Monthly Archives: October 2006

A Competitive Advantage (in the Supply Chain)

The theme of this year’s Fourth Annual Symposium on Supply Chain Management was Optimizing the Supply Chain: Competitive Advantage through Information Technology, and a competitive advantage is what you would have taken away if you had attended.

Despite a relatively low attendance when compared with other eProcurement conferences1, this is by far one of the better conferences you can attend. Even though attendance was around 95 this year (typical attendence is slightly over 100), you had participants from America to Australia, from academia and industry, and the practitioners in attendance cut across almost every industry. Thus, even though it’s sponsored primarily by PMAC (Purchasing Management Association of Canada), it’s truly an international event – and substantially different from PMAC’s annual meeting, which would be more of a Canadian event.

I know many of you are probably scared off by the dual academic/industrial nature of the event, noticing that it’s also sponsored by the McMaster eBusiness Research Centre, and worried that it will be overrun with academics in their ivory towers who have no clue about, and no interest in, real world problems, but this is not the case with this event. I understand where your concerns are coming from – I attended many academic conferences in my day and was consistently put off by not only the lack of application of much of the work, but the academic indifference toward the lack of application at many such conferences – but these concerns are unfounded. In fact, attending these types of events is even more beneficial then attending purely practitioner events as true innovation comes from the merging of great ideas, great technologies, and great best practices. Academics exist to come up with great ideas and foundations for best technologies and Practitioners exist to build great technologies tailored to best practices, using the best ideas they can find in the process. When the two come together with common goals in a common forum and work together, in my view, that’s when the best innovation occurs.

Furthermore, when you consider the broad range of topics that were covered in this year’s symposium, you quickly see that there’s something for everyone. In addition to papers on supply chain management, global supply chain management, risk management, supply chain design, supply chain integration, and e-Procurement, you also had papers on green initiatives, flexible manufacturing, talent sourcing, value networks, RFID, project management, and supplier management from the perspective of a range of industries including health care, pharmaceuticals, automotive, consulting, and software. In other words, the conference is just as informative as many two day crash courses in supply chain issues, at a fraction of the price.

I learned something in every presentation I went to, even the ones on the topics I knew very well. As a whole, the presentations were very well done. There’s so much to report that, as you probably guessed from my posts on New Technology Strategies and Managing Business Risk, I’m not even going to try to cover the conference in a post or two. Instead, I’m going to do a series of posts over the next few weeks on, or inspired by, the ten most informative or thought provoking presentations that I attended at the conference and apologize in advance to the speakers who get left out. (I could only attend a fixed number of presentations and even an overactive human brain can only process a finite amount of information in a short time period.)

In conclusion, I would strongly encourage you to join the academics who’ve stepped outside of their ivory tower and the innovation-focussed practitioners and attend next year’s event – especially if you reside in Canada or the United States and are only a short flight or two away – as I’m sure you will benefit from the experience. And who knows, maybe you’ll even get to meet a blogger!

1 A large list can be found at Sourcing Innovation.

Managing Business Risk

There were a number of really good presentations at the Symposium on Supply Chain Management on Friday, but one of the ones that really stood out was the presentation by Francis Borromeo of Shell Oil Canada on Business Continuity Planning.

Business Continuity Planning is one of the best ways to manage risk, including supply chain risk, and last year, Shell Oil proved it. Hurricane Katrina devastated multiple oil refineries in South Texas. The effects were that plants were closed for months, with a mid-term effect on supply and a detrimental effect on oil prices. It was all over the news. However, what they didn’t tell you was that it could have been much, much worse.

Oil refineries process more oil than most oil tankers carry. And we all remember how many years it took to clean up those spills off of Alaska. And multiple refineries were almost destroyed. Had they been processing oil at the time, it could have been one of the worse environmental impacts of the decade, putting the plants out of commission for years, if not closing them down permanently. But not one dropped was spilled. Why?

Shell Oil, like the other major producers in the region, had rock solid business continuity plans that identified all of the major risks as well as measures to not only recover from disasters, but prevent the severe ones from occurring in the first place. As soon as the hurricane started heading toward the region – processing stopped. Tanks were emptied. Above ground pipes were pumped empty. Stockpiled oil was relocated inland.

In addition, thousands of people could have been seriously injured or killed. This did not happen. All non critical personnel, and their families, were airlifted out of the region well before the storm hit. Critical personnel were evacuated as soon as possible. The end result, only buildings – easily rebuilt – were destroyed. It was a disaster, but it paled in effect to what it could have been.

And you can do this too. Business continuity planning and risk management does not have to be ridiculously expensive. The key is that you

  1. have a business continuity plan with
  2. prioritized risks and recovery plans that you can use to
  3. manage the recovery process in order to
  4. transition to business as usual in a manner that permits an
  5. after action review to allow you to improve and thrive.

A business continuity plan not only provides a framework for the recovery of the critical business processes, but it allows you to safeguard your brand and reputation.

But it’s probably last on your management priority list. After all, you only see a return when a major disruption or disaster happens. However, considering that Aberdeen recently found that your average international company experiences two significant disruptions per year, it is critical that you have one. So how do you get the support and resources you need to initiate one?

Francis outlined the following arguments that you can use. On their own, chances are not one of these will win you the support you require – but taken as a whole, the business case becomes very compelling.

