Posts Tagged ‘supply chain visibility’

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The current economic uncertainty facing many companies in the world will likely be the accelerant needed to push the on-demand (or SaaS) model further into mainstream. The result will be a win-win for both consumer of the service, and service provider. Indeed, the on-demand industry has the potential for significant and positive growth in these trying times while legacy perpetual software companies may see threat to survival.

As the white paper “Four essential requirements for today’s supply chain management solutions” articulates, global supply chains have never been more complex, or more volatile. Regardless of size or tenure, companies are outsourcing all or most of their manufacturing operations to regions often outside their target markets. The velocity of innovation has never been faster (and it is accelerating still). And there’s my personal favorite,  the nuvo-art of selling in a world undergoing a major “Groundswell” (a must read book by Charlene Li and Josh Bernoff, Harvard Business Press).

The business challenges are undeniable, and companies will find it difficult, if not unbearable, to leave their current supply chain condition untreated. Existing within a distributed supply chain model means the information about a company’s  ‘true’ overall health is equally distributed. What could be more natural than an outsourced solution which reconsolidates your supply chain visibility into a single point? With large scale, large capital projects facing unprecedented scrutiny, or postponement, organizations will look to lower cost solutions where their investment closely coincides with their return. On-demand service based offerings are in the rather unique position to accomplish just that where one can expect, among other things, the following:

·         No capital investment in hardware

·         No software license investment

·         No infrastructure foot-print

·         No software maintenance tasks

·         Monthly subscription fee over perpetual fully paid up license

·         Variable contract terms

·         Lower cost of deployment

·         24×365 monitoring and support

·         99% or greater service level agreements

·         Lower IT support requirements (usually focused on user/group account management)

·         Try & Buy programs

·         Optimized data center for high-availability, security, redundancy, bandwidth consistency, and business continuity

For the first time in history, small to medium sized enterprises are able to afford the same rich and sophisticated solutions as the multi-billion dollar enterprises. There is also a surge in coverage from the respected analyst community, the most recent I read was an article by the Aberdeen Group entitled “SaaS in Supply Chain: Boon or Boondoggle” where they state their hypothesis:

“While there are many drivers today forcing companies to evaluate and implement SaaS-based SCM solutions, our hypothesis is that the predominant pressure faced by the enterprise is the cost to purchase and deploy traditional on-premise SCM solutions.”

I believe adoption of on-demand service-based solutions for supply chain will see significant adoption through 2009 and beyond, giving it the same potential growth witnessed as Salesforce.com entered the CRM space.

Is it just me or does it seem like the topic of supply chain risk management is everywhere these days?  It seems like no matter where you turn the notion of supply chain risk is being talked about.  Some evidence:

• Jason Busch at Spend Matters has a post entitled “Managing change: a supply risk imperative” that cites Noha Tohamy of AMR Research who says “global companies are struggling to understand and mitigate risks across their extended supply chains in arguably some of the worst economic conditions of modern times.” Jason adds, “but not only are times tough — they’re volatile as well.”
• At the SupplyChainNetwork, Jeff Ashcroft has a post entitled “Analysis shows downturn decimating global suppliers.”  The post references insights from Panjiva, an objective information source on global suppliers that were based on analysis of the apparel industry in the second half of 2008.  It reveals staggering statistics, including: The number of suppliers actively serving the U.S. market dropped over 70% in just three months; from 22,099 suppliers in July to 6,262 suppliers in October.  The post also states that according to Aberdeen Research’s July 2008 survey and report on Supply Chain Risk Management, 58% of companies surveyed “suffered financial loss because of supply chain disruptions.”
• Jeff has another post entitled “Detroit 3 bankruptcy would ‘implode’ supply chain“ at the SupplyChainNetwork that talks about the potential cascade of failures amongst suppliers should the Big Three automotive companies declare bankruptcy.  There’s another post at SupplyChainer entitled “When supply chain makes two enemies good friends” talking about the shared suppliers between the Big Three and the Asian manufacturers, making a situation where they too are worried about the potential impact of bankrupties.
• At Supply Excellence, Tim Minahan has a post entitled “Risk: the next big (bad) thing.“  Tim writes “And suppliers are equally concerned about their customers. The CPO at one of the U.S.’s leading regional financial institutions told me last week, “Risk is a big issue in our sector. Period. Our supply base is now doing as much diligence on us as we are on them.”  He goes on to propose some risk mitigation approaches.
• IndustryWeek has a new article entitled “Supply chain risks threaten shareholder value.”  The article opens with “Supply chain integrity is a risk management issue that affects not only business operations but also long-term shareholder value, according to a new report from PricewaterhouseCoopers LLP. The report found that the average stock return of companies suffering from disruptions was almost 19 percentage points lower over a two-year period relative to the benchmark group.”
• And, I’ve commented on this numerous times (see here, here and here to name but a few).

