Posts Tagged ‘Response Management’

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]

I recently received my personally signed copy of Lora Cecere’s Bricks Matter and it immediately had me thinking that I have always wanted to do a book review.

As for reviewing this particular text, I also thought it might be nice to bring a perspective that was not steeped in traditional supply chain knowledge and experience.  Having spent the last 15 years in enterprise software, I am continually struck by how different the value chain of plan-source-make-deliver-return, along with the associated supplier and customer touch points, is with enterprise software.  Thinking about it the other way round, I have no natural biases in reading the book from the perspective of how I think value chains should be structured.

So, here goes.  This will be a seven-part series.  One blog per chapter with a final, summary review to wrap up.

The first chapter, Why Bricks Matter, starts us off with a great tone and foundation for the rest of the book.  I was expecting the chapter to be a history lesson on the last 30 years of supply chain, which it certainly covers, but it is also a lot more.  The chapter acts as a blueprint for the rest of the book, but more importantly, a blueprint for value chains of the future.

Before getting to the history-for-the-purposes-of-future-blueprint section of the chapter, it is important to point out what Lora refers to when she says, “bricks.”  Lora points to three components of building the right BRICKS: (1) Buildings and the Right Use of Assets, (2) Expansion into BRIC countries, and (3) Supply Chain Process Knowledge.  The building blocks lay out the essential components to value chain strategy creation for the short-term and the future.

Lora does a brilliant job of telling the history (and of the immediate future stage) of supply chain management by looking at each 10-year stage (generation) of supply chain by the pioneers who defined each generation: What were their backgrounds?  What challenges were they facing?   What was the state of information technology?  This backdrop really helps understand why choices (good and bad) were made in the past and the likely path leaders will need to take to drive value chain excellence in the future.

Moving on from the pioneers themselves, Lora shifts (literally) to the five shifts in supply chain processes after pointing out why supply chain processes are so important.  In my opinion, these five shifts act as a blueprint for supply chain excellence more than other maturity models that I have seen.  Each model obviously has a place, but Lora’s model is very practical and easy-to-understand, covers all aspects of the value chain, and frankly, points out the stages that supply chain leaders are progressing through today.

Lora wraps up the chapter with a discussion of the supply chain leaders – based on solid evidence.  I will leave the discussion on these leaders for future blogs.

To summarize chapter 1, it does a great job giving the history of supply chain management and the beginnings of a blueprint for the future. I am really looking forward to the next 5 chapters.

CJ Wehlage recently joined Kinaxis as vice president, high tech solutions. Wehlage joins a senior team of technical and industry experts that are a highly-leveraged resource for the company’s most critical initiatives across the sales, marketing and client services organizations.

Wehlage brings over 20 years of industry experience both as a supply chain practitioner and an industry research analyst. We asked CJ how his first month with Kinaxis was going. Here’s what he shared:

Last week I met up with an old friend, a supply chain executive in the Valley and we caught up on the last 20 years. I shared my journey with several large companies: Apple, EMC, Bose, AMR Research, Sony and now Kinaxis. As we were chatting he asked, “what’s been the coolest place to work?”

I thought a good bit about it.  Was it the Friday afternoon beer-bashes at Apple? Was it the walks over to Dunkin for coffee with the AMR analysts and talking best-in-class supply chain research?  After some thought, I told him the coolest place was where I learned something every day, where the environment is not only open to learning new concepts, but also executes them. That’s the definition of innovation (…The free products & company logo shirts were pretty cool too…).

That’s the reason I joined Kinaxis. The product is innovative, implemented, and delivering on the promised benefits.

In these past 30 days, I’ve watched > 20 videos of Kinaxis presentations, met with > 15  clients & analysts, and read > 30 case studies of Kinaxis success stories.  The one theme that resonates is that customers love using Kinaxis.  Why? Best answer I’ve received, “I’ve got a lot to deal with, and not a whole lot of time to solve it”.

