Top 10 Movie Quotes from Kinexions! The Kinaxis Training & User Conference

Published September 26th, 2014 by Bill DuBois 0 Comments

Film poster for Top Gun (film) - Copyright 198...It’s an exciting time of the year at Kinaxis as we gear up for another user conference. Kinexions will take place this year in San Diego with the theme set as Innovation at Mach Speed (with some Top Gun references), a keynote from Navy SEAL Robert O’Neill and Afterburner (actual fighter pilots), along with a unique Customer Appreciation event.

The last couple of years we did parodies on movies, like “The Hangover” and “Back to the Future” so with the movie theme continuing, here are the…

Top 10 movie quotes from Kinexions that were also heard in famous movies.

10. Exchange between a customer and developer after seeing the capabilities in the next release: “Surely you can’t be serious?!” “I am serious…and don’t call me Shirley.”

9. Customer sharing ERP deployment horror stories: “ERP deployment is like a tense episode of ‘Everybody Loves Raymond’…only it doesn’t last 22 minutes. It lasts a lifetime.”

8. Customer talking to his Account Executive: “Keith, since I’ve met you I’ve noticed things I never knew were there before…birds singing, dew glistening on a newly formed leaf, stoplights….(scorecards, dashboards…).”

7. Customer after hearing Doug Colbeth’s opening remarks: “He’s the sweetest guy. Have you ever looked into his eyes? I swear it was like the first time I heard the Beatles.”

6. Prospect after seeing a Customer presentation: “I’ll have what she’s having.”

5. Customer before the Product Management presentation: “Go ahead, make my day.”

4.  Product Management after their presentation: “How’d ya like those apples?”

3. CIO to VP of Supply Chain: With great power comes great responsibility.”

2. Customer running a “what-if” in a training class: “I feel the need. I feel the need for speed.”

1. Attendee leaving Kinexions: “I’ll Be Back”.

 

Can you guess the movies? Hope to see you at Kinexions.

kinexions 2014

Posted in Demand management, General News, Jokes, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management


Your supply chain is costing you money – Reason #4 Making key decisions by modelling the supply chain in Excel

Published September 24th, 2014 by John Westerveld 5 Comments

Reason #4 Making key decisions by modelling the supply chain in Excel

Making key decisions by modelling the supply chain in Excel

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:

In my career, I’ve had the pleasure of working with several top tier supply chain companies. Companies that are household names. Companies that have been in business for decades. Companies worth billions of dollars.  Companies that are forced to use Excel to manage large swaths of their advanced supply chain planning.  Companies that are starting to realize that while Excel is a powerful tool and can be used for lots of things, it isn’t the tool to use to run your supply chain.

Excel excels (if you’ll pardon the pun) at many things.  But modelling complex supply chain relationships isn’t one of them. There are many issues with using excel that have been written about numerous times in this blog.  A sampling are here, and here.

I can briefly summarize the main points;

Companies use Excel because their traditional planning systems don’t allow them to view and understand aggregate data and more importantly, don’t allow them to effectively react quickly to change.  However, because people need this information and because people (especially those in supply chain) are very smart and come up with ingenious ways to solve problems, they extract data from their ERP systems and build complex models in Excel.

So we understand why companies turn to Excel; they can’t get what they need from ERP.  Now let’s look at why Excel shouldn’t be used to run your supply chain.

Errors – Excel is a free form modelling tool – which means anyone can build a spreadsheet for just about anything.  Many of these spreadsheets are not validated or tested, meaning that the model is only as good as the persons that create the model.  Millions of dollars have been lost to Excel errors.

Everyone has their own version – While you can password protect and lockdown Excel spreadsheets it is difficult to do effectively and many companies simply don’t do it.  This means that often there are multiple copies of the same spreadsheet, all slightly different.  I’ve been in meetings where what appears to be the same spreadsheet tell different tales because someone made a data or formula change.  Eventually everyone has their own version and are all going off in different directions.

Excel is not supply chain software – it doesn’t matter how good your Excel model is, you simply cannot model the complexity of the supply chain in Excel. This means that the best you can do is build an approximation of your supply chain in Excel.  As we know, in supply chain, details do matter and the small detail that is approximated in your model might be the detail that costs you.

