Posts Tagged ‘Supply chain’

Elephant in the Room: Thoughts on Metrics That Matter in Semiconductor and Hard Disk Drives

Published August 29th, 2014 by CJ Wehlage 0 Comments

Metrics That Matter in Semiconductor and Hard Disk Drives

Supply Chain Insights recently published a Metrics That Matter report covering both the Semiconductor and Hard Disk Drive (HDD) industries. Despite being hit hard by the recent recession, overall the research shows that these two industries have fared well over the last decade and are positioned to continue that success.

Success, provided they monitor the 7 “elephants” in the room.

Consolidation

Notice in the Supply Chain Insights report, there are only two HDD companies.  That industry has already gone through consolidations.  Semiconductor is poised to consolidate, which will have huge impact on the metrics.  It’s already happening with Avago/LSI, RF Micro/TriQuint, Micron/Elpida, MediaTek/MStar and Fujitsu/Panasonic.  Speed to integrate the planning functions during an acquisition is critical.

Profitability

With the OEM’s driving down the price, the semiconductor/HDD companies will have to follow (or innovate new products).  Lower price means lower profitability. This will begin to impact the semi/HDD ability to raise capital and innovate/expand.  Cost pressures and faster time to market in the planning processes will be required.

Global pressure

Consider that the Chinese and India governments are investing in the semiconductor industry.  With China already a source for semiconductor raw materials and the China/India end consumer market growing, there will be pressure to supply chips and hard drives to local China/India OEM’s first.  This could create a shortage in the US/Europe OEM chain.  Understanding inventory planning will take on a new dynamic.

Of course, like any industry, Semiconductor and HDD manufactures are faced with a set of unique challenges in their space that puts their supply chain at risk.  The largest risk being a balance between shrinking product lifecycles in the OEM world versus expensive asset utilization.  We are at a time where consumer electronic brands have a 9 month (that’s 270 days) lifecycle, while Semiconductor & HDD supply chains have 6 month component lead-time, with 3-5 year depreciation of capacity.  After reading the research, I would summarize the main obstacles as follows:

Position in the Supply Chain

As suppliers of technology embedded in more complex products, Semiconductors and HDD manufacturers find themselves further back in the supply chain, often 3-5 levels down. This can make it difficult (compared to those closer to the front of the supply chain) to find balance in what Supply Chain Insights calls the Effective Frontier – growth, profitability, cycle and complexity. The ‘bullwhip effect’ certainly plays a role here, creating wide fluctuations (over and under) of supply and demand – due to disorganization, lack of communication or miscommunication, incorrect demand information, etc. – as information moves down the supply chain to the manufacturer.

Potential for Tightening Margins

Related to their position in the supply chain, competitive and consumer pressures that drive down pricing are often pushed down the supply chain, forcing suppliers to tighten their costs.

Supply Chain Length

Reliance on suppliers beyond the US borders has extended the length of the supply chain, and opened it up to significantly more risk, as demonstrated by the impact of the Thailand flooding on both the Semiconductor and HDD segments.

Growing Complexity

As one of several suppliers contributing to the creation of a single product, Semiconductor and HDD manufacturers are susceptible to issues experienced by others in the supply chain, as explained by Broadcom in the Supply Chain Insights report: “Our products are incorporated into complex devices and systems, creating supply chain cross-dependencies. Accordingly, supply chain disruptions affecting components of our customers’ devices and/or systems could negatively impact the demand for our products, even if the supply of our products is not directly affected.”

Despite these challenges, the Supply Chain Insights dive into financial data shows that these two industries have fared well, thanks to strengths in product innovation and supply chain planning functions. More specifically, the research shows strong year-over-year growth and large (and increasing) operating margins (with minimal impact -so far-on from upstream cost pressures).