A lot to deal with = complexity

Not a whole lot of time = speed

It reaffirms my belief in the equation: complexity is the inverse function of agility (or speed).

In my 23 years of supply chain business, a constant has always been “complexity”. I’ve seen, and probably can be blamed, for high tech supply chain outsourcing. China, Mexico, Eastern Europe, 3^rd Party providers, Multi-Sourcing Suppliers, you name it, High Tech supply chain footprint is complex.  Removing a SKU off the price book – never saw it in 23 years – product is complex.  My favorite complexity story was at the AMR conference, Cisco’s Angel Mendez presentation:

“On its first night of continuous operations in 1973, Federal Express delivered 186 packages to 25 US cities…”

Pause… plays some Enya “Orinoco Flow” music.

“FedEx delivered 9 million packages to 220 countries …last night.”

To put it bluntly, speed cures the ills of complexity. Don’t like your monthly S&OP cadence?  Try doing S&OP weekly, at the SKU level – Samsung does… and their market share results show why.

Why is speed so important?  For obvious reasons, speed enables better margins & profits, improves cash flow, lowers COGS, and addresses quality issues faster, better cost-to-serve and a greater shot at improved market share.  Case in point: one very complex situation that most supply chain’s run into is EOQ (End of Quarter) or the fun term: Hockey Stick effect.  Speed can make or break the EOQ profit.  At EMC, we’d get 40% of the quarter’s orders in the last week (or some would say, the last day).  We would need to align various sales geographies, factory & distribution personnel, finance, and supply chain around the single goal of most profitable orders.  The traditional thinking of improving speed of transactions between systems was usurped by improving speed of knowledge between people.  The end benefit was amidst all the EOQ complexity and limited time, everyone was focused on just the most profitable orders.  Inventory movement was optimized, premium freight was minimized, and overall COGS was controlled.  We even got a side benefit where inventory was prepped for the next quarter – and commits (on time delivery) were maintained.

The other reason, one which is not so obvious, is that speed enables innovation.  I love asking supply chain executives how they innovate their supply chain. Here’s how the conversation typically plays out:

Q. “How do you innovate your supply chain?”

A. “We simulate new strategies and supply chain models, and test them against business outcomes”

Q. “When and how often does your team do this?”

A. “Well, after we complete the plan, share it with Sales & Marketing, align it with Finance, finalize it with our suppliers, communicate it out to our customers, expedite critical orders, resolve inventory stock outs, adjust the BOM’s impacted by ECO’s, and true up the NPI/E&O plans, we then have the time to focus on innovation.”

I’ve seen so many supply chains get caught in the cycle of managing the day to day complexity.  Speed, applied the right way, doesn’t get rid of complexity. Rather, it allows your organization to rise above complexity, and have the time to ask what if questions, and execute what if scenarios.  When you get to this stage, your supply chain will be “not only learning new concepts, but also executing them”.

And, that will be a cool place to work…

In the original blog on this topic, 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.

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

Windows 8 is here and the Surface tablet is shipping. Is this going to put excitement back into Microsoft or just fall with the thud of Windows 7 phones, Zune, and some many other launches of the past ten years?

Just over 12 years ago, literally at the turn of the century, Microsoft was still a massively dominant software company. Windows-based personal computers accounted for 95% of the market (vs 30-32% or so today) and Microsoft still had the uncanny ability of picking – and then quickly dominating – new market areas. (Whether or not Microsoft was a great innovator remains a topic of great debate, however, it is hard to question their ability to pick and dominate markets).

Since 2000, Microsoft has certainly done OK – especially compared to many other high flying software companies of the time – but they have also haven’t done anything exciting over that time either. A dollar investing in Microsoft stock 10 years ago today would be worth $1.06 (unless you are Canadian and it is worth about $0.68 with exchange, sigh). Google was obviously a new company, but a dollar invested 10 years ago would be worth $525 today and a dollar in Apple would be worth $7800. Let’s face it, over a 10 year period, stock price is a decent proxy for success.