So if ERP can’t do it and Excel isn’t the tool, what tool can help you make supply chain decisions?  This tool needs to have the following characteristics;

End to end visibility – To make supply chain decisions, you need to have visibility across your supply chain. You need to be able to see where inventory exists, what capacity is available and what the issues are.

Simulation – The ability to create a scenario, make a change and instantly see the impact of what that change means that you can try things out and know with confidence that it’s going to work.

Full supply chain analytic model – Supply chain planning is very complex and while most vendors have similar basic logic there are many differences between systems, even within implementations of a given system.  To effectively model this logic, you need a tool that can simultaneously model the supply chain logic from all these different systems.

Collaboration - No one person has knowledge of the entire supply chain in their head.  You need to be able to work with others to resolve complex issues.  So an effective supply chain decision tool will need to allow you to quickly identify who you need to work with and then share your scenario with those people.

How do you make your major supply chain decisions? Comment back and let us know!

 

Posted in Demand management, General News, Inventory management, Response Management, Supply chain collaboration, Supply chain management


Purposeful Collaboration: What It Could Mean for Your S&OP Process

Published September 22nd, 2014 by Melissa Clow 0 Comments

Purposeful Collaboration What It Could Mean for Your S and OP Process

Just a quick post to let our readers know of an upcoming webcast “Purposeful Collaboration:  What It Could Mean for Your S&OP Process” on Wednesday, October 8th at 2:00pm ET.

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 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

register now

 

 

Speakers:

Alan Lepofsky, VP and Principal Analyst, Constellation Research
With almost two decades of experience in the software industry, Alan helps organizations understand how to develop, purchase and implement collaboration solutions. Rather than evangelizing how social software can change the way people work, he instead focuses on how organizations can improve their existing business processes by providing access to the colleagues, content and communities that can help people get their work done more effectively.

Trevor Miles, VP Thought Leadership, Kinaxis
As vice president of Thought Leadership, Trevor serves as an expert source for Kinaxis customers, prospects, industry analysts and journalists. Known throughout the supply chain field, he has published many articles, presented at various industry events, and is a contributor to the Kinaxis 21st Century Supply Chain blog.

 

Posted in General News, Milesahead, Miscellanea, Sales and operations planning (S&OP), Supply chain management


Your supply chain is costing you money – Reason #3 Not having end-to-end supply chain visibility

Published September 17th, 2014 by John Westerveld 0 Comments

LA freeway is like complex streets of supply chain

Not having end-to-end supply chain visibility

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:

Imagine this scenario.  You are a supply chain leader. It’s Friday afternoon and your thoughts are turning to the upcoming weekend with your family.  The phone rings – it’s your VP of sales. A prospect that your company has been chasing for years has finally agreed to place an order.  It’s a big one and they need it fast.  Really fast.  Inside cumulative lead-time fast.  The question is can you do it.  Can you commit to this order with confidence that you can deliver?

Traditional ERP offers a couple possible options.  1) Load and pray. Accept the order and hope / pray that everything aligns and you actually can deliver on time… maybe event at a profit. The problem with this approach is that very often, you can’t deliver and you lose a customer and worse your reputation.  2) Fire drill (I knew a company that actually called it that). This is where you e-mail each node in the supply chain with the order requirements, have everyone do a feasibility analysis on accepting the order and then wait for the results. The results, however may take several days / weeks to come in.  By that time the customer and their lucrative order have moved on.

Why are there only these two options with traditional ERP systems? It comes down to the disconnected nature of these systems. Companies that have grown through acquisition typically have multiple ERP systems distributed throughout the enterprise. Even if systems are from the same vendor, they will often be at different versions and are not interconnected.  So a scheduler at one plant has no visibility as to the inventory position, capacity or material supplies at another plant.   The only recourse is to pick up the phone or pound out an email to find out…or guess.

There is a third option, one where you can commit to a customer order with confidence. This new approach enables you to simulate the addition of the new order, see the impact across the entire supply chain, try out different options to resolve any shortages and most importantly know that you can commit to and actually deliver this order…and respond in hours not days or weeks.

