@ Supply Chain Management


Book Review: Supply Chain Excellence

Supply Chain Excellence – A Handbook for Dramatic Improvement Using the SCOR Model is a worthy effort by Peter Bolstorff and Robert Rosenbaum published by American Management Association (AMACOM).

At the end of this book review, I want to drive towards clear answers for the following questions and/or headings. As I review more books, hopefully, I will expand the following questions into some sort of template against which future books would be reviewed.

1. What this book is about – what are its aims?

If I were to ably classify this book, I would slot it in the category of a Map. I have classified it as a map because it is written to help you navigate the challenge of structuring supply chain management inside and outside your firm. The two authors, Mr. Bolstorff who is a SCM consultant and Mr. Rosenbaum who is a journalist, have laid out a path using the SCOR (Supply Chain Operations Reference) Model as the framework within which your supply chain can be evaluated, planned and executed. It would be a truism to say that various firms are situated somewhere along that path to excellence, the achievement and realization of the said state is unknowable, ephemeral if achieved and the mine upon which careers are built or wasted – such is the life of business.

Rather than deal with such matters of philosophy or digging deeper into what excellence really means or the like, the task at hand is to begin that project – to make a stab at Supply Chain Excellence. And the authors have a 17 week plan to get you started. While I have my sweet suspicions of the 10 step program or for that matter the 17 week project (that’s still over 4 months of work), the plan is a tight one with meetings, homework, templates, samples of charts, tables and tasks and more. In order to give users of this book/guide a context for the required changes and a backdrop for the challenge itself, an imaginary Fowler’s Inc. has been conceived and employed which is a useful device as well.

So the aims as spelt out by the authors themselves:

a. The book is meant to be a manual for anybody (specifically for someone who wants to make sure supply chain improvement is done right) who seeks a rigorous and proven methodology for systematic supply chain improvements.

b. As a working guide for using SCOR as a tool to help senior managers at every step of undertaking supply chain initiatives.

2. Who this book is for?

My take on this topic is – If you’re not in the Steering Team (which not only comprises the power players but also members of the design and project team), chances are that this book will only be good review of how the SCOR model meets the road of implementation and execution. Which is a shame, all said and done from multiple points of view. A steering team typically consists of the few – no doubts about this. Say you are a marketer – would you prefer to market a commodity such as a book to the few or the many? Sure, it is the few (in the steering team and above) who have to take decisions at the end of the day and that is what a lot of this book is about i.e. how to create that sort of a methodology based (SCOR) supply chain improvement plan and execute it. The authors have done an excellent job of writing effectively to and for this group. But what about the many – those who will actually participate and implement this new plan, who will form the links for feedback on how well the plan is working – why and why not?

3. Does the book succeed in its aims?

I believe that in one of its principal aims – that of being a working guide for using SCOR by senior managers, this book succeeds a great deal. Laying out a four month plan is a very short time to get down the path of supply chain improvement and I do wonder if this is a realistic goal as well. However, what I would think about doing is to take a look at the cycle of activities that forms the normal quarter to quarter cycle within a firm and adjust the timelines accordingly. So, while they hit one of their aims above (b) nice and square, they do miss out on a good chunk of (a) and thus also a significant market for this book. Can anyone say companion book to this one?

4. A summary of my thoughts about the book

There is a host of valuable insights about how to make this sort of change happen within an organization and the fact that one of the authors is a consultant who has considerable related experience under his belt contributes to this mine of insights. But as I have said above, this is a map and there are several maps out there not only in the area of supply chain excellence but also in the area of change management and the like. The benefit that is readily observable to me is that over the project period, a structure and ordering of activities is presented which should be mined for insights. Moreover, a set of templates associated with the structure and activities is also available for modification and adaptation.

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RapidResponse9 and Response Management

One of my blog friends, Randy Littleson, alerted me to the release of RapidResponse9 – a Response Management tool. In the light of my recent series on Surviving the China Rip Tide: Surviving the China Rip Tide – How to profit from the Supply Chain Bottleneck and Surviving the China Rip Tide – Recommendations???, I think it is quite appropriate to highlight the need (or upcoming need) for Response Management.