So … what went wrong and are they repeating it again?

Microsoft flat out stopped going after new markets, or probably more accurately, they stopped their efforts at dominating new markets created by others early in the emergence of those markets. Basically, they have been late to market with everything. In Geoffrey Moore speak, usually both the gorilla AND chimps were already established before Microsoft entered the game.

With Surface and Windows 8 (and the inevitable MS Surface phone), is this game playing itself out again? It sure looks like it. Apple and Google (plus the Google-Samsumg partnership) are dominating the smartphone market in the personal productivity market, with RIM hanging on as a third player for the business-centric buyer (and to a lesser degree in the personal market). Microsoft currently, with about a 4% share, is nothing more than a rounding error.

Does it need to be this way?

No way! Is we step back from all the feature debates and religion around open vs closed platforms, there still is a market to grab. Especially since this “market” turns over at a rate unheard of in history.

Let’s look at what made Apple so great so quick – cutting through all the feature/religion garbage and getting back to core principles. When the iPhone and then iPad came out, they made people’s lives a lot more productive – after all productivity is the only reason to adopt technology in the first place. (I would even extend this to gaming and movies – making our “recreation” time more productive is what wins in this space too.) I admit it. I bought the original iPad the day it came out. It has made my personal life more productive. Picking meals, to grocery shopping, to cooking is easier – no more looking through books, writing out lists and digging books back out! I love sitting on the sofa watching TV and going, “That actor looks familiar.” Quick to the iPad, IMDB, voila! Would I have pulled out a laptop to satisfy that curiosity? … unlikely.

However, has Apple (or insert Google-Android here) made my work life more productive? Not a lot. It is easier to travel with music, search the web, get email and calendar (barely), and so on. It is barely “good enough.”

A lot of you might be like me and still spend a depressing amount of time in PowerPoint, Excel, Word, and Outlook. Has iPhone/iPad and Android helped here? Not really. (If you answered “yes”, you are either kidding yourself or have a much lower standard for convenience that I do!)

Imagine in the late afternoon when I have to run to see a basketball or hockey game … no more rushing to save work and pack up a laptop. Grab my Surface device and pick up mid-PowerPoint when I get home (or mid-email, Excel model, etc).

Basically, I am saying that Apple/Android has gone to market with a “Great for Personal. (Barely) Good Enough for Business.” model. Microsoft, why can’t you take a “Great for Business. Good Enough for Personal.” approach. I would buy that!

I am hopeful, I just don’t think they can.

The single biggest indicator is the new Windows 8 ads. Who thought it would be a good idea to go to the ad agency and say, “We are going to dedicate ¼ of the money and 1/10 of the time Apple thinks about advertising and go-to-market, but please copy their ads!”?

Thirty seconds of confusing people. Great job.

Please, Microsoft, try to make this interesting. Apple vs Android just isn’t fun anymore.

It is with great surprise that I read about the demise of yet another company focused on supply chain planning, namely the purchase of JDA by RedPrairie for $1.9B. Of course RedPrairie does not see it in this manner.  They see this as growth, as opportunity.  Equally interesting is that it is RedPrairie, with revenues of about $300M, that has bought JDA with revenues of close to $700M. I can’t help wonder how that came about.  Of course it could be a lot more innocent.

More important is the fact that JDA has been formed through the acquisition of a number of other supply chain companies, most notably Manugistics and i2 Technologies, both pioneers in the supply chain planning space.  JDA was already struggling with rationalizing the number of software applications to reduce the cost of maintenance and bug fixes, and now RedPrairie will need to evaluate how to absorb the JDA applications. Lest we forget i2 Technologies also grew through acquisition of Think Systems, OptiMax, ITLS, Aspect, and Smart Technologies, amongst others.  So did Manugistics. And then JDA. And now RedPrairie. Same DNA, same result?

