Posts Tagged ‘Manufacturing’

Teradyne – Managing Demand: How Agility Replaces Predictability – SupplyChainBrain & Kinaxis Video Series

Published March 2nd, 2015 by Melissa Clow 0 Comments

SupplyChainBrain attended our annual Kinexions user conference, and while there, they completed a number of video interviews with customers, analysts, and Kinaxis executives. And, we’d like to share them!

With consumer markets more volatile and unpredictable than ever before, companies need to make up for a lack of forecast accuracy with supply chains that can rapidly respond to changing demand, says Chris Vosse, business systems analyst with Teradyne.

Demand planners agree: the forecast is always wrong. “We haven’t been able to accurately forecast for a long time,” says Vosse. But rather than try to hone their predictions further, companies should be looking to improve their agility in responding to unexpected shifts in demand.

Vosse speaks of the process of “informed risk decisions.” At Teradyne, many components have a lead time stretching over two quarters, and require 26 weeks to procure. Yet customers expect delivery to occur within eight weeks or less. The solution, according to Vosse: “You need to start acting sooner in order to respond later.”

Watch now: Teradyne – Managing Demand: How Agility Replaces Predictability

Teradyne is determined to give customers exactly what they want, despite the volatility that marks much demand today. In some cases, it has made changes to product while still in the process of building or configuring it. Even with the outsourcing of manufacturing, it has vowed to maintain high levels of service and customer satisfaction.

Teradyne can’t just build to a forecast supplied by marketing. “We need to own this,” says Vosse. “Make informed decisions, and start taking control of demand itself.”

The answer lies in a more strategic approach to inventory and supply. It’s important to create a “one-number” forecast that is shared by all parties, Vosse says, adding that Teradyne maintains close communications with its contract manufacturers.

Teradyne is deploying the RapidResponse planning and forecasting tool of Kinaxis to help achieve those goals. Contract manufacturers feed it data inside that application, allowing Teradyne to create an accurate material requirements plan and achieve a holistic view of the supply chain, “as if we had manufacturing within the company.”

Check out the other videos in this supply chain interview series:

 

Posted in Demand management, General News, Supply chain management


The Challenges of Master Scheduling: Hug Your Master Scheduler Part One

Published February 24th, 2015 by John Westerveld 0 Comments

Hug Your Master SchedulerI’ve had the opportunity over the past few weeks to investigate how many companies perform their Master Planning practices, and in the process do a pile of thinking about the Master Scheduling role.

My conclusion is that if your company is running smoothly, you need to stop what you are doing right now and hug your Master Scheduler. If your company isn’t successfully executing your plan, you should look at the tools you’ve given your Master Scheduler because with the traditional tools, asking the Master Scheduler to do an effective job is like asking da Vinci to paint the Mona Lisa with a can of spray paint. It isn’t going to be pretty.

If you think about it, the Master Scheduler is the keystone of your business. They have the unenviable job of being the first point of execution in your planning process. The Master Scheduler sets the build schedule for your plant, or perhaps even for your global supply chain. To do this, they need to balance the realities of the supply chain against the randomness of demand (after all, forecasts are…well forecasts. And you know the rule about forecasts – they are always wrong.)

Master Schedulers need to do this while respecting capacity limitations, working the overloads and back-filling the underloads. If that isn’t challenging enough, these constrained resources could be multiple levels away from the point of demand with multiple lead time offsets to consider. Starting to sweat yet? Now think about this; at the same time, the company has firm inventory targets that need to be respected. If your wonderfully leveled master schedule causes you to exceed your inventory targets, it’s back to the drawing board. If you are able to make a schedule that meets all requirements, you no sooner have that schedule ready to go when someone is trying to make it invalid. Scrap, late supplies, demand changes and capacity issues all can force the Master Scheduler to review and possibly adjust their plan.

On top of this, the Master Scheduler has multiple other responsibilities. They can be pulled into new order feasibility discussions with Order Fulfillment, they often are responsible for maintaining planning BOMs and are responsible for setting planning parameters like lead times, demand horizons and lot sizes.

So, I think we can all agree that the Master Scheduler has a challenging job. But, you’ve given the Master Scheduler the best tools, right? Stay tuned for part two to see how you can help your Master Scheduler with more than just a hug.

