Posts Tagged ‘Enterprise resource planning (ERP)’

“Storage Wars” Rescues Supply Chain Ignominy

Published August 6th, 2014 by CJ Wehlage 2 Comments

Take a good long look at this picture.  That’s my ignominy.  That’s my garage.

When we moved to San Diego, we loved the weather, we loved the ocean sunsets and we loved getting rid of our parka coats, gloves, scarves and tossle caps. Roddy Martin, my colleague from AMR Research, now with Accenture, often uses the term “ah-ha” moment. Up until this past year, my greatest “ah-ha” moment was watching my Boston neighbor walk away with my Arians Platinum 20-SHO snow blower.  I no longer had a need for it and he was a happy camper.  Never again was I to wake up at 4am, face the 5 degree temps, and walk up and back my driveway, blowing the snow into the woods… “Ah-Ha!”

But, in Boston, we had this dirty little secret.  A secret that  I could no longer keep hidden in San Diego.  In Boston, we had an “ATTIC”.  In San Diego, there’s no attics, no basements.  Stuff goes into the garage.  For years, we just put boxes into our attics.  Never thinking much about what it was, or why we needed it.  Occasionally, I would move the attic boxes around, putting labels on some boxes.  It made me feel like I had control on the attic.  Now, in San Diego, every box we collected for 12+ years, was sitting in the garage.

I had day-dreams of calling Darrell Sheets from the show “Storage Wars”.  They would film a segment where Dan the Auctioneer would open my garage door, and Darrell, Jared, Brandi, and Dave Hester would bid on my garage.  Wouldn’t it be great to collect $3,000 and have my garage cleaned out! Then, my wife and I would do the same old thing. Start asking questions, like:

  • What if there’s a family heirloom in one of these boxes?
  • How did we get to this point?
  • What is all this stuff?
  • Is any of this valuable?
  • Where do I begin working on this?

There I stood, looking at this garage, asking these five questions. And then I realized, these are the same questions I would ask about the ERP system when I led supply chain organizations.  In some cases, we had multiple ERP instances. In all cases, my “single” ERP Planning solution was made up of multiple modules…  Each with its own data structure and each with its own DBA team and development team.  Least we not forget, I had “boxes” of excel files as well.  I had multiple versions of the truth.

And that’s not the worst part!  My supply chain was made up of 1st/2nd/3rd Tier suppliers, 3PL’s, 4PL’s, distributors and retailers.  Last I checked, NONE of them were running my ERP system.  I had a whole other team called “BI” (business intelligence) that managed this. Agility was constrained by the lack of timely information.  People say “information is power”. I beg to differ. I say “informative decisions is power.”

Innovation leads to real change

So, as I pondered what to do about my garage, I borrowed lessons learned about we did with our ERP.

  Garage ERP System
What’s the primary purpose? Park car Transactions
Quick access to Key Decisions? Shelving on wall Planning System of Record
How to break the cycle? Think about the entire living space & storage Think about decisions in the end to end network
Informative Decisions? What do I need quick access to? How can this network know sooner & act faster?

The “ah-ha” moments are the catalyst to innovation.  Staring at my packed garage, the “ah-ha”, or better said “ughhh” moment, made me rethink the storage process and purpose of the garage.  The same held true back when I looked at my ERP system.  I had to rethink my planning process, since my network was made up of global nodes, using any old ERP system.  The “ah-ha” moment for ERP was that its purpose was a transaction system.  The end to end network required real time technology, from a single data source that could “know sooner and act faster”.

My garage is now cleared out and organized.  It serves the primary purpose of parking my car.  As well, I’ve mapped the end to end processes that require storage, resulting in quick access to key items in the garage.


Posted in Inventory management, Supply chain management

The Innovator’s Dilemma: How Does it Apply to Supply Chain?

