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Using Prediction Markets for Collaboration

Prediction Markets Blog talks about Using Prediction Markets for Collaboration the use of collaborative tools and lists a few applications of such technology.
The post lists three particular directions for collaborative products namely:
New Lines of Communication

Prediction markets have the ability to open up new lines of communication within the organization. In a lot of companies, especially large ones, the executives don’t get to hear what the “normal” employees on the ground are thinking because the two groups are insulated by multiple layers of management hierarchy.

This is precisely what is called “Going to the Gemba” in Lean thinking and that’s really what this sort of collaboration technology opens up. However, there is more than merely creating a common place/market where people can interact but actually going down to the floor and physically interacting with people is the way to go. Perhaps, collaboration takes us part of the way there but I don’t think that it can or should be a substitute for taking the time and effort of going to the gemba.
Collaborative Brainstorming

GE and many other firms utilize markets because they are trying to figure out how to devote their time and resources to the best ideas. By allowing individual traders to create new “stocks” in the market, many more ideas are brought to the table than if the process were to remain centralized.

I think this is a great idea and a space that could use more advertising as well.
Collaboration within the Supply Chain

One of the most compelling aspects of prediction markets is that they don’t have to be limited to just the employees. Since the market itself is web-based, you can cast a wide net of participation that includes vendors, retailers, and others along the supply chain. If you are a manufacturer of DVD players and are interested in forecasting what the consumer demand is going to be in two years, wouldn’t it be wise to allow your wholesale partners to weigh-in with their unique perspective on the situation? What more effective way to coordinate actions like this than with a prediction market?

There has been talk for ages about Supply Chain collaboration but the talk has not been followed by the walk, at least not as much as it should be. But things are changing now, slowly but changing. The arrival of new technology such as the one highlighted above might give it a boost and for good reasons. RFID is also entering this fray in a big way and will provide the data component of what is collaborated upon.

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ASDN Logistics Analysis Software

While surfing the web for logistics related software, I came across the site hosted by the International Centre for Innovation and Industrial Logistics (ICIIL).
ICIIL has some information about an open source logistics analysis software that is being developed University of Vaasa, Finland and ABB Corporate Research Center.

ASDN – “Agile Supply Demand Networks” is software for analyzing and developing logistics networks. This rapid modelling tool should help decision-making in network architecture design and performance management.

The project home page is located at http://asdn.sourceforge.net and the source codes (Java) are distributed via SourceForge: ASDN


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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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Supply Chain Software providers report their successes!

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_
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What should an ERP software/tool possess?

The question that I ask myself today is not what particular features/functions an ERP must possess but what kind of experience must users as well as firms experience with an ERP software/tool? So, I decided to draw up a list of things that ERP software/tools must deliver in three broad experiential areas:
1. Understanding – A concept level requirement. Here the idea is that the assumptions, methodology of planning/calculation should be visible and easily understood by a firm’s management and/or users. This would mean that there are no black boxes that accomplish magical things or some dark art embedded within. From the competition aspect (i.e. with other ERP vendors), this throws open the inner workings of the system. Therefore, it will have to be tempered a bit – grey boxes that nevertheless explain in a simple manner what is being accomplished.
2. Adaptation & Implementation – Should a firm adapt its business processes to an ERP software or should an ERP software be adapted to a businesses processes? That is the basic question that underlies this area of Adaptation. Along with that arises the need for an ERP software to model the business process as it is or in a desired reengineered state. A frequent issues that I have observed is absurdly long implementation plans and projects which increases the risk of failures.
3. Operation & Continuous Improvement – An ERP system might be the backbone of an organization but it cannot be the system that only a backbone specialist only can contend with or change at a moments notice. The very notion of continuous improvement implies that any user should be able to change/improve the functioning or scope of an ERP system.
Now, admittedly, this is a rough cut of what I see an ERP must accomplish in order to be successful. From that broad classification of user experience, some ideas fall out as first cut rules that an innovator might follow:
1. Implementation of the ERP system must be in a timeframe of months (even weeks) rather than years.
2. IT departments must be minimally involved in the setup and roll out of the ERP system.
3. Black boxes must be kept to a minimum if not eliminated entirely
4. Don’t get stuck into thinking that ERP systems should be modular, especially along the lines of defined functional areas. Other forms of organization such as inheritance (OOP) and value chains might offer alternative ways of organizing features.
5. Meta modules and inherited modules must be available. A frequent thought that I have is that when people from different functional areas communicate, they’re abstracting what they think is happening in areas outside their expertise in order to understand those activities. I am thinking out loud here whether that is the nature of communication between functional areas as well.
6. Upgrades to the ERP system should be radically modified. I can’t think of a way to achieve this because the underlying philosophy of the system might change but the architecture initially outlined must consider both ongoing operations as well as future operations along the three broad areas above (Understanding, Adaptation & Implementation and Operation & Continuous Improvement)
7. Dashboards. Dashboards look cool. Other than that, it might very well be an information dissemination service to all members of the firm rather than decision makers.
8. Leverage open cooperation between ERP adopters and implementors across different industries and allow them to collaborate on process development, insights, measurement and continuous improvement ideas. In fact, allow them to exchange and adapt business ideas through the system.

That’s an attempt at a first list. Some of the above might seem outrageous and wishful thinking but if you’re going to set goals, they might as well as be as far out as possible. Next step – features.

