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Top Supply Chain Initiatives

SDExec.com (Supply & Demand Chain Executive magazine) reports on the top supply chain initiatives extant in the market today. Their article is based on the results of a survey by E2open which was conducted

at the fourth-annual SAP Logistics and Supply Chain Management 2007 conference, held in Orlando, Fla., had conference attendees from more than 160 companies rank the top supply chain initiatives that enterprises are undertaking

And who is E2open?
Short answer: They are a SCM software services provider with a multitude of offerings that range from visibility to partnering and execution.

In brief, their findings as interpreted by me:
1. A firm thinks of its supply chain in a global context and thus creating an internal operations group that reflects not only such global operations but actually needing to and getting to integrating these functions together.
2. Global initiatives picked from the following set:

* Globalization to leverage economies of scale across multiple operating units
* Lean demand-driven supply chain
* Operations and sourcing in low-cost countries (China, etc.)
* Outsourced manufacturing and design
* Process automation, such as vendor- or supplier-managed inventory (VMI or SMI), international procurement office (IPO) and trading center (ITC), etc.
* Trading partner integration

3. Global Platform

The new global organization and initiatives must be supported by improved visibility to timely and accurate supply chain information and greater control over the processes that span across companies in the extended supply network. A new shared platform is required to synchronize processes and information across all participants in the end-to-end supply chain, extending internal processes and systems and leveraging the investments made in traditional enterprise applications such as enterprise resource planning (ERP), supply chain management (SCM) and product data management (PDM) systems. This platform must support the very different architecture, technical, security and operational requirements of a multi-enterprise solution.

In this business, you’ve got to be good at marketing and whoever wrote the above is trying very hard.

According to the survey, the highest priority supply chain initiatives were:

* 48 percent of survey respondents identified lean supply chain — eliminating waste and unnecessary steps, for example, by evolving from a “push” to “pull,” demand-driven strategy;
* 45 percent identified operational improvement programs — obtaining visibility into supply chain information by replacing manual processes with automation (automated VMI/SMI programs, IPO/ITC, etc.);
* 39 percent identified globalization — leveraging economies of scale across multiple operating units;
* 29 percent identified improvement in trading partner integration by migrating from legacy systems to multi-enterprise supply chain platforms — replacing legacy collaboration applications and B2B gateways.

And the top business objectives the above supply chain initiatives were meant to address:

* 66 percent cited reducing operating costs;
* 52 percent cited reducing inventory;
* 41 percent cited improving on time delivery;
* 39 percent cited improving availability and cycle times.

An interesting piece of info from the survey regarding partner integration or how firms in the supply chain communicate:

* 44 percent are using EDI
* 42 percent are using e-mail
* 29 percent are using Excel spreadsheets

Now, that’s an opportunity.

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Three issues in Supply Chain Management 2.0 – Part 3

As mentioned previously, Michael Lamoureux is hosting this year’s Big Bad Blogger Throwdown at his blog – Sourcing Innovation. Here is the link to the announcement of the cross-posting cornucopia. As recounted in the first and second part of this series at Three issues in Supply Chain Management 2.0 and Three issues in Supply Chain Management 2.0 – Part 2, I listed out my three top issues that I think are important for firms to be cognizant about. They were:
1. Supply Chain Talent
2. Closed loop Supply Chain Management
3. Supply Chain Collaboration
In this last post, I will delve into the second and third of the three issues in a more substantive fashion.
The essential design patterns in Web 2.0 are recounted here. The first issue is linked below.
Issue #1: Supply Chain Talent
Issue #2: Closed loop Supply Chain Management
I refer to closed loop supply chain management in a sense that is quite different from the usage that I have encountered at many websites and discussions proceeding on the web. A typical reference to a closed loop supply chain would be like this one linked here – The Challenge of Closed-Loop Supply Chains. The proposition advanced here is that a closed-loop supply chain includes the forward part of the supply chain (i.e. product/material flow from producer to customer) as well as the reverse part of the supply chain (i.e. product/material flow from customer back to the producer). The closed-loop supply chain here has more to do with product flow.
What I mean by closed loop supply chain management includes supply chain decision making and translation into operations and execution on the forward loop and information flow on the reverse loop of the supply chain. This proposition has more to do with information feedback about the effectiveness of the supply chain strategy and how to continually make course corrections in order to address the current market. Such a closed-loop supply chain naturally lends itself to continuous improvement – it is actually continuous improvement expressed in Supply Chain Management.
Remember that in the forward loop, lies strategic decisions concerning the supply chain such as manufacturing configurations, inventory levels, sourcing decisions, investments in supply chain assets etc. These decisions are taken by the few or perhaps within middle management with a view of the world that they have built up with experience and/or sales data (feedback loop), growth forecasts (wishful thinking and/or statistical inferences) etc. The closed loop that exists here is some decision making on the forward loop and data warehouses that either relay information or calculate forecasts on the feedback loop. The actual feedback loop should extend all the way to the customer and the sales rep who interacts with the customer because even if a customer doesn’t end up buying a product the information gathered about the customer within the context of a conversation (apart from a standard sales survey) is quite important for the whole system.
So how does Web 2.0 figure in this particular issue? Today, in Web 2.0, you would observe a proliferation of blogs – “71 million blogs… some of them have to be good – Matt” as the Technorati dogs-ear goes. A blog if anything can be described as the creation of meta-information by experts, semi-experts and downright doofuses that add content (of questionable value) to the information stream. In the case that we’ve been talking about, the customer and the sales-rep play the role of value creators except that instead of it being printed/typed, it is verbal information.
So in order to get at this valuable information, you need to store the conversation between a sales-rep (who is equipped with a vocabulary) and a customer, parse it and glean the required information (and perhaps for purposes of privacy – destroy the conversation at the end of the parsing process). This is the sort of process that Google undertakes within the context of its gMail service – or as I have understood it.
A system of the sort that I have described above, takes the feedback loop closer to the customer than the information that is presently obtained at the point-of-sale.
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Three issues in Supply Chain Management 2.0 – Part 2