Posted in General News, Inventory management, Supply chain management


Your supply chain is costing you money – Reason #5 Not having a supply chain risk management process

Published October 1st, 2014 by John Westerveld 7 Comments

supply chain risk management

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:

Reason #5: Not having a supply chain risk management process

In today’s society, unless you are rich enough that you can afford to replace your possessions, pay for your health care, and cover your liabilities, you have insurance (unless you are poor enough that you can’t afford the premiums).  Insurance is a form of risk mitigation. Insurance protects us against theft, fire, accidents, and health emergencies and if this were to happen, it can provide for our family when we pass.   Yet, a surprising number of companies (while they have traditional insurance) do not have a supply chain risk management “insurance” aka a supply chain risk management process. To put it another way, they have insurance to protect them if someone trips on their property and sues, but don’t have a risk management process to mitigate against their top supplier going out of business.  The insurance covers what could be a million dollar risk, supply chain risk management protects against what could be a MULTI-BILLION dollar risk.

Supply chain risk can be broken out into multiple different types;

  • Geographic:  This includes natural disasters and political unrest. These are the types of issues that impact supply for an entire region.  We saw this type of issue over the past several years with the Japan earthquake / Tsunami in and with the Thailand floods.  Political issues can also have a significant impact on supply. Conflicts, government policy changes, regulatory changes and coups can mean that supply is suddenly turned off or that a market is no longer available.
  • Supplier issues: This includes quality issues, delivery reliability, financial stability, reputation, strikes, and pricing changes.  We talked about many of these issues in the first post of this series – “Offshoring without getting the full picture”. The key point here is that in today’s connected supply chain, your suppliers are an extension of your own business.  If your supplier fails financially, it will impact your business.  If your supplier goes on strike or can’t deliver for some other reason, it will impact your business. If your supplier has had a shaky human rights record, your business’s reputation can get tarnished.  If your supplier decides that you need to pay more or global currency exchange rates drive up the cost of a component (and you have no alternatives ready to go) your margins can be significantly impacted.
  • Customer Demand: Interestingly, this is often ignored when people think about supply chain risk however, it can be one of the biggest factors.  If your demand decreases, you have excess inventory or idle capacity.  If your demand disappears completely you are out of business.  If your demand increases significantly, your supply chain can be overwhelmed and delivery becomes an issue.

IT  security: This is also often ignored when thinking about Supply Chain risk.  If you’ve been watching the news lately, you know that hackers seemingly are able to access corporate records at will.  Imagine now, if hackers accessed your design systems…. Your customer records, your accounts payables / accounts receivables.  Imagine if your proprietary designs and customer records were sold to your competitors.  Not a pleasant idea to think about but something that is happening every day despite the billions of dollars spent on IT security.

In the post “Innovate approaches to Supply Chain Risk”  I describe 4 key action areas that companies developing a more systematic, focused and proactive supply chain risk management approach need to address as outlined in a report by SCM World;

  • Identifying and assessing risk – This includes visibility across the supply chain including a good understanding of the companies involved.  Leaders like Cisco and IBM utilize dialog with suppliers and customers as well as visual risk mapping and scenario planning techniques
  • Quantifying and prioritizing risk – Given that all companies operate on limited resources, focus on those areas that will deliver the biggest benefits. One way is to plot likelihood of occurrence against business impact. While this approach can work well for recurring operational risks like supplier performance, it doesn’t work as well for hard to predict incidents like natural disasters.  One approach suggested in the article is that supply chain managers assign financial impact and time to recover factors at a site and component level.  This tends to identify critical but low-spend suppliers that may otherwise be overlooked.
  • Mitigating Risk – inventory tracking and dual sourcing are considered to be the most effective risk mitigation strategies.  Also increasing use of standard components, segmented and regionalized supply chain strategies and business continuity plans
  • Speeding Recovery – Business continuity plans that have been developed and tested with suppliers are key to rapid recovery

Supply chain risk management is like insurance.  You hope you never need it, but if you do, you will consider it the best investment you ever made.

Do you have a supply chain risk management process in place? What risks worry you and how do you mitigate against them? Comment back and let us know!

 

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


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


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


Your supply chain is costing you money – Reason #1 Offshoring without getting the full picture

Published September 3rd, 2014 by John Westerveld 2 Comments
Here, there and everywhere | The economist
Here, there and everywhere | The economist

Reason #1: Offshoring without getting the full picture

Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money.  In a series of blog posts, I’ll outline these issues and discuss some ideas around how to avoid these practices.

We all understand the appeal of moving manufacturing offshore;   In many cases, offshore manufacturing is considerably cheaper, is apparently easier (just send the requirements and they build it!)  But before you pull the trigger, make sure you understand these cost factors that don’t often get considered;

Longer lead time – The product that at one time was manufactured in your plant and then shipped to your customer (often in the same country) is now being shipped by boat.   Instead of a 1 week lead-time, you are looking at a month or more.  This significantly changes the supply chain picture and must be considered in terms of additional safety stock requirements (which will drive up inventories) and your order promise policies.

