It begins with what he believes defines the customer experience value chain:

“Network of internal and partner processes, people and capabilities that translate innovation into customer value while delivering an unrivaled customer experience”

While closely formulated from Forrester’s definition, loosely defined as “activities through which companies create value, competitive advantage, and superior customer experiences”, what I find unique and interesting about Cisco’s definition is the specific attention and promotion of “people” and their “capabilities”. Perhaps this resonates so much with me because I have long believed that collaboration is the next supply chain “optimizer”, and collaboration is decisively a purpose-driven human activity. To be more precise, it is the unifying of actions taken by uniquely capable people for a common good (more on this later).

Angel identified four legs required to support the creation of strategic advantage; Customer Focus, Agility, Collaboration and Sustainability. At first glance, you might find these to be obvious and perhaps not so unique – and indeed, many companies are talking about these elements in one form or another. What is different about Angel’s message, for one, is the maturity and execution of the model. For example, I’ve never met a company who would say they are “not customer focused”; however, most continue to govern themselves according to traditional, and very operationally focused, metrics (e.g. cost, quality, delivery and speed). Cisco, on the other hand, measures their customer focus by focusing on perfect product launch, perfect order, order-to-invoice cycle time and last but not least “moment of truth customer satisfaction measurements” – thus, redefining their balanced scorecard to align with its customer focus.

A significant portion of Angel’s presentation was spent on the Flexibility/Agility leg. What caught my eye most is a theme I am seeing across multiple manufacturing segments, and is becoming a key requirement for many looking to improve their supply chain management and S&OP processes: the growing gap between Demand Chain and Supply Chain. Today, it is not uncommon to see completely disjoint demand side planning (S&OP) and detailed supply chain planning solutions, and yet, it is in between the two where a significant amount of efficiency and performance can be lost. I believe the gap is widening at a steady rate, and this is what is driving the need for new and innovative solutions to “collaborate and effect change in real time”.

So we’re back to Collaboration – the third leg. In my humble opinion, it will be in this area where excellence will be won or lost. You might look at collaboration as the combination of people + processes + technology/tools, but I was very impressed to see a slight variant of this long standing equation. In Angel’s vision, it is “culture” + process + technology/tools. I admit never having thought about it as a cultural challenge, but having worked with many large organizations on this problem, I’ve come to realize how unique a problem this is… collaboration amongst peers and employees is often challenging enough across departments. The type of collaboration Angel is talking about is inter-enterprise – which means that on a given day, you may very well be collaborating with a complete stranger living on a different continent. Indeed, there are cultural implications to achieving this level of maturity.

Again, I might say there is nothing new about promoting collaboration as a key to success; however, it is what Cisco is doing about it that distinguishes them from the rest. They are leveraging many of their own technologies to produce what they call an “Integrated Workforce Experience” (IWE) platform capable of bringing teams together to collaborate and solve ‘moment of truth’ problems that occur in the gap between demand chain and supply chain planning. Unlike social networking platforms, such as Facebook, MySpace and the like, which use friends, family and fun as a hook, I believe platforms like IWE will motivate productive usage and involvement through content, context, and consequence.

Finally, we have Sustainability, which is extremely topical these days as we watch in horror the catastrophe still hemorrhaging under the Gulf of Mexico. Here, we heard some common themes on creating efficiencies and innovations in product design, educating and increasing employee involvement, and a particularly catchy tag line: “Don’t just ‘comply’, lead, innovate, differentiate”. The one resonating message around sustainability, more of a lesson really, is the reminder that sustainability should not be viewed as a factor for competitive advantage, but rather, the one common flag around which everyone can unite and learn from one another. Industry collaboration will be the key to effecting a meaningful and lasting change.

Does Angel’s vision align with yours? Do you see effective collaboration as an emerging competency that will distinguish your company’s performance?

By the way, if you missed the presentation, grab a soda and sandwich and watch the replay of this presentation by registering here.

As part of the 2010 CSCO Summit, the free-to-attend virtual event taking place on June 15th and 16th, 2010, John and Angel will co-present the track entitled, “Creating the Next Generation Value Chain to Deliver Customer Value,” on June 15th, 2010 at 9:00 EST (14:00 GMT).