This option requires a new tool and a new way of thinking. This approach requires lightning fast simulation and, most importantly, visibility to all the nodes of your supply chain. Let’s look at these one by one;

  • Simulation – To simulate the impact of a major supply chain change like a large order you need to have several things; 1) Analytics that model the results from each of the ERP systems involved in your supply chain.  2) An in-memory data model that bypasses the slow read/write cycles used by disk based systems resulting in lightning fast supply chain calculations and 3) the ability to instantly create scenarios – effectively a copy of the entire database within which you can try out multiple approaches to resolve supply chain issues 4) the ability to share and collaborate with other members of your team.
  • Visibility– Imagine trying to drive a car where you have no visibility to the side, none behind nothing out front except through a little 4” by 5” window.  Yes, you might be able to successfully navigate but the chances of you making a very expensive mistake is pretty high. The sad thing is that this is how many of us navigate the complex streets of supply chain. Traditional ERP often are siloes of information locking off other nodes because they are using different versions or worse, entirely different versions. In our drop in situation, you could have sufficient inventory at a different site but never know it because you can’t see it. But visibility goes beyond the raw data.  Many traditional ERP systems limit visibility because they are designed to show one part, one order at a time.  You cannot look at aggregated data without running specialized reports or extracting the data and loading it into a BI tool.Visibility also means understanding the impact of your decisions on key corporate metrics. Knowing that when you make a decision, that it make sense not only from the context of your department, but also for the company as a whole.

How do achieve supply chain visibility?  Comment back and let us know.

 

Posted in Demand management, General News, Supply chain management


Top 15 Supply Chains to Admire from the Supply Chain Insights Conference

Published September 16th, 2014 by CJ Wehlage 1 Comment

CJ supply chain insights conferenceThe Supply Chain Insights annual conference was held on September 10-11, 2014 at the Phoenician in Scottsdale, Arizona. As an ex-AMR Research analyst, this was my favorite venue. Great memories here, as so much has changed in the supply chain research world these past 5+ years. Reliving the old days was made even more rich, as there was a panel session at the conference with Lora Cecere, Roddy Martin, Mickey North-Rizza and myself. All ex-AMR analysts on the stage, talking about the ‘Top 15 Supply Chains we Admire’.

CJ supply chain insights boardThere has been so much discussion on the “top” supply chain lists.  When we did the Top 25 list at AMR, we mixed a bit of science, art and influence.  While there was always passionate discussions on companies and metrics, the end goal was to raise awareness of supply chain as a practice.  I know the Sales and Marketing folks have lots of elaborate events to celebrate their achievements, and we in supply chain needed to pause from our 17 hour flights to far off places to negotiate a 2% reduction in cost, and celebrate our industry. 

The panel discussed the Top 15 Supply Chains we Admire, as built off the Supply Chain Index.  While other “lists” use ROA, Inventory Turns and Revenue Growth, I find Lora’s science very objective.  She is analyzing growth, inventory turns, operating margin, and return on invested capital, performance and improvement over time. 

The Supply Chain Index methodology was built on the belief that the supply chain is a complex system with increasing complexity. We believe it is the supply chain leader’s role to build and manage supply chain performance to drive year-over-year improvements which are balanced, strong and resilient. We find that most companies throw the system out balance and are able to only drive progress on a single metric, not the metrics portfolio.”

-          Lora Cecere, Founder and CEO, Supply Chain Insights LLC and Abby Mayer, Research Associate, Supply Chain Insights LLC

So, drum roll please…

The Top Supply Chain We Admire are:

  1.  TSMC (Taiwan Semiconductor)
  2.  Intel
  3.  EMC
  4.  Cisco
  5.  Apple
  6.  Seagate
  7.  Colgate
  8.  General Mills
  9. BASF
  10.  Eastman Chemical
  11.  TRW
  12.  Audi
  13.  Nike
  14.  Ralph Lauren
  15.  AB Inbev

Very happy to see two of my prior employers, EMC and Apple, make the list. I would highly recommend you read the Supply Chain Insights report,.  This provides the depth of analysis that created these rankings. With some AMR history on this, I have to say this is a great step in a more objective and mathematical measurement of supply chains. I find it more objective because it is broken down by industry.  I’ve always believed it’s too unfair to compare a life science supply chain (whose primary goal is to manage profitability across the drug lifecycle) against a consumer electronic supply chain (who’s primary goal is market share). 