So what does Response Management do for you?

Taken from their website,

"In high-volatility, supply-constrained businesses, the new basis of competition is the ability to peer faster than your competitors into the black box of multiple planning and execution processes, running offline scenarios that give collective, rapid visibility to financial and service impact of a short list of viable decision alternatives,’" said supply chain research director Stephen Hochman, in a recent AMR Research article.

Now, regardless of whether this volatility is/has been created by your own supply chain decisions or those of others, in this age of having done globalization or off shoring already, you might very well need such a product or something like it to mitigate some of the risks the firm has exposed itself to with long lead times and global logistics. Moreover, response management is equally applicable for firms that have not packed up shop and shifted to China – when the one of the key differentiators is speed when competing with firms that obtain parts/products from overseas, getting the right product in the right quantity to the customer (especially if they’re high margin products) is going to be a source of relative advantage vis a vis its competitors.

If you’d like to know more about Response Management, there is a white paper on the subject by AMR Research that you can download for free at the Kinaxis website if you sign up.

What can I say – Lead time, lead time, lead time! What an age to live in?

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Differences between ERP and PLM – A White Paper

I was forwarded this whitepaper written by Chuck Cilamore, CTO of Omnify Software. The topic of the whitepaper is to delineate the roles of ERP (Enterprise Resource Planning) and PLM (Product Lifecycle Management) in creating a successful collaborative environment. Omnify Software is a providers of PLM software for OEMs (Original Equipment Manufacturers) and EMS (Electronic Manufacturing Service) providers.
Chuck highlights the following as the essential difference between an ERP and PLM offering:

The manufacturer had an ERP system in place to manage all of the operations-centric business activities such as financials, purchasing, planning and work orders. But the ERP system did not address their engineering design requirements.

Furthermore, the real objective of the PLM is,

A PLM system is designed to manage the full gamut of engineering information in a single location through the many stages of a design. The enterprise server manufacturer used the PLM system to manage the lifecycle and all revisions of their Bill of Materials (a listing of components used in a product), provide revision control of engineering documents (such as assembly drawings, schematics and datasheets), electronically route approvals for New Part Requests (NPRs), manage and automate Engineering Change Orders (ECOs), and control Approved Manufacturer’s List (AML) changes. More importantly, the PLM system helped bridge the gap between engineering and manufacturing. By providing direct data sharing with the ERP system, any changes made in the PLM system were automatically uploaded to ERP so that engineering and manufacturing were always in synch.

The essential distinction being drawn between ERP and PLM by Chuck is a void that exists on the ERP side i.e. an ERP system doesn’t delve into the details and complexities of product development and lifecycle management. However, that void is something that ERP systems will expand into by acquiring some of the PLM players and integrating their products into the ERP suite of offerings. I saw the same thing happening with ERP players gobbling up TMS providers to precisely fill this gap that was perceived in their offerings.

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Creating the Optimal Supply Chain – Review (Supply Chain Enterprise Systems: The Silver Bullet?)

In this concluding review of the report titled – Creating the Optimal Supply Chain published by experts from Wharton and BCG, I take a look at the section titled – Supply Chain Enterprise Systems: The Silver Bullet?. In earlier posts, I had reviewed the first three sections namely, You Can’t Manage What You Can’t Measure’: Maximizing Supply Chain Value, Avoiding the Cost of Inefficiency: Coordination and Collaboration in Supply Chain Management and Flexibility in the Face of Disaster: Managing the Risk of Supply Chain Disruption. The report – Creating the Optimal Supply Chain is available online as well.
There can be little doubt in the minds of supply chain professionals and practitioners that managing the supply chain is no easy task no matter how simplified the meta level process diagram looks like that neatly shows product flows in one direction and information flows in the other. It is precisely because supply chain management is such a complicated issue that Supply Chain Enterprise systems have appeared on the scene from a variety of vendors – SAP, Oracle, i2, Manhattan etc. However, since supply chain management is a rather complex task in itself, systems deployed to facilitate supply chain management are also complex such that a practitioner now has to deal with supply chain complexity through a complex system. And thus go I to say – “Have you really solved a problem when your solution creates two new problems?” This task is not made any easier when you have to wade through not only a complicated solution set but oodles of marketing gimmicks, ploys (and well meaning marketing professionals as well), endless half promises with inflated verbiage and out and out term misuse.