Published March 26th, 2014 by CJ Wehlage 2 Comments

It has been said that the business book that most influenced Steve Jobs was ‘The Innovator’s Dilemma’. Considering the success Jobs experienced in his lifetime, I’m intrigued as to what he learned from it. We all know Jobs was a highly successful businessman, for example, Apple stock increased nearly 7,000% during the time Steve returned to Apple in August 1997 until passing the reins over to Tim Cook in August 2011.  It made me wonder what this book means to the supply chain business. So I decided to read ‘The Innovator’s Dilemma’. But when I read it, I inserted the word “Supply Chain” where “Product” was mentioned.

I’d like to share some insights I gleaned from the book:

Clayton Christensen, author of “The Innovator’s Dilemma’ said,

“The reason why successful companies fail is they invest in things that provide the most immediate and tangible evidence of achievement.”

In ‘supply chain speak’, that means the inability to link strategy with execution.  Most of us get caught in the day–to-day challenge of running the business. For example, planners spend endless hours on finding and resolving exceptions. There’s just not enough time in the day to focus on strategy and innovation.

A very good method I have used when leading supply chain strategies, is to focus on the decisions, rather than the information.   Asking, “What margin do I need this network to have for the first three months of NPI?” is better than asking “How can we get safety stock data to match between systems?”

Why is this better?  I say because of “critical thinking”. Planning is a combination of systems and human judgment. Too many planning organizations rely only on the system output. Yet, with complexity and volatility in today’s global network, critical thinking is just as important to solve the planning challenge.

I have a saying: ‘Information isn’t Power, Informative Decisions is Power’.  Figure 1 shows a very common supply chain decision flow.

Information isn’t Power, Informative Decisions is Power

Reactive supply chains manage right to left, meaning the majority of their time is driven by the impact (low profitability, excess inventory, shortage, etc).  Predictive supply chains manage left to right, meaning they simulate the plan for desired impact, and then execute.  The majority of their time is doing critical thinking and collaborative scenarios.   All supply chains bounce between reactive and predictive.  However, a heavy focus on reactive makes a more efficient supply chain, and solves today’s issue. However, it doesn’t make for a more effective supply chain or solve forward looking issues such as profitability, total cost to serve and market share.

Another good book to read is ‘Profit Mapping’.  A quote I really like is:

“We see many instances where a company may have become more efficient when viewed through a process improvement lens, but not necessarily more effective as far as the business is concerned.”

Being more effective at operating margins and inventory turns (two very good supply chain metrics) only occurs with predictive planning and critical thinking.  And, while efficient supply chain leaders can improve their KPI’s, most industries find it difficult to sustain that improvement. See the research table from Supply Chain Insights LLC presented at their 2013 Supply Chain Insights Global Summit.



Pretty much across the board, sustaining growth in turns and operating margin beyond three years is not likely to happen. Typically, progress stalls after two years.

The three reasons found to stall progress

1. Functional leadership

Today’s supply chain continues to focus on functional fixes, such as purchasing, logistics, etc.  With the network so complex, global, and outsourced, the greater impact is on your ability to manage the end-to-end process.   This requires not only visibility of end-to-end, but also, the ability to simulate and collaborate end-to-end.  It has less to do about your ERP system, and more to do with the entire network’s planning capabilities.

2. Complexity of systems used

Many companies have multiple systems, multiple ERP instances, and in many cases, functional systems bought for functional purposes.  Middleware is everywhere, and spreadsheets rule the day.  I’m not talking about the number of systems, because when you think about “end-to-end”, you now include all your 1st and 2nd Tier suppliers, 3PLs, distributors, etc.. Face it, there are a lot of systems.  I’m talking about the justification of the landscape.   It’s difficult to justify a functional system for an end-to-end process.

3.       Lack of a supply chain strategy

Lack of a supply chain strategyI’ve seen many supply chain leaders, while working on a supply chain strategy, get caught in the idea that data needs to be cleaned before innovation.   Don’t get me wrong, clean data is a good thing. But, how you go about getting there is the innovation.  Rather than spending countless hours of data cleanup, look at your most critical end-to-end processes, ask what knowledge is needed to plan and execute, and pareto the data needed to execute and fix.