At the conference, Lora held a session, “The Math Behind the Supply Chain Index” with Dr. George Runger, Arizona State, and Abby Mayer, Supply Chain Insights. This made it fun for us ex-AMR analysts, as we got to talk about our viewpoints and opinions, and Dr. Runger & Abby Mayer had the tough task of going through the methodology.

Some interesting insights:

  •  There were 0 companies from Retail, Paper & Packaging, Pharmaceutical, or Medical Devices.
  • ·Some “big” names from other lists, like P&G, Toyota, Samsung and Walmart didn’t make the lists.

During the panel, I shared my thoughts on Samsung.  They are a supply chain that I very much like, especially from an S&OP practice.  However, they seem to fall under the conglomerate issue, where multiple business units may skew the summary metrics.  Samsung has Visual Displays, Appliances, Semiconductor, Digital Imaging, Networks, PC/Laptop/Printer, Mobile Communications, and LCD panels.  Their S&OP is great across these business units.

  • Demand and supply volatility makes the supply chain “tough”.  And when the going gets tough, the tough get going.  Industrial networks rank highest, followed by consumer.   No healthcare networks made the list.
  • While 12 out of 13 improved resilience, 11 out of 13 lost ground at the intersection of operating margin and inventory turns.

CJ supply chain index

During the Panel, I was asked to comment on the 5 leading factors that make a difference:

  1.  A clear definition of supply chain excellence by leadership
  2.  Strong horizontal processes
  3.  Intentional design
  4.  Value of supply chain planning and analytics
  5.  Development of organizational capabilities

The one that stands out the most is strong horizontal processes.  For years, supply chains have evolved from the Plan, Buy, Make, Deliver model, building Functional processes, with Functional systems.  Each Functional area built “middleware” to bridge the gaps. Most of this middleware was Excel and Meetings.  As we made the supply chain more global and complex (see Supply Chain Insights findings on how we describe our supply chain today), we keep thinking functionally when we should transform to an end-to-end solution. 

supply chain insights lora cecere

 

Speed and Agility will improve dramatically when the process AND solution is focused end-to-end. 

You can see it with the high tech companies on the list.  Each has a story, or driving force behind their transformation to an end-to-end network.

TSMC: driven by a desire to manage the cost and sustainability at their nth tier suppliers, as well as TSMC and their customers, they continually are recognized as a strong partner from both their network as well as external organizations.  Tracking and optimizing costs at all your supply chain nodes requires an end-to-end strategy.

Cisco: for many years, Cisco has led the charge for raising the awareness of supply chain, through their risk management focus as well as their leadership and educational programs. Having a highly outsourced supply chain and managing the risks requires an end-to-end strategy.

EMC: while EMC’s product line is not as complex as, say, Samsung, they are strong at aligning end customers with supply chain with engineering.  One of the best tours is the EMC factory.  You will see how their supply chain is in lock step with test engineering.  This end-to-end focus allows EMC to manage the end customer environment, using manufacturing results to predict customer installed product events, and EMC pre-event resolutions.  It also allows EMC to drive detailed new product introduction success, aligning NPI dates with supply chain plans. 

Seagate: it took a big external event, the Thailand floods, to force Seagate to an end-to-end strategy.  Existence as a company was at stake, and Seagate had to support their suppliers financially.  During this crisis, Seagate leadership rose to the occasion, and created the journey as an end-to-end supply chain.

And, Apple: Having worked there, I would say their strongest ability is leverage. From cash, to product, to dates, to future business, they align end-to-end very tightly to leverage their supply chain network.  Some would call this “demand shaping”.   There’s been many views on the Apple supply chain.  They’ve ranked #1 in the AMR/Gartner list for 7 straight years, since 2008.

Trivia question: Who was the #1 Supply Chain prior to Apple’s 7 Year run?

Answer: Nokia

This brings me to a perfect conclusion: The Supply Chain needs to transform to an end-to-end, business leader role.