According to supply chain experts from the Boston Consulting Group (BCG) and Wharton, applying enterprise systems technology to supply chains is often a difficult undertaking with an uncertain outcome; in reports and cases cited by both BCG and Wharton, companies that have implemented supply chain technologies often fail to leverage the new systems for a competitive advantage.

That is by itself not surprising at all. The success of a supply chain system implementation (or for that matter any type of implementation) is limited by the capability of the people deploying and using the system. Furthermore, in order to use such technology to create competitive advantage is a task of an order well above the capability that some firms possess or are even in the process of acquisition.

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Creating the Optimal Supply Chain – Review (Flexibility in the Face of Disaster: Managing the Risk of Supply Chain Disruption)

In the continuing review of the report titled – Creating the Optimal Supply Chain published by experts from Wharton and BCG, I took a look at the section titled – Flexibility in the Face of Disaster: Managing the Risk of Supply Chain Disruption in this post. In earlier posts, I had reviewed the first two sections namely, You Can’t Manage What You Can’t Measure’: Maximizing Supply Chain Value and Avoiding the Cost of Inefficiency: Coordination and Collaboration in Supply Chain Management. The report – Creating the Optimal Supply Chain is available online as well.
Supply Chain disruption is making headlines in recent times because of events that occurred in recent months past such as terrorist strikes, hurricane Katrina and the longshoremen strike at the US West coast ports. I must reiterate again, that the macro picture against which such supply chain disruptions might occur is the globalized, outsourcing/offshoring manufacturing/procurement business world. That implies that while the world’s resources and manpower is at a firm’s disposal, more or less, so also are the world’s problems – in a global supply chain, the disruptions even though occurring locally might have multiplied effects far beyond the locally known or observed effects. Also, those effects might not even be noticed by those decision makers who sit far removed from the means of procurement or production and the first intimation of the crisis might be at the supply level by which time it might be far too late.
The authors state,

Today’s leaner, just-in-time globalized supply chains are more vulnerable than ever before to natural and man-made disasters — a reality that creates greater demands on companies to keep supply chains flexible and integrate disruption risk management into every facet of supply chain operations.

That’s just way off-base. Today’s globalized supply chains, whether or not they are just in time, cannot be in any sense leaner than before. Given the fact that lead times have increased in a globalized world through outsourcing/offshoring, inventories have gone up in every stage of the supply chain – so how have globalized supply chains become leaner? But it is also true that exposing one’s lines of supply (just as in the case of war strategy) globally, the risks of disruptions have also increased. Now, the question has to be asked, was it worthwhile to have gone the route of globalization in procurement/manufacturing on the basis of per unit cost without taking into account the total costs of procurement that are involved for the supply chain?

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The coming wave of Supply Chain Convergence…

Logistics Quarterly has an article about The Coming Wave of Supply Chain Convergence in their latest issue. The lead in describes the following:

Over the past decade, we have seen warehousing companies become logistics companies, watched logistics managers become supply chain professionals

That sort of describes where I work right now as well as my current role. Nevertheless, the author Benjamin Gordon believes that the next big trend in the supply chain industry will be “supply chain convergence”. What does he mean by that phrase? Benjamin defines convergence in the following way:

Convergence is all about the combination of relevant services to provide customers with a broader set of solutions. In the 1990s, convergence meant the fusion of warehousing, freight forwarding, and transportation management to produce lead logistics providers or 4PLs. Companies like Menlo, UPS and Kuehne & Nagel, developed integrated supply chain solutions and enabled customers to reduce the number of logistics suppliers they used. Today, companies are increasingly choosing to compete by combining services. For instance, PWC Logistics acquired GeoLogistics, Trans-Link, and Transoceanic in order to add freight forwarding, event logistics, and project logistics to their arsenal of contract warehousing-based capabilities. Similarly, UTi has acquired Standard Logistics, Unigistix, and market transport in a bid to add warehousing, reverse/value-added logistics, and transportation management to their freight forwarding base. The convergence of logistics services is already well underway.