The Roadmap to Sustainable Progress

Clayton has a statement in ‘The Innovator’s Dilemma’, “great managers…must first understand what has caused those circumstances and what forces will affect the feasibility of their solutions.”  I believe there are three core steps a supply chain can take to achieve end-to-end control.

Step 1: Collect end-to-end data, and the policies that drive the data

  • Data is good, but the policies that drive the data, especially when considering the time/events that drove the rules, like beginning of the month, last quarter, etc.
  • With the end-to-end data, set control limits to the policies.  When an issue arises, effective alerts go off, keeping the planners focused on core priorities

Step 2: Improve planning by launching what-if capabilities

  • With end-to-end data, you will have exposed the bad data.  Start your first simulations around what policies are most impacted with that bad data.  This will drive the pareto of what data absolutely needs to be fixed.
  • Yesterday vs today: run what if scenarios that tell you each morning what has changed from yesterday, and what are the most critical actions for today.
  • Informative decisions: simulate what it would take for higher profit, better turns, less excess inventory, better COGS, etc…

Step 3: Segment your end-to-end priorities

  • Segment your products and customers. Simulate various supply chain policies against those segments.  Test the attributes that make up each segment

Great supply chains need to align a strategy with the execution.  Putting an intense focus on simulation in Planning allows you to prepare in advance of the impacts.  And that’s summarized well in the book Profit Mapping:

“a wise manager knows that success only comes with operational excellence that is properly aligned with strategy.  The challenge is knowing what actions to take and when to take them – navigating without knowing the impact of your actions on the bottom line is a risk you can’t afford to take.”

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

Making Connections at Kinexions – Our customers say it all – Part 2

Published November 19th, 2013 by Trevor Miles @milesahead 0 Comments

Reflecting on our user conference at the end of October and the comments from several analysts, which I covered in a previous blog, I failed to mention the excellent 3-part coverage by Bob Ferrari of Supply Chain Matters.



Bob starts his coverage by noting something about which we are very proud, with my emphasis:

Industry analysts, market influences and invited prospective customers are provided unrestricted access to all of the conference sessions and allowed to mingle with all attendees, something that unfortunately, all software or services vendors do not practice.  Our one restriction as an independent industry analyst and supply chain social media mechanism is to respect the stated confidentiality needs of specific customers or Kinaxis, which is appropriate.

In commenting on the opening remarks by our CEO, Doug Colbeth, Bob comments that:

…at Kinaxis board meetings, the discussions are always focused on ways to add value for customers vs. existing competitor’s [SIC] in the market: 
Why would we want to emulate the competition?
By our view, those comments indeed provide the true descriptor of the unique fabric that makes up Kinaxis and its approach with customers.

Bob is correct. We are forging a new path for supply chain planning that is not stuck in concepts first formulated in the 1980s and realized in solutions dating from the 1990s. We are not your father’s supply chain solutions. We are young, we are hip, and we are different. And, in case you missed it, we are proud of it.

Nothing captures what this means to our customers more than Bob’s observation, again with my emphasis, that:

…one of the consistent and somewhat unique themes that we have consistently and objectively observed at past Kinexions, namely customer’s open articulation of their enthusiasm concerning the value that Kinaxis RapidResponse software has provided in their business and decision-making processes, coupled with the ongoing existence of a positive partnership with a software vendor, one that consistently demonstrates responsiveness to their needs.  Trust me in the statement that while many software and services vendors consistently attempt to achieve this state in a customer focused event, it is something that cannot be consistently scripted or orchestrated.  It has to be organic and living.

Commenting on the many customer presentations at the event, Bob captures the key reasons customers turn to Kinaxis very well:

Constantly changing business and supply chain environments requiring more responsive and more predictive planning.
A realization that the majority of today’s supply chain information exists outside of an organization’s backbone or legacy systems.
Either frustration with attempting to implement an existing ERP based planning application, or current gaps in required planning capabilities needed.
Seeking a trusted partnership with a technology vendor and insuring that the vendor is responsive to ongoing needs.
The critical need to insure user acceptance and adoption of any tool selected, and that the system actually does what it is supposed to do.

