Monthly Archives: June 2009

Listen to Gene and Seize Your Supply Chain Opportunities

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Gene Tyndall, editor of CSCO Insights, recently penned a piece on how the recession offers chief supply chain officers opportunities as well as challenges which I believe is a must read because I do not think enough organizations are taking advantage of the opportunity provided to them to become the organizational superstars. Gene, who recommends that organizations pursue smart cost reductions, indicates that these smart cost reductions are likely to be found in your:

  • Overall Supply Chain

    As many companies have found, going global typically adds unexpected costs, increased time, and risk. However, innovation and intelligence focussed on the problem by an experienced organization can often reduce these costs, time, and risks.

  • Supply Chain Network

    Production and logistic locations add costs in the form of fixed capital, operations, taxes, leasing, and SG&A expenses to the business. Rationalizing the global network can reduce these costs.

  • Total Delivered Cost

    The total delivered cost, which includes freight, duties, taxes, and logistics, can often be reduced through better logistics, duty, and tax planning.

  • Logistics Outsourcing

    This industry has rapidly matured over the last decade, and a 3PL provider with an appropriately designed network might be able to save you money.

  • Supply Chain Technologies

    While traditionally thought of as long-term cost reductions, there are near-term savings potentials through today’s rapid implementations, improved visibility, powerful analytics, and greater alignment of technology to the business. Especially if you go pay-as-you-go SaaS. e-Sourcing will allow you to identify potentially lower-cost and higher-quality sources of supply, decision optimization will allow you to define the allocation with the lowest cost that meets all of your business requirements, contract management will allow you to monitor and ensure provisions and pricing are being met, e-Procurement will automatically do m-way matching and flag invoices that aren’t at contracted amounts or duplicate billings, etc.

Industry Week’s Mega Checklist for Improving Cash Flow in Your Supply Chain

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Industry Week recently an article on how to optimize your supply chain to improve cash flow that was pretty much a 21-point mega cash-flow optimization checklist for manufacturers that need to improve their cash-flow, which starts with EBITDA (earnings before interest, taxes, depreciation, and amortization) optimization. The suggestions offered were:

  • Business Process Optimization

    Reduce direct variable process costs with better information flows that are designed to decrease order management costs.

  • Direct Effort Optimization

    Decrease direct variable costs by increasing the value-added-to-nonvalue-added ratio through network and production optimization.

  • Efficient Utilization of Tools

    Lessen direct variable costs by ensuring the right number of tools are available, adequately utilized, cared for, and properly stored.

  • ERP & PLM

    Diminish divisional ERP/PDM/PLM software fixed costs by rationalized all of the various ERP, PDM, and PLM instances in use.

  • Indirect SG&A Optimization

    Constrict variable headcount costs through processes and procedures as well as organizational and software solutions.

  • Logistics Optimization

    Shrink direct variable costs with better packing and storing that reduces waste and overhead.

  • Machine Optimization

    Compress direct and indirect variable costs by optimizing machine utilization and maintenance schedules.

  • Network Optimization

    Ebb fixed costs by reducing the number of redundant facilities.

  • Obsolescence Cost Mitigation

    Wane direct variable costs through better forecasts and inventory management.

  • Lean your Plant Layout

    Subside fixed costs by reducing the space needed for the same output.

  • Product Management Optimization

    Abate indirect variable costs by improving product-use instructions.

  • Production Optimization

    Contract direct variable costs through cycle time reduction.

  • Quality Control Assessment of Production

    Curb indirect variable costs by minimizing failure rates.

  • Research and Development Optimization

    Curtail indirect variable costs by reducing the need for engineering support staff.

  • Risk Management

    Lighten indirect variable legal costs by assessing potential business risks.

  • Safety Audits, Training, & Insurance Spend Management

    Lower indirect variable costs by auditing the production area and minimizing safety issues.

  • Spend Management

    Restrain direct variable costs by evaluating existing assets to realize consumption cost savings.

  • Supplier Audit

    Check indirect variable costs by ensuring material and information flows with the supplier are optimized to minimize failure and rejection rates.