Communication issues – Dealing with people in other countries has its challenges; language barriers can make communicating detailed technical issues a challenge.  Meetings are difficult to set up because one side or the other will need to take the call outside of normal business hours. And if you decide to meet face to face, you are looking at long travel times.

Increased transportation costs – Has anyone noticed that the price of fuel is going up? Kind of hard not to notice actually.   And I don’t think we are going to see fuel prices declining any time soon.  These high fuel costs impact the shipping lines too and those costs will get passed on to you.

Loss of control and oversightSupply chain is complex.  Anyone remember the complexity of managing a multi-part engineering change? Expediting multiple lines on a customer order?  Implementing a manufacturing process change, Resolving a significant quality issue? Tough to get everything working together, right?  Now imagine trying to do these things when you have no control over the manufacturing process.  The bigger issue is that in the public’s eye, there is no difference between the company manufacturing the product and the brand that owns it.  So, if the company manufacturing your goods has an accident or mistreats their employees, your brand is going to get dragged through the dirt.

Intellectual Property loss – Very often, your design, your manufacturing processes are a closely guarded secret, and rightfully so.  This knowledge is what sets you apart from the competition. When you offshore your manufacturing you are, by necessity, letting your secrets out to the world.  And because you are dealing with a foreign country you may not have recourse if the company you contracted to make your product goes ahead and copies your product.

So, as I mentioned earlier, moving your manufacturing offshore could well improve your financial position.  That being said, before you make the move make sure you investigate and consider these additional cost factors.

Do you have other costs associated with offshoring?  Have any interesting stories? Comment back and let us know.

 

Posted in General News, Inventory management, Supply chain management


What the Analysts Are Saying About…A&D Supply Chains

Published July 18th, 2014 by Bill DuBois 0 Comments

What the Supply Chain Analysts Are Saying About A and D

Are you looking for some reading material to pass the time on your next flight? Even if you’re not you should check out Supply Chain Insights, Supply Chain Metrics That Matter. For the past several years, Supply Chain Insights has been delivering this research series.  What caught my eye is that for each report, they do a deep dive on a specific industry and use a mix of financial data, survey research results and interactions with their clients to help get a better understanding of various industries’ supply chains.

I spread my Supply Chain wings at an Aerospace company and since Aerospace and Defense is a key vertical market for Kinaxis, the recent Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report was downloaded on my laptop to read on my next flight. The research benchmarks A&D companies against other industries and looks at the top five A&D companies over the last decade. Although it didn’t give any suggestions on what to do when you find yourself in row 32, you know the one next to the washroom, it did discuss the challenges the industry is facing as well as offering up solid recommendations for areas of improvement.

From a challenges perspective, here are the highlights covered in this report.

The obvious challenge is the complexity in the A&D industry. The report uses the Boeing 747-8 International as an example. It has about 6 million components which are manufactured in 30 countries by 550 unique suppliers. Think about those design, sourcing and delivery challenges. I always thought getting through security these days was complex.

With such a heavy reliance on first, second, third, fourth and fifth tier suppliers and in some cases having only one or two suppliers for specific components, it’s easy to see how delays and budget overages can happen. A supply chain based so heavily on external sources is susceptible to more risk than catching a flight on time out of Newark. As Supply Chain Insights mentions, this is having a significant impact on the company’s bottom line.

Interestingly, to help address the issue of ensuring materials are available when needed; the research indicates that A&D companies have “developed some of the most advanced sourcing techniques and practices.” Companies like Lockheed Martin, are looking at new strategies for materials (raw or otherwise) that are harder to source, especially in the cases where increased Supply Chain volatility have thrown a wrench in their “Just In Time” approach. The challenge is balancing reduced material delays with rising inventory levels and longer Days of Inventory.

To help address these challenges, Supply Chain Insights makes a few recommendations that I think are spot on. Suppliers, in particular of materials that are sole sourced, play such a large and important role in the A&D supply chain, it’s vital that there be a focus on supplier collaboration and communication at every level.  A big part of this is increasing visibility into the supply chains to ensure they can anticipate and plan for potential disruptions. Focusing in these areas will help reduce supply chain risk, and make A&D companies better prepared to deal with inevitable disruptions when they do occur.

Thanks to Metrics That Matter, not only did I get some valuable A&D insights but it took my mind off of sitting in row 32 on a delayed flight out of Newark. The report covers a lot more ground than what I’ve discussed here, so feel free to download a full copy of Supply Chain Metrics That Matter: A Focus on Aerospace & Defense report here. (No registration required.)

Posted in Best practices, Demand management, General News, Supply chain collaboration, Supply chain management