Attendees will learn about Cisco’s supply chain transformation from a cost-centre to a competitive advantage. In response to rapidly shifting business demands, Cisco has focused on integrating previously siloed back-to-front end operations into a single global operations group that covers the extended value network, from downstream suppliers through to upstream customers.  This session will provide critical insights on the lessons learned and the key focus areas to consider.

The CSCO Summit, a two-day event consisting of an agenda of 11 presentations, brings together an influential group of global supply chain, operations and procurement leaders to learn and share best practices around the critical factors driving strategic supply chain and operational agendas across multiple industry sectors. 

To register for this free event, please visit:
http://cscosummit.raptureworld.co.uk/register

The obvious first approach is to fix the situation with the late supply, but a lot of times this cannot be accomplished.   Many different strategies are in place at some manufacturers to mitigate this type of situation, such as: vendor managed inventory, lean manufacturing, schedule sharing with suppliers etc. but, regardless, I have seen at many of the customers I have worked with a lot of late and past due end product demand.
So when late supply, and therefore late end product demand is inevitable, what is the best way to deal with this situation and reduce inventory?  From my point of view, to effectively plan and reduce inventory, there are some key capabilities required:

1. Ability to identify the gating components and determine when they will be available.  Required here is a tool to easily identify gating components as well as an effective way to collaborate with and get reliable commitment dates from suppliers.
2. Visibility into the gating components far enough in the future to reschedule the end product demand so that purchase orders and production orders on other components can be delayed in time to realize inventory savings.
3. Capability to determine if the rescheduling of demand is worth the inventory savings given the administrative effort involved, as well as the change and disruption at the suppliers.  This implies an ability to simulate the change and calculate the potential inventory savings as well as the amount of rescheduling that will need to be executed.

I would like to know your thoughts on this subject. If this situation is applicable to your manufacturing operations, how do you deal with it? What tools or applications do you have that assist you in effectively managing late supply against customer satisfaction and inventory levels?

Here is more about it:

“Using Segmentation Strategies for Better Demand and Supply Balancing in the Mid-Market”, presented by:

• Jeff Range, VP, global operations and customer service, March Networks,
• Nari Viswanathan, VP and principal analyst, supply chain planning practice, Aberdeen Group, and
• Trevor Miles, director, industry and applications marketing, Kinaxis.

Mid-market OEM’s are faced with unique challenges in today’s world of outsourcing. An effective balance between demand and supply in this environment is crucial, yet difficult to achieve. Learn how March Networks has used product segmentation processes and systems to overcome some of the supply chain challenges presented by outsourcing.

This 60-minute webcast presentation will be held on March 3, 2010, at 1:00 pm EST.

• Customer side equations will take prominence over rest of value chain
• Supply chains will get more integrated with marketing and service chains
• Speed and responsiveness will be key drivers for spend on new initiatives
• Cost will continue to play critical role in decision making
• Asset Management will gain more prominence and will help in accelerating “green” initiatives

I responded to Atul in the following manner:

We too are experiencing that prospects and customers are focusing a lot more attention on customer satisfaction as it pertains to on-time delivery of orders, but also to the enquiry-to quote and quote-to-order processes.

I couldn’t agree more with your third point about speed and responsiveness. Overall the trend we are observing is that consumer behaviour is pervading B2B transactions with ever shorter lead times. Coupled with the adoption of Lean and postponement strategies, companies have to be very responsive to changing demand, blurring the lines between planning and execution. These are the business drivers for your third point about agility and responsiveness.

Cost will always be a driver in supply chain management. If we adopt any of the Lean concepts it should be the elimination of waste. All too often I come across situations where the information and decision lead time exceeds the physical lead time to manufacture and/or deliver the order.

But this got me thinking about several other reports and observations that have come across my desk over the past 12 months. 