Of course roll-up is the same business model adopted by Infor. Perhaps this is the route RedPrairie, or, more correctly, New Mountain Capital, RedPrairie’s owners, has chosen. Here is the list of Infor acquisitions in Wikipedia, and I don’t even seen BaaN on this list. (The accuracy of Wikipedia is a whole other topic I won’t get into here!)

Infor Acquisitions

• Agilisys (SCT) (2002)
• Brain AG (2002)
• Future Three (2003)^[5]
• Infor Business Solutions (2004)
• Daly.commerce (2004)^[6]
• Varial Software (2004)
• NxTrend Technology (2004)
• Aperum (2004)
• IncoDev Software (2004)
• Lilly Software Associates (2004) ^[7]
• Mercia Software (2005)
• MAPICS (2005)
• Paragon (2005)
• Intuita Holdings (2005)
• Alpine Systems (2005)
• Formation Systems, Inc. (2005)
• Datastream (2006)
• GEAC ERP (2006)^[8]
• Extensity (2006)
• Systems Union (2006)
• SSA Global (2006)
• Profuse (2007)
• Workbrain (2007)
• Hansen (2007)
• Corpsoft (2007)
• SLA Management Services (2008)
• SoftBrands (2009)
• Bridgelogix (2010)^[9]
• Qurius (2010)^[10]
• Hotel PMS division of Amadeus IT Group SA
• Lawson Software (2011)
• ENXSUITE (2011)
• Easy RMS (2012)

Having been around in the early days of i2 Technologies, when they only had one product, Factory Planner, I have mixed emotions.  There is a lot that i2 Technologies, and Manugistics, brought to the table.  They changed the way we saw the problem; how we went about planning complex supply chain planning problems.  I am very proud of the time I spent at i2.

But there was always a major flaw in the approach of the early vendors to supply chain management as a practice.  They approached supply chain planning by addressing the needs of individual functions without giving any thought to the value of cross-functional process enablement. What they ended up with was a Rubik’s Cube of solutions.  I was at a two day conference held by the Center for Transportation and Logistics at MIT recently during which one of the participants said that they have over 200 supply chain management applications, which means that when implementing new functionality the cost of integration is greater than the cost of purchase and deployment of the new application. That is a sad state of affairs.  How are they going to innovate in that environment? But we were all – vendors, practitioners, analysts, academics – complicit in segmenting supply chain management into functional silos, divorcing demand planning from supply planning and materials planning, divorcing new product introduction from procurement and capacity management, divorcing trade promotion planning from supply allocation and distribution requirements planning.

The ERP vendors are faced with the same issues. Oracle has grown its application suite through acquisition, most notably Demantra and JD Edwards. While SAP has grown its APO suite through organic development, they too have followed the functional silo model with 7 individual APO modules with different data models, code bases, UIs, and analytics engines.  How are we ever going to be able to support horizontal cross-functional processes and even multi-enterprise commerce with these architectures? Of course Oracle has tried for several years to solve this issue with Fusion and SAP with NetWeaver. Following either of these links is to be faced with yet another list of modules and components required for Fusion or NetWeaver. And Infor has ION, i2 had Agile Business Process Platform, and RedPrairie has E²e, all of which try to accomplish the impossible. This issue of multiple functional solutions also impacts innovation in the supply chain space. With vendors so focused on integration between modules, where is the process innovation going to come from? With small groups focused on functional needs, where is the cross-functional innovation going to come from?

From attending multiple conferences and working with big customers I hear a lot about the need for horizontal process enablement and innovation.  Of course any of us can still find conferences that focus on functional excellence, and I’m not suggesting that functional excellence is not important.  The gap, though, what is missing, is the horizontal, cross-functional process enablement.  This is why there is such as buzz about what we call Supply Chain Control Towers or, what Jim Shepherd called “Multi-Enterprise Commerce” while he was at Gartner.  Unfortunately Jim’s original post on Gartner’s First Things Monday blog is no longer available, but here is what he said on Supply Chain Brain.

