Monthly Archives: March 2010

Are We Throwing It All Away?

Someday you’ll be sorry
Someday when you’re free
Memories will remind you
Of what was meant to be
But late at night when you call for help
The only sound you’ll hear
Is the sound of your voice calling
Calling out for help

Just throwing it all away
Throwing it all away
And there’s nothing that I can say

With apologies to Phil Collins, that slightly modified verse just keeps playing over and over again in my head. This recent article in Industry Week on optimizing outsourcing relationships for today’s market realities has me shaking my head. Manufacturers signed contracts to outsource more than $10.4 billion worth of IT and business process services in the last six months of 2009. 10.4 Billion! That’s an awful lot of services being handed out and an awful lot of knowledge at risk of disappearing. Not that I have anything against augmenting your capabilities with those from best-in-class organizations, but the way most organizations approach outsourcing, where it’s just thrown over the wall and forgotten about until all knowledge of the service disappears from organizational memory, scares me.

And ever since I saw that ridiculous article that said we should outsource thinking, I’m on edge. We’re on the precipice of a new age, but if we’re not careful, it will be a very dark age in American history. Innovation got us here, and without innovation, which depends on thinking, we’ll fade away.

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Stay Hip with the Program with Hiperos

Last year, I told you how you could Get Hip with Hiperos, an “Extended Enterprise Management” platform that allows you to manage your risk, performance, compliance, sustainability, and supplier information through a single portal that they dubbed R3. Knowing that you can’t stay still in the quickly evolving supply chain space (and knowing that there were lots of point players with deeper solutions in each), they’ve been hard at work on R4 since that time. Last week, I had the chance to do a detailed review of R4, and am pleased to say that they did a great job and that a number of significant improvements in R4 greatly increases the value the solution offers.

In particular, five improvements in the Hiperos R4 platform commanded my attention:

  • In-Line Collaboration
    It’s a pretty simple idea, but the fact that you can associate a discussion thread with any element of the system is quite powerful. No longer do you have to search separate discussion forums or, even worse, try to track down out-of-system e-mails to find out what happened, or why part of a questionnaire is still blank, or why a template was modified.
  • New Workgroup Capability
    Hiperos recognized that true performance, compliance, and sustainability is collaborative, that single-directional Q&A is not collaboration, and built in a new discussion-based workgroup capability that lets buyers, suppliers, and other involved parties collaborate through a centralized, integrated environment.
  • The Program
    Since compliance, risk management, sustainability, and performance all revolve around programs designed to satisfy a regulatory initiative, emerging threat, or a green goal in the real world, in the Hiperos platform, it’s now abundantly clear that everything revolves around the program, which is very easy to define and manage. There are three ways to create a new program. Instantiate it from a template, load it from a properly structured Excel file, or define it from scratch in the tool — which will walk you through its creation step by step in a simple 7-step process. (Outline Detail, Organizational Units, Questions & Documenation Requirements, Dates, Individual Organizational Unit Reqirements, Measurements, and Reviewers.)
  • Out-of-the-Box Compliance Programs
    They have over 60 compliance templates built in, with heavy support for the finance (BITS, etc.) and health-care sectors (HIPAA, etc.).
  • Supplier Focus
    The supplier portal is almost as extensive as the buyer portal. Suppliers get their own set of dashboards, which they can do deep reporting dives into to find out where the measurements came from and how they were calculated, relationships, which they can manage, programs, which they can track, and communities. Truly enabling the supplier on your platform goes a long way towards supplier adoption. The only functionality suppliers don’t get is Supplier Information Management (SIM) and Application Administration (unless, of course, they buy the platform themselves).

The system also includes a number of other improvements, particular in the area of SIM (where you can capture a lot more information in out-of-the-box templates and define your own data elements to be tracked), reporting (where, in addition to dozens of reports in each area that you can use out of the box, you can also create your own reports using an improved wizard that walks you though a simple 6-step report definition process), and built-in KPI and SLA templates available for your use (there are over 6,000 that can be accessed system wide). Furthermore, the dashboards are more than just pretty gages, they also contain a quick summary of your action items (open evaluations, pending approvals, etc.); the relationships you are responsible for; and current risk assessments, in-process supplier profiles and compliance controls. And while other providers might still go deeper in specific areas (though none go deeper in all areas), the breath of integrated capabilities put them in a fairly exclusive club as I have only seen applications displaying a similar breadth and focus in enterprise management from Aravo, CVM Solutions, Rollstream, and, in the healthcare and agency management verticals, Vendormate and Decideware.

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Three Tips to Get Strategy Right

A recent blog entry on strategy on the morph from The Conversation over at the Harvard Business Review had three great tips on how to get your strategy right in these turbulent times that need to be highlighted.

  1. Distribute the right to make strategy throughout your organization
    Strategy needs to be a collective effort — not an edict handed down from on high — and people need to be empowered to make the right decisions.
  2. One process does not fit all decisions
    Some processes need to be long and drawn out because the decision will affect everyone at all levels of the organization … others, that involve decisions that will only affect a single department, can be made more quickly. The key is knowing what process to use when, and distributing that knowledge throughout the organization.
  3. Resources — money and talent — needs to move as fast as decision making
    A strategy needs to be executed. Otherwise, it’s just another pointless decision.

