@ Supply Chain Management

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

David Margulius writes about the recent McKinsey Quarterly (registration required) article about the data capture for supply chain in his column titled Fine-tuning your supply chain. Just reading the headline made me think about i2\’s ABPP system post wherein I was thinking about whether it was really “fine tuning” or “fine tinkering” that managers are upto in the supply chain.McKinsey research offers:

The problem, according to the McKinsey research, is that companies today not only buy more from far-flung third parties in an effort to cut costs, but they also rely more on third-party contractors to move these goods around the globe. That means critical supply chain data (such as quality, inventory, and capacity) is “locked up in the IT systems or spreadsheets of a dozen or more companies.”

I think this was always a problem (I blame Microsoft for the Excel program) especially with technically clueless managers who have just gotten trained on some spreadsheet or powerpoint tool and know only how to deploy such tools. Another source of the problem is as David himself outlines:

Although the McKinsey report makes sense, it misses the boat in one key area: human nature. Companies, as do people, sometimes don’t want to pass information on to partners for competitive reasons, control reasons, or just for no reason at all.

If you\’ve worked in the business world, you just know that this is true – its just human behavior.McKinsey outlines its view of best practices for reuniting supply chain data:

1. Fit information flows to supply chain types. For fashion-oriented products such as iPods, for example, focus on IT connections that help you “chase demand rapidly by providing repaid coordination between designers and suppliers.” But for commodities such as TV tubes, focus on cost and inventory data.

In other words, customize your supply chain operating model (that should ideally integrate a supply chain information and data exchange mode) with your business strategy.

2. Develop deep monitoring capabilities, or systems that allow you to pull key data from both your suppliers’ systems and their suppliers’ systems (you’ll probably have to give suppliers incentives to invest in this, McKinsey warns).

How about “bull-whipping” your suppliers as an incentive to developing deep monitoring capabilities. This should really be the only incentive for suppliers to cooperate with you and anything above and beyond that is a premium that you\’re paying out for reducing the uncertainty for suppliers for free.

3. Think cross-functionally and use detailed scorecards. Your purchasing people may be rewarded for selecting the lowest-cost supplier, but the manufacturing group may be rewarded for keeping inventory low and fill-rates high. They must get in a room and agree on performance metrics to make sure you get all the data you need from your suppliers.

Basic supply chain execution meaning that the supply chain is here and not here. By definition a chain is not one link though the strength of the chain is limited by the strength of its weakest link. If two functional departments are operating together, it makes sense not to incentivize or measure them in contradictory or incoherent ways. There is a thing to be mentioned here about truth – it needs to be repeated or else it is forgottten.

The top 25 third party logistics (3PL) providers as reported by Global Logistics and Supply Chain Strategies magazine are:

1. Exel, PLC – $13,335
2. Kuehne & Nagel – $10,700
3. Schenker – $10,700
4. DHL Global Forwarding – $9,500
5. UPS Supply Chain Solutions – $7,700
6. Panalpina – $6,320
7. CH Robinson – $5,689
8. TNT – $4,270
9. Expeditors – $3,902
10. Schneider Logistics – $3,852
11. NYK Logistics – $3,560
12. Penske – $3,171
13. Eagle Global Logistics – $3,096
14. Nippon Express – $3,000
15. PWC/Geologistics – $3,000
16. Bax Global – $2,899
17. UTi Worldwide – $2,785
18. Ryder – $2,181
19. Caterpillar Logistics – $2,100
20. Kintetsu – $2,025
21. Menlo – $1,340
22. APL Logistics – $1,290
23. Maersk Logistics – $800
24. SembCorp Logistics – $713
25. Fedex Trade Networks – $672

SupplyChainDigest reports on what i2 plans as its “Next Generation” solution in the supply chain space.
Whatever i2 is pushing is based on its Agile Business Process Platform (ABPP) – so it helps to ask what exactly is the ABPP? ABPP is explained on i2’s website as:

The i2 Agile Business Process Platform is a finely tuned, synergistic development suite designed to support new-generation supply chain management solutions.

Alright, what does that distil down to?

This new-generation platform functions much like a “factory”, in which standardized application components such as data models, business rules, user interfaces (UI), and business workflows can quickly be assembled and then adapted to meet company-specific business and market needs. The platform can bring greater speed, agility, quality, and cost-efficiency to any supply chain.

I have a lot of experience, way back in 1998-2000, working with Labview from National Instruments which is a prototype systems software development tool that I used in the R&D labs. And the above description by i2 sounds a lot like a Labview type of environment within which a business can structure its supply chain planning, design and development processes. More details about the ABPP:

The platform makes up a comprehensive environment for supply chain management application development, including:
Core platform services. Including distributed process modeling, execution and monitoring, business rules definition, and web and rich-content UI generation.
Data services. With extensive supply chain data models and processes for validation, synchronization, staging, and aggregation.
Integration services. From bulk data transport and mapping to web services support for messaging and generic EAI.
Application development. With a proven studio environment for the integrated development, modeling, testing, deployment, and maintenance of new solutions.

Now, that is something to look forward to and I suppose it was bound to happen sooner or later. However, I would like to see how successful i2’s efforts are going to be in bringing a client’s organization up to speed on using even half of the functionalities described above. Will it turn out that i2 itself would have to invest a significant portion of resources to develop templates that will be adapted by the end-user. Or will there be special programmers such as ABAP programmers who do such customization. Time wil tell.
Back to the SupplyChainDigest article:

John Cummings of i2’s chief marketing officer says, “Historically, not enough of customer spending on SCM solutions went to true process innovation. Next generation supply chain is also about trying to change that.”

So here we have the notion that process innovation is going to be spurred within a firm by bringing in a tool from i2. Really? I don’t think so. What could happen is that in firm’s that have truly grasped and implemented process innovation is going to find i2’s tools more than helpful in building up a significant competitive advantage. But the source of that competitive advantage resides in the process innovation that prexisted the arrival of a tool but the extent of success derived would be greatly assisted by a tool such as that envisioned by i2.

John Cummings continues, “If you look at the Plan-Do-Check Act model, we’ve always been able to deliver the “Plan-Do” part, but not necessarily been able to close the loop on that and get to “Check-Act”.

All he is saying is confirming the view expressed above. The success of the PDCA model, a continuous process improvement methodology, is that it is a competency that pre-exists any tool that is brought in from the outside. In fact, I’d think that it is not dependent on any tool. But the next sentiment gets my undivided attention:

Now we like to do what I call “managing while tuning” the supply chain, tuning all the parameters in the planning cycle to make sure you’re getting the right answers.

I’d hazard a guess that John Cummings has a systems background of some sort, either in education or in some previous work experience capacity. “Managing while tuning” is so fine an art which is unfortunately not taught in any school except in control theory and perhaps then only for control systems and not for general systems that abstract control models – such as the activities of the firm. However, in the world at large, we usually “Manage while tinkering” which is just about the opposite of “Manage while tuning” which implies a strong grasp on the fundamentals of how to structure and execute the firm’s activities. But I’m impressed at the sweep of what i2’s tinkering with here.
More from John Cummings:

What struggled a little bit with what to name it, but it