Wow. If we had stated this in a brochure no-one would believe us. They would think it was just more Marketing blah-blah. But these are the reasons Bob heard our customers articulate. I love it. All I can say is thank you to our customers that presented – Applied Materials, Cisco, First Solar, Amgen, Flextronics, and NCR – and to all the other customers who chatted to Bob and the other Influencers during the conference.

In closing, when commenting on Kinaxis’ product direction and opportunities, Bob quotes from Robert Frost’s poem “The Road Not Taken”. The part that I believe captures both the Kinaxis spirit and why RapidResponse is so relevant to our customers and prospects is:

Two roads diverged in a wood and I—

I took the one less traveled by,

And that has made all the difference.

Yes Bob, we will continue to take the road less traveled. It has made all the difference to our customers, and it is what makes us able to not only respond to traditional supply chain approaches differently, but also to address different supply chain problems, allowing our customers to Know Sooner and Act Faster by not only Planning, but also Monitoring and Responding quickly and profitably. It is the combination of these 3 complementary capabilities that makes us different.

As Doug, our CEO, said: “Why would we want to emulate the competition?” Vive la différence.


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Posted in General News, Milesahead, Supply chain collaboration, Supply chain management

Making Connections at Kinexions – Our customers say it all

Published November 4th, 2013 by Trevor Miles @milesahead 0 Comments

We had our annual user conference, Kinexions (pronounced ‘connections’ – isn’t English a strange and fabulous language?) in late October with record attendance and great feedback. The theme of the conference was our tag line ‘Know Sooner. Act Faster.’ Indulge me while I parse out our strap line.

Know Sooner – The ability to detect market changes quickly and determine whether the changes represent risk or opportunity, as well as identifying and alerting the people impacted by the risks or opportunities.

Act Faster – The ability to determine the best course of action quickly through scenario analysis within a team of people, across functions and even organizations, in a structured manner.

In other words our strap line is all about reducing decision latency through purposeful collaboration driven by responsibilities.

As usual it was the great customer testimonials that drive home the benefits of this theme through:

  • Rapid time to value in the initial deployment
  • Rapid innovation on the part of Kinaxis
  • Consistent value delivery over time as they expand into new BUs, geographies, and business processes
  • Mature into a Planning Control Tower – End-to-end supply chain planning process enablement

Of course that is easy for me to say, so I want to focus on external validation of these points.

We had Christian Titze attend our conference for the first time from Austria. In a short summary of the conference Christian states that:

Client companies at the conference demonstrated several ways in which they are adapting and improving their supply chains. These included speeding up time to value from deploying new software, and using embedded analytics and master data management (MDM). In doing so they showed how they were redefining their supply chain planning (SCP) application portfolios to support an adaptable and capable planning system of record (SOR).

Several client companies showed how they were using RapidResponse as a planning SOR. Some are now decommissioning their other SCP solutions and even moving material requirements planning (MRP) out of their ERP systems. This indicates Stage 3+ IT maturity for planning, whereby a planning SOR is in place and ERP systems are seen solely as transactional SORs.

Titze, C., Payne, T.; Kinexions 2013 Shows the Value of Adaptable Planning Systems of Record; Gartner, Inc.; 31 October 2013 .

Unfortunately Ray Wang had some travel issues meaning he could not attend our analyst/influencer session in which we have open kimono discussions with several customers, but Ray has attended our user conference in the past and knows several of our customers. However we were fortunate to have Holger Mueller on a panel which I moderated. Holger has tons of experience in large ERP vendors so it was great to see him endorse the benefits of our technical architecture in a Twitter stream with Ray, which is of course behind all the value delivery.


Lora Cecere has been a consistent voice of the customer in the analyst community for well over 10 years now, often putting the software vendors feet to the fire, including ours. She calls this ‘tough love’. As a consequence any positive statements about a vendor need to be cherished, so it is with great joy that I can report that while at our conference, Lora wrote a blog entitled ‘Applause’ in which she states:

In leaving the Kinaxis user meeting this week, I am struck by three things.

