We all need to get results in our day to day activities. But if you think about it, getting results almost always has a time component to it. Think back to your school days. Finishing an assignment was a result. But if the assignment was due on October 10th and you handed it in at the end of December, it didn’t matter how good the work was, you failed.
Supply chain is like that, only more so. Your customers want their orders confirmed and their goods delivered on-time…or you fail. I think we all can agree that the timeframe in which customers expect their answers is shrinking too. They expect to know within the day, sometimes within the hour if you can accept the order. To succeed you need to get results fast, you need to get rapid results!
Let’s say it’s Monday morning and your ERP system has just run and you have a fresh new plan. Then the phone rings and it’s a new potential customer with a large order that could turn into an ongoing relationship. The only catch? They want the items inside of lead time and they need to know today if you can handle the order. How do you solve this problem? You simply can’t solve this using your ERP system. Why?
1) You don’t want to load the order in your production ERP system because you don’t yet know if you want to accept the order. You certainly don’t want to trigger new Purchase orders to support an order you don’t know if you can accept! Even if your system supports what-if analysis, it takes hours to set up the new scenario before you can even begin your analysis.
2) If the product in question has a complex BOM, you must do a full MRP run to truly understand the implications of the change. Most ERP systems run MRP on a nightly or (**GASP**) weekly basis because MRP takes so long to run.
3) Once the analysis is done, how do you know what the impact is due to the order you just added. First, the traditional ERP interface is designed to work on a part by part, screen by screen basis. Evaluating a complex change this way can take hours or days.
Typically, users give up on their ERP system and revert to spreadsheets to try to guestimate whether or not they can accept the order. They manually try to figure out what they can or can’t make. They call or fax suppliers to see if they can expedite orders. Hours (often days) later they have a “best guess” as to whether or not they should accept the order.
Some companies try to avoid these issues by holding lots of inventory. Of course we know that this comes at a significant cost and typically, you end up with too much inventory of the wrong part. Other companies simply prescribe to the “Load and Pray” approach of accepting the order and praying that it gets done. These companies can be recognized by their sub 60 percent on-time delivery metrics and the line of angry customers outside their doors.
So let’s look at how to get rapid results.
There are numerous capabilities that are required by any planning system to enable rapid results;
1) Instant what-if capability. This is the ability to instantly create a scenario, make a change and see the impact of that change.
2) Alerting. A rapid result system needs to alert users to a situation that needs to be addressed. This is more than alerting that you have a new order. It’s letting you know that this new order is going to be late…or drive significant new purchase orders…or will cause another order to be late.
3) Powerful real-time analytics. A rapid result system needs to replicate the same calculations that your ERP system is doing, but do it in seconds rather than hours. The results of these analytics needs to be displayed through an interface that makes it simple to see the impact of your change.
4) Collaboration. Many supply chain problems cannot be solved by a person working alone. A rapid result system needs to enable the sharing of information with a team of users and manage the responses from those users providing a clear picture of the final result.
5) Alternative comparisons. There are many ways to solve a problem, however it often isn’t clear which approach is best; one approach may meet the revenue targets, while another reduces manufacturing costs. A rapid result system will compare the possible resolution scenarios, scoring them against corporate goals and will clearly show which approach is best.
So if you had a system as I’ve describe here, how would our new order scenario go? Probably something like this;
It’s Monday morning and the phone rings. It’s a new potential customer with a large order that could turn into an ongoing relationship. You log into the system and create a what-if scenario. You add the order and instantly see that the order is currently planned to be six days late. You drill into the causes for lateness and see that you have three late purchase components and a capacity constraint preventing on-time delivery of this new order. You share the scenario with the capacity planner and the buyers for the late parts. They receive a notification that they have been invited to help. Within minutes, you hear back from the capacity planner to say that the constrained resource can be rescheduled to meet your demand. Minutes after that, the first buyer is back to you to say that they can expedite a component, or alternatively they can get an alternate. Within the hour, you’ve heard back from the other buyers. You have two possible resolutions to look at: One, solves the problem using expedites, the other using alternates. You compare the scenarios and decide that expediting has the least impact on overall cost and you place the order. An hour after your customer has called, you’ve called them back and can confidently promise their order will be delivered. The start of a beautiful relationship!
Are you getting rapid results? Or are you locked in the ERP dungeon of best guesses, spreadsheets, and excess inventory. Break out!
On the lighter side check out this week’s New Kinexions episode – it’s about Rapid Results…hey what a coincidence!