What we haven’t seen is apps that are directed at manufacturing and the supply chain…yet. I saw an article in Industry Week several days ago talking about mobile technology being used in manufacturing.  Two apps are discussed in the article; one is an app that allows sales representatives to view pictures and specifications of complex products.  The other is a plant floor app that can be used for material flow analysis.   These are interesting and in some cases necessary, but there is another area where mobile apps can be really exciting.

Let’s play a little scenario out in our minds; imagine the typical in-person sales meeting.  You are visiting with a prospective client trying to get orders placed for one of your high-profit products. Your customer is interested but they have an immediate need which requires delivery inside of lead time.  To add to the stress, they will place the order if you can confirm it today; otherwise they will place the order with a competitor.  So how do you respond in this situation?  The optimist (or perhaps the cynic) might say that you take the order and pray that you can deliver.  The pessimist might say that you don’t take the order and hope that you can do business next time (because you haven’t antagonized the customer by not delivering on a promise).  Either way, you are put in a difficult situation because you don’t have the information you need at hand.

Now let’s imagine the same scenario but this time you are carrying a tablet connected to your supply chain software. Using the tablet, you create a scenario (a safe environment where you can do “what-if” analysis without impacting actual production) and simply add your customer’s order. The analytics in the supply chain software evaluate the new order in the context of the existing customer orders, and the current supply, and capacity information and then determines an available date. It turns out that the available date (when the order can be shipped) is acceptable to the customer and you can accept the order with confidence. You are happy, the customer is happy, and your supply chain is happy because you haven’t promised something that may not be delivered.  This is where the true power of mobile computing shines for manufacturing and the supply chain.

Manufacturing apps are here.  Those that embrace these new capabilities will have a distinct advantage over those are stuck in the old paradigms. But the journey is only beginning; how do you see mobile applications changing your job? Comment back and let us know!

Aamer Rehman, vice president, manufacturing solutions here at Kinaxis, serves as the conference chairperson for Day 1 of the event, on January 26. As the chairperson, he will introduce each speaker, lead the Q&A after each session, and share his personal experiences and key highlights of the topics discussed. Aamer will also present the session “Continuous Sales & Operations Planning for the Manufacturing Sector” on Friday, January 27, at 11:30 am.

Here is the session abstract:

Planning has long been segmented into different isolated activities that reflect organizational structures and functional goals, leading to long, ineffective, and inefficient planning cycles. For maximized value, sales and operations planning (S&OP) must be a truly cross-functional activity that can directly and simultaneously address both individual departmental goals and joint corporate objectives. In this session, you will learn about the specific technology and process requirements to achieve a continuous and collaborative S&OP capability as it applies to the manufacturing industry in particular.

A recording of this session and slide deck will be made available shortly after the event. Stay tuned!

If you’re at the show, stop by booth #7 and say hi to the Kinaxis team! Also, make sure to follow the hashtag #SOPLVS on Twitter to get real-time updates from the event.

For more information on the Sales & Operations Planning Innovation Summit, visit: http://operations.theiegroup.com/sop-lasvegas

In the late 1980’s I was working for a large government electronics manufacturer located in Scottsdale, Arizona.  This was the first time that I was on a complete MRPII (Manufacturing Resource Planning) implementation team.  My duty on this team was that of a Training Instructor, responsible for the development of the training materials and the facilitation of the courses.

During the initial training sessions I attended given by the software developers, one of the instructors introduced me to a field I had never heard of called fixed Manufacturing Lead Time Override.  He explained that it was to be used on an exception basis.  True manufacturing lead times were always to be used but on occasion, when some assemblies were bought outside or brought in from another division, you could temporarily override fixed and variable elements of true manufacturing lead times.

To my surprise, at completion of the implementation, fixed Manufacturing Lead Time Override was, in fact, the norm and not the exception.  All of the make parts were being planned utilizing fixed lead times.  This means that once you set a fixed manufacturing lead time, all of the manufacturing orders will use this one lead time.  If you have a 10 piece spares order, it will be back-scheduled with the same lead time offset as a 1,000 piece manufacturing order.  There is no variable element to give the 1,000 piece manufacturing order the correct amount of lead time it deserves.