On the downside, it appears that these industries are struggling with inventory issues. The research shows the cash-to-cash cycle has increased, as have days of inventory, and inventory turns are on the decline. Supply Chain Insight’s look at four key Semiconductor companies and two key HDD companies indicates these inventory issues are not the result of poor inventory management but rather an industry trend. The research suggests that both product complexity and the length of the supply chain are contributing factors.

Based on the above, it seems clear that putting a focus on optimizing inventory management practices, making risk management initiatives a priority, and building strong collaborative S&OP practices with their customers, will help Semiconductor and HDD manufacturers continue to see success in the coming years.  This comes with a solid planning system of record.  One that will remove manual steps in the process, drive real time information from the semiconductor/HDD testing to the OEM demand, and connecting the end-to-end decisions with the planning model.

P.S. The Supply Chain Insights’ research report covers additional areas than what I’ve summarized here, and supplies comparative financial data. If you’d like to read the Supply Chain Metrics That Matter: Semiconductors and Hard Disk Drives report in its entirety, you can download a copy here, with no registration required.

 

Posted in Demand management, Inventory management, Supply chain collaboration, Supply chain management


3 Lessons from Gold and Silver Pawn: This… is Supply Chain, This… is Pawn Stars

Published August 27th, 2014 by CJ Wehlage 0 Comments

3 Lessons from Gold and Silver Pawn This is Supply Chain. This is Pawn StarsIf you read my prior blog, “Storage Wars rescues supply chain ignominy”, you would have seen my garage after I moved from Boston to San Diego. Every box we collected for 16 years, stuffed in the Boston attic. And now, in San Diego, the only place to put it was the garage.  Well, here’s the updated picture of my garage. I used the supply chain ERP “shedding” theory to innovate and clear out my garage.

Just like shedding ERP when building a planning system of record, when I shed my garage, I was able to find cool side benefits. I found an “item” dating back to 1910, Carnegie, Pennsylvania.  My grandfather passed it down to my uncle, who passed it down to me. It’s a piece of baseball history from the Pittsburgh area. I’ll tell you in a minute why I cannot say what the item is.

shedding ERP vs shedding my garage clutter

Now came the decision as to what to do with it.  I could frame it and put it in my office. A home office that pretty much only I go into.  I could hand it down to my son. Or, I could sell it. I know you all would say “hand it down”, but our challenge is having a son with autism.  His ability to comprehend what the item means is limited.  His interests lie elsewhere.

So, as I was watching one of my favorite shows, Pawn Stars, I thought the next time I am in Las Vegas, this is what I will take into the Gold and Silver Pawn Shop. I did some investigation as to the process, best times to avoid the crowds, and how to get a fair price.  I found out two really important things:

  • The guys: Rick, Big Hoss, Chumlee and the Old Man, rarely, if ever, work the counter. Too many picture takers compromise the discretion of the customers.
  • Rick Harrison did something truly great for a young fan with autism.

CJ Wehlage Pawn StarHaving a son with autism myself, I was inspired by this story, and decided this “item” is going to be sold to Rick.  In January, 2015, I will follow up this blog with more details.  Suffice to say at this time, I did sell the item to the Pawn Stars, and in January, 2015, the episode will air. Until that episode airs, I need to keep the details to a summary level.

During the process, I had the chance to talk with the Pawn Stars team.  One of the most interesting –  well interesting to me, since my world is supply chain – is how they view their business.

I asked the guys what the key success factors were:

  • Know how to make a profit when buying and selling
  • Know your inventory, what needs to turn now, this week, this month, etc.
  • Think “cash-flow” at every transaction

This is so much like our world of supply chain. I asked Rick what the toughest challenge was to meeting these success factors. His answer, “determining if something is real or fake, genuine or hot”. Same applies to an end-to-end supply chain – working with bad data.

I love Rick’s view of “bad data”. He says you’re running your business on bad data today.  What you need to do is twofold. Firstly, do whatever you can to improve the data and secondly, continue to run and improve your business. Don’t wait to fix all the data and then run the business.

