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How supply chain metrics are used?

SDExec.com reports on the results of a survey carried out by Maxager. The principal finding of the survey was,

Many manufacturers believe that it is important to measure the speed at which products are made, but very few have systems in place to do so

The survey results amply show that while everyone is aware that there is a problem, few have a solution:

The survey results showed that although respondents overwhelmingly (92 percent) believe that analyzing the speed with which they produced profitable products was important, 71 percent don’t have software or systems in place to do so. The result is that very few manufacturers (5.7 percent) have the ability to use a metric that is aligned with return on assets (ROA).

Here is a snapshot of Maxager’s solution to the problem:

Combining production velocity with margin produces a profit-per-minute metric. Being time-based, this metric is directly linked to ROA. It can be used at an operational level to measure the profitability of individual products, customers, deals, markets, sales regions, salespeople and production facilities. Then, everyday decisions about which products to make, who to sell them to and where to make them can be made collaboratively to maximize annual corporate profits and ROA.

What do you think? Does it work?

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Supply Chain Metrics – A first cut

If you’ve come across the term KPIs or Fill Rate or Inventory turns, chances are that you’re aware that all these terms fall (not exclusively though) under the rubric of a topic called Supply Chain Metrics. In this first post about Supply Chain Metrics (of what I will be hoping is a series of posts), I want to assemble an intersection of the most common Supply Chain Metrics as might be observed in practice. Beware, there is no uniform standard for these metrics across firms and so terms that mean one thing in one firm might mean something approximately the same with slight differences.
Here’s an initial list of metrics that I have assembled
Supplychainmetric.com
1. Back orders
2. Cycle Time
3. Fill Rate
4. Inventory Classification (ABC)
5. Inventory Turns
6. On time shipping and delivery
7. Perfect Order
The Power of Metrics (DMReview)
DMReview organizes supply chain metrics using the following four dimensions:

1. Response-Time Metric (timeliness dimension)
2. Visibility Metric (process efficiency dimension)
3. Productivity Metric (productivity dimension)
4. Shrinkage Metric (profitability dimension)

Building and leveraging Metrics Framework to drive Supply Chain Performance (Infosys)
They outline the key characteristics of the right metric as including – Reliability, Validity, Accessibility and Relevant. They also elaborate that:

• Metrics are most useful when embedded in a metrics model that represents a business process
• The criticality of a metric is determined by the process performance insight that it provides
• Metrics need to be assigned to roles that have process execution, monitoring and tracking responsibilities

Supply Chain Benchmarking (AMR Research)
AMR Research focuses on 8 high-level operational processes:

* Request to quotation
* Order to delivery/cash
* Perfect order fulfillment
* Inventory management
* Source and make (with cash to cash)
* Operational planning
* New product development time
* Supply chain management costs

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Is an IBM and SAP Marriage in the Works?

SCDigest reports on strong rumors about merger talks between IBM and SAP.

These are just rumors, to be sure, and have been circulating at some level for almost a year.
SAP has strongly denied the rumors during that time, though chairman Hasso Plattner unintentionally put some fuel in the fire last May by saying to the German Financial Times last year that: “There are only three potential buyers [of SAP]: IBM, Microsoft and Google. Of all companies, I don’t see anyone else. If shareholders think that a combination, and not independence, is better, then it will happen.”


From the services model that IBM follows, it makes sense to acquire a behemoth like SAP purely for its installed base and then sell all sorts of services to them. But the larger question is – what’s the room for growth here? From a software sales point of view, the market is pretty much saturated. My own view of the ERP behemoth is that given the utter complexity of something of the order of SAP/Oracle and the implicit insistence that the firm adapt to SAP’s version of reality – there is quite an opportunity for an intelligent class of enterprise software to make deep inroads.
Whatever the big honchos at IBM are thinking, I’m skeptical of such a merger simply because of revenues from any sort of installed base growth. The market space where there is some growth potential seems to be:

IBM and SAP have an existing partnership to bring ERP to the small and mid-sized company market. Penetrating these smaller companies has been a key marketing goal of SAP for the past few years.