When I questioned the use of Manufacturing Lead Time Override, I was told that the studies that were conducted found that the start dates of the assembly manufacturing orders were only off by about 2 – 3 manufacturing days and usually within the same week.  Besides, it takes a lot of work to come up with all of the move, queue, setup and runtimes and it is much easier to input one Manufacturing Lead Time Override.

I believe that there is a law of physics that states “The whole is equal to the sum of the parts”.  We aren’t just building and shipping assemblies, we are building an entire product.  If you have ten levels in a bill of material and you short all of the assembly orders by 2 – 3 manufacturing days, you are shortening the planned build schedule of the product by an entire manufacturing month along with scheduling the purchased material to support that product build by the similar amount.

The 2 – 3 day start date variation argument might hold water if you are just shipping spares assemblies but from a Master Production Scheduling viewpoint that is concerned with forecasting and shipping finished product it results in a crapshoot.  That’s right, MPS success then depends on the roll of the dice.  The manufacturing order quantities that closely align with fixed manufacturing lead times will succeed but the ones out of alignment will fail.  What makes it an even bigger crapshoot the fact that very seldom will you ever wind up with all of the manufactured order quantities for a finished product that align properly.  The odds against that go up as the number of levels in a bill of material increases.

Fixed manufacturing lead times appear to be the norm in just about every company I’ve come in contact with and so my question is:  Does the art of scheduling still exist?

Those senior schedulers were undervalued by their company but in my opinion, they were worth their weight in gold.  Who knows, if we redeveloped the art of scheduling, we might be mass producing aircraft as fast as they did back in WWII and maybe a 2012 Chevy Bel Air might cost $2500 again.

Imagine what it would be like if:

• Every one of your employees made a difference every day
• Every one of your stock holders could see the difference every day
• Every one of your customers would want your difference every day

Sounds idealistic but supply chain practices need to improve. One such idea that is being turned into reality within many supply chain organizations is that of a control tower. You immediately think of an airport control tower and that is very similar to a supply chain control tower. Air traffic control is fundamental in the airline industry so why wouldn’t we embrace this role in the supply chain? Think of the complexity across multiple industries today – aerospace, high tech, pharmaceutical, retail, CPG, industrial…..Organizations are global in nature with numerous distribution centers, manufacturing centers, inventory stocking locations and very very volatile demand. How does that get managed without a control tower? Unfortunately, we are conditioned in supply chain to think in silo’s. Siloed software solutions, siloed geographies, and siloed business processes.

A control tower solution integrates all of these silos. It does the monitoring and provides predictive visibility and the “Supply Chain Traffic Controller” is alerted to conditions that require their attention and works with others to resolve the conflicts. It can support numerous supply chain processes from demand planning, to supply planning, project management, and P&L. Processes that will improve the overall effectiveness  of the supply chain become part of that organization’s control tower.

If you haven’t already you will hear about visionaries within supply chain organizations, analysts and software companies working together to deliver state of the art control towers. I highly recommend Capgemini’s article on Global Supply Chain Towers (full report).

I am interested in your opinions. What do you see as opportunities or challenges in implementing a control tower approach in your organization?

1)      “…further standardize parts across Japanese automakers so they could share common components that could be manufactured in several locations”

2)      “…ask suppliers further down the chain to hold enough inventory – perhaps a few months’ worth – for specialized components that cannot be built in more than one location”

3)      “…make each region more independent in its parts procurement so that a disaster in Japan would not affect production overseas”

Step 1 – Standardizing of parts will definitely reduce the risk and reliance on single sourced components. This practice is commonly employed in the electronics industry. However, undertaking this initiative will clearly require more effort as a result of additional engineering efforts to standardize these parts. Given Toyota’s strong reputation in the area of quality (likely somewhat as a result of unique and arguably better design), will corners have to be cut or sacrifices have to be made in the name of standardization? What will the longer term impact be on the brand image should this happen? Remember the Sticky Gas Pedal recall that Toyota went through in 2009-2010?