So, there’s no shortage of evidence as to the magnitude of the issue.  The last thing you want to do at this point is to freeze and not do anything.  Market leaders are taking proactive action in light of the current environment.  They are establishing supply chain risk management strategies that include:

• Risk assessment–understanding where you have risk exposure by ensuring you have supply chain visibility and early warning systems in place.
• Risk mitigation–ensuring they have the right tools to simulate potential risks to mitigate negative impacts associated with any potential risks.
• Risk response–arming their staff with tools for risk tradeoff and response to those risks that do materialize, ensuring people can detail and collaboratively reiew various action alternatives and implement the right course corrections.

The current environment requires you to be on your toes.  Proactively developing a solid supply chain risk management strategy will ensure that you can spot potential risks, avoid many of them and manage those that do materialize.

Kinaxis has just published a new white paper entitled “Four Essential Requirements for Today’s Supply Chain Management Solutions.” An abstract for the paper follows:

The continued downward pressure on IT budgets combined with the shifting dynamics of today’s supply chains has created an environment ideally suited to be addressed by on-demand service offerings. With the right capabilities, on-demand solutions for supply chain management can offer a unique combination of tangible benefits to IT (costs savings and low IT resource requirements) as well as to the business (sophisticated computing solutions designed to excel within today’s global and collaborative supply chains).

There was a recent post at Sandhill.com on a similar theme. The post, entitled SaaS reinvents the supply chain, suggests that “high-tech companies need to take advantage of SaaS-model benefits for real-time visibility into their supply chain—especially in tight economic times.” The post goes on to describe some of the business challenges and describes the unique benefits that on-demand (or SaaS) solutions have in meeting those challenges - starting with supply chain visibility.

I would argue, though, that this is not at all unique to high-tech companies. While high-tech companies have certainly been some of the first and most aggressive global supply chain outsources, they are no longer alone in this regard. Today, companies in all industries - from aerospace & defense to industrial and automotive - have globally outsourced supply networks. They too share the same challenges of seeing into their widely dispersed network of partners and of orchestrating the intricate cooperation and coordination necessary for these sophisticated networks to work efficiently and effectively. And, with the pace of change and volatility on the rise, their challenge continues to grow.

There’s a good post here at Supply Excellence entitled “How clear is your visibility program?“   I found myself nodding my head in agreement as I read through it. Justin makes a lot of points that, if you are a regular reader here, you know I too am a big proponent of as well.  In particular he says:  “In times of uncertainty and rapid change, whether in sales, operations or spend management, fortune favors those who are positioned to confidently take decisive action and efficiently execute decisions.”   He goes on to talk about how data is the currency in this regard, but aptly points out that “Even if you have the data, isn’t it what you do with it that makes all the difference?”  Success is about getting the right information, to the right people at the right time.

Justin writes about this in the context of spend management, but this rings true for all areas and functions of the supply chain, and in fact I would argue that individual programs or solutions for specific silos of the organization makes little sense.  These capabilities (supply chain visibility, data analysis and reporting, decision support) are integral not only to spend management but also to the broader functions of demand management, supply management, supply chain risk management, sales and operations planning (S&OP), etc.   

An integrated system that can provide a holistic view and balance decisions based on multiple dimensions is critical to success in today’s marketplace.  To optimize a decision based on the specific objectives of one area of the business, may negatively affect others to the detriment of corporate-wide KPIs.  So while I whole-heartedly agree with the notion of unlocking data and leveraging analysis for strategic decision making, I believe companies need to take a broader and more integrated view of how to empower their organization with these necessary capabilities.

This morning we put out a press release announcing that Pioneer has selected Kinaxis RapidResponse for dynamic demand and supply chain management.  Pioneer is a global brand headquartered in Tokyo.  Like many companies, Pioneer is facing a more challenging supply chain management environment that requires them to better align supply and demand while reducing excess inventory and providing early detection of shortages.

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Pioneer Corporation Deploys Kinaxis RapidResponse for Dynamic Demand and Supply Chain Management
Leading Electronics Manufacturer Chooses RapidResponse to Maximize Customer Responsiveness and Reduce Inventory Risk

Ottawa, Canada, November 18, 2008 – Kinaxis™ Inc., provider of the on-demand RapidResponse service that empowers multi-enterprise manufacturers with the collaborative and integrated demand-supply planning, monitoring, and response capabilities required in today’s complex and dynamic world, today announced that Pioneer Corporation’s Mobile Entertainment Business Group – the leading electronic manufacturer’s most rapidly growing business unit – will deploy RapidResponse.

Headquartered in Tokyo, Pioneer provides mobile entertainment products to major automotive customers in Japan, Europe and the United States from its primary manufacturing facility in Asia. Pioneer selected RapidResponse in place of an extension to its legacy supply chain planning solution, because of its ability to:

• provide multi-enterprise supply chain visibility,
• perform detailed analysis based on real-time Materials Resource Planning (MRP) calculations and
• support worldwide Sales & Operations Planning (S&OP) initiatives.

Pioneer was looking for a solution that could allow them to better align supply and demand, while reducing excess inventory and providing early detection of shortages. With deep supply chain visibility into manufacturing operations and real-time “what-if” scenario simulation capabilities, RapidResponse empowers Pioneer to determine the impact of changes within the supply chain and respond quickly and confidently, meeting both customer and corporate objectives. RapidResponse is projected to reduce both inventory and expedited shipment costs.

“As the market for mobile entertainment products continues to prosper, the stakes are high to provide on-time delivery and exemplary service to our global leading automotive customers,” said Hiroshi Tatsuta, General Manager, Production Management Department at Pioneer Corporation. “We chose RapidResponse for its unparalleled ability to enable us to keep up with ever-evolving demand patterns and in turn, better serve our customers.”

“The ability to make informed supply chain related decisions on the fly is integral to maintaining the competitiveness of a company – even more so for those industries that are experiencing rapid change,” said Randy Littleson, vice president of marketing at Kinaxis. “RapidResponse uniquely combines supply chain visibility of demand and supply within a single solution, with real-time analysis and simulation capabilities that will help Pioneer to thrive within this fast-growing industry.”

The deployment, which is expected to be completed by early 2009, is being performed in conjunction with Kinaxis partner, and leading Systems Integrator, EXA Corporation. Upon completion of a successful implementation, RapidResponse is expected to be integrated into other Pioneer divisions.

About Kinaxis
Kinaxis™ RapidResponse is a single on-demand service that empowers multi-enterprise manufacturers with collaborative and integrated demand-supply planning, monitoring, and response capabilities. RapidResponse embraces human judgment to enable planners and front-line responders to handle unpredictable changes. Global leaders such as Casio, Honeywell, Jabil, Qualcomm, and Raytheon use RapidResponse to achieve breakthroughs in sales and operations planning (S&OP), demand management, supply management, and supply chain risk management. The results are superior customer service, improved operations performance, and a competitive market advantage. For more information, visit the Kinaxis web site at www.kinaxis.com or the company’s blog at www.21stcenturysupplychain.com.

I found a good article here at Supply Chain Management Review discussing the current and future state of supply chain management software.  The article includes lots of insights from leading experts in the industry.

The article states that Joe Francis, executive director of technology for the Supply Chain Council in Washington, D.C., sees that global supply chain visibility has come to the forefront for many companies. “Global visibility is the best practice that everyone wants right now,” says Francis. “Bad events are so disruptive that we’re starting to see much more emphasis on track-and-trace and predictive events control.”

I agree - but would also add that bad events are coming in large numbers.  The problem that most companies struggle with is the fact that most bad events “just happen” and there’s no system to help them understand which events are going to have a negative consequence to the business going forward.  Supply chain management professionals need to ask themselves:

• How soon can we capture unexpected change in the business?
• How soon do we understand the resulting anticipated risk of an unexpected change?
• How soon will we know which people are responsible for pre-empting the risk?  How soon will they know?
• How do people know how their risk trade-off’s affect others?

The trap that I think a lot of companies fall into is believing that supply chain visibility is the end goal.  It isn’t.  You have to go beyond visibility and understand what problems you’re trying to solve and what tools you need to solve them.  You need to work backwards from the end game.  Supply chain visibility absolutely will be a core element of a solution, but it is not the end game since visibility alone isn’t going to solve most of the problems.  You need ensure that your supply chain professionals have the tools to answer the questions above and take the right actions.