Monthly Archives: March 2011

Probabilistic Chips ARE NOT Going to Improve Your Supply Chain Software

It simultaneously humours and scares me every time non-technical folk decide to write about a new piece of technology and how it is going to revolutionize whatever domain they regularly write about. The latest example is this recent piece over on Supply Chain Brain that says one should look for breakthrough technologies this year.

The article, which correctly notes that adoption of ERP systems led to:

  • Stumbling
    as a lack of depth in planning functionality in ERP systems did not lead to integrated planning
  • Failed Promises
    as the ERP is not the de-facto data model for the enterprise or even the end-to-end supply chain
  • A Lack of Agility
    as it has failed to deliver any sensing capabilities that would drive supply chain agility

went on to say that 2011 would be the year when breakthrough technologies using probabilistic chip logic, parallel processing for near-real time response, and artificial intelligence would hit the market. WHAT THE FRACK? Are you kidding me? Did Supply Chain Brain really publish this? Was it written by the Scarecrow from the Wizard of Oz? Let’s examine these technologies in more detail.

  • Parallel Processing
    Your average solution is already taking advantage of this. It’s called a multi-core chip which has been standard in every server for years now. Sure most applications are not written to be multi-threaded or take advantage of multi-cores, but, in order to allow the developers to handle increasing complexity and code-sprawl, most applications are written as multiple modules that are assigned their own processes, and the OS will balance the processes among the cores to speed up overall performance.
  • Artificial Intelligence
    We have been promised (true) AI for 55 years and it has never materialized. What makes you think the next 55 are going to be any different? And how are supply management applications going to deliver a technology that does not even exist yet?
  • Probabilistic Chip Logic
         Obviously the author has no fracking clue what PCL is. Because if the author did, the author would know that PCL, by its very definition, CAN NOT improve computational results. In fact, what PCL actually does is WORSEN computational results. (It will make a decision optimization model worthless since optimization requires millions of calculations and the propagated error would soon be so bad that there will be no accuracy left.) In some applications, like video and audio compression and decompression, small losses in accuracy are not only acceptable but often unnoticeable. It turns out that if you are willing to accept small losses in accuracy, you can do the computations with significantly less energy.
         Most of the voltage required by a computer chip is used to overcome the electrical “noise” created by constantly moving electrons in the chip materials. If this noise is not drowned out by a high enough voltage, then a chip may not be able to accurately determine if an electron flowed through one of its transistors. (Chips produce their bits, 0s and 1s, by measuring the absence or presence of an electron in a transistor.) If the voltage is decreased, the signal-to-noise ratio decreases and the probability of registering an incorrect bit increases. It turns out that the nature of electricity means that voltage (and energy) requirements can be significantly decreased if one is willing to accept an increase in the probability of a bit being mis-read x% of the time, which for some applications (like video and audio signal processing) only results in a small loss of precision.
         Thus, the use of a probabilistic chip can decrease your energy requirements (and corresponding operational costs of computing machinery), but cannot improve the processing accuracy of any applications so using it (although it can speed the chips up slightly since lower voltage utilization means they can run faster without overheating). And, at least for now, one will get (considerably) more speed from parallel processing.

Mobile Supply Chain Management: The Dream Will Take a While to Manifest

A recent article over on the Technology Evaluation Centers site on “mobile supply chain management: the dream is becoming reality” started off by making a great point — ultra-portability still means restricted ease of use and functionality, and even though the release of the iPad by Apple last year began a hardware revolution that opens up a new horizon for supply chain management (SCM) systems for businesses, it’s going to take a while before tablets become common place in the supply chain. While possibilities are opening up for mobile devices now that we’re seeing true touch-screen tablets hit the marketplace, we have to remember that enterprise platforms are typically a few years behind consumer applications, and we’re only starting to see consumer applications use the features of these mobile devices.

First of all, the Android tablets are only starting to hit the market place. Until there are a number of affordable options that match the iPads power, there’s only one tablet option — the iPad, and it’s not really an option when you consider Apple’s closed ecosystem and the fact that any app can be rejected any time for literally any reason.

Secondly, resolutions are not much better than what you find on a small laptop display, which limits the amount of data that can be displayed on one screen. This means that, until the 10″ tablets get better resolution and / or 3D display capability, the analytics and reporting abilities will be limited, and this will limit the usefulness of a tablet for analytics and/or reporting applications.

Thirdly, computing power is limited, so not only are you limited to SaaS platforms, but due to the data requirements, you’re limited to wherever you have good wifi.

Of course, once the Android tablets take off, resolutions improve, wifi is more universal, and more business applications appear that are designed specifically for mobile devices, it will be a different story. But that’s still a few years away.