Step 2 – Asking suppliers further down the supply chain to maintain higher levels of inventory can surely provide an insulating layer against both volatility in demand and short term supply disruptions, however the question is….what is the cost of this and who bears that cost? Traditionally in the automotive industry, larger OEMs and Tier 1 suppliers have a reputation of pushing the cost burden downstream to lower tier suppliers by such methods as imposing penalties for stock outs (line down situations) and applying cost negotiation pressures. Another recent article by Bob Ferrari points to a new study which while referring to these types of behaviors, also refers to a trend of automotive supply chains working to become more collaborative, which in my opinion, is what is needed in times where everyone is being squeezed. Having said that, this article also references the practice in this industry to be very focused on the short term pains, rather than longer term gains that can be realized through investment in technology solutions to enable better collaboration. These seem to conflict with each other. So what is the reality? Truth is that it’s probably a bit of both. I can speak to the fact that I personally know some companies in the automotive industry that are “getting it” and being more collaborative with their extended supply chain, however, I am sure there are many that are still stuck in the past.

Step 3 – Independent parts procurement – This reduces regional risk in manufacturing sourcing however increases the risk of inconsistent quality and reduces ability to leverage overall purchasing power when negotiating supply contracts. Industry trends in supply chain (especially in high tech) are leaning towards more and more companies looking to a centralized procurement strategy that leverages the volume of business they do with suppliers globally to negotiate more favorable procurement terms. This is even true of companies which outsource portions or all of their manufacturing to companies in the EMS industry. This strategy that Toyota seems to be employing is actually the opposite of this trend.

So what is the “right” answer? Good question! While I agree that all the steps that Toyota has outlined will assist in reducing some areas of supply chain risk, the biggest risk I still see is that all these strategies seem to come at a cost which doesn’t have some sort of ROI specifically tied to it….as would be the case with an investment in technology.  So…..what do you think? Is this the right strategy or will this just drive up the cost of the next car you buy? What would you do?

Unicharm is the largest manufacturer and distributor of diapers and other consumer sanitary products in Asia. They implemented RapidResponse (replacing existing supply chain planning solutions) so they could move away from the limitations of statistical-based planning systems. With RapidResponse, Unicharm can complete planning calculations in five minutes—a process that previously took 12 hours.

In a news release distributed today, Unicharm said:

“We chose RapidResponse for its unparalleled ability to allow us to effectively manage our supply chain in today’s environment given the urgent and explicit need for supply chain visibility, simulation, and collaboration capabilities.”

It’s so humbling hearing it directly from the customer! Check out what other customers are saying about us in the Executive Perspectives section on Kinaxis TV.

You have 20 light bulbs in your house and they are all the same kind, made by the same manufacturer. The bulbs are used for eight hours a day. The light bulb packaging indicates that each bulb has a burning life of 1000 hours and the fine print states that the burning life is 70 percent accurate.

How many spare light bulbs should you keep for replacement of blown bulbs?  Assuming you go to local hardware store only once a year to buy the spare bulbs, and you are happy to have a 60 percent chance of spare bulbs available when needed.

Now you find out there is another manufacturer who charges $2.00 extra, but the fine print on the box states 1000 burning hours with 97 percent accuracy rather than 70 percent. What happens to the calculation?

Situation: Mom-in-law is visiting and now you want to have 95 percent chance of a spare bulb available rather than 60 percent. What happens to the calculation?

Can you minimize your total spending by opting for higher priced manufacturer bulb and still have replacement 95 percent of the time?

Lots of math .  If you got this teaser you understand the very basic math behind the service parts planning.

In the case of service parts, supply chain planning is vastly different from planning for manufacturing.  I will try to put the key differences in the three functional areas: Master Data, Demand Management, and Supply Management.