The real business problem that today’s manufacturers and distributors are struggling to manage takes place between companies, not within them. Planning, sourcing, production, costing, tracking and fulfillment must take place in an environment that can be accessed and updated by all the players in the value chain. This certainly suggests cloud-based services, rather than a series of on-premise systems hidden behind various firewalls. The applications themselves will also have to be redesigned to accommodate rapidly evolving supply networks and extremely fluid material ownership.

Application designers could learn a lot from today’s Web store, lsupply chain and sourcing products, but they need to extend the scope to include finance, asset management, traceability, order management and service. In a multi-enterprise environment, these activities will need all new business processes, and the expectations for control, visibility, and efficiency will be quite different.

I can envision this “multi-enterprise commerce” suite, and I can see how valuable it would be for companies in industries like electronics, life sciences, food and beverage, or fashion. Their businesses today are really based on creating and managing global value chains that may have dozens or hundreds of participating entities. I don’t think the fundamental design of ERP fits this business model very well, and I don’t think just moving it to the cloud really solves the problem.

I agree with Jim’s assertion that manufacturers are struggling to manage what takes place between companies, but I am not yet convinced that they have satisfied the need for horizontal or cross-functional processes within them. Because of outsourcing, what has happened over the past two decades is that many of the internal functions have been outsourced, validating Jim’s statement.

I was asked to comment on the merger by fellow blogger Jason Busch from Spend Matters. He shares some interesting perspectives on this industry news – you can read the article here.

So we live in interesting times.  I can’t wait to belt out that other perennial Queen favorite. Know the one I mean?

In the current corporate climate, most companies are seeking to increase market share by flexing their supply chain to meet the needs of both the company and the customer. The question for many corporations comes back time and time again to: How can market share be retained or even post gains with on time performance? Many companies over the last few years have been holding onto cash due the economic downslide along with cutting jobs and any other way of reducing cost. It has been noted that the economy will not improve unless we change that way of thinking. Promoting jobs, promotes spending. It’s simple yet complex at the same time. In my opinion, large companies hoarding cash is not the way to stimulate growth in this country.

As many of us are aware, supply chain management is a challenge for companies of any size. I have spent many years in both distribution and manufacturing helping to streamline business processes and have learned that it is a continual evolution. In my years of consulting on the business side of things, I always found that effective and innovative Supply Chain Management plays a large role in increasing revenue. Years spent working with implementations of ERP business systems have taught me that there are several ways to increase productivity, reduce costs and streamline business processes from quote to cash. Most focus was spent working with inventory management, procurement and lean manufacturing processes in order to help companies become more profitable. During this time I found that responsiveness to customers is directly linked to capturing more revenue opportunities. The supply chain planning process along with inventory and procurement has always been the focus to increase profitability in distribution. Manufacturing is not much different, just a few more processes, but cost reduction and process improvement in the manufacturing cycle can greatly improve revenue. Sales always seem to have the need to be competitive and so there is very little room there to increase revenue only through pricing measures. Today, with the economy being down makes it harder to increase prices without losing sales and customers.

Recently I came across an article by Hitachi Consulting that talks about the “Six Key Trends” for changing Supply Chain Management today. These may be some keys to success, but I believe there is more to it, but it’s a great place to start.

I believe one way to improve supply chain performance and efficiency is to use technology to continually improve upon business processes. This has become the widely accepted element of an overall business strategy — to improve the supply chain, thus increasing value for the customer resulting in a more profitable company.

Let’s face facts. We as consumers all look for the same product, but try to find the best affordable price. Corporations know this to be true and must look for ways to cut cost, retain revenue and provide better service and value to the customer so as to retain that customer. Technology plays a vital role in that (and specifically as it relates to the six trends discussed below).

