Randy Littleson of Kinaxis on Response Management blog has a post about how firms are often kicked into “response mode” where in they’re trying to respond to the latest fire that is about to kill their customer service ratings. Isn’t it always like that or doesn’t it always feel like that? He is of the opinion, no doubt earned by consulting practice that it is virtually impossible to plan out the activities of the firm such that you can avoid/significantly mitigate the “response mode” state of affairs.
These deviations from plan are happening literally hundreds of times throughout the day in most organizations. It may be a key customer calling, a field failure that needs to be dealt with, an unexpected delay in receipt of a critical part of any number of things that “just come up.”
At the core to solving these problems is compromosing. Teams need to get together and figure out what tradeoffs and compromises need to be made on the spot to solve these types of problems….and they need to do so while weighing the impact on the rest of the business.
Well, you could if you wanted to.
Quite simply, you either have to have excess capacity built into you system (not so good idea) or have a system that operates at or near the lowest total lead time (better idea). I’m not saying that you’d be able to handle every “response mode” crisis hands down this way but a significant portion of the response mode crises ought to be mitigated by advanced planning. But that requires a different way of thinking and applying i.e. bringing in the fruits of applied queuing theory into the firm’s activities. One of the highpoints of my graduate education was putting this into practice – through Quick Response Methodology (QRM). QRM is the brainchild of Dr. Rajan Suri at the University of Wisconsin-Madison and I was part of a team that consulted with a manufacturing firm with the specific objective of reducing their lead times for spare parts.
If you’re facing any of the below:
- Our biggest customer is demanding faster response time …
- We provide a high degree of customization, and JIT is no longer helpful in our low-volume, high-mix environment …
- Our shop floor has become very efficient, but it takes too long to get out a quote or process an order …
- Our own response time is fine, but our supplier is another story …
Logistics Management has an article on their website (Free registration required to view the article) which summarizes a survey of current trens with respect to SCM technology – likes, dislikes, loves and gripes. The respondents were surveyed about the type of SCM or related software that they intended to purchase/upgrade/deploy in the near future, important factors w.r.t SCM software and who in the firms made the decision to acquire SCM software. This is the kind of response that any SCM consultant or SCM software maker has to be keenly watching – hopefully not as a first source of industry trends but as a sort of secondary confirmation.
The article gives an idea about the content of their survey sample:
The final survey sample included logistics and supply chain managers from both large and small companies, with annual sales ranging from less than $49 million to $1 billion or more.
Some important takeaways (which are succintly graphed in the article as well):
1. Six types of software are most commonly used in logistics today. The most popular are warehouse management systems (WMS), used by 61 percent of respondents, followed by enterprise resource planning (ERP) at 55 percent and transportation management systems (TMS) with 34 percent. Rounding out the list are supply chain planning (32 percent), import/export management (15 percent), and yard management systems (YMS) with 10 percent.
When it comes to upgrading or purchasing software, WMS and TMS are at the top of readers’ shopping lists. Supply chain planning and ERP applications are close behind.
This year’s survey also highlighted an important trend in on-demand (“pay-as-you-go”) solutions. Some 28 percent of readers already use such systems, and 34 percent expect to purchase them within the next 12 months.
2. Ultimately, readers said, the most important reasons for purchasing supply chain software include the right features for their operations, quality of service and support, compatibility with existing solutions, and configurability. All of that is aimed at achieving one overarching objective. “The number one attribute that companies tell us they’re looking for is integration of their internal supply chain,” says John Fontanella, senior vice president and research director, supply chain services, at Aberdeen Group. “That is head and shoulders above everything else.”
3. Eighty percent of the respondents who plan to buy supply chain solutions expect to spend less than $1 million on software, training, and integration. Most are currently evaluating vendors, and a smaller percentage have already decided which vendor they’ll buy from. Respondents typically rely on a team that includes corporate management, information technology, and warehousing/distribution/logistics, among others, to make those decisions.
In exchange for their investments in supply chain software, one-third of the respondents expect a payback within 12 to 18 months.
4. Fontanella adds that a 12- to 18-month ROI is not only within reason, it has become a necessity. “It’s not an unreasonable expectation at all,” he says. “A technology vendor that can’t deliver that will be out of business.”
All of the above seems just about right except the last point. T’is all well and good to expect an ROI within a 12-18 month timeframe but to place that squarely on the shoulders of a technology vendor smacks of the COTS (Commercial Off The Shelf) problem and how firms tend to view software solutions – as a magic wand. And that is singularily unhelpful.