Master Data: A good system should be able to maintain key data elements and run analytics based on them. Some of the data elements important for service planning are:

1. Service BOM Data: A manufacturing BOM could have 100’s of component and several levels, but a service BOM is much simpler. Think of copier machine; if the roller fails to pick up paper, the service part that is shipped to the end user is the entire roller assembly, which the end user can pull and replace. So the service BOM will typically stop at that level.
2. Alternate Service Parts Data: This element is very interesting and if an organization is able to manage it well, it can reap huge rewards on the inventory metrics.  It is fairly complex when compared to the typical alternate parts management in the manufacturing. Think of a failed hard drive in the end user’s laptop with specifications as 5400rpm/60GB. The service provider can ship equivalent or better replacement. Specifications permitting, the end user will gladly accept a replacement of 7200rpm/80GB, and it may also be easier and cheaper for the service provider to do so if the 5400rpm/60Gb is obsolete and hard to procure. This kind of alternate replacement typically does not happen in the manufacturing planning.
3. Sourcing Data: Sourcing data needs to be maintained for repair partners apart from new buy partners. Repair lead times and repair yields should be maintained and considered in analytics.
4. Multi-Echelon Data: Service organization set ups are more multi-echelon as compared to manufacturing. Customers use products everywhere in the world and may have service contracts of next day service or as quick as onsite four hours service. The data on the service level identified in these contracts should be available for analytics.
5. Logistics Partners/Service Contractors Data: Several service organizations typically work very closely with logistics partners like Fedex/DHL to stock and deliver service parts. There may be field contractors/agents (the guy who came to fix my washing machine, which was still under warranty, when it broke down) who are tasked to fix the unit at the end user. The system should maintain information on these service partners.

Stay tuned for part two on Monday where I’ll be discussing Demand Management and Supply Management.

There was an interesting article in Industry Week last month suggesting that the US was becoming a low-cost country for manufacturing.  Well, I guess it all comes down to how you spin it.  Let’s look at what’s happening;

• According to the article, Chinese wages are rising by 17 percent per year.
• The value of the Yuan is increasing.
• Many states are offering incentives to bring manufacturing into the state.
• Unions and workers are more willing to provide concessions in order to get back to work.
• The estimate from the article is that net labor costs in China and in the US will converge by 2015.

The article goes on to point out that several companies including Caterpillar, NCR, and Wham-O are bringing production back into the US from Mexico and China.

Given these factors alone, you might make the argument that the US is becoming a low-cost country for manufacturing.  I don’t think that is a fair assessment because the next logical step in the argument would be that if the US were becoming a low-cost manufacturing center, other countries will start manufacturing their goods in the US. I don’t think that is likely to happen. I think what really is happening is that China is pricing themselves out of the low-cost advantage they’ve had for years. As we start coming close to cost parity, other factors are making local manufacturing more attractive.

The on-shoring or near-shoring movement is gaining speed. This is the idea of bringing manufacturing back to where the demand is. A blog post in Plastics Today points out that according to management consulting firm Accenture, “Companies are beginning to realize that having offshored much of their manufacturing and supply operations away from their demand locations, they hurt their ability to meet their customers’ expectations across a wide spectrum of areas, such as being able to rapidly meeting increasing customer desires for unique products, continuing to maintain rapid delivery/response times, as well as maintaining low inventories and competitive total costs,” and that “managing supply operations that are separated far from where demand occurs has weakened their overall operational planning, forecasting and general flexibility, while in some cases driving up costs with the need for complex network management. In some cases, this situation has limited the companies’ competitive advantage.”

Let’s look at some advantages of putting manufacturing where the demand is;

• Time to market can  be significantly improved
• Less risk to intellectual property
• Lead times are reduced and are more consistent
• Given reduced and more consistent lead times means inventory levels can also be reduced.
• With fuel prices going through the roof, reducing the overall distance traveled for our manufactured goods can only help the bottom line.
• Reduced product travel also impacts the overall carbon footprint for the product, a factor that is starting to become more and more important in the eyes of the consumer and governments.

I’ve always been in favor of manufacturing near where the majority of the demand is (See my blog post from last year here). I think when companies look at the overall costs associated with offshore manufacturing, more will realize that manufacturing where their market is just makes sense (and dollars too).

Are you currently manufacturing offshore? Are you considering moving your manufacturing back to North America? Have you moved already? Comment back and let us know!

