Posts Tagged ‘Inventory’

Know Sooner. Act Faster. Not just a supply chain software conference theme

Published November 6th, 2013 by John Westerveld 0 Comments

We recently held our user conference, Kinexions, in Scottsdale Arizona. Attendees from around the world gathered to learn, laugh, share and connect. The event was kicked off by an address from Kinaxis CEO, Doug Colbeth. This was followed by an inspiring talk by Sir Ken Robinson discussing finding your passion: how you need to find what you love to do and then you’ll never have to work a day in your life. That was followed by several customer presentations describing how they’ve used RapidResponse to know sooner and act faster. And actually, that was the theme of the show…“Know sooner, act faster”.

If you are a Kinaxis customer, you know what this tagline means. For those who aren’t, this is what we are talking about:

Know sooner: Imagine that you have a supply chain disruption. Your supplier’s line has gone down and they’ve decommitted the next few weeks of orders while they make repairs and get caught up.   Imagine you found this out first thing Monday morning.  With your current ERP system, how long would it take you to understand what that delay would do to your production schedule?  What customer orders would be impacted?  What does this do to your weekly, monthly, quarterly revenue targets?  Maybe the supply delay really only impacts safety stock and minimally impacts actual customer orders. Perhaps the supply delay impacts millions of dollars of revenue.

Not knowing means either lost time working on minor problems (while more significant issues are ignored) or potentially not working a problem that could impact your company financially. Now, what if you had a system that would notify you when something like a supplier line down occurred.  Imagine if you could configure the system to only notify you if this change impacted customer revenue? Further, what if this system could lay out for you what the revenue impact was and the items causing these orders to be late. That is how you know sooner.

Act Faster:  Now imagine that the line down situation described above actually does drive millions of dollars of lost revenue? What would you need to do to recover? Do you find another supplier?  Can you substitute the late component with another equivalent component?  Can you offer customers a higher end product in place of the ones that are short? Or is it better to just accept that the late/lost revenue? Each of the possible resolutions have cost, revenue and customer service implications.

If you are using a traditional ERP system, you will need to pick one approach and go with it because you cannot effectively simulate different options, and even if you could, with the limited reporting capability inherent in today’s ERP systems, you can’t easily see the impact of those options on revenue, margin and customer service.  To act faster, you need to be able to identify those people affected by a change, collaborate with them to simulate the possible resolution options and then compare those resolution options  to see the revenue, margin and customer service impact.

When plans and events create risk/opportunity for you, the speed at which you bring together the right people to collaborate will make or break your operations performance.

It’s not difficult to see that knowing sooner and acting faster is a competitive advantage. Other factors being equal, reacting to changes in your supply chain faster than the competitions means that you will win more business, hold less inventory and earn more profits.

Kinexions-know-soon-act-faster

 

 

 

 

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


How First Solar is Achieving End-to-End Supply Chain Alignment: A Case Study

Published June 18th, 2013 by Melissa Clow 1 Comment

First-Solar and Supply Chain Alignment We recently completed a case study with First Solar entitled: How First Solar is Achieving End-to-End Supply Chain Alignment.

First Solar is a maker of solar panels, as well as builder and manager of solar power plants. They have a complex product that’s part of an intricate supply chain; the Tempe-based business manages over 3500 suppliers and globally has over 33,000 people in their supply chain network.

This case study provides insights on how First Solar is operating effectively amid a volatile environment by achieving high levels of supply chain agility.

As an example, First Solar is able to monitor inventory and understand inventory positions in minutes. They are also modeling sales orders, forecasts and shipments in RapidResponse along with finished goods inventory and projected supply. The team can now provide their Sales team with exact figures of what is available to sell. Within three months of using RapidResponse, they saw a ten percent reduction in overall inventory.

Here’s a quote from First Solar’s VP of Global Supply Chain, Shellie Molina:

“The implementation of RapidResponse as our single demand planning tool has given us the cross-functional visibility that we never had before and has opened up the opportunity for us to replace our siloed goals with common goals and objectives across planning functions.”

To learn more, download the case study here:

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


The Effective Supply Chain Frontier – Fact or Fiction?