First, their recent work on mobility and defining the user experience on a mobile application is very cool.

Second, the flexibility of the Kinaxis solution makes the product hard to message, but the clients that have figured it out, are very happy.  (Some of the happiest….)

Third, the solution is most often deployed in material-intensive supply chains for what-if simulation and visibility. It is a cloud-based solution that scales easily for hundreds of users. It has helped many clients that were too constrained by the inflexibility of the traditional APS platform.

At the conference, Kinexions, I heard many clients speaking freely about the deployment of Kinaxis and the turning off of Oracle and SAP APS solutions.  Many were almost giddy. The ease-of-use of the Kinaxis system was freeing for their teams.

Our Customers
While I wish I could share details of the customer stories shared with the influencers and as keynotes, these days companies are very reluctant to provide public statements of benefit.  What I can say is that during the influencer session we had three customers speak:

•    Flextronics – Customer since Oct 2001
•    Amgen – Customer since Mar 2009
•    NCR – Customer since Jan 2010

The consistent story across all 3 is how they paid for the initial investment in less than a year and how they have expanded their deployment of Kinaxis ever since, often to adjacent functions such as Finance, R&D, and Regulatory/Control. These stories were repeated in the main stage presentations by Cisco, Applied Materials, and First Solar.

What I love about these customer stories is that they give us purpose. Without tangible business benefits software is nothing but a few bits and bytes.


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Posted in Control tower, Demand management, Milesahead, Products, Response Management, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

Extending Supply Chain Planning Paradigms Beyond Advanced Planning Solutions

Published September 30th, 2013 by Trevor Miles @milesahead 1 Comment

“Many business process directors are under pressure to help make the best possible process-related decisions to ensure desirable business outcomes, business differentiation and continuous innovation.”
Sinur J., Schulte R.,

“Use Intelligent Business Operations to Create Business Advantage”
Gartner Research, 20 March 2013

Nowhere is this statement more applicable than in the supply chain.

While the inventive concept of Intelligent Business Operations (IBO) is gaining traction in multiple functions and process areas, the applicability and potential is particularly high within supply chain management.

Intelligent Business Operations Delivers the Benefits Promised by
Supply Chain Event Management

Supply Chain Event Management (SCEM) first emerged as a hot topic in 1999, peaking in interest in 2001, only to fall away into obscurity. It has resurfaced recently, but centers around transportation execution requirements such as track & trace. Several factors played a role in the rapid rise and fall of SCEM as a topic, including the fact that SCEM was part of the .com bubble and that the appreciation of the benefits of sharing information between trading partners was a very new concept. But the major factor in its demise was that it was treated as an add-on to planning systems rather than as an integral part of planning systems. At the time, the generally accepted process coverage of SCEM included measure, monitor, notify, simulate, and control; however, the more difficult parts of simulate and control were never realized because this required them to be integral parts of the planning systems.

supply chain planning - intelligent business operations (IBO)As a result, SCEM solutions were little more than alerting mechanisms flooding users’ inboxes with hundreds of messages which were of dubious importance and provided no mechanism for evaluating the resulting impact of the event on the wider supply chain, nor identifying the people that should be notified about such impacts. And, very importantly, there was no way to generate actionable responses to the events. The reemergence of SCEM within the transportation execution space has been as embedded capabilities within transportation management solutions (TMS), and are providing valuable advantages even though the events being tracked are very limited.

The benefits to be realized from SCEM concepts have not diminished since their early inception in the late 1990s. In fact, because the early solutions never got past the monitor and notify capabilities and the recent reemergence in TMS is so narrow in focus, the benefits remain largely untapped; one of the most significant ones being improved customer service at lower cost.