I am referring of course to the blog titled “Low cost of labor – How long will it last?” published by Monique Rupert, who is a good friend and colleague, in which she refers to an article by Dan Gilmour of Supply Chain Digest titled “Rethinking China.” It is tough to disagree with a friend and colleague, but I feel I must, but perhaps more so with the original article by Dan Gilmour. In his introduction Dan apologizes for being political in his column. I must too, though I would hope that both of us are more in search of solutions than being political. It is less the factual evidence Dan provides to which I disagree than the sentiment. For decades the US has railed against closed economies and through its dominance of the World Bank has enforced (I use the term loosely) its version of market economics on countries without the social and political structures to absorb the huge economic shocks and resultant social consequences on countries that had to come begging to the World Bank.

No, I am not a socialist. In fact I am a lot closer to a believer in market economics. But there are times when a less purist interpretation of market economics can lead to less human suffering. I know, I know: Market economists will argue that slow change is only postponed pain. Perhaps. But isn’t it market economics that Monique and Dan are arguing against?  The relentless rise and rise and rise of China as an economic power driven by the need to find ever cheaper sources of supply for the western economies?

I am a British citizen, so I am well acquainted with the slow and steady decline of power and influence. While my 15 year old daughter would be surprised to hear that I did not live during the Victorian era, which was the height of British power and influence, I have experienced the dramatic shift in the manufacturing power of the UK over the past 50 years. It is not an easy thing to live through and accept.  As late as the 1950’s the UK was the second largest car manufacturer in the world and the largest exporter of cars. One has only to look at the figures for the last 10 years to see the continued decline to the point that there isn’t a single UK based mass production brand left and the number of vehicles produced dropped 22 percent between 2000 and 2010.  You can just imagine what the combination of declining volumes and increased efficiencies have done to the employment figures.

Source: http://www.smmt.co.uk/reports-publications/industry-data/

And yet there can be no question that the general standard of living in the UK has increased tremendously over the past 50 years, largely driven by the financial sectors and entertainment, but also by the general growth of the world wide economy.  There is no doubt that many individuals have suffered tremendously over the past 50 years as the manufacturing base dwindled to almost nothing.  According to the World Bank the UK economy as a whole grew, very well in fact. In comparing the economies I used the value of “GDP per capita (current USD)” which the World Bank defines as:

GDP per capita is gross domestic product divided by midyear population. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars.

When we compare the US, the UK, and China over the past decades we can see that the UK experienced greater GDP per capita growth than the US, but China has lagged quite far behind until as little as 10 years ago. The GDP per capita growth is measured from the base of 1960, not the year-on-year growth because I wanted to illustrate the overall increase of the quality of life (using GDP per capita as a proxy) in the UK while the manufacturing sector has shrunk considerably during this period.  The second graph illustrates that the GDP per capita in China is still only about 10 percent of the GDP per capita in the US, despite the huge gains over the last 10 years.

http://data.worldbank.org/country

In other words, the emergence of China as a world economic power does not represent a zero-sum conundrum for the US and other western economies.  The average Joe in the street may still see an increase in standard of living while the relative economic and political power of the US is diminished.  One only has to read “Guns, Germs, and Steel” by Jared Diamond to understand the inevitable ebb and flow of power over the millennia to understand that absolute pre-eminence is difficult to maintain. It simply costs too much to maintain a country’s preeminence.  According to Wikipedia it won a Pulitzer Prize and the Aventis Prize for Best Science Book in 1998, so there are plenty of people in the US who thought very highly of the book.  There is also an excellent short discussion of the book on the PBS web site.

There is a great article in the December 2, 2010 edition of The Economist  titled “The dangers of a rising China” which probably requires a subscription to read on the internet. After discussing some of the threats posed by China, the authors go on to state that:

Pessimists believe China and America are condemned to be rivals. The countries’ visions of the good society are very different. And, as China’s power grows, so will its determination to get its way and to do things in the world. America, by contrast, will inevitably balk at surrendering its pre-eminence. They are probably right about Chinese ambitions. Yet China need not be an enemy. Unlike the Soviet Union, it is no longer in the business of exporting its ideology. Unlike the 19th-century European powers, it is not looking to amass new colonies. And China and America have a lot in common. Both benefit from globalisation and from open markets where they buy raw materials and sell their exports. Both want a broadly stable world in which nuclear weapons do not spread and rogue states, like Iran and North Korea, have little scope to cause mayhem. Both would lose incalculably from war.