The question is – why pick an elephant (or a sheared down version of an elephant) to run what needs to be, strategically and execution-wise, a nimble organization? Any new entrant in the enterprise software space needs to enter via the small and mid-sized company market because that’s where the behemoths are concentrating their efforts.
Old Chinese (Confucius) saying: “Do not use a cannon to kill a mosquito.”
This makes for an exciting few years ahead.

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A review of Transportation Management System (TMS) players

Inbound Logistics has posted a review of Transportation Management Systems (TMS) players in the market. They note:

Still, at the heart of all TMS products is a software engine that strives to create maximum transportation efficiency for its users.

All the major players are listed as well as whether they offer a licensed or hosted version of their particular solution. Take a saunter that way!

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Top 30 3PLs in 2006

3PLWire alerted me to the publication of the Top 30 3PLs of 2006, a list compiled by Richard Armstrong of Armstrong & Associates released his annual report of the top 3PL providers in North America.

Rankings are based on total annual revenue in N. America.

Well, it looks like GENCO made the list this year and at the #24 position. Well, its good to know that even if it were a Top 25 list, GENCO would have still made it.
The Top 30 3PL list:

1. UPS Supply Chain Solutions
2. C.H. Robinson Worldwide
3. Schenker USA/BAX Global
4. Expeditors International of Washington
5. Schneider Logistics/Dedicated
6. DHL Contract Logistics (Exel)
7. Penske Logistics
8. EGL Eagle Global Logistics
9. UTi Worldwide
10. Kuehne + Nagel Contract Logistics, North America
11. Ryder System
12. Caterpillar Logistics Services
13. Hub Group
14. Menlo Worldwide
15. Meridian IQ
16. J.B. Hunt Dedicated Services
17. TNT Logistics North America
18. Werner Dedicated Services
19. Landstar Global Logistics
20. Greatwide Logistics Services
21. Transplace
22. NFI Industries
23. PBB Global Logistics
24. GENCO
25. Logistics Insight Corporation
26. Ozburn-Hessey Logistics
27. Total Logistics Control
28. BNSF Logistics
29. A.N. Deringer
30. Kelron Logistics

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Updates will be slow because of a Hard disk crash

Forewarned is forearmed, they say – I wonder, if it holds when it comes to computers – very finicky things, these machines. Well, mostly so in this case. However, this month has not been very great on the computer front – I’ve trashed/burnt three computers now. First, two desktop computers at home that had a KVM switch between them went down together because of what looks like a power surge in one of the computers. So I had to buy a brand new one – got a Core duo which more than made up for the loss of the two. Then roughly a week and a half later, my work laptop just blinks (maybe the coffee that I splashed on it helped! :-)),flickers and then calls it a day. No! Year, No! life.

It will be a little slower than usual getting off the ground after this crash. I’ve recovered almost everything vis a vis this blog and so should be up and running to speed soon enough.

Ciao!

New Strategies for Financial Supply Chain Optimization

Yesterday, I signed up at the Aberdeen Group website to take advantage of a free report offer that is running through Jan 26th, 2007 to download a copy of the report titled – New Strategies for Financial Supply Chain Optimization. (Apparently at this link, you don’t even have to sign up to get the report) The focus of the report is,

Rethinking Financial Practices with Your Suppliers to Maximize Bottom Line Performance

and the introduction to the report outlines what the folks at Aberdeen think is a glaring opportunity for firms that have gone the route (I guess there are but a few firms that have not either lead or followed their competitors overseas) of global sourcing or offshoring/outsourcing:

Driven by the pressing need to lower the cost of goods sold, companies have embarked on sourcing from emerging markets and have been able to achieve significant benefits when the strategy was executed correctly, including 10%-35% savings on the cost of goods purchased. However, most companies are still leaving money on the table because they fail to take into account the SCF opportunity when undertaking low-cost country sourcing (LCCS). Applying SCF innovations can bring the next wave of cost savings into the corporate LCCS program, helping a buying organization optimize its working capital, reduce product unit costs by taking advantage of arbitrage opportunities due to the higher cost of capital in emerging markets, as well as reduce supply base risk by enabling faster and more predictable payments to emerging market suppliers.

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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.

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