Nokia had a great supply chain, focused on the mobile phone hardware.  They failed to integrate software and watched other brands leverage digital content.  They failed to transition to the smart phone era, thinking their brand in mobile will allow them to “catch up”. 

“The high tech era has taught people to expect constant innovation; when companies fall behind, consumers are quick to punish them. Late and inadequate: for Nokia, it was a deadly combination.” The New Yorker, James Surowiecki, September 3, 2013.

Functional excellence is no longer good enough.  Supply Chains are in danger of being punished by consumers, who have the balance of power, if they don’t establish end-to-end control. And, not just for agility & speed, but to leverage the business strategy.


Posted in Demand management, Gartner Supply Chain Managment, General News, Sales and operations planning (S&OP), Supply Chain Events, Supply chain management


Your supply chain is costing you money – Reason #2 Poorly executed or non-existent sales and operations planning

Published September 10th, 2014 by John Westerveld 4 Comments

sales and operations planning gears

Reason #2: Poorly executed or non-existent sales and operations planning

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 post here:

Tell me if you’ve heard this one before.  Your company has implemented an S&OP process.  At first it showed some promise, but now it has turned into a blamefest attended if at all by lower level representatives that aren’t empowered to make decisions.  No one trusts the numbers, inputs are late and you aren’t seeing any improvements month over month and people are starting to wonder “why bother”.  Sound familiar?

So how does a poor S&OP process cost money?

  • Excess and obsolete inventory. S&OP is all about aligning manufacturing and sales. When you don’t make what you sell and don’t sell what you make you create inventory.  Lots of it.
  • Lost sales.  This is the corollary to the above.  Typically companies with poor planning don’t have too much of everything.  They have too much of things that aren’t needed and too little of things that are.
  • Lost market opportunities.  Companies without an effective S&OP are typically much slower to react to market changes.  This means that their competitors will beat them into new markets and products.

A well-executed sales and operations planning process can transform a company; allowing them to better control inventory and costs while meeting rapidly changing demand pictures.  It does this by gaining alignment across the sales, demand planning, manufacturing and finance organization.  In effect making sure all areas of the company are working towards the same plan and towards the same goal.  5 years ago, I wrote a blog post in which I discussed the 3 pillars of S&OP. They are;

Process:  Trying to run sales and operations planning without a clearly defined process is like driving in a city where no one obeys the rules of the road….you probably won’t get where you are going.   If there were no process driving S&OP, then there is a very good chance that key information would not be presented (or presented poorly), key people would not be in attendance and that critical decisions would not be made.  It is important that the structure, timing and agenda of S&OP is documented, published and adhered to.   If the process needs to change due to changing business requirements, those changes need to be documented and published.

Executive Commitment:  It is very difficult (bordering on impossible) to implement an effective S&OP process without executive commitment.  Why?  First let’s ask what is the purpose of S&OP?  The purpose of S&OP is to align supply and demand and the various departments contributing to that alignment. Departmental alignment can only occur if the top level department executives are involved in the key decisions…because those top executives have the decision making authority.  Sales and Ops is a failure if the representative at the meeting needs to go back to their executive to get a decision.

Effective S&OP Tools: This includes the tools to analyze the data, present information and make decisions.  Effective S&OP tools also include the ability to integrate the data that drives S&OP.  While Excel can be fine to do the initial S&OP model, moving to the next level of S&OP effectiveness requires a more integrated, responsive and collaborative application.

S&OP is a powerful tool if performed well. Inventory reductions, improved efficiency, improved customer service and reduced expedites are all expected benefits.  However, If there is no buy in, if executive commitment isn’t there, if data isn’t reliable and doesn’t drive action your S&OP process won’t delivery these results.

Have you experienced poor S&OP planning processes?  How about excellent planning?  Comment back and share!

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


On the road! 4 September supply chain conferences we love

Published September 9th, 2014 by Melissa Clow 0 Comments

September is a busy time of year for us at Kinaxis – Many folks here are flying the skies to attend various conferences. Here’s the supply chain conferences we love and will be attending. Hope to see you in the coming weeks!