Let us hope that “cooler heads” prevail on both sides of the US-China divide. Quite honestly I believe it is a matter of giving a little to get a lot, not only for the US and China, but for all western economies as well as the other BRIC countries.

But let us get back to more prosaic discussions of supply chain management. Yes, as Monique and Dan point out, it is at the heart of the manufacturing and economic power shift we are seeing. This is because an efficient supply chain makes it economically viable to use labor half way around the world and still bring the product to market more cheaply than before. Of course cheap labor costs make a huge difference, but if efficient supply chains did not exist this would not matter. Either the cost would be too high, eroding the advantage of a lower cost of labor, or the product would arrive in the market too late to capture changing trends in consumer buying patterns. But let us not forget that the rise of the British Empire was as much to do with the development of rail and the power of the British merchant marine fleet as it did with the Industrial Revolution. There is no doubt that the Industrial Revolution had an enormous impact on the efficiency with which raw materials were converted into finished products, but this would not have amounted to much if raw materials couldn’t be brought to the factories from around the world quickly and efficiently and finished products couldn’t be shipped to markets around the world quickly and efficiently. Of course by today’s standards the supply chains of the mid-1800’s were incredibly slow and inefficient, but at the time they provided huge leaps in productivity.

However, the UK wasn’t just a consumer market, it also controlled the means of production and the innovation that arose from that. As Dan and Monique point out, this isn’t the case for most western economies today, perhaps with the exception of Germany.  Only time will tell if this will lead to absolute decline rather than relative decline.  I know I am hoping and praying for relative decline.

The entire Q&A along with PJ’s introduction and commentary on Kinaxis can be found here (free registration required).

PJ: Do you see a link between S&OP and multi-echelon inventory optimization (MEIO), and what do you offer in that regard?

TM: There is a wider link between S&OP and multi-tier visibility, planning, and control. S&OP has been traditionally seen as an internal process focused on getting consensus among different internal functions. But S&OP was conceived well before the advent of pervasive outsourcing and offshoring: a time when the manufacturing, let alone commodity management and procurement, were just ‘down the hall’—a time when most customers were in the same country and spoke the same language.

The intervening years haven’t reduced the level of visibility needed. In fact, offshoring has increased the need for multi-echelon visibility, while outsourcing has reduced multi-echelon visibility. So I am absolutely convinced that multi-echelon inventory visibility, and of course demand visibility, is closely linked to S&OP. How inventory levels will be set will depend on the contractual agreements between the original equipment manufacturer (OEM)/brand owner and the contract manufacturer. In addition, S&OP is often referred to as sales inventory operations planning (SIOP) and production, sales, inventory (PSI)—both cases emphasizing the inclusion of inventory management in the overall S&OP process.

RapidResponse provides ways to determine ideal inventory levels given the customer service level targets and historical demand and supply patterns. Scenarios can then be used to test the financial and operational consequences of changing safety stock or reorder point (ROP) values.

PJ: There is indeed a great deal of cross-functional cooperation and collaboration that is required for managing S&OP. How are companies enabling this, and are they doing it successfully?

TM: From a process perspective, it is difficult to get people to work across functional boundaries, let alone across organizational boundaries. In addition, technology is often a barrier when each function has its own data and systems for analysis. Not only are there arguments about the results, but also about the data. Another barrier is that often, particularly in outsourced environments, people don’t even know whom to call in another function or company to resolve an issue.

As discussed above, we enable cross-functional cooperation and collaboration by providing a solution that has a single data model, a single set of analytics, and a single UI. Naturally, we have a full security model and the ability to filter and aggregate the data to make it relevant to the person and their role. If anyone makes a data change that has a significant impact on someone else, the person affected will be alerted immediately and can then collaborate on resolving the issue. Naturally, more than two people can collaborate in a given scenario. Any changes are immediately visible to all participants in the scenario.