I’ve been in front of so many supply chain leaders who have this challenge. They have multiple ERPs, external nodes, Excel files, etc., and their data is bad. They feel that this bad data needs to be “fixed” first before doing any supply chain innovations. This is a trap that leads to an endless and expensive “master data” project. Expensive not just because of the project cost, but also because of the lack of focus on improving the business.

I challenge each supply chain leader to do what Pawn Stars does – keep the focus on:

  1. Profitability: as we improve our data, create simulation capabilities to understand the profit tradeoffs.
  2. Inventory: as we improve our data, build speed into our demand/supply processes that will drive down inventory, improving working capital and lowering carrying costs.
  3. Cash Flow:  as we improve our data, collaborate across your entire supply chain network to optimize cash flow, enabling the optimal margins for each partner, and the best cost to serve for the consumer.

Great lessons for supply chain, coming from the Pawn industry. Kinaxis RapidResponse not only provides end to end visibility of data, but also the planning models.  This critical, as you can see what bad data is impacting what model, and prioritize the focus on cleaning data.

To close, I couldn’t leave without some fun facts I learned along the way:

  • symbol of a pawnbrokerThe symbol of the pawnbroker is three spheres suspended from a bar.  Some say it’s from St Nicolas’s gift of three bags of coins to the three daughters of a poor man so they could marry.
  • Most expensive item sold at Gold and Silver Pawn shop? Four one kilo gold bars $125,000 USD.
  • Oldest item at the shop? Greek Didrachm (ancient Greek currency) dating back to 325 BC.
  • Rick’s is an expert at assessing the value of:
  • Gibson guitars
  • Rolex watches
  • Diamonds
  • Best night for business at the shop? Fight nights (boxing)
  • Who buys the most jewelry? Pimps
  • Percentage of pawns redeemed?  80%
  • Four items Rick Harrison will never sell?
  • Olympic bronze medal
  • Patriots Superbowl ring
  • 1490 Samurai sword
  • Original Iwo Jima battle plan

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


Remembering: Compromise. Confessions of a Supply Chain Dropout by Laura Dionne, TriQuint at Kinexions

Published August 21st, 2014 by Melissa Clow 0 Comments

Compromise. Confessions of a Supply Chain Dropout by Laura Dionne TriQuint at Kinexions

Like I’ve mentioned in my last couple of Thursday blogs, we are starting to gear up for this year’s Kinexions (our annual training & user conference). A few weeks ago I began to reminisce about our fun customer videos from past conferences and I decided to create a blog series to share. So, on this ‘Throw Back Thursday’, I would like to share this video of Laura Dionne, director worldwide operations planning, presenting “Compromise. Confessions of a Supply Chain Dropout”.

In this video hear Laura Dionne, JP Swanson and Guenter Schmidt speak about their experience with RapidResponse – it’s not only educational, but fun too. Please check it out!

Laura Dionne has over 30 years of semiconductor experience spanning manufacturing, supply chain, IT and operations. Her career has spanned supply network activities from the days of 13 column pads to Lotus 1-2-3, to MRP & APO and now into Her professional passion is focused around business intelligence and decision support, rapid analysis of multi-dimensional problems (profit, revenue, cost, capital) as well as the marriage of business process, IT solutions and employee development for solving business challenges.

If you don’t see the video below, view “Compromise. Confessions of a Supply Chain Dropout” here.

Posted in General News, Supply chain comedy, Supply chain management


The Next Great Disruption Coming to Supply Chains

Published August 18th, 2014 by CJ Wehlage 2 Comments

Next great disruption coming to supply chainsWhat would you say is the next great disruption coming to our supply chain world?

I’ve heard some common themes, such as weather, political changes, even war.   Those are potential, and somewhat out of our control.  However, there’s one great disruption already occurring, which has yet to truly “touch” supply chain.  It’s the consumer.  And, WOW! how they ever already impacted retail and brand marketing.

I watched a TED Talk video by Philip Evans, from Boston Consulting Group and shuddered to think that all our traditional fulfillment and inventory models can be drastically transformed by the “consumer”.