Gartner EMEA1. Gartner Supply Chain Executive Conference
September 10-11
London, UK

Kinaxis is pleased to be a Premier Sponsor and participate in panel discussion of the 2014 EMEA Gartner Supply Chain Executive Conference.

Panel Details:
“The Technological Advances that Will Catapult Supply Chains into the Next Decade”
Wednesday September 10th at 9:45 AM – 10:15 AM in Room Westminster B&C

Immediately following the keynote speaker, Trevor Miles, Vice President of Thought Leadership at Kinaxis, along with other technology vendors, will take part in the following panel topic: Technology advancements have been at the heart of supply chain transformations during the past decade. Throughout the next decade, a whole new set of technologies will underpin supply chain success stories. A series of thought-provoking questions focused on the future of supply chain technologies will be put to the panel.

Learn More
Schedule Meeting
 
Supply Chain Insights Conference Image
2. Supply Chain Insights Global Summit
September 10-11
Scottsdale, AZ

Kinaxis is pleased to sponsor and participate in panel discussion the Supply Chain Insights Global Summit.

This exclusive event is designed for the line-of-business leader (Supply Chain Leaders, Chief Financial Officers and Corporate Social Responsibility Leaders) driving supply chain excellence and building value networks.

Panel Details:
“Top 15 Supply Chains to Admire”
Wednesday, September 10th at 10:30 AM – 11:15 AM in Room Westminster B&C
The Phoenician, Scottsdale, AZ

The “Top 15 Supply Chains to Admire” is the culmination of a two-year effort to evaluate supply chain performance and improvement for the years of 2006-2013 by industry by vertical for publicly-held companies. To make the list, companies out-performed their peer group on operating margin, inventory turns and Return on Invested Capital while driving significant improvement in financial metrics over the period.Supply Chain Improvement is based on a detailed analysis calculated factors for balance, strength and resiliency. This methodology, termed the Supply Chain Index, was developed in partnership with the Operations Research team at Arizona State University. As part of the panel, four ex-AMR analysts –Roddy Martin, Mickey North Rizza, Lora Cecere and CJ Wehlage– will share insights on the results and the trends.

Learn More
Schedule Meeting
 
LogiPharma US
3. LogiPharma
September 16-18
Princeton, NJ

Kinaxis is pleased to be a sponsor and participate in panel discussion of North America’s #1 End to End Supply Chain Conference for Pharmaceutical and BioPharmaceutical Companies.

Supply Chain Visibility Panel Details:
“Getting Information from a Variety of Systems into One Location to Extract Information”
Thursday September 18th at 9:55 AM

Join Trevor Miles, Vice President, Thought Leadership at Kinaxis, along with supply chain executives, as they discuss ways to gather data from a variety of systems into one location for the purposes of gaining actionable information and insight to make decisions in real time.

Learn More
Schedule Meeting
Automotive Logistics Global Conference
4. Automotive Logistics Global Conference
September 16-18
Detroit, Michigan

Kinaxis is pleased to be a Silver Sponsor of the 15th Annual Automotive Logistics Global Conference.

The Automotive Logistics Global Conference is the place where the intelligence, contacts and expertise come together to address industry challenges.  Join Kinaxis and the most senior executives from OEMs, Tier suppliers and LSPs to network, learn and do business.

Learn More
Schedule Meeting
 
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Happy Tuesday all!

Posted in General News, Sales and operations planning (S&OP), Supply Chain Events, Supply chain management


Do Supply Chain Planning systems generate any value?

Published September 8th, 2014 by Trevor Miles @milesahead 0 Comments

I have been in the advanced planning and scheduling (APS) space since 1995 when I joined i2 Technologies in Europe. Before that I was in management consulting doing what would be called supply chain design or reengineering today.

While MRP and S&OP were defined as early as the 1980s, these provided rough cut analysis at the aggregate level, nowhere near the level of detail that is possible today. The diagram below by Oliver Wight, with some enhancements by me, captures the progression of capabilities since the 1970s. My enhancements were to add the underlying technology and company information at the bottom which gives some context.

 Oliver Wright S&OP IBP

The key point is that I have spent a lot of my working life focused on the value generated by more advanced planning solutions.