Benjamin seems to differentiate convergence in the past (which could be said to be about consolidation of multiple competencies under one broad roof) and convergence in the future (which could be said to be about proliferating specific services under the broad roof already created in the past). However, he rightly points out that this convergence is being really driven by the customer of integrated supply chain services i.e. large MNCs that have gone global (through outsourcing and in search of global markets for their products) in a substantial way. If today that seems largely one directional i.e. MNCs in the developed world driving globalization, that will change in the near future but integrated supply chain service firms will benefit nevertheless.
However, Benjamin draws my attention to something more substantial:

In the current decade, we are beginning to see the emergence of the next big wave of convergence: the combination of outsourced logistics with other forms of outsourcing. For example, in a recent survey of logistics CEOs at the International warehousing and Logistics Association (IWLA), we found that, out of five topics, the subject that generated the highest level of interest was titled: “Where logistics outsourcing converges with other outsourcing.”

I’m not biting. Yet. It is undoubtedly true that engaging a supply chain services partner might seem a lot like outsourcing your IT or accounting or manufacturing from the point of view of the customer and thus there might be an expectation from the customer that instead of using 5 solutions providers for as many outsourced functions, it might be better to use just 1 or 2 integrated solutions providers. Therefore, one might take the view that this might drive convergence of the solutions providers themselves.
Benjamin cites the following in support of his thesis:

First, just as GM’s move (over 15 years ago) to dedicated contract carriage with Schneider, ushered in a new era of dedicated contract carriage growth, so GM’s moves in IT outsourcing may represent a broader trend. Second, logistics outsourcing contracts are likely to follow the same path as the IT outsourcing route. Third, aggressive IT outsourcers are seeking logistics partners. Some are even pursuing mergers. Companies like EDS, Accenture, and other IT firms are looking at logistics acquisitions as a way to extend their outsourcing capabilities. Meanwhile, logistics companies like New Breed and Menlo are bolstering their IT capabilities in a bid to accomplish a similar goal, but from a different direction. Convergence is already underway!

I would offer the following: Outsourcing/offshoring takes advantage of real economic disparities distributed across the globe. It is cheaper for an MNC to produce an unnamed branded shoe for 50 cents an hour or day, whatever the case might be, in some third world country. It is also true that 50 cents an hour or day is a boon as far as employment goes in that part of the world as well. However, the production/shipment/marketing/sales of the shoe involves several competencies. If you outsource your competencies to a third party (rather than retaining those competencies when you offshore your production), then you’re indirectly narrowing the range of competencies from which you can then derive competitive advantage. Moreover, you’re unwittingly giving leverage to third parties when it comes to negotiating power for those same services. Some of that leverage is probably mitigated by the fact that third parties can be switched in and out but that is true only for commoditized products and services. This can be boiled down to the following that it makes sense to outsource non-value added processes but not value-added processes. From the point of view of a customer, outsourcing non-value added services to a third party creates a middle man of non-value added services that can only function profitably on scale and breadth of services offered. While the third party is hired with the idea that on an ongoing basis, better services will be had for cheaper prices, the third party will try (or die trying) to offer “value” as a justification for same or higher prices for services rendered. However, that brings up an interesting paradox – while it is specifically non-value added processes that a firm initially outsources/should ideally outsource (non-value added from the point of view of a customer), the third party can only exist by creating value in those outsourced services – otherwise, it really wouldn’t be profitable except in the scenario that third parties would merge into 1-3 large entities in order to create efficiencies of scale.
This is why I think that such convergence would be limited because firms survive by creating competitive advantages in the portfolio of value creating activities that they engage in or offer. Offshoring makes sense in that line of thinking. Outsourcing any activity other than non-value added services doesn’t make sense.
An interesting aside, I’m plagued by the idea that all this designation of value added or non-value added services is being driven by some accounting allocation of overhead. That would be horrible.

Categorized as: Reviews_, Supply Chain Management_
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Theory of Base6© – Successfully Implementing the Lean Supply Chain – Part II

In Theory of Base6

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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