@ Supply Chain Management

The latest edition of GLCS magazine is out at the site. I scanned the magazine for reports of successes claimed by Supply Chain Software providers in various industries. Some of the successes reported were:

1. IBM reports that its new Dynamic Inventory Optimization Solution (DIOS) helped reduce inventory for a German Retailer – Max Bahr by upto 40%. This they did integrating Point of Sale (POS) transactions from Max Bahr’s 90 stores, analyzing them against a two year history of each product and calculate replenishment targets automatically and even turn 90% of them into orders.

Having attended the DIOS webinar, I must say that what I saw demonstrated seems to accomplish what has been described above. However, I am wary of producing/stocking to forecasts (even if they’re based on factual historical data) but that is probably better than not having an integrated system that actually does some data crunching which seems to have been the case at Max Bahr prior to DIOS introduction. In that case, what is the precise value and more importantly source of the value that introducing DIOS has created at Max Bahr?

2. Oracle integrates Demantra into its enterprise solutions offering. Demantra is focused on promotion forecasting and event planning and its integration into Oracle is claimed as a complementary move.
3. Kinaxis helps Varian Semiconductor respond rapidly to customer needs. Varian Semiconductor operates in a highly cyclical market that involves complex products that require significant customization and ongoing engineering updates. Varian also experiences long lead times from parts suppliers as well as short order lead times from customers. Kinaxis’s response management tool – RapidResponse allows Varian to perform what-if analyses in minutes versus hours with its ERP system.

Very interesting! After coming across RapidResponse and Response Management and quickly diving into the underlying Theory of Constraints, I think that this is very important on two levels. Firstly, that ERP while providing data exchange and visibility across the organization fails to help managers manage their business – meaning that ERP is not really serving the customers needs. Secondly, that RapidResponse works not only at the conceptual level but also from the point of view of ease of implementation and integration – that means that you’re using the ERP data backbone quite effectively.

4. SmartOps creates a model inventory plan for Caterpillar. Caterpillar aims to create competitive advantage by focusing on faster and more predictable product availability. SmartOps solution Multistage Inventory Planning and Optimization (MIPO) helped Caterpillar reduce total chain inventory, improve dealer and end customer satisfaction through improved product availability.

Only one comment to make – Is it so bad in the earth moving/agri-business industry that making one’s product available to its customers faster and more predictably (wonder what that means) is considered a competitive advantage? Is Komatsu listening?

5. Terra Technology provides Campbell Soup with a recipe for supply chain success. Campbell implemented a “Class A” sales and operations planning process (S&OP) by installing Terra Technology’s Real-Time Forecasting (RTF) and Real-Time Inventory (RTI). RTF’s approach to forecasting includes analyzing the most recent demand signals nightly and adjusting forecasts to better predict demand. Because RTF detects unexpected shifts in demand when they occur, Campbell is aware of them immediately instead of weeks later.

Can IBM’s DIOS and Terra Tech’s RTF be more alike? They’re probably not that similar but it does look like they’re competing in the same space. What really underlies this technological space is integrating POS data near real-time into a predictive engine and come up with new targets. Here is a comment from Steve Cortese, Campbell’s director of Supply Chain Infrastructure:

“We carry 20 percent less safety stock using RTI. At the same time we have become more responsive to our customers.”

There are two polar opposite ways of dealing with the uncertainty in demand that a firm might experience at the customer end. One way is to produce to a forecast of the demand and the other is to produce to the demand, the former is a version of reality created by sophisticated/unsophisticated algorithms while the latter is reality. The competition that these two possible ways of competing is really between the realized magnitude of error in the forecast and the ability of an organization to compress its actual lead times in fulfilling the demand. In the former case, while predictive forecasting is better than some forecasting is better than no forecasting, the competency that is being created/honed is How do I create a better idea of what the real demand is going to be?. In the latter case, the competency that is being created/honed is the ability of a firm to relentlessly execute its manufacturing/procurement plan in order to fulfil the demand, satisfy the customer etc. Which way do you think a firm should be headed?

Categorized as: Lean_, Supply Chain Management_, Review_, News_
Tags: Supply Chain Management, Supply Chain Planning, Supply Chain Execution, DIOS, Lean, Terra Technology, Predictive Forecasting