It has been with some shock, therefore, that over the past few months I have come across a number of prospects, partners, and analysts that question whether any real value has been generated by all the investments in technology over the past 25 years. I have come to the conclusion that this needs some further analysis, which I won’t be able to complete in a single blog.

Let me start with the confusion between planning and execution. I was on a call last week with a large company in the food and beverage space that has spent $100s of millions, and many years, on an ERP deployment. And of course during the deployment their organizational structure has changed and they have gone through some M&A activity in that time. Needless to say they have a continued multi-year deployment of the supply chain planning system provided by the ERP vendor. And they are still a long way from complete from deploying the ERP modules let alone the supply chain planning modules. Now they want to deploy an S&OP process. They have piloted the process in Excel and know that they need an enterprise level solution for a global roll-out of S&OP. The issue is that none of their IT investments in the last 10 years have moved the needle on operational metrics such as inventory levels, case fill rates, and other operational metrics. Their words. As a consequence they are looking for tangible evidence of value before progressing with a global deployment.

paul meyer productivity quoteAbout a week before that I was at dinner with Mo Hajibashi of Accenture. Mo has been around this space about as long as I have and has seen all the changes. We were reminiscing about the trade exchanges that were so much part of the discussion in the late 1990s. Of course these largely went the same way as the rest of the dot com bubble. But Mo went on to say that many companies have struggled to quantify value from their investments in supply chain systems. We were there to discuss other topics so we did not dig too deep into his statement, but it stuck, and came roaring back when I was in discussion with the company I mention above.

In July, Lora Cecere of Supply Chain Insights kicked this all off with a blog on the Forbes web site titled “My Quest to Know …” in which she seemed to question the value of IT in driving value in corporate performance. She states that

As technologies evolved over the course of the last decade, there was a promise that investments in software like Enterprise Resource Planning (ERP), Supply Chain Planning (SCP) or Business Intelligence (BI) would improve corporate performance. I was a research analyst in the throes of this movement, writing article after article on how IT projects will drive corporate performance improvements. I believed it. I was a prolific writer and a committed disciple. I thought it would transform organizational capabilities.

While Lora and my paths are different, our trajectories are the same. I studied Industrial Engineering and Operations Research focusing on Optimization Theory. I lost faith in optimization early when I realized that the uncertainty in our knowledge of true capacity, yield, lead times, and hundreds of other variables drowned out the promise of optimization. And that is assuming that we have a good handle on demand, which we don’t. However, I still believe in the promise of greater productivity through replacement of slow and manual processes with fast and agile digital processes.

In other words, while I didn’t dispute Lora’s findings, I was puzzled by her conclusions of supply chain planning systems. She seemed to be saying that benefits have not been realized from deploying planning systems, which didn’t fit my understanding of her position. When I asked Lora about her blog she replied that:

Supply chain planning, while over-hyped, and under-delivered by many technology vendors and consultants, adds value. The companies that achieve the highest levels of performance, and balance, in corporate performance make the design of their networks and their planning processes a priority. It does not happen overnight, and does require the right fit of technology to drive greater potential. The factors are the right data model, a frequency of planning that reflects the rhythms and cycles of the supply chain, and the right level of granularity of the modeling. The best planning systems are implemented carefully based on conference room pilots and focus on modeling the business. As a result, the best implementations are usually not the fastest.

The market has been scarred by two issues: the bad behavior of the best-of-breed solutions in the first generation of solutions, and the lack of depth of the extended ERP solutions. As a result, there currently a gap between what companies want and what they have. However, excellence in corporate planning matters. The concepts improve the potential of the organization to deliver higher levels of balance sheet performance. The greatest value today usually comes from a best-of-breed solution that is implemented by the same best of breed provider. The over-hyped promises of extended ERP implemented by large system integrators as advertised on signs in airports has not driven the levels of value that the best-of-breed solutions have.

Perhaps we have been looking at the benefits of  supply chain planning systems too narrowly. There have been additional benefits, and Lora points to two of them, namely our ability to absorb supply chain complexity – Lora refers to product complexity – and become a lot more efficient as measured by revenue per employee. I consider these huge gains. How could Apple have grown like it did both in terms of product and market expansion without greater efficiency and the ability to coordinate the flow of materials throughout the world? How could Procter & Gamble have expanded into the emerging markets without forming a number of regional planning hubs?  (Please note that I am using company examples which are not Kinaxis customers deliberately so that I cannot be accused of bias.)

