while today companies require horizontal supply chain excellence. Global companies require data and information to be shared and decisions made across the organization very quickly.
Those of us raised in the traditional supply chain era where functional expertise was the #1 priority may think of collaboration as a very nebulous term. Today it is a necessity for timely communication and decision making from the customer to manufacturer to supplier.
The emerging digital supply chain requires data and analytics AND social media functions.
Join us on July 7 at 1pm EDT as we sit down with “The Dean of Innovation” Jeff DeGraff for a live Q&A.
Jeff’s creative and direct take on innovation has made him a world-renowned thought leader and helped him earn the title of “The Dean of Innovation.” Putting his practices into action, he advises Fortune 500 companies on how to grow, change and ultimately move forward to see positive results.
An enthralling and inspirational speaker, this is an amazing opportunity to learn a bit about Jeff’s unorthodox view of innovation as he shares his ideas on combining theory and practice to instill the mindset needed to make innovation truly happen.
The modern day inventory manager described in this series is the backbone of your company’s inventory planning process. She has a strong understanding of supply chain fundamentals and is an expert at controlling the key levers impacting the inventory company’s investment in inventory. All that’s left is to add a planning system that enables her to work effectively. If you leave her to build reports and metrics that she needs in excel then she’ll spend all her time crunching numbers instead of planning your company’s largest asset. So, what features should you look for in a good planning system?
All your data’s in one place. Your planning system should combine all your company’s data in one system. It should be up-to-date (daily at a minimum), and include all the input data required to make your inventory planning decisions.
Closed Loop. If you don’t execute with your planning system, there should at least be a closed loop between the systems so you don’t spend all your time transcribing after making a decision.
Built in reporting systems should immediately alert your inventory manager to changes requiring response. Agile response can make all the difference.
Your inventory manager needs a dashboard that can give her a clear picture of the current status of the inventory plan and provide insight that guides her actions each day. It’s also useful to have more in-depth tools that provide a visual representation of a wide array of metrics simultaneously to help identify concerning trends and improvement opportunities across all the levers in her toolbox. While it can be hard to find time for it, exploratory analysis often pays big dividends.
I covered this last week, but I really can’t stress enough how important it is to select metrics that support all of your business goals. It’s important that the impact of you planning decisions are visible across all parts of your organization. These metrics should be using live data, and you should instantly see the results of the changes you make.
Interactive charts and graphs. The metrics on your dashboard should be interactive to enhance their analysis value. You should be able to hover your mouse over charts to read key figures, and you should be able to drill into the details with a single click. Metrics should update immediately when you make changes and you should be able to filter the input data to dig in to areas of concern.
Hierarchies. Data hierarchies allow you to see your data at various levels of aggregation. Imagine being able to see your metrics at a global, regional, country, or site specific level with a click of the button. Hierarchies can be built into dashboard and reports to allow instant filtering to look at key details.
What-if scenarios allow you to immediately calculate the results of changes you make so you can evaluate the results before committing the changes to your master data. You can easily lose a whole day if you have to wait for your ERP system to refresh overnight before you can understand the impact of a settings change.