Categorized as: ERP_, Tools_
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Where the Supply Chain Planning Players are at?

Gartner Research has published its magic quadrant (nothing magical about it but its an informative quadrant though) about the relative competitive position of Supply Chain Planning software vendors for the first half of 2006.

There are three key sectors (Process Manufacturing, Discrete Manufacturing and Distribution Intensive) for which the quadrants were created. They’re available free of charge at Oracle’s site (Magic Quadrants for Supply Chain Planning) at the following links:
1. Magic Quadrant for Supply Chain Planning in Process Manufacturing Industries, 1H06
2. Magic Quadrant for Supply Chain Planning in Discrete Manufacturing Industries, 1H06
3. Magic Quadrant for Supply Chain Planning in Distribution-Intensive Industries, 1H06
What I wanted to determine from perusing these quadrants was the criteria by which certain firms’ SCP software was categorized as visionary and others as followers or laggards. Here is the summary of firms seen as visionaries (as opposed to niche players) in various segments of the SCP marketplace.

Process Manufacturing Discrete Manufacturing Distribution Intensive
Aspen i2 i2
i2 SAP SAP
Manugistics Oracle Logility
SAP
Oracle
Logility

According to the report, a visionary has to demonstrate:

  • A developing global support strategy
  • Five customer references in each targeted vertical industry
  • Differentiated vertical-industry domain expertise and unique industry-specific functionality
  • Development beyond a third vertical-industry-specific solution
  • Development support for a multi-enterprise architecture on an SOA platform
  • A targeted presence leading to influence and activity into how aspects of the market evolve

Making sense of the alphabets (ERP, SCM, MRP, MRP II, CRM, PLM… hmmmm)

There is no doubt in my mind that if I were to ever come up with a product offering in one or all of the above spaces, I’d christen it hmmmm without thinking a second time – market research be damned. Then again, the world is spared the notion by the appropriate coincidence that I haven’t come up with such a product offering but boy its getting there. There is little doubt in my mind that I detest jargon of every kind except the kind that I understand. Jargon introduces a threshold in conversations as well as shorthand to getting things across. If you were to talk to me day long about ERP systems, not only should you expect diminished returns of attentiveness over the course of the whole day but also an increased willingness to employ violence towards the end of dat. But remember, I know something about ERP. So what about those genteel people of the world who know nothing or next to nothing about ERP not to say anything about the rest of the alphabet soup? I will not even mention those who have been through an ERP implementation and a still smaller group who have been through a successful implementation of an ERP system.
So, first of all a clarification of the alphabet soup:
PLMProduct Lifecycle Management: How do you manage the entire lifecycle of the product from conception, to design, to manufacturing, to after market parts and lastly obsolescence? I ask myself who is responsible for thinking that products are the lifeblood of a company? Let’s see – do accountants think like this, do finance people think like this, do marketers think like this (may be), does customer support think like this, do engineers think like this (you betcha), do logistics people think like this? I’d hazard a guess that PLM was developed by engineers for engineers and has suddenly found broad acceptance in a whole stratum of jargonists for whom Excel just would not do. But I’m being very creative here with my guessing.
ERPEnterprise Resource Planning: A while ago, I read an article at Darwin magazine that ERP was neither about Resource nor about Planning, it was about Enterprise. And that puts a sharp axe to everything that you might read about from an ERP vendor’s colorful brochures no matter the breadth of applications and features that an ERP possesses. ERP bothers itself about the whole enterprise from sales and marketing to manufacturing and supply management, transportation and warehousing to finance and accounting – the whole gamut. When such is the scope, then failure is not only possible but also lurking at every corner to make a lunge at such an enterprise wide transformation. Methinks that ERP is ripe for competition (Can elephants dance?) – radical competition. Hence, hmmmm…!!
MRP (& MRP-II)Material Requirement Planning (Manufacturing Resource Planning): Before ERP was, MRP (& MRP-II) was the order of the day. Material Requirement Planning (MRP) was developed for manufacturing companies in order to calculate what materials were required, at what time in the optimal quantities. That morphed into Manufacturing Resource Planning (MRP-II) with the idea that true MRP required a more broad based approach that included shop floor control, planning and scheduling etc. The other major introduction with MRP-II was the closed-loop model with the aim to compare forecasts with output and thus improve the required processes.
CRMCustomer Relationship Management: As the name implies, this type of (software + methodology + capability) is aimed at better management of a firm’s relationship with customers. Rather than just powered by a software, it is a structured interaction with a firm’s customers that is systematic and intentional. The functions that are most impacted by CRM include marketing, sales and customer service with allied functions such as BI (Business Intelligence) etc.
SCMSupply Chain Management: Saved the best for last! Some might be of the view that supply chain management is all about managing suppliers. Perhaps this is why some insist on calling this field Demand Chain Management because it is all about fulfilling demand but that is not all that accurate either. Perhaps, it is better called Chain Management because that is what it really encompasses is a whole gamut of activities from suppliers to manufacturers to transportation to warehousing and inventory to sales and forecasting – a chain of activities that need to be deployed, changed or reworked at a moment’s notice. Oh by the way, just when it was getting manageable, everybody decided to outsource to China. A few years ago, it would have been common for people to say that SCM sits on top of ERP systems – today, it is the ERP system.

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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.

@ SCM Clustrmap

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