Planning systems do improve supply chain performance when coupled with process and organizational change.  Did anyone see that wonderful spoof in which a daughter gives her elderly father an iPad who then uses it as a cutting board? This is Lora’s point. Lora is running the Supply Chain Insights Global Summit next week in Phoenix, and one of the agenda items is about the Supply Chain Index she has been working on. Unfortunately I cannot be there. I’d really like to be in the session that discusses the supply chain index Lora is developing.

us manufacturing output jobs

As I have stated already, the real question is what would have been the cost of running these massive supply chains without the IT investments? While we might have exhausted the benefits to be gained from large ERP deployments, I am not at all convinced that we have got even close to 50% of the efficiency gains we can achieve with new solutions based more on consensus building and collaboration than on optimization. I am one of those gray-haired men Lora’s refers to in her blog, but I am also a ‘digital native’, something that cannot be said about most of my contemporaries, who are typically ‘digital immigrants’ at best. Yet my contemporaries are the ones making large decisions about organizational structures, processes, and solutions that are rooted in mental models developed and perfected in the 1970s and 1980s. And far too many of the analysts and management consultants continue to position these mental models as best practice. They are not; They are yesterday’s practice.

digital natives versus digital immigrants

But let us step back from my polemic and look at the data. Of course it is impossible to separate out the investment in planning systems from robotics and other technology investments.  But we can look at the ‘digital revolution’ as a whole and make some pretty broad assumptions and correlations with planning systems. First of all this isn’t a recent topic. As early as 1990 Erik Brynjolfsson of MIT published an article titled “The Productivity Paradox of Information Technology: Review and Assessment” in which he cites even earlier analysis of the topic. Erik states that:

The relationship between information technology (IT) and productivity is widely discussed but little understood. Delivered computing-power in the US economy has increased by more than two orders of magnitude since 1970 (figure 1) yet productivity, especially in the service sector, seems to have stagnated (figure 2). Given the enormous promise of IT to usher in “the biggest technological revolution men have known” (Snow, 1966), disillusionment and even frustration with the technology is increasingly evident in statements like “No, computers do not boost productivity, at least not most of the time” (Economist, 1990).

erik brynjolfsson raching with the machine

However, in a subsequent article published in 2003 and titled “Computing Productivity: Firm-Level Evidence” Erik states that

We explore the effect of computerization on productivity and output growth using data from 527 large US firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using one year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to five times greater over long periods (using five to seven year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.

In other words:

  • There is a sufficient business case in the short term (12 months) to justify IT investments
  • While there is a significant delay between the investment and the full gains in productivity, the gains too are massive, much greater than first assumed

In the paper “Computers, Obsolescence, and Productivity” published by the Federal Reserve Board in 2000, the author, Karl Whelan, states that:

Real business expenditures on computing equipment grew an average of 44% per year over 1992-98 as plunging computer prices allowed firms to take advantage of ever more powerful hardware and, consequently, the ability to use increasingly sophisticated software. These developments have helped improve the efficiency of many core business functions such as quality control, communications, and inventory management, and, in the case of the Internet, have facilitated new ways of doing business. They have also coincided with an improved productivity performance for the U.S. economy: Private business output per hour grew 2.2 percent per year over the period 1996-98, a rate of advance not seen late into an expansion since the 1960s.

This is enough evidence for me. At the same time I have no doubt there has been extensive over promising and under delivering, and bungled deployments. Do we really want to go back to typing letters and mailing them to customers and suppliers? Do we really want to use a manual planning board to plan the purchase of components and assembly of a tablet that occurs in multiple continents across many organizational boundaries?  I am highlighting where many of the productivity gains have already been realized.

It is going to require a new generation of ‘digital natives’ in senior positions making decisions about organizational structure, processes, and supporting technology before we realize the full potential of IT investments. And the benefits we have realized so far are enough to justify continued investment.

human evolution technology

Posted in General News, Milesahead, Sales and operations planning (S&OP), Supply chain management