Implementing VFS: A Beginner’s Guide, Part VI

In our last post we highlighted more of the key issues associated with the seven-step process for Value Focussed Supply as identified in CAPS’ recent report on “Linking Supply to Competitive Business Strategies”, and the issues associated with the middle steps in particular. In this post, we will tackle the rest of the issues that need to be addressed if an organization is going to answer the questions necessary to formulate a good VFS strategy as part of a Next Generation Sourcing effort.

  1. Evaluate and Select Strategic Supply Options
    • Which suppliers have excess capacity, modern equipment, or innovation capabilities that the organization can take advantage of?
    • Will products be built to order, built JIT, or built in bulk and stored at key distribution points? Or will hybrid methodologies be used, where subassemblies are built in economic order quantities, and then assembled and delivered JIT? Will inventory be handled in house, by a 3rd party, or by a partnership?
    • Can the organization change the way the supply market operates or alter consumer market dynamics by way of one or more available supply options?
  2. Identify and Implement Levers
    • Which of the following can change the market dynamics?
      • alternate sources of supply
      • non-traditional markets
      • market / organizational restructuring
      • change of ownership, location, or M&A
      • change in supply base, distribution structure
      • introduction of new competitive tension into the consumer or supply markets
      • a new, segmented, supply chain
    • Which of the following can change what is bought?
      • product simplification or standardization
      • design changes
      • disruptive technologies
      • customer aligned customization
      • demand reduction / elimination
      • innovation on demand
    • Which of the following can change supplier interaction?
      • volume levels
      • investment
      • supplier development program(s)
      • (joint) process integration
      • performance-based rewards
      • target costs / pricing
      • intellectual property management
      • (more) relationship management

Once all of these issues have been addressed, the organization will be in a good position to answer all of the questions required by each step of the VFS process designed to enable an organization to select the right strategies that will create true, long-term, value in the supply chain.

In a future series, we will address how the process can be integrated into a larger Supply Management framework.

If You Trim Your Supply Chain, It Will Grow

In some ways, a supply chain is like a bonsai tree. It must be regularly pruned, shaped, and defoliated if it is to take on an aesthetically pleasing shape that is sustainable in the long term. This is especially true if the supply chain is going to be the foundation of corporate success. As per this article over on Supply & Demand Chain Executive on how “most companies [are] paying a ‘Coherence Penalty'”, companies with very few (one to three) firm-wide strategic priorities are the most likely to … have above average profitability and revenue growth.

Furthermore, if the company’s capabilities — namely the supply chain — support the company’s strategy, profitability and revenue growth will most likely be above average. And if the company is coherent, which is only true for about 13% of companies, it is twice as likely to have above-average profitability.

Thus, since there must only be a few strategic priorities, and since the supply chain must support those priorities, the supply chain must be lean and focussed on those priorities — and those priorities alone. If the supply chain sprawls, it will not be sharply focussed on the strategic priorities, and, chances are, the lack of focus will lead to a sprawl in priorities which will, in turn, lead to a sprawl in strategy. This will cause the company to lose coherence which will in turn stunt revenue growth and profitability.

So keep trimming that supply chain. The reward will be worth it.

Implementing VFS: A Beginner’s Guide, Part V

In our last post we highlighted some of the key issues associated with the first three steps of the seven-step process for Value Focussed Supply as identified in the CAPS recent report on “Linking Supply to Competitive Business Strategies”. In this post, we will tackle more of the issues that need to be addressed if an organization is going to answer the questions necessary to formulate a good VFS strategy as part of a Next Generation Sourcing effort.

  1. Evaluate the Company’s Strategic Options
    Now that the categories that are central to the current and future business plan are identified, the truly strategic categories and products need to be identified.

    • What are the relevant macro and micro factors that need to be considered? Four types of data will be required to identify these:
      1. Customer Focus
        What are the price to value ratio, overall value chain performance metric, and attributes critical to market success?
      2. Purchase
        What are the specs, cost drivers, technology roadmaps, the anticipated rate of (technology) change, usage patterns, product life cycle, and (amortized) annual spend?
      3. Supply Market
        What are the degree of competition in the supply base, pricing trends (and [raw material] cost drivers), cost structures, supply industry dynamics, major users, and government regulations?
      4. Supplier Data
        What are their business strengths, risk exposure, capabilities, and performance levels?
    • What type of analysis can be brought to bear on the data? Value chain mapping? (Should) Cost and Cost Driver modelling? Cost-to-Outcome Analysis? Segmentation analysis? Risk/Reward Analysis? TCO/TVM (Lifetime) modelling