Philip Evans shares how today’s consumer is sharing a colossal amount of data to come to a buying decision. Some people call this “Big Data”.  Others consider how this “data” is used, and use the term “Omni-Channel” or “Internet of Things”.  Google wrote a great book, ZMOT, or Zero Moment of Truth.

ZMOT the next great disruption coming to supply chainsThis is the point where a consumer looks across all the channels in the market, using multiple devices to search reviews, ratings, styles and prices.  That’s before the P&G First and Second Moments of Truth.  They trust other online reviews over the brand. This is how they’ve drawn the ZMOT challenge.

The shoppers multi journey - supply chain disruption

As a supply chain practitioner, do you notice something missing?

Where is the supply chain nodes? 3PL’s, Contract Manufacturing, Suppliers, Logistics providers…

Supply Chains have primarily stayed on the outside of this challenge.  Sure, we’re concerned, and in some cases stocking more inventory at local distribution centers.  But, we continue to see the trend as a sales and/or a demand planning issue; something where we need better visibility to real time demand or a finer cut of demand signals.  Supply Chain Insights has done research on the top trends:

Top 3 supply chain trends

However, I look at these trends as primarily a “consumer to sales” challenge.  Supply chains have yet to digest the impending disruption beyond retail fronts and sales.  The balance of power has shifted to the buyer, but supply chains still see it has a retail issue.

What if the next great supply chain disruption was…

Consumers used multiple devices, internet of things, etc, to check FGI (finished goods inventory) /sub-assembly and raw inventories, build plans, and sourcing options, as they are considering a purchase!

In the book ZMOT, the comment was made: , “We are officially living in a post-Akerlof world – any trace of information asymmetry tipping the balance in favor of the seller is officially gone.”  It’s happened in the consumer to marketing/brand arena.  I would expect it to come and impact supply chain very soon.

How has this happened?  Listen to Philip Evans’ TED Talk about the falling transaction costs. Not just processing time coming down, but communication time shrinking. The time he refers to is the customer’s time to search, analyze and purchase a product.  Mobile devices have not only brought transparency to the buying process, but also have brought down the communication time.  This falling transaction time is impacting the traditional vertical value chain.  In essence, allowing competitors to step into the value chain and disintermediate, ultimately, collapsing the economies of scale, and creating less need for the vertical integration.  He explains it as using the Encyclopedia product. But, it’s happening today with Google in the auto industry, Amazon in the grocery industry, and Apple in the music industry, and many others.

So, imagine a customer going to social media and online communities to consider a product.  Then, they go to the retail store, scan the barcode to check inventory, price, and promotions in their 10 mile radius.  Then, they check online for deals and shipping dates. Since they are brand agnostic, they look at inventories in the supply chain network; they want to customize their purchase. They want to assure the sourcing meets their “sustainable” expectations.  They are mobile, so they want to have it delivered to where they want it and when.  They understand what options make up the end product, so they demand “deals” on these options (such as memory on a PC).   In essence, the consumer is putting a postponement demand on the brand.  From the ZMOT book, they show today’s consumer is looking around for deals, reacting much faster to purchase and effortlessly willing to move from brand to brand.

My thoughts on what supply chain leaders need to do starting TODAY!

  1. Get a method to capture, and USE all this “Big-Data”.  Most of this big-data is demand centric, but supply chains need to capture, segment and analyze these demand patterns – Building a true planning system of record is core to this challenge.
  2. Take these core patterns and create supply chain models. Start with the as-is model supporting the pattern.
  3. Simulate what it would be like if a pattern had access to raw materials and inventory positions in the network.
  4. Test scenarios that would optimize inventory costs, postponement options, shipping costs, etc…
  5. Analyze what these new “costs” would do to COGS, SG&A, operating income and margin.