As mentioned previously, Michael Lamoureux is hosting this year’s Big Bad Blogger Throwdown at his blog – Sourcing Innovation. Here is the link to the announcement of the cross-posting cornucopia. As recounted in the first part of this series at Three issues in Supply Chain Management 2.0, I listed out my three top issues that I think are important for firms to be cognizant about. They were:
1. Supply Chain Talent
2. Closed loop Supply Chain Management
3. Supply Chain Collaboration

In this post, I will delve into the first of the three issues in a more substantive fashion including trying to answer such heady questions such as Why the issue is important?, Why if a company did nothing about, its apocalypto now? and What if anything a company should do at all? (This is code for “You should really be hiring us Supply Chain bloggers as consultants” or something like that). As I write this, what is perking up from the top of my head like that strand of hair that will just not fall into place no matter the steady grooming in process, is the silly realization that I am acting like a theologian pontificating on sin, fall and redemption – version 2.0, no less. If you didn’t get that last line, never mind, its just my confession. So here we go!

Background:
Just in case, you haven’t read the previous post in this series, here is a brief recap of what is in situ. I inquired into what could be termed SCM 1.0 and SCM 2.0 and the relation that both have with Web 2.0. After that, thanks to the good people at O’Reilly and Chris Alexander, I opined about Design Patterns in Web 2.0 which are recounted below:
1. The Long Tail
2. Data is the Next Intel Inside
3. Users Add Value
4. Network Effects by Default
5. Some Rights Reserved
6. The Perpetual Beta
7. Cooperate, Don’t Control
8. Software above the level of a Single Device

This is how Web 2.0 lives and breathes – the above is the central and structural DNA of the anarchic ecosystem that is spreading through the internet. So how do my issues figure against that Web 2.0 paradigm?

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Three issues in Supply Chain Management 2.0

Michael Lamoureux did an interesting thing by calling this SCM 2.0 implying that something of a change is necessary in that same ol’, same o’ SCM 1.0. But that begs three questions:
1. What is SCM 1.0?
2. What is Web 2.0? and
3. What is SCM 2.0
I’ll begin with (2) because that is probably the least unknown of the three. (1) will reveal itself when (3) is sufficiently fleshed out. Since (1) is really dependent on (3), perhaps an analogy mapping from (2) to (3) might be sufficient at this point.
So what is Web 2.0?
Web 2.0 is a marketing gimmick – nothing but hype. So says, Tim Bray about Web 2.0:

I just wanted to say how much I’ve come to dislike this Web 2.0 faux-meme. It’s not only vacuous marketing hype, it can’t possibly be right. In terms of qualitative changes of everyone’s experience of the Web, the first happened when Google hit its stride and suddenly search was useful for, and used by, everyone every day. The second syndication and blogging turning the Web from a library into an event stream is in the middle of happening. So a lot of us are already on 3.0. Anyhow, I think Usenet might have been the real 1.0. But most times, the whole thing still feels like a shaky early beta to me.

Now, that you’ve heard from the opposition – a contrary opinion simply pleading a lack of visibility and the very need for a name for something that is not that big of a deal, I’ll go to the proponents case for what Web 2.0 is. This article at O’Reilly – What is Web 2.0 describes the position quite well. If you have the time to peruse the article, I think it’ll be worth your while. However, what is of immediate interest to the me can be found on page 5 of the article – Web 2.0 Design Patterns (Refer to the grey box on the right side of the page).