Here are the six key trends for supply chain management today highlighted in the article, with my thoughts on a few aspects of those themes:

Demand Planning
There have been new approaches to demand planning in manufacturing. Plant level production planning is costly and does not directly influence what products sell most. Instead, having a demand driven focus will influence the sales focus on what products are “wanted” in the market place and therefore drive a more customer focused approach to managing supply chain effectively without sacrificing operational efficiency.

Consensus demand planning has become critical as all leaders in a company must be in agreement with a demand plan in order for it to be successful. This requires capturing all influencing factors and cross functional input, such as customer demands, new potential products, product improvements based on market trends and competition, market conditions, current market acceptance and services needed to support such products. These factors need to be continually evaluated and the demand plan must be changed accordingly for continuous improvement and forecast accuracy.

Analytic tools available today help reveal the flaws in most ERP systems that can be fixed. The key is to know where to look to find the root of the cause and fix it. ERP systems are designed to “run the business” from ‘quote to cash’.

For example, MRP will show you what needs to be purchased or made to meet the forecasted demand, but the demand plan could be flawed (and often is) and without the ability to analyze “why”, we follow orders based on straight demand from the system.

Only after the fact did we realize that we don’t need to make 1000 of something. Somehow, a minimum was set wrong or safety was set wrong on the part and no one caught the exception because ERP systems don’t warn you that this is not an independent or dependent demand. If we could proactively analyze the supply and demand on an ongoing basis, we could see when there is a problem and fix the root of the problem. Some systems afford the ability to create queries, but again, this is more often after the fact, and by then it’s too late, or the queries put too much strain on the system to run often and as needed (MRP takes usually 8 hours or more to run on average).

Only after the fact did we realize that we don’t need to make 1000 of something. Somehow, a minimum was set wrong or safety was set wrong on the part and no one caught the exception because ERP systems don’t warn you that this is not a independent or dependent demand. If we could analyze the supply and demand with tools, we could see when there is a problem and fix the root of the problem. Some systems afford the ability to create queries, but again, this is after the fact and by then it’s too late or the queries put too much strain on the system. MRP takes usually 8 hours or more to run on the average.

Globalization
The business world is becoming more global both in supply acquisition and sales. This is mostly due to communication, internet and the digital age. A global customer and supply base has greatly affected the supply chain. Most corporations are looking for the best place to manufacture product cheap, without sacrificing quality, as well as looking for the best place to buy supply needed to manufacture product.

Container shipment volumes have increased over the years and some ports have capacity issues related to customs or trans-shipping, thus forcing companies to logistically re-route, which has a major effect on the overall cost and efficiency of the supply chain network. Changing the point of entry for inbound shipments can have a positive impact on the “total landed costs” due to factors such as customs clearance times, capacity and better efficiency of transporting materials. Alternate ports would need to be evaluated for supply chain costs and efficiency.
A well thought out global network design can optimize a supply chain network, reduce overall costs and obtain maximum performance due to a better flow of materials to the “end point” — be that a customer or the manufacturing facility.

Increased Competition and Price Pressures
As with most brands in the past, if you had a unique product that was in high demand (such as an iPhone) than you could stay ahead of the competition and focus on improvements. However, today that is not enough to remain competitive in the market place (Android is closing in on market share). There are too many competitive products in every category. Price is the factor that is driving demand in most cases due to a challenging economy, but it’s not the only factor. People will sacrifice a better product for a cheaper one if they cannot afford it. So to diversify, suppliers can differentiate themselves to OEMs by offering value added services such as VMI, Drop Shipping and collaboration to name a few. Ultimately, better collaboration among OEM, CMs and suppliers across the global network can lend itself to value added services for end customers, which can keep your company competitive by building better relationships with customers. Many consumers do take into account quality, support and services when evaluating products for purchase.

Outsourcing
This one is debatable in a lot of areas.