First and foremost must be the article by Dan Gilmore at Supply Chain Digest highlighting the work done by Supply Chain Digest’s research arm CSCO (Chief Supply Chain Officer) Insights.  There is an excellent report titled ”Next Generation Supply Chain Management: Integrating Planning and Execution” available from this link. (Subscription required).  In the article, Dan Gilmore observes that “For many years, analysts and others have offered separate models of ‘supply chain planning’ and ‘supply chain execution’ processes, and the technology vendors were generally organized in that sense as well. You can find many diagrams that show hierarchical planning processes with no connection at all to execution, for example. The report argues, and the research supports, that this gap must be closed from a process perspective to meet the challenges of today’s supply chains.” I added the bolding because this is the key to being able to provide the speed and responsiveness to which Atul at Infosys refers.  Not only that, but also managing to contain if not reduce supply chain costs will depend on being able to reduce this gap between planning and execution.   

Traditionally we have used inventory to buffer against what we would like to happen (the plan) and what actually happens (execution).  But this is no longer possible.  As the graphic below illustrates, as long ago as 2004 postpone strategies had pushed much of the inventory up the supply chain to the suppliers.  They too have adopted Lean and postponement strategies, leading to even lower inventories.  And then there is the effect of the recent recession.  Nearly all the OEM’s I speak to are struggling to secure supply of components, clearly indicating reduced inventory levels in the suppliers. I wish I had equivalent inventory figures for 2009.  Anyone willing to provide these figures?

Then there is the excellent blog written by Lora Cecere recently titled “Tackling the Black Hole in the Center of Your Supply Chain” in which she states “We now know that fixed data integration, one-dimensional rules mapping, and traditional master data techniques from ERP to Supply Chain Optimization are insufficient.  As a result, plans are created and consumed in isolation, and transactional systems hum along with little– to no — guided intelligence.”  So as the speed of business has increased – some would describe this as volatility – the supply chain systems have not kept up. 

And most of the information is now external to your organization.  Companies have being trying desperately to get point-of-sale information to get early trend analysis of sales.  At the same time, many brand owners have largely outsourced manufacturing, not only lengthening the physical supply of goods, but also the time and effort it takes to make a decision.  All of these factors are only making the gaps between planning and execution even wider.  But the business need is to close this gap; to respond to demand changes quickly and effectively.  As Lora Cecere, states, the solutions from the 1990’s have not kept pace with the business needs.  Throwing more ERP at the problem isn’t the solution.  At their heart, all ERP systems are essentially accounting packages.  They deal with your data – financial and operational – but provide very little help in dealing with the majority of the information, which now exists outside of your organization.

What are your thoughts?  Do you experience this gap?  Are your systems able to cope.  Will your next breakthrough in performance come from learning to plan better, or learning to respond to plan variance?  In other words, closing this gap between planning and execution.  Robust debate encouraged.

In my first post to this blog, I want to point out three table stake capabilities that ERP vendors have failed to provide. I’ve been with Kinaxis for four weeks and have been immersing myself in the world of supply chain and S&OP trying to figure out what really drives organizations to improve their supply chain. In talking to my colleagues, which include some of the world’s most knowledgeable supply chain experts who work side by side with some of the world’s best run manufacturing companies, I’ve learned that customer service is at the top of the list.

In these volatile, post-recessionary times, manufacturers need to know when a customer order is at risk, and then they need to figure out fast how to course correct. Unfortunately the solutions in place – at one extreme, error prone manual spreadsheets, or at the other extreme, multi-million dollar ERP modules – can’t offer the following capabilities:

1. SPEED.  When a customer calls you with a potential order, how long does it take you to get back to them with a promise date?  Increasingly, customers will want feedback in a matter of minutes – not hours or days. If you’re saying to yourself “That’s impossible.” Well, it is possible.

2. RESPONSIBILITY ASSIGNMENT.   When an unexpected event puts orders at risk, do you know who to call? How many steps are required to understand and rectify the situation? Being responsive to keep a customer order ship date on time requires an immediate response whether that be to an internal resource or external supplier.

3. ONE VIEW. As you rely more heavily on outsourced manufacturing and suppliers, it becomes increasingly difficult to see and coordinate your supply chain from beginning to end. A ‘twenty-ten’ supply chain solution must be able to provide visibility across sites and suppliers.

The last capability might not stand up to the argument that it cannot be found elsewhere because given enough time and money, anything is possible. However, most manufacturers don’t have enough time and money to continue down the ERP path. Business leaders have realized that now it’s time for something different. It’s going to be an interesting decade.