Supply and Demand Chain Executive has on their website an interactive global supply and demand chain map that has identified enablement options and solution providers for the different functional areas in the SCM space. (Note: The map requies Macromedia Flash Player to work properly).
Look at the map here.
What is the scope of mySAP’s solution space? While dealing with SCM, one has to meddle with the ERP system that one finds within a firm. mySAP is one of those leading ERP providers that is making inroads into the SCM space as well. Here is the solution space of mySAP as outlined on their website.
The main solution function areas are captured in the figure below (which I shamelessly copied from their site – I wonder where the jury of copyright matters rests on the matter?).
Each of the solution areas has its own mini-web site which explains some of the capabilities ensconced therein. So let’s go one by one starting bottoms up:
1. Strategic Supply Chain Design: Three areas under this category.
- Supply Chain Definition : You can model every part of the supply chain (such as locations, transportation lanes, resources, products, and so on.) using the Supply Chain Engineer in SAP APO. The Supply Chain Engineer allows you to place locations on a map and link them with the corresponding transportation lanes and product flows. Furthermore, you can drill down to all elements belonging to the supply network, or request information about single or combined elements in the network. For example, you have the ability to see which products belong to a particular location. You can also add products to this location or modify the location’s master data. Master data can also be transferred from SAP R/3 bzw. SAP ERP using the Core Interface (CIF). Materials are limited in their validity and availability. This has to be taken into consideration throughout the entire supply chain management solution. A central maintenance instance for interchangeability relations is offered that provides information for all planning applications. This secures consistent planning of discontinued material stock before using follow-up material stock. For a service parts supply chain, the supply chain definition is extended with the Bill of Distribution, which not only describes a location hierarchy but also allows the modeling of virtual locations (which are physically the same locations as aggregation locations in the location hierarchy, but are logically only used to model the direct customer facing demand of those aggregation locations), virtual consolidation regions (to consolidate the demand of several locations for slow moving parts) and inventory balancing regions.
The Supply Chain Engineer in SAP APO sounds a lot like the tool that I developed (based on the transshipment model) that allows for strategic level planning for supply chain components. The great thing about the Supply Chain Engineer is the integration that it provides with the ERP system which is how it should be ideally.
- Supply Chain Monitoring : The Supply Chain Cockpit (SCC) consists of a highly intuitive, graphical interface that acts as the top enterprise planning layer covering all planning areas such as manufacturing, demand, distribution, and transportation. All employees in the Plan -> Source -> Make -> Deliver cycle of supply chain management can use it to their advantage. As the gateway to SAP APO, the SCC makes dealing with a vast supply chain easier and more manageable. SCC allows you to:
So advises Jane Lee, a director of supply chain solutions at SupplyChain Consultants in the June edition of GLCS. She begins her article by saying what may seem as obvious but in a fad fed world, it may not be first on your agenda.
The first step to improving your supply chain is very basic: you have to understand what is working and what is not./blockquote>
And that’s the segue for introducing supply chain assessment as one of the key competencies that a supply chain consulting firm should possess. Therefore, how does a firm evaluate which supply chain consulting firm to employ to fo the assessment?
Many consulting firms will claim an expertise in almost anything. A firm that does consulting on finance management, corporate strategy, shareholder value and oh-by-the-way supply chain effectiveness is frequently a “jack of all trades, master of none”.
The number of qualifications in the above statement ought to give one pause. Why doesn’t she just say what needs to be said – that a jack of all traders is a master of none.
Firms which focus entirely on analyzing and improving supply chains have a large institutional knowledge base of what has and has not worked in scores of other companies, enabling you business to leverage other companies’ mistakes.
Couldn’t have put it better myself though I might have added a qualifier here where it is necessary – was another consulting company involved in that failure or not? Then again, maybe not – another commandment to savor – Thou shall not put a gun to your own foot.
Jane’s distilled recommendations on supply chain qualifications:
1. Choose practise over theory when it comes to knowledge
2. Choose consultants with domain/industry specific knowledge
3. Choose a listener over spouter
4. Choose consultants with an ear for red flags
All of the above are great tips for choosing a supply chain consultant. I would add the following:
5. Choose someone who can adapt their recommendations to you existing systems/be prepared to change a lot of things
6. Choose someone who can base his recommendations on hard quantitative analysis (like a decision support system) rather than soft fluffy feel good terminologies. Of course, I wouldn’t consider LEAN or Best Practices as soft fluffy feel good terminology – that goes without saying.