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Algorhythm: Still Pounding Out the Optimization Rhythm on the Tabla (Part I)

Since I last covered Algorhythm and their supply chain optimization rhythm, they’ve been pounding out a steady beat and extending the breadth and power of their unique supply chain optimization platform. Not only do they have extensive optimization capabilities in production planning, network planning, and logistics planning — with specialized solutions for oil, steel, and packaging, but they now have a best of breed multi-echelon inventory optimization capabilities and a best of breed distribution network design optimization platform that can take multi-echelon inventory requirements into account and allow you to optimize your distribution network around your detailed inventory requirements, which can be specified at daily demand levels if you desire. This is a very powerful capability that sets their platform apart from the other solutions on the market, as most of the other supply chain optimization platforms focus on inventory, or network design, but not both simultaneously.

To understand just how powerful their new solution is, we have to start by discussing how hard it is just to optimize inventory. There’s a lot more to inventory than just the carrying cost that is recorded on the books. There’s the cost of replenishment, the cost of a stock-out, and the cost of missed service levels, for starters. If your planning is poor and you’re always having to rush inventory, or if you’re not maximizing truckload volume, you’re spending a lot more on inventory replenishment than you should be. If a stock-out results in lost sales, that’s missed revenue opportunities which go straight to the bottom line. And if you keep missing your service level targets, your customers might just find a new source of supply at contract renewal time. (And on the flip side, if you are constantly carrying too much inventory to make sure you don’t miss service levels, your carrying costs will go through the roof.)

To optimize inventory, you have to take into account the many layers of your distribution network: factories, (first tier) national warehouses, (second tier) regional / provincial warehouses, and (third tier) local warehouses; storage space at each location; valid flows from one tier to another, as well as valid flows between nearby warehouses at the same tier; transportation options available; stores or end-use facilities that require the SKUs; the individual SKU demand patterns (and [expected] forecast accuracies); lead times (and variabilities); service levels; and costs associated with storage, transportation, and stock-outs at various inventory levels. (Transportation costs in particular will vary.)

This is because you don’t need the same service level at every node in the network to achieve that service level at an end customer location, especially if a customer location can be serviced by multiple distribution centres. For example, if an end customer location can be serviced by three different distribution centres, you can achieve a 98% service level (defined in terms of SKU availability) as long as each individual distribution centre has a 75% service level (as the chance of all three distribution centres being simultaneously out of stock and unable to service the customer location is 0.25 * 0.25 * 0.25 or 1.5625%). Furthermore, as the lead time from each DC to each customer location will vary depending upon distance, transportation options, and local routes, and so on, the inventory levels at each DC can vary and still allow you to meet your target service levels, which can in fact vary by location (as you’ll want a higher service level at a high-profit location than you will at a low-profit location as service levels drive inventory which drive costs). In fact, the deeper you dive into inventory, the more complex the cost equation becomes and you see that you really do need to take into account all of the elements supported in the Algorhythm Xtra Sensory Inventory Optimizer, inventrhythm, if you truly want to optimize your inventory costs.

But this is just the beginning. Since your distribution network design will ultimately dictate your inventory costs, to truly optimize your inventory costs, you have to simultaneously optimize your network (to the extent that you are able). Algorhythm‘s platform can do this, and we’ll discuss what’s involved in Part II.

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New and Upcoming Events from the #1 Supply Chain Resource Site

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis — and it will continue to do so.

The following is a short selection of upcoming webinars and events that you might want to check out in the coming weeks:

Date & Time Webcast
12:00 GMT-05:00/CDT/EST
Collaborative Planning, Forecasting, and Replenishment in the Global Supply Chain
  Sponsor: PMAC
14:30 GMT-05:00/CDT/EST
Connecting the Dots – Identify, Negotiate and Realize Savings
  Sponsor: Zycus
13:00 GMT-05:00/CDT/EST
Cirrus Logic Improves Its Supply Chain Planning and Execution Capabilities
  Sponsor: Supply & Demand Chain
14:00 GMT-05:00/CDT/EST
Results of the 26th Annual Logistics Management Salary Survey
  Sponsor: Logistics Management
12:00 GMT-04:00/AST/EDT
A 3-Part Plan For Working Smarter In Retail – an IBM and Retail Solutions Online Webcast
  Sponsor: Integrated Solutions for Retailers
14:00 GMT+10:00/AEST
Project Portfolio Management: Gain Visibility and Control Webcast
  Sponsor: Oracle

Dates Conference Sponsor
2010-May-10 to
CIPMM 2010 National Workshop
   Montreal, Quebec, Canada (North-America)
2010-May-10 to
FMI 2010
   Las Vegas, Nevada, USA (North-America)
2010-May-12 to
Predictive Analytics Summit
   San Francisco, California, USA (North-America)
IE Group
2010-May-12 to
NTMA/PMA Contract Manufacturing Purchasing Fair
   Irvine, California, USA (North-America)
2010-May-16 to
Fundtech Insights Conference 2010
   Santa Monica, California, USA (North-America)
2010-May-16 to
WEC Annual Conference
   Anaheim, California, USA (North-America)

They are all readily searchable from the comprehensive Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know you were looking for!

And continue to keep a sharp eye out for new additions!