Even more intriguing though is the emergence at Gartner Research of  Intelligent Business Operations (IBO) which incorporates many of the initial SCEM concepts in the broader context of any process. According to Gartner (Sinur J., Schulte R., “Use Intelligent Business Operations to Create Business Advantage”, Gartner Research, 20 March 2013),

IBO is an emerging style of business behavior that leverages analytics embedded in processes to support better decision making and improved knowledge worker collaboration. IBO-based processes are “smart” about the context in which they run, which is influenced by events external to the process.

supply chain planning paradigms - gartner supply chain IT glossaryInterestingly, all the fundamental capabilities of measure, monitor, notify, simulate, and control of SCEM have been included in IBO. While not directly transferable, the ideas are largely represented (and have been extended) in recent IBO-related concepts such as

  • Business Activity Monitoring (BAM) instead of Measure and Monitor,
  • Complex Event Processing (CEP) instead of Notify, and
  • Business Process Management (BPM) instead of Control.

More important is the application of IBO in the wider contexts of strategic, tactical, and operation planning, not only in execution. In addition, the inclusion in IBO of Constraint Based Optimization (CBO) and Simulation capabilities as core requirements address the initial short comings of SCEM, namely the ability to determine an appropriate response to an event.

What is not captured explicitly in the definition of IBO is the need to create the initial plan against which performance will be measured. If the capabilities used to determine an appropriate response to an event are different than those used to generate the initial plan, then it is unlikely that the response will satisfy the business goals of the organization. (Of course in certain circumstances, the business rules used to address an exception are different from those used to plan and manage operations under normal circumstances.)

The separation of planning from event management was the key weakness of early SCEM concepts, which was exacerbated by the narrow focus on execution, ignoring the rich opportunities in all levels of planning. We should not repeat the same mistakes.

To learn more about this topic, feel free to view the complimentary Gartner Research report featured in the Kinaxis newsletter: How to Use Intelligent Business Operations to Create Business Advantage (Sinur J., Schulte R., Gartner Research, 20 March 2013).  And, be sure to keep an eye out for part 2.

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

Crossing the Pond to Attend Gartner Supply Chain Executive Conference

Published September 20th, 2013 by Melissa Clow 0 Comments

Gartner Supply Chain Executive Conference

We are proud to sponsor next week’s Gartner Supply Chain Executive Conference, September 23 – 24, 2013 at the Lancaster London, in London, UK.

Event Details
Lancaster London, Hyde Park in London, UK

Join us September 23 – 24, 2013 for the Gartner Supply Chain Executive Conference. This conference will focus on how supply networks have reached a critical inflection point that, while unnerving, provides an unprecedented opportunity to rethink the very way supply chains work. The Gartner Supply Chain Executive conference will help you reimagine the supply chain and drive your enterprise to new levels of competitive advantage.

Find out more about the Gartner Supply Chain Executive Conference and this year’s theme of: Re-Imagine Supply Chain: Fast, Forward, Focus.  And, if you’re headed to the conference, we invite you to stop by the Kinaxis booth #S19.

Not attending? Follow the Supply Chain Conference on Twitter at: #GartnerSCC or @Kinaxis to get real-time updates from the event. For more Kinaxis news, follow us on LinkedIn or Facebook.

Happy Friday!


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

Hey Software Bullies, Stop Picking on Excel

Published August 26th, 2013 by Bill DuBois 0 Comments

As many supply chain professionals will attest, Excel is a life saver. It picks up most of the analytical slack from ERP, whether planned or as a stopgap measure. So as much as most ERP vendors say they can do everything, users continue to flock to Excel to manage, analyze, and plan their supply chains, or to query data to answer financial or statistical questions. Organizing and displaying data in Excel is a hit with users, with years of training and use, putting the tool squarely in their comfort zones.

With its arsenal of capabilities, some still position Excel as the unspoken ERP module. Even my own colleague, John Westerveld recently published a blog entitled, Yet Another Excel Blooper. When Will We Learn? John sites a column Blooper badges manage sophisticated supply chains with Excelerror on a Eurozone Crisis study that fundamentally changed the results, causing some skewed decisions. John also quoted Forbes, who called it “the most dangerous software on the planet”. These “bloopers” are not a problem with Excel, the software is simply doing what it is told. If there is an error, it’s a human one.