The latter half of the article deals with how a typical supply chain assessment looks like:
1. The level of coordination between different operations from forecasting to manufacturing to order fulfillment as well as effectiveness of the current supply chain planning operations
2. A comparison of the operations with best-in-class operations to determine areas of improvement
3. An assessment of the IT system being used to support the supply chain, to identify specific gaps and improvement potential
4. Business process changes and organizational needs to support a best-in-class supply chain operation
Jane warns about the following which I think is important to know:
Studies show that implementations of even the best information systems tools, without accompanying business process changes have not produced the expected results.
Jane expands on what a firm should expect from a supply chain assessment:
1. A map of the current state of the supply chain
2. A map of the desired future state of the supply chain
3. A list of “low-hanging fruit” improvements that can be made at little/no cost
4. A detailed, prioritized, step-by-step path forward to move from current state to intermediate states to future states and the associated organization, business process and tool changes in order to make the progress
5. A database of the firm’s historical supply chain for internal analysis and improvement
6. (Three points collaspsed into one) Customer analysis and segmentation using lead times, pareto analysis and customer service criteria
7. Identifying trends within the firm’s supply chain operations and execution
A central component of getting your firm to run through its daily operations is the quality of the supplier relationships and the inbound materials that are processed. So in the natural progression of superlatives, if the supplier relationships that were the base description at the beginning of the SCM initiatives, then it is quite natural that we must have by now arrived at the “Super Supplier”. Ofcourse, what is the next superlative then? I suppose it would be “Next Generation Total Quality Super Responsive Supplier”. Jokes aside, developing supplier relationships are critical to the supply chain, so much so that I view the proliferation of technology into the space with suspicion. This suspicion is not really about the efficacy of the technology that is making inroads into the firm but about its impact on the way that business relationships (the intangible side, specifically) are affected.
The article Developing the Super Supplier at CPO Agenda delves into the issues of who, what and how a super supplier comes about.
“Super collaboration” is the most advanced form of customer-supplier interaction possible. Unlike combative, co-operative and even partnership types of relationship, it aims to create competitive advantage for both parties over the long term, argue the authors – three professors at the IMD business school in Switzerland.
Hmm… create competitive advantage for both parties over the long term? Let’s see…
Four conditions are required for super collaboration to take off: procurement has to be focused on enhancing competitive advantage; a genuine market opportunity must exist; all functions in both organisations must be committed to making the relationship work; and a strong communication and evaluation structure needs to be in place.
It appears from the summary that the competitive advantage so developed has more to do with cost rather than differentiation. I’m guessing that the notion of cost employed here is not the lowest price bid but lowest total supplied cost.
Update: Only the executive summary was available and so I cannot access the rest of the article.
I am currently watching a webinar sponsored by the Electronics Supply Chain Association (ESCA) on Dynamic Inventory Optimization from IBM. The Center for Business Optimization (CBO) group has two individuals – Terry Gleason and Michael Datovech, presenting their DIOS (which I suppose stands for Dynamic Inventory Optimization System) tool in a brief manner.
According to the service template that IBM’s CBO uses for consulting with clients, they have a timeline of working through an entire engagement in a 6 week timeframe, reporting back the potential savings that could be had i.e. ROI analysis. The actual implementation of the recommendations i.e. to inteface with a SC planning tool or ERP tool takes about 12-20 weeks.
Beth Enslow of the Aberdeen Group also presented during the webinar (before I actually logged into the presentation). According to the slides that she presented:
Interest in advanced inventory optimization is especially strong in electronics and high tech, retail, consumer goods, industrial distribution, make-to-stock mfg, medical distribution, chem/pharm and aftermarket parts.
Update: Just finished the webinar. Was alright – got some more fact based market research, so to speak. The IBM tool had a degree of sophistication that will be lost on line managers who will resort to doing what they know or “tinkering” around to see what fits. Ideally, that makes for contracts for supply chain consultants who can adjust the appropriate distributions to use for modeling and the like.
Let me reiterate a commandment of successful change practice – “Thou shall not confuse those you upon whom you wish to impress change.” Perhaps, it should be changed to – “Thou shall not confuse” but that is sometimes too restrictive because in confusing others, sometimes, I see very clearly what the problem is with the issue at hand- call it: a mental clarification through numerous what-ifs that lead only to error.