  • the insurance provided vs. the cost of insurance;
    a well designed plan will only cost pennies on the dollar and will deliver a ROI many times what it cost to prepare in the event of a disruption … many times …
  • a business impact analysis is bound to identify process improvements
    no business does everything optimally … and often the only way you figure this out is through documenting the process and identifying recovery methodologies
  • tangible, documented, business knowledge
    which can then be shared throughout the organization vs. silos that reside in your employee’s head
  • validation of organizational focus
    once you’ve identified the critical processes, you know what you need to focus on … and chances are you’ll discover a few processes that are a lot more critical then you otherwise thought
  • customer requirement
    a marquis customer will only work with you, or stay with you, if they know you can recover as fast as they can in the event of a major disruption

Who’s your favorite Weasel?

It’s that time of year again – when Scott Adams holds his annual weasel poll where you can vote for the weasliest pundit/reporter, celebrity, sports person, politician, industry, organization, company, and country. You can cast your vote now over at the weasel poll.

I think it will be interesting to see who is voted the weasliest company – especially given the on-going scandal plaguing HP and the exploding laptops caused by faulty Sony batteries and who is voted the weasliest country, especially given North Korea’s recent cantankerous stance with regards to the rest of the world and continuing censorship in China.

New Technology Strategies for Supply Chain Management

The first keynote at the Symposium on Supply Chain Management yesterday was Beth Enslow‘s presentation on New Technology Strategies for Supply Chain Management. Over the last 6 months, Aberdeen has produced a slew of reports on Supply Chain that have identified a number of common findings that point the way to a best in class supply chain.

The five key findings were as follows:

  • Compete on Agility
    Traditionally, technology has not had the required agility, but in today’s environment where product cycles are shortening, new product introductions are increasing, and transportation networks are taxed, agility is key if you want to be best in class.
  • Beyond 4-walls Control
    Today, there is more reliance on external partners and processes are often driven externally.
  • Collaboration is Popular Again
    Collaboration can drive more value than reverse auctions. Significantly more value.
  • Reinvigorated Focus on Inventory Management
    Inventory is costly – you have to store it, and many products are perishable with new products always just around the corner.
  • New Technology: SOA & SaaS
    These technologies are more agile and integratable and should be at the foundation of any new initiative you undertake. After all, when 86% of companies require more than 6 months, and 40% more than 18 months, to adapt IT systems to changing business requirements and many on-demand SOA / SaaS solutions can be implemented in 3 to 6 months, this just makes sense.

Amazingly enough, these key findings line up reasonably well with the top four investment priorities for SCM, considering there seems to be a systemic blindness out there to the importance of proper SCM processes and technologies, a topic I’ll discuss further in a later post.

The top four SCM investment priorities identified by Aberdeen were:

  • Inventory Management (63%)
  • Demand Management (S&OP) (63%)
  • Supplier Collaboration / Global Transportation Management (40%)
  • Supply Chain Execution (40%)

In other words, if a company implements these technologies using Business Process Management and Workflow driven on-demand SOA applications with the ability to be configured on a company-by-company basis, they will be multiple steps closer to being able to execute as a best in class company.

Other interesting statistics included the attributes of the best-in-class inventory management companies (which have customer service satisfaction levels over 95% and reduced inventory carrying costs):

  • 45% use multi-echelon optimization systems
       vs 14% for all others
  • 57% have existing supply chain visibility systems
       vs 22% for all others
  • 52% have a forecasting system supporting customer-level forecasting
       vs 23% for all others

… and the on-demand vs. traditional statistics …

Metric better same worse
ROI 64 32 3
Upgrade Ease 66 19 16
Implementation Time 57 34 9
Customer Service Level 46 47 7

… and fact that for certain managed services, up to 50% of companies are somewhat interested and up to 30% of companies are highly interested … which is promising considering that best-in-class PSPs (Procurement Service Providers) can often outperform your in-house staff on categories outside of your core strengths.

Beth concluded with five recommendations that I strongly suggest you keep in mind when selecting new supply chain technologies:

  • Choose SOA-based solution offerings to ease implementation and improve usability and agility.
  • Consider on-demand and managed services.
  • Demand quick implementation and payback. You should be fully implemented within 6 months and see a return within 1 year.
  • Exploit the value of improved supply chain management information internally.
  • Agility! Agility! Agility!

Global Supply, Visibility, and Performance

Not too long ago, I wrote about Aberdeen’s Global Supply Visibility and Performance Benchmark Report in my Global Supplier Visibility and Performance post where I noted that Aberdeen has found that the average company has had an average of two major supply chain disruptions per year and that industry average and laggard companies are only able to meet customer-requested ship dates 40% of the time. I also noted that I would post more of my own thoughts on it later.

First of all, the great Sudy Bharadwaj, your report author, is absolutely and positively correct when he said that spreadsheets and in-house software development are not the answer! Considering the requirements for a real-time GSVP system, and the expertise required to build one, you really should be using best-of-breed software from a best-of-breed provider.

Secondly, your humble report author is also dead-on when he states that any GSVP process must be repeatable year-over-year. GSVP is not a one time quick-fix, and the real benefits only materialize as a result of year-over-year continuous improvement.

Thirdly, you should focus on the top 10% of your suppliers in the initial implementation of a GSVP program and start within a specific product line, business unit, or geographic location. All the big, scary software failure stories you hear about are generally simultaneous-wide enterprise roll-outs of a new system or methodology. Start small, work out the kinks (more often in your processes than your technology if you make the right technology choices), and build up gradually. Before you know it, 90% of your business will be GSVP enabled.

As I indicated previously, there are more great insights in this report and I highly recommend you download a copy before the sponsorship disappears.