Published May 27th, 2013 by Trevor Miles @milesahead 1 Comment

Lora Cecere over at Supply Chain Insights has been writing for some time about Conquering the Supply Chain Effective Frontier. Lora characterizes this as a focus on long term resiliency of the supply chain, not just short term cost efficiency. She is right.

Supply Chain Frontier

Lora writes that

As shown in the Supply Chain Effective Frontier framework it needs to recognize the impact of corporate trade-offs, business investment strategies, supply chain trade-offs and the degree of complexity in business policies. These together form the system definition of the Supply Chain Effective Frontier. … While students of economics might caution that this is the efficient frontier, we have consciously chosen not to define this as the “Efficient Frontier.” Companies have traditionally defined the most efficient supply chain as the most effective supply chain with the lowest cost per unit. It is our belief that the most effective supply chain is not always the most efficient.

In other words the primary focus of the supply chain function should be the conscious trade-offs between customer service and cost-to-serve. These trade-offs can only be made horizontally, across multiple functions and even trading partners. This becomes more obvious when discussing the trade-offs needed by, for example, a pharmaceutical manufacturer when trying to determine how to respond to a tender. This requires the evaluation of long term profitability of the tender considering the costs associated with non-conformance, both immediate and long term. These need to be balanced against satisfying non-tender business, which is both a lot more uncertain and more profitable over the life span of the tender. How does accepting the offer impact capacity needs? Will the capacity be required beyond the life span of the tender? Will inventory need to be placed closer to the market?  How will planning introductions of the same into new markets be impacted?  These are not decisions that can be made in isolation by Demand Planning, or Marketing, or Sales, or Inventory Management, or Manufacturing, or Purchasing. These are decisions that have to be made horizontally, across these vertical functions, and often in conjunction with Contract Manufacturing Organizations (CMOs) and Third-Part Operators (TPOs).

The tender process is only one example of the increasing need to focus on horizontal process enablement in order to make the conscious, risk adjusted trade-offs Lora is writing about.  It is time that the ‘war room’ concept – a co-located cross-function team which is often used to deal with crisis – became standard operating practice. We have to look beyond the ‘divide and conquer’ concepts dating from the 1980s, which broke up planning into multiple function and time horizons, such as in the diagram below. Many of us may feel uncomfortable with this idea because it challenges our pre-conceived notions, how we were taught to view supply chain as a practice. Change can be difficult, even when it is good for you.

Source: http://www.partnersforexcellence.com/toptenlist.htm

Change starts by recognizing that an approach that puts horizontal process effectiveness first is far superior to an approach that only focuses on functional excellence. It starts by recognizing that harnessing and harmonizing human ingenuity and imagination across functions trumps functional optimization every time. It starts with the recognition that the ‘divide and conquer’ approach that guided the development of all legacy APS solutions is no longer enabling, but limiting progress. Yesterday’s approach fails todays dilemma.

All the APS suites were developed in this ‘divide-and-conquer’ paradigm with individual applications being developed for Demand Planning, Inventory Planning, Distribution Planning, Capacity Panning, Master Production Planning, …  To be fair, technology in the 80’s and 90’s was not able to support the data scale, speed, and analytics required to connect horizontal business processes in real-time. In fact, the only partially successful attempt to do so was ERP, but with a batch oriented computational engine that took hours, often days, to run. Technology limitations are no longer an excuse with the advent of the internet, social, and in-memory computing.

And it isn’t all the fault of the vendors. There is a great article just published in Modern Materials Handling titled “JDA Focus Challenges Attendees to Think Outside the Silos” which comments on the first conference of the joint JDA/Red Prairie operation.  According to Modern Materials Handling Tom Kozenski of JDA states that

“Optimization is a funny word,” he says. “You can optimize a WMS. You can optimize a TMS. But if you optimize a platform that sits above them, it might be one plus one equals three. We love to pitch the platform approach [such as in JDA eight], but the customer buys by silo. They think the platform is interesting, but only as long as it solves the problem in the silo. For many of them, siloed behaviors, thinking and budgets are hard to get away from.”