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The Big Bad Blogger Throwdown @ Sourcing Innovation

Hear ye, hear ye! Michael Lamoureux is hosting this year’s Big Bad Blogger Throwdown at his blog – Sourcing Innovation. Here is the link to the announcement of the cross-posting cornucopia.
Michael makes an interesting versioning idea ala Web 2.0; he calls its Spend/Supply (Chain) Management 2.0. The topic of the confab of posts from a number of bloggers (including yours truly) is to come up with the top three issues that supply chain bloggers blog about.
Or, Eh Mannnnn!!!, What getteth thy goat?
In English, that would be:

  1. What the issue is
  2. Why it is important
  3. What a company can do about it and
  4. What could happen if its not addressed

I’d better get cracking on them because I hope to have them up next week. Michael is smart enough to realize that you should never give a blogger two weeks. Wars are finished in less! Well, some of them are.
Lastly, kudos to Michael for taking this on.

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Supply Chain Network Optimization and Competitive Advantage – Part 2

In Supply Chain Network Optimization and Competitive Advantage – Part 1, I began exploring the notion articulated by SC Digest’s editor Dan Gilmore in a recent post about Supply Chain Network Optimization and Competitive Advantage. In the article Mr. Gilmore goes on to describe how a few companies are adopting this particular aspect of Supply Chain Management in their processes so much so that it is seen as a source of competitive advantage.
In Part 1, I explored whether the use of such network modeling and optimization tools constitute a true competitive advantage and finding in the negative, I hope to explore what it might really be called. But before getting there, I need to revisit the notion of competitive advantage again (and not for the last time). As explored in the previous post, the essential components of a competitive advantage are:
1. A member of {Demand Competitive Advantage (Customer Captivity), Patented/Superior Technology, Economies of Scale}
2. Provides a barrier to entry
3. Realizes a net positive return on some Sales-Cost metric
As Greenwald and Kahn note in their article – All strategy is local, there is an essential difference between Strategy and Efficiency. Strategy is (Oh well! – change that to “should be”) cognizant of (if not focused on) the other players in the arena – thus outward looking. A strategy that doesn’t assert (based on the probable reactions of competitors) or react (based on the actions of competitors) can be effective if only luckily so. However, while the formulation of a strategy is outward focused, executing a strategy is limited by what is available internally. Efficiency on the other hand is very much focused on internal structure, processes and in an advanced case collaboration and partnership with key suppliers and enablers. Efficiency might have a focus on the efficiency benchmark from other players in the arena (or in the case of benchmarking – players that are quite unrelated in the competitive space) but again it is not related to the topic of competition per se. As the authors note,

A company’s best and most innovative users of information technology, business models, financial engineering and almost everything else that applies to operations suffer from the same availability to rivals. What a firm can do, its competitors can eventually do as well. IT effectiveness, HR policies, financial strategies, and so on are essentially aspects of what it means to operate efficiently.

So where does the above discussion leave the supply chain planning and network optimization function?


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Supply Chain Network Optimization and Competitive Advantage – Part 1

SC Digest’s editor Dan Gilmore has a recent post about Supply Chain Network Optimization and Competitive Advantage and how a few companies are adopting this particular aspect of Supply Chain Management in their processes so much so that it maybe a source of competitive advantage.
While I am quite convinced about the need for strategic planning for supply chains at the highest echelons of management using the very kinds of tools that Dan Gilmore is talking about, I am hesitant, if not quite in the opposite camp, when the use of such tools is deemed to confer, even offer, a competitive advantage. The opportunity of deriving a competitive advantage this way is minimal at best. What is competitive advantage and what is not is the subject of this part of the series. In following parts, I hope to identify what supply chain planning and optimization really is.
In order to explain myself, I need to first elucidate the very notion of competitive advantage and strategy (or strategizing). I refer you to the excellent article on strategy: All strategy is local by Bruce Greenwald and Judd Kahn. The byline of their article states that:

True competitive advantages are harder to find and maintain than people realize. The odds are best in tightly drawn markets, not big sprawling ones.

The aim of true strategy in their opinion is,

to master a market environment by understanding and anticipating the actions of other economic agents, especially competitors. But this is possible only if they are limited in number. A firm that has privileged access to customers or suppliers or that benefits from some other competitive advantage will have few of these agents to contend with. Potential competitors without an advantage, if they have their wits about them, will choose to stay away. Thus, competitive advantages are actually barriers to entry {emphasis is mine}. Indeed, the two are, for all intents and purposes, indistinguishable.

Greenwald and Kahn contend that true competitive advantages, whatever their source, are really barriers to entry – in the sense that gaining such a competitive advantage presents a significant threshold to be scaled. The conclusion is an acceptable one and as you can imagine begins to chip away at the notion that the use of supply chain strategic planning tools in some way offer a competitive advantage. I think there is a case to be made about sources of competitive advantage with regards to all aspects of supply chain management within a firm. I do not see that the output of supply chain strategic planning (which is a streamlined and robust supply chain network) offers any real competitive advantage. To belabor the point, any competitive advantage that can be easily replicated is not an advantage, it is the entry price for remaining in the competitive arena.

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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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