Yes, this is hard stuff.  But, the pay-off could position your supply chain as an innovative leader.  This isn’t about incremental change to the business strategy.  It’s about a new business strategy to address an impending disruption.  Philip Evans stated, “Technology is driving the natural scaling of the activity beyond the institutional boundaries used to thinking about business strategy.”

The starting point is having a planning system of record, which has fast access to your entire end-to-end supply chain network.  Then, and only then, can you simulate new business strategies.

Posted in Demand management, General News, Supply chain management, Supply chain risk management


An Open Confession – Please Don’t Fire Me, I Promise to Learn Laugh Share and Connect on the Supply Chain Expert Community

Published August 14th, 2014 by Bill DuBois 0 Comments

Before I start let me confess something. I am not a social media guy. I only go on Facebook to see my latest invitations to play Candy Crush and I still think a Twitter is 3 hits away from a no-hitter. However the idea of an online community seemed a bit more appealing since it was all about a group of people with a common interest sharing information on that topic. Obviously one community I pay attention to is the Supply Chain Expert community powered by Kinaxis. That leads me to the second part of my confession. I haven’t been on the community for a little while. Recently I was doing a demonstration of the Dashboard capabilities in RapidResponse. One participant asked about authoring Dashboards and I suggested they visit the Supply Chain Expert Community to check out a short video on authoring dashboards. The third part of my confession is that I had not seen the video for myself. I knew it was there but after making the recommendation I thought I should see it firsthand. The final part of my confession is that I had been taking the content of the community for granted.

The first thing I took for granted is that anyone can get to the dozens of training videos, for free, without having to be a Kinaxis customer. The video I suggested on authoring Dashboards was only one of many. If you look at the 6 menu items below, 5 are open to anyone. Only the support is closed to customers because it deals with specific customer data and use cases.

supply chain expert community header

If you look at the Content section you’ll see everything from ways to better utilize RapidRepsonse to information of key Supply Chain topics and strategies. Sorry, it’s lacking a bit on motivational quotes and links to the latest celebrity wardrobe malfunctions. Notice I’m only in as a guest and still have access to everything from blog posts, discussions and videos.

supply chain expert community content

Next you can see who is participating. This group includes RapidResponse users, Kinaxis customers along with Supply Chain Analysts, consultants and many people just looking to learn more about Supply Chain.

Places and the Supply Chain Hub easily take you to some of the most popular and informative places in the community. One of those places is the Just for Laughs section which includes the most popular Supply Chain show in western Ottawa, the Late Late Supply Chain Show. Some people say it was just a way I could  get free Coronas but it was really a group of employees that wanted to shed light on a vital part of any organization and the opportunities available to radically change the way we manage Supply Chains…while drinking beer.

supply chain expert community places

The RapidResponse section is a goldmine of information for all users and anyone interested in getting into the details of the new generation of Supply Chain tools and processes. I still can’t believe this section isn’t locked down to customers but the Kinaxis team feels that more participation will lead to faster breakthroughs and stronger Supply Chains for their customers.

supply chain expert community RapidResponse

There you have it. The truth will set you free, I feel much better after my confession. So go check out the community or drop me a comment to see if I got fired for my lack of social media savvy.

 

Posted in General News, Supply chain collaboration, Supply chain comedy, Supply chain management


Gaining full visibility of supply and demand: How Agilent Technologies Measures Up

Published August 14th, 2014 by Melissa Clow 0 Comments

Gaining full visibility of supply and demand - How Agilent Technologies Measures Up

Here at Kinaxis, we are starting to gear up for this year’s Kinexions (our annual training & user conference). A few weeks ago I began to reminisce about our fun customer videos from past conferences and I decided to create a series of blog posts to share. So, on this ‘Throw Back Thursday’, I would like to share this video of Ethan Hunt, “Gaining full visibility of supply and demand: How Agilent Technologies Measures Up”.

Ethan Hunt, supply chain consultant with Agilent Technologies, talks about the challenges his company faces in gaining full visibility of supply and demand, and in dealing with increasing supply-chain volatility.