While I praise JDA for raising this issue of silo buying, solving it from a solution perspective will take much more than simply integrating the functionally focused applications through an integration framework. This approach will do little to address Lora’s Effective Frontier of providing horizontal conscious trade-offs, which is the fundamental reason for connecting these processes in the first place.  Connecting the data without connecting the people still promotes a siloed decision making approach focused at functional expertise. Unfortunately, in many cases the people do not want to be connected, which is the point being made by JDA about siloed behaviors, thinking, and budgets in the user community. Only strong executive leadership will drive an organization to conquer the supply chain Effective Frontier with a strong emphasis on horizontal processes supported by functional excellence.

It isn’t just the so-called East-West, or horizontal, integration that has been lacking in processes and technology, it is also the North-South integration between financial and operational plans. Executives have long experienced the side-effects that result from trusting a thin S&OP process disconnected from its deeper operational implications, namely misalignment between objectives and achievements.  Leaders are now expecting full and deep alignment between their highest level plans, and their lowest level operational constraints. Far too many companies believe that they cannot operationalize the S&OP plan, let alone the Annual Operating Plan (AOP), because it can only be developed at a corporate level in aggregate form and in chunky monthly buckets, at best at a Business Unit level. The net effect is an AOP that is, at best, a very loose statement of intent rather than an alignment between intent and feasibility.

I’d like to see all of us in supply chain management – executives, practitioners, analysts, commentators, and vendors – lift our heads to focus on the art of the possible. We have the opportunity to rewrite how supply chain management is conceived, enabled, and performed by focusing on the Effective Frontier.

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


SupplyChainBrain Video Series Part 8: Celestica’s Supply Chain Collaboration Center

Published May 16th, 2013 by Melissa Clow 0 Comments

SupplyChainBrain attended our annual Kinexions user conference.

At our event they completed a number of video interviews with some customers, analysts, and Kinaxis executives. These videos are loaded with great information and we would like to share it with our readers.
Each week, we have been sharing the clips. The final video in our series is Celestica!

Celestica’s Supply Chain Collaboration Center

Celestica’s collaborative initiative comprises three elements – inventory visibility, much closer relations with suppliers, and optimized inventory management, says Erwin Hermans, vice president of supply chain solutions at the contract manufacturer. [Run Time (Min.): 12:22]

 

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


SupplyChainBrain Video Series Part 7: Agilent’s Vertically Integrated Supply Chain

Published March 20th, 2013 by Melissa Clow 0 Comments

In October, SupplyChainBrain attended our annual Kinexions user conference.

At our event they completed a number of video interviews with some customers, analysts, and Kinaxis executives. These videos are loaded with great information and we would like to share it with our readers.
Each week for the past few weeks, we have been highlighting clips in the series. Next up, Agilent!

Agilent’s Vertically Integrated Supply Chain

Yoke Sun Lieu, head of supply chain engineering at the Electronics Measurement Business Group of Agilent Technologies, talks about the supply chain challenges of a high-mix. Low-volume business and describes Agilent’s two-level supplier collaboration model.

[Run Time (Min.): 5:50]

 

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Posted in Demand management, Response Management, Supply chain collaboration, Supply chain management, Supply chain risk management


SupplyChainBrain Video Series Part 4: Transforming Operations Planning at TriQuint Semiconductor

Published February 18th, 2013 by Melissa Clow 0 Comments

In October, SupplyChainBrain attended our annual Kinexions user conference. At our event they completed a number of video interviews with some customers, analysts, and Kinaxis executives. These videos are loaded with great information and we would like to share it with our readers.

Each week for the coming weeks, we will be highlighting a clip. Next up, TriQuint Semiconductor!

Transforming Operations Planning at TriQuint Semiconductor

TriQuint Semiconductor didn’t worry much about planning when all its capacity was employed trying to keep up with demand, says Laura Dionne, director of worldwide operations planning. As the market changed, however, TriQuint needed a solution that would allow it to rapidly sense and respond to market changes; its search led to a partnership with Kinaxis.