Excel was the first supply chain planning tool I ever used. Although we were only doing some simple demand supply balancing, it was still easier, faster and more effective than our legacy ERP system. I continue to use it today for data analysis and as a measurement system. If you haven’t guessed already, I’m a fan of Excel. It’s a great personal productivity and analytical tool.However, managing a global supply chain may expose areas where Excel just doesn’t fit.

Golf ShotTo use a favorite golf analogy, what club would you rather hit, that expensive driver or your nine iron? The right answer depends on what shot you need to make. If you’re standing on the tee of a short par 3, the answer is obvious. Even the best golfers in the world will have a difficult time making a great shot with the wrong club. It’s the same with your supply chain decisions, and it is critical for a supply chain professional to understand when a challenge requires a more sophisticated tool. John’s blog post offers up some requirements that can’t be met when attempting to manage more sophisticated supply chains with Excel.

Here are some of those common signs:

  • You have multiple data sources, in different locations, coming from different participants including customers and suppliers.
  • You’re looking for a single source of the truth for your planning organization.
  • You spend more time collecting data than working with information.
  • Your supply chain has become more complex beyond simple demand and supply balancing based on due date. You allocate materials based on priority or customer, you aggregate and disaggregated forecasts sometimes with different planning ratios, you use alternative sources, substitutes, materials expire or unchecked inventory policies could cause excess and obsolete conditions. In short, you have a substantial amount of analytic requirements.
  • You react to problems rather than being alerted of future potential shortfalls.
  • You find you can no longer respond to demand variability and supply chain disruptions effectively and profitably.
  • It’s becoming necessary to conduct what-if simulations in minutes or seconds versus hours, days or weeks.
  • Your S&OP cycles are too long and it is difficult to reach consensus before the next cycle starts.
  • Your IT department is resource constrained and thoughts of offering supply chain solutions in the cloud seem attractive.
  • Multiple people need access to the same information, sometimes in locations where it would be better served up on a mobile device.
  • Your supply chain KPIs – on time delivery, margin, revenue and inventory turns – are not where you want them to be

Do any of theseMicrosoft Excel Logo situations sound familiar? If you have applied Excel as a stopgap tool in any of these situations, I think you will agree it can only provide limited value. Back in the early 80′s I don’t think anyone imagined they were getting a global supply chain solution the first time they opened a new spreadsheet, but that’s the pattern many organizations have fallen into. If the symptoms above do sound familiar, you may have outgrown what Excel was intended for. So all you software bullies, stop picking on Excel. It will continue to remain a powerful analytical tool. You may just need to change clubs to tackle the tougher supply chain shots.

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Posted in Demand management, Response Management, Supply chain management

Virtual Vertical Integration: The best of all worlds

Published August 20th, 2013 by Trevor Miles @milesahead 1 Comment

Virtual Vertical Integration: The best of all worldsIn a recent article titled “Virtual vertical integration is the future of supply chain” reported that Flextronics’ CPO and CSCO, Tom Linton, said that virtual vertical integration is:

“… managed alignment of external supply chain capabilities that leverages multiple levels of those capabilities to improve profitability and cash flow”, where the suppliers are seen as an extended enterprise that behaves as if internal to the company.”

While Flextronics is referring to highly outsourced supply chains, the key message is just as applicable to multi-stage insourced supply chains, and to the planning process itself.  The question is how do you get “an extended enterprise that behaves as if internal to the company”. It most certainly isn’t through overnight Electronic Data Interchange (EDI) messages flowing between ERP systems.

Linton went on to state that:

“Transparency is difficult. It is one of the things we have to get over. We have to have it, because it defeats complexity and minimizes risk. … As complex as some of this sounds. It’s about fundamentally looking at the multiple tiers of your supply chain and figuring out how to connect it in a way that gives you greater control and therefore your financials have greater results, whether it be cash, operating profit or revenue growth,” he concluded.