Unfortunately, we are finding it difficult to find the right type of person.  There do seem to be several candidates out there, however we are looking for a mix of deep supply chain skills as well as technical proficiency - perhaps that is difficult?  Or perhaps candidates should be marketing themselves a little better? 

• I think it is important for candidates to list specific business accomplishments at each job and not just general job duties. 
• I also find it helpful to have the candidates list which business problems/processes they have been working on.  It is easy to say inventory reduction of X, but how did you accomplish it (VMI, supplier visibility, etc.)? 
• Some SCM candidates under emphasize their technical skills as well.  These skills should be brought to the forefront, because most SCM business problems require some type of technology to assist in solving the problem.
• Industry expertise is nice, but not required.  We work with many different types of industries and find that 90% of supply chain business problems are consistent across industries, with minimal uniqueness per industry.  However, exposure to different industries is nice to know.  For consulting, exposure to different industries adds credibility when working with different customers. 
• Location of candidates is also not that important, however they should be close to a major airport.  A challenge is that many of the candidates I see do not want to travel.  That is understandable, but if they aren’t willing to relocate or travel, it will be difficult to find a match in certain geographies.
• Some people mention they are looking for entry level jobs and those are hard to come by in the consulting world and in private industry.  Customers do not want to pay top dollar for someone who doesn’t know more than they do.  However there are some entry level jobs I would hire.  I think the key for entry level jobs is to be very flexible.  Willing to live anywhere, relocate on your own and willing to travel.  We can have more junior people learn on bigger projects and then grow from there.  Entry level candidates really need to demonstrate drive and ambition.

I would love to hire some high quality SCM professionals with deep skills and technical proficiency with a willingness to travel and solve lots of different business problems for lots of different companies.  The key is having the candidate indicate on their resume they have all the right skills so the resume is not passed over.

It is also important to differentiate between what might be strictly waste (anything that doesn’t add value from the customer’s perspective), and what might still be required (or in other words is still essential to ensure that value is delivered). A good example is the process around capturing and confirming the customer requirements. This sub-process is completely unnecessary in a retail store where the customer physically selects the product, but when that same product is going to be purchased on-line or over the phone, a communication occurs that is necessary to ensure that the customer acquires what he wants, but it really won’t increase the value of the product that gets delivered. In fact, any activity between the order and the delivery represents both opportunity and risk.

The opportunity is to reduce that activity to the bare minimum of what is essential and therefore improve the customer experience while minimizing the cost. The risk is that every step in a process typically introduces defect risks that threaten the customer experience and cost management. The challenge then is to engineer the essential elements of the process in a fashion that embraces “mistake proofing” and performs adequate validation on that objective before implementation. It’s never been easier to lose a customer and a single bad experience may mean they will never return.

The other key point of this article is that a Lean Order Fulfillment process must not be just “Change Tolerant”, but “Change Enabled”. The difference between these two conditions are really night and day. Have you ever wanted to change a hotel or car reservation on-line? How easy was it to do? With-out naming names, for years I used one primary car rental company but as the volatility of my travel increased I grew increasingly frustrated over the change process and very often just booked a new reservation rather than canceling the old one. The issue was that the change process required that you have the reservation confirmation ID at hand and there wasn’t any alternatives offered to find the reservation through other means. Think of all the waste that I introduced by not canceling the original reservation. Finally, my guilt and frustration resulted in a change to a different car rental company.

I’m sure that you’ve probably also noticed the increased trend towards encouraging people to order their product or service directly over the internet. This move isn’t just about reducing the amount of human touch time involved in the fulfillment process, there are other enormous advantages including the direct role of the customer in selecting and confirming their desires before the order is placed. On several occasions I’ve placed a phone order and only after receiving the email confirmation did I find that the address or product purchased has been entered incorrectly. The self service side of the internet eliminates many of these risks but it introduces new ones such as;

1. How easy is it for the customer to get information on the specific product or service of interest? I quickly abandon sites that are too complex or slow in this regard.
2. How easy is it to navigate through the ordering process? If I want to make changes, can I do it easily without losing other information I may have already provided?
3. How quickly can I get to the complete cost for the service or product including taxes and shipping?
   Is the product availability confirmed or a projected ship date provided?
4. Once ordered, is it easy to get status?