[Run Time (Min.): 11:25]

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


Truth, Lies, and Statistical Modeling in Supply Chain – Part 2

Published February 13th, 2013 by Trevor Miles @milesahead 2 Comments

In the original blog, “Truth, Lies, and Statistical Modeling in Supply Chain”, John Skelton asked if I had not mistakenly used “too much inventory”instead of “too little inventory” in the highlighted section of the sentence below:

“If we determine safety stock based upon the average demand, which is the usual manner of determining safety stock, we are keeping too much inventory to satisfy ‘most’ demand – as measured by the mode, or peak, of the distribution – and yet too much inventory to satisfy peak demand – as measured by the upper 95% confidence limit.”

The graph below illustrates my position and also highlights the issue John is referring to in his question.  I’ve chosen to focus on the curves for a CoV=2.5 because they have the greatest difference.  At a 90% probability the LogNormal distribution’s value is 227 while the Normal distribution’s value is 420, meaning that by using a Normal distribution the peak demand is being overestimated by nearly 100%.  It is only at about 98.2% probability that the curves swap over.  Until then, the Normal distribution is overestimating the peak demand.

Statistical Modeling

But John is correct above a 98.2% probability. By the time we get to a 99.9% probability using a Normal distribution, underestimates peak demand by 250%.  Typically a Z value of 1.64 is used in the standard safety stock calculations which equates to a 95% confidence level.  At this confidence level the Normal distribution is overestimating peak demand by 142%.

As Lora Cecere has pointed out in a blog titled “Three Lies and a Truth”, only High-tech has achieved a material reduction in inventory over the past 10-12 years. My take is that this is because High-Tech has had to adopt postponement strategies because of rapid changes in product portfolio driven by globalization of demand and rapid changes in technology. They have had to become more responsive to demand changes and translate that demand change into a profitable response very quickly.

 

However, other industries have a shorter order-to-delivery cycle coupled with longer supply lead times, and therefore they have struggled to reduce inventories. In order to reduce inventory beyond our current levels we need to approach inventory management differently.  We should be using inventory buffers to model fluctuation in demand and supply near the mode or ‘typical’ demand and address the issues of unusually large demand or unusually long lead times through risk identification and risk recovery mechanisms.  In Make-to-Stock industries the typical risk mitigation issue of running higher inventories is satisfying neither our need for reduced working capital nor is it fully accounting for the risks which we are mitigating.  This is a very ‘command & control’ approach which we need to augment with a ‘sense and respond’ approach which will allow us to reduce inventory while simultaneously reducing risk through early risk identification and rapid risk recovery.

Know sooner; Act Faster.

Of course the approach we will take will depend on our risk tolerance and ability to sense and respond quickly.

More blogs in this series:
Truth, Lies, and Statistical Modeling in Supply Chain – Part 1
Truth, Lies, and Statistical Modeling in Supply Chain – Part 3

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


On Demand Webcast, Supply Chain Control Tower: Concept and Impact

Published December 3rd, 2012 by Melissa Clow 0 Comments

Last week, Kinaxis participated in a webcast with Aberdeen Group on the topic of “Supply Chain Control TowerOn Demand Webcast, Supply Chain Control Tower: Concept and Impact: Concept and Impact”.

Bryan Ball, Vice President, Supply Chain Management, Aberdeen Group and Kirk Munroe, Vice President of Product, Kinaxis, spoke on the topic of “Supply Chain Control Tower: Concept and Impact” and we were lucky enough to record his presentation.

The recorded presentation is now available; in addition, the slide deck is available for download.

In the presentation you will hear:

This on-demand webcast will address the concept and impact of Control Towers in the context of supply chains. A definition will be offered in terms of obtaining the research data and the findings will be presented utilizing the Aberdeen PACE methodology. In addition to basic findings the metric of “time to problem resolution” is presented as means of measuring the effectiveness of control towers.

A comparison of those with control tower capabilities to those without those capabilities will be made with t he intent of defining a summary list of possible technology elements required to enable a complete control tower solution. The fewer the elements involved in the complete solution the more effective the control will likely be due to the latency removed between separate pieces of the overall solution. Takeaways and recommendations will be made by organizational maturity class along with summary comments and direction.

 

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