Outsourcing some or all of your supply chain can be advantageous if you have all the right control measures in place and manage the process from end to end. But we have seen over time that it can be dangerous and can cause loss of customers if this part of the supply chain breaks down. In my opinion, the US has outsourced too much and it has had a direct impact on the economy. By trying to save money and outsource manufacturing operations, we have caused the loss of jobs and growth to which in the end, has resulted in less US revenues for companies, because many individuals have curbed their spending.

However, one can outsource certain parts of the supply chain and be successful. Many factors come into play such as, provider selection, competency, performance, capacity limitations and financial due diligence on the provider/supplier to name a few. There also must be focus on proper management, communication and control variables of outsourced providers and process, this would be key to manage the processes efficiently and be proactive in monitoring the various components of this particular outsourced supply chain part/product line.

Sometimes outsourcing can be harmful if not properly managed and can affect the breakdown of the complete supply chain.

Shortened and More Complex Product Life Cycles
This one key trend in my opinion is the most challenging. Companies looking for the cheapest method to manufacture, as well as the cheapest components to build their products in order to keep the cost down, are taking risks that far outweigh the cost benefits. If the product fails too soon or the quality is spared as a result of this process, the consumer is left with a bad experience and with consumers having such a strong and far-reaching online “voice”, for the offending company, a poor reputation is very hard to recover from.

A well thought out, engineered PLM (Product Lifecycle Management) process will greatly benefit companies by reducing risk of obsolete components and materials. The struggle today remains with products not sharing common components, operations, or materials with the newer products that will take the place of older models. There needs to be a better focus on managing new product design with product discontinuation in mind, and designing for manufacturing using similar processes so as to gain leverage across the entire product line. This will help reduce costs and complexity, as well as increase/improve product life cycle times without sacrificing quality.

Product lifecycle management also encompasses adherence to local packaging, labeling regulations, development costs (engineering) and final entry to market. As the economy becomes more Global, all these factors must be considered in order to promote effective distribution of the product, whether targeted to region or consumer.

Collaboration Between Stakeholders in the Extended Supply Chain
Collaboration across all lines of the supply chain is critical. This increases visibility and coordination across the supply chain and that allows all involved to make good decisions which will affect the total value. The right tools (software), processes and organizational structure will make effective supply chain collaboration achievable.

Consumers, suppliers and manufacturers need to be in alignment in order to improve upon supply chain value.

Recently Sales & Operations Planning has emerged as the main vehicle for collaboration and a way to help increase value by maintaining a well-coordinated, valid operating plan in support of customer demand, business planning and strategy. S&OP bridges the gap between sales/forecasting and supply chain. This is needed to make critical, informed decisions.

S&OP also allows for greater visibility across the entire value chain. This cross-functional (and even cross-company collaboration) will lead to a better PLM process, improved demand planning, minimized inventory, reduced costs and will help achieve superior customer service and fulfilled customer expectations.

In conclusion:
As a whole, these trends seem to be what most corporation are taking into account when evaluating their current supply chain. No doubt that technology is needed to address these key trends, and that includes:

• ERP to run the business efficiently, supplemented by
• Added SCM solutions designed for today’s complexity and volatility and targeted at creating an integrated, streamlined, and agile supply chain.

As the market changes, so too must the companies serving it. The bottom line is that if the supply chain performs poorly, the effect is felt across the entire business causing possible long term failure in performance of an otherwise successful business.

We recently completed a Celestica case study entitled Dramatic Gains in Order Promise Efficiency and Responsiveness. As any vendor will tell you, sometimes good customer case studies are hard to come by, so it is with both great pride and appreciation that we are able to tell the Celestica story. I’ve included the highlights below:

The Goals
With a global manufacturing footprint and inherently complex supply chains, Celestica sought an opportunity to:

The Gains

It is companies like Celestica that we feel so fortunate to call customers. Sharing the vision and supporting the leading edge practices of our customers is ultimately the fuel of our success.