If you think about the questions above, a poor job in any one of these areas represents a serious risk of customer loss. If done well, it becomes a competitive advantage while simplifying the order and confirmation process.

As the article clearly articulates, efforts to reduce the Order Fulfillment cycle time offer significant benefits to both the customer and company provided they are implemented in fashion that also delivers a good user experience and minimizes any quality risks.

Let’s take a look at two companies that manufacture the same item.  One company produces excellent quality for a reasonable cost and can typically deliver in 15 days.   The other company has similar pricing, the same level of quality but can deliver goods (always on time) in 8 days.  If you were in the market for the item these companies produce, which company would you rather deal with?  It doesn’t take a supply chain guru to say that you would rather buy from the company that can deliver it in 8 days. 

Now let’s turn it around.  Let’s say you could be the company that delivers in 8 days or you could be the company that delivers in 15 days.  Which company would you rather be?  This might be more complex because I haven’t talked about profit margin, market share, and other factors.  But I think I would want to be the company that can deliver in 8 days. Why?  Because that company has a competitive advantage…and it’s not just lead-time. When you can reduce lead-time, some very interesting (and good) things start to happen to your supply chain;

1. To achieve this level of lead-time reduction, you’ve needed to do some serious waste elimination.  This typically means your operations are more efficient.
2. When you reduce lead-time, you need less safety stock.  Safety stock is used to cover demand and supply variation during the lead-time of the part.  If your lead-time were 0 (you could snap your fingers like the Great Gazoo and make inventory appear), you would need no safety stock because you could handle any variation in supply or demand.
3. With less inventory, you need less space to store it, thus reducing capital costs.
4. When you reduce lead-time, you can react faster to changes in demand signals.
5. With reduced lead-time you can promise delivery to your customers with confidence.

As the white paper points out, companies typically focus their lead-time improvement efforts on tackling internal manufacturing lead-times or working with suppliers to improve their lead-times.  This is valuable and companies should continue to challenge waste that leads to longer lead-times wherever it occurs.  However, the white paper explores another key opportunity for improving lead-time. The administrative process.  The time it takes from when a customer originally places the order to when work begins.  This lead-time includes many activities;  order configuration, order entry, scheduling, detailed planning, sourcing, shortage and constraint resolution and finally kitting.  In many cases – especially when manufacturing lead-times have already been reduced – the administrative activities take more time than manufacturing the goods!  This is an area of opportunity for many companies that is often overlooked and can yield huge benefits if addressed.

In other organizations the customer is not always #1 or at least certain parts of the organization are detached from the customer. Should that be the case? I don’t think so. Understanding the customer is just as important in high tech or aerospace or consumer packaged goods. It is more difficult to create a culture of ‘customer is always #1’ in some organizations. However everyone gains a greater sense of purpose in their jobs if the company operates this way. How many buyers are expediting or cancelling parts orders and don’t know who they are affecting?

I am not suggesting that other metrics, like revenue or profit are ignored but customer value, customer satisfaction, and customer responsiveness are differentiators for companies. Is this difficult to measure? Certainly. Your CFO cannot objectively measure customer satisfaction as he or she can measure inventory turns or revenue. One has to consider the opportunity for increased market share and separating your company from your competition.

An excellent post by Colleen Crum that spans a number of topics touches on poor customer service inevitably being the result of poor decisions and poorly designed processes that lack integration.
‘Advances in communicating information across a supply chain aid in better decision making and collaboration’

This confirms that there are a number of opportunities to improve your focus on the customer.

a) Continuously communicate the value of the customer to all employees
b) Identify key objectives linked to customer value for all employees
c) Ensure that processes are integrated such that individual contributors at all levels understand their impact on the customer
d) Ensure that the appropriate tools are in place that identify the customer impact of your actions. This may be the buyer expediting a part or a production scheduler adjusting a production plan.

The end result of having the appropriate people, processes and tools is a leaner, more efficient workforce rewarded by providing customer value which results in positive impact to other key metrics such as revenue, margin and shareholder value.