  • Supply Chain Management

    Slash direct variable costs by developing optimal just in time structures with demand planning.

  • Supply Chain Management Optimization

    Minimize direct and indirect variable costs by focussing on financial, material, and information flows in planning/scheduling, logistics, and procurement.

  • Transportation Management

    Narrow direct variable costs by optimizing shipment lot sizes, consolidating shipments, and improving freight terms.

Purchasing Blues

Editor’s Note: This is a reprise of “Summertime Blues“, which was originally posted on July 7, 2007.

Well, it’s time to raise a fuss

  and it’s time to raise a holler

About diminishing returns

  from the corporate dollar

I just heard from my boss

  who governs me

If I don’t save the cash

  he’s gonna fire me

Sometimes I wonder

What I’m gonna do

If there ain’t no cure

For the purchasing blues

My CFO he told me to

  go beat on the supplier

That his margins must be high

  while ours are under water

So I talked to the supplier

  he said costs were elevated

He was losing all his money

  at the rates we had created

Sometimes I wonder

What I’m gonna do

If there ain’t no cure

For the purchasing blues

So I found a consultant

  told her about my problems

And she went and discovered that

  the supplier was just stalling

Material costs were falling

  and the exchange rate was fair

I had wasted all my time

  just pulling out all my hair

Next time I have a problem

  I’ll find me a solution

I’ll find a sourcing expert

  and get my retribution

No more will I wonder

  What I’m gonna do

I’ll find me a cure

  For the purchasing blues

Don’t Fall For The Innovation Myths

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An article this past winter from Industry Week that astutely pointed out that industrial companies are not innovating enough also pointed out that many companies believe the following innovation myths that are, of course, not true.

  • Myth 1: Innovation only applies to technology and products
    Don’t forget process, customer service, and the consumer experience! There’s lots of room for innovation there.
  • Myth 2: Innovation is a long-term project.

    Innovation really is about creating and capturing new kinds of value in whatever way is most relevant to a particular industry over a range of timeframes. While some innovation projects will take time, some will happen quickly.

  • Myth 3: Innovation happens by chance.

    While innovation sometimes happens by chance, it is, in fact, a discipline and not a random chaotic process or black box.

Managing Supply Chain Technology Challenges

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A recent article in Supply Chain Leader on synchronizing supply chain applications with continuous change had some good tips on how to manage the challenges that come with any technology deployment, including technology deployed to support the supply management organization. As the article notes, even the best designed applications won’t deliver with a deploy-and-do-nothing approach. Value comes from continual use, and continual upkeep, and this only happens if you conquer the challenges and get the adoption levels you need, quickly.

According to the article, these are four of the biggest challenges and the best ways to combat them:

  • Operational Challenges

    Retaining operational knowledge is a challenge for the best of organizations. A continual commitment to training and employee process ownership is key.

  • Evolutionary Challenges

    Continuously changing demand requirements, competitive pressures, and supply arrangements put a strain on even the most agile supply management departments. They key to success is to continually monitor application usefulness, and when performance starts to slide, refine the models, data, and application thereof. This will require regular maintenance and updates for an on-premise application, or regular product direction councils with your SaaS vendor to make sure the application stays as relevant as the day you bought it.

  • Organizational Challenges

    Many applications are implemented to respond to certain business needs, but priorities shift over time. As attention gets diverted, applications lose executive sponsorship and the (financial) support required to keep them relevant. In order to make sure this doesn’t happen, current and potential application usefulness needs to be reviewed every year along with the potential savings that could be realized if the application obtained the necessary support. Then, a business plan that presents the ROI can be prepared to secure necessary funding. And if the ROI isn’t there, you know it’s time to replace the application with a more appropriate one, and you can focus your efforts on building that business plan instead.

  • Infrastructure Challenges

    As the technology landscape continues to evolve, new hardware and middleware releases bring new technology and innovations to the table. Every upgrade of infrastructure opens questions of compatibility, both backward and forward, requiring business applications to be upgraded. But if you keep track of your current compatibility requirements in a compatibility matrix, and analyze upgrade requirements before a planned upgrade, you can insure that the infrastructure environment evolves to support your application needs.