I don’t think complexity needs to be ‘defeated’, but if by ‘defeated’ Linton means ‘absorbed’ then I am in complete agreement.  As Linton states, it isn’t just ‘transparency’, but ‘connectedness’ that is important. Undoubtedly transparency or visibility is a good place to start, but it is connectedness that makes a substantial difference to operating performance. Transparency only tells you the state of something, such as inventory, and whether or not it satisfies predefined targets. It is connectedness that tells you whether or not that something is of operational or financial importance.

Let’s take two examples.

  1. The inventory targets of a key component have been set at 75-100, and the projected inventory is fluctuating around 80 for the next few periods.  Sounds okay, right? Well, what if you are experiencing a demand spike for a finished good that normally only represents a demand of 5 per period for this key component, but now will represent 25 per period. Transparency isn’t going to tell you that you have a problem with raw material supply.  Connectedness will.
  2. A supplier decommits on a delivery date by one week, which is well outside of the agreed service level conditions, but the supplier can expedite the shipment to meet expected delivery dates, at your expense.  Transparency would say that you should expedite the shipment. Connectedness may tell you that you may be violating safety stock levels but that no demand will be impacted, so why expedite?

Some would say that they have ‘sufficient’ connectedness through daily MRP runs and overnight EDI messages. I don’t think this is good enough, and Gary Godfrey and Mark Pearson from Accenture don’t think so either. In a podcast entitled, “Why ‘dynamic’ is as crucial as ‘efficient’” they state that:

I was just talking about the fact of organizations in-ability to sense the market, capture the insight and then be able to disseminate and make decisions very rapidly so one of the core capabilities that we talk a lot about is this idea of insight to action, the ability to capture real time insight from the market and from sensing engines that you have. The ability to then be able to understand how do I want to respond to those changing market conditions and then be able to disseminate that into action across the organization.

It is well worth listening to the full podcast. Again, the emphasis is on translating the external signal across the entire organization, even the network, in as little time as possible.  But, transmitting the signal through the network is only the first part of the ‘insight to action’ duo. Accenture then emphasizes the need for a cross-functional response, what they call ‘action across the organization’. This is what I call Concurrent Planning, which is the capability to plan and respond across the network, not in isolated functions. If you are trying to respond in a timely manner using a cascaded process supported by disparate functional applications you will fail. Accenture’s description also captures the idea of Plan + Monitor + Respond, which is the ability to put in place a plan, in reality an intent, to sense true demand and the current state of the supply network, and then be able to respond rapidly and profitably to true demand. These need to be three equal and complementary capabilities. The overall effectiveness of your supply chain will be determined by the weakest of these capabilities.

Speed is quality.

What about Virtual Vertical Integration?

As long ago as 1998 Michael Dell, the founder of Dell computers, at the time the company leading the charge on both outsourcing of manufacturing and direct-to-customer distribution, in an interview in the Harvard Business Review titled, “The Power of Virtual Integration”, said that:

Virtual integration harnesses the economic benefits of two very different business models. It offers the advantages of a tightly coordinated supply chain that have traditionally come through vertical integration. At the same time, it benefits from the focus and specialization that drive virtual corporations. Virtual integration, as Michael Dell envisions it, has the potential to achieve both coordination and focus. If it delivers on that promise, it may well become a new organizational model for the information age.

What is clear is that Michael Dell was trying to regain the control over the supply chain Dell lost when they outsourced manufacturing. As Dell says, they were balancing the financial advantages of outsourcing with the operational benefits of vertical integration.

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To achieve Dell’s vision requires a capability that goes well beyond visibility across tiers. There is too much decision latency embedded in a cascaded planning process that relies on daily MRP runs followed by overnight EDI transfers between MRP systems. This is what Linton was getting at with Virtual Vertical Integration, and what Accenture was getting at with the comparison of ‘dynamic’ and ‘efficient’.

Speed is quality.

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