PJ: What is your take on the link between S&OP and collaborative planning, forecasting and replenishment (CPFR), and what are your customers doing in that regard?

TM: CPFR, in the strictest terms, has been a failure largely because it was a burdensome process and because of the expectation on the part of consumer packaged goods (CPG) manufacturing companies that it would improve the forecast accuracy of the retailers. If instead we take CPFR to simply mean a more collaborative and inclusive planning process between trading partners, then I would say it is on the rise. As already discussed, outsourcing of manufacturing has led to the need for CPFR between the OEM and the contract manufacturer by extending internal cross-functional cooperation and collaboration to contract manufacturers in particular.

PJ: If you had to name the top three priorities for a company looking to evolve their S&OP process, what would they be?

TM: I would say the following:

1. Do S&OP more frequently, preferably continuously.
2. Do S&OP collaboratively and consecutively, not sequentially through a traditional five-step process.
3. Understand that S&OP is one step in a planning continuum, and that all steps need to be synchronized constantly.

PJ: What role does exception management play, or should play, in S&OP?

TM: All planning, let alone S&OP, should be governed by the principle that execution against the plan should be monitored continuously. In addition, if there are major market shifts, a company must react quickly by regenerating the S&OP plan. But exception management is important not only in monitoring execution of the plan and market shifts, but also in detecting big changes in the plans being generated. But the exceptions need to be relevant to the person receiving the alert, and the supporting data needs to be packaged in a manner that is relevant to that person.

PJ: How and where do ‘what-if’ capabilities fit into the S&OP process? Is it a priority capability for an effective S&OP process?

TM: I don’t see how S&OP can be carried out effectively without strong ‘what-if’ capabilities. It is more than a priority—it is a core requirement! Humans are so much more creative than machines. What they need is a rapid way of testing alternatives and evaluating the consequences in a timely manner. If they have an effective manner to understand the effect of the decisions on financial and operational metrics, they will inevitably make the right decision, particularly when several alternatives can be compared side-by-side.

PJ: What is the role of master data management (MDM) in S&OP, and what is Kinaxis doing in that regard?

TM: Because of our long history in the outsource high-tech/electronics space, we have had to deal with MDM-like issues for a long time, particularly equivalent item numbering, including bill-of-materials (BOM) structures. We focus a lot of attention on data quality and have a number of workbooks that identify missing and incomplete data. Without a doubt, MDM systems do increase the quality of data, but I do not see any reason to delay the deployment of RapidResponse until the MDM system is in place.

Clearly, the business is being run with the existing data, and using the existing data in a more effective manner would only be beneficial. However, I would not recommend waiting for perfect data. If an MDM system or data warehouse already exists, we can integrate it.

PJ: Some S&OP/IBP players offer functionality (often via acquisitions) for DP, trade promotions, financial consolidation, strategic network optimization (SNO) (‘what-if’ simulations of networks), and even PLM capabilities for NPI/PPM. What is your plan of action for successfully competing with these much broader and strategic-level S&OP offerings?

TM: As stated above, we provide a single solution to satisfy many supply chain processes using a single data model, a single set of analytics, and a single UI. We believe we already have a broad and strategic-level offering. Our analytics either currently covers all of the capabilities you list above or will shortly.

We have a fundamental issue with the concept that S&OP can be satisfied effectively using an overlay solution that has a separate data model and analytics from other planning tools. How can NPI be separated from DP/forecasting, supply planning, and capacity planning? By extension, how can you finance these other functions? The relative importance of these adjacent capabilities will depend on the industry, and clearly we have broader coverage and deeper capabilities for the industries we focus on, namely high-tech/electronics, aerospace, industrial, and pharmaceutical.

PJ: Do you have any other observations and trends related to S&OP that haven’t been mentioned in the previous questions?

TM: Without a doubt, there is a trend to a broader description of S&OP, particularly in outsourced environments where the contract manufacturers, at the very least, need to be included in the S&OP process. But, this is not only broader in ‘geographical’ coverage, but also in departmental function and time horizon.

That’s it! Thanks for following along.