Agilent is a leading test and measurement equipment company for high-tech, life sciences and chemical analysis. On the supply-chain side, the company’s primary goals are on-time customer delivery and product quality, the latter of which is “a huge differentiator for us,” says Hunt. “Inside our supply chain, we’re looking for efficiency [and] continual improvement.”

Agilent runs an unconstrained supply plan, meaning that customers can unexpectedly order product at just about any time. “It’s a challenge that we’re willing to take in,” says Hunt. Bills of material can be complex, based on a configure-to-order process. Validating them requires something more sophisticated than traditional spreadsheets. In addition, the company needs to be able to forecast demand for parts well into the future — in some cases as long as 10 years.

Formerly a part of Hewlett-Packard Co., the now-independent Agilent has had to cope with a number of homegrown legacy systems. Over the last five years, it has refined the IT infrastructure to streamline the movement of key data from contract manufacturers to other parts of the supply chain. It is working with Kinaxis and can now run simulations before choosing the optimal scenario for satisfying demand.

The company’s biggest challenge lies in the handling of new-product introductions. “We are having to bring our products to market faster than ever before,” says Hunt.

If you don’t see the video below, view it here.

And if you’re interested in other Agilent stories, check out our two case studies:
Agilent Control Tower Case Study (by Supply Chain Quarterly)
Comprehensive Supply Chain Visibility Case Study

Posted in Miscellanea


Streamlined Sales and Operations Planning: A Konica Minolta Case Study

Published August 13th, 2014 by Melissa Clow 0 Comments

Konica Minolta logoToday we have a great customer, Konica Minolta, that recently allowed us to write up their sales and operations planning story and I believe that it has merit in sharing with our readers!

At Konica Minolta, the IT Equipment Business team was struggling to get a quick and  comprehensive view of the global supply chain network.

The Japanese consumer electronics company didn’t have visibility into the impact of supply and demand changes on the business. As well, attaining agility and alignment across the supply chain was difficult.

Here’s a quote from Noboru Ota, Manager of SCM Planning, Konica Minolta on how they doing today:

“By integrating five systems into one, we gained a distinct advantage because multiple problems are solved by one product. We have the advantage of being able to streamline the operations. S&OP analysis has successfully changed from a weekly to a daily basis and now reflects the actual results, so the data is dramatically more accurate.”

And another quote from the case study:

With the deployment of RapidResponse, the team switched to daily calculations. Despite increasing the data size by seven fold (weeks to days), calculation times decreased from several hours to just minutes while supporting seamless transitions between volume and mix planning.

Very cool.

A big thank you to Konica Minolta for letting us tell their story.  We love what you are doing with the product!

If you are interested in learning more about this customer, read the complete case study. Trevor Miles also wrote a blog about Konica Minolta’s story when they presented at Kinexions Tokyo. Feel free to check it out.

 

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


Throw back Thursday: Applied Materials case study, ‘Agility enables Customer Satisfaction and Growth’ at Kinexions

Published August 7th, 2014 by Melissa Clow 0 Comments

Applied Materials case study, 'Agility enables Customer Satisfaction and Growth' at Kinexions

Here at Kinaxis, we are starting to gear up for this year’s Kinexions (our annual training & user conference). As we get closer, I’m remembering all the great interviews we were able to do with customers and analysts. So, on this ‘Throw Back Thursday’, I would like to share Applied Materials case study, ‘Agility enables Customer Satisfaction and Growth’ at Kinexions.

In this main stage presentation, Kinaxis customer Jim White, vice president of central operations with Applied Materials presents their story.

The semiconductor market is highly volatile, yet cyclical as well, in step with larger economic trends. Complicating matters is the highly configurable nature of nearly everything that Applied Materials makes. It’s a low-volume, high-mix world – making accurate demand planning extremely difficult. Watch to learn how ‘Agility enables Customer Satisfaction and Growth‘ at Applied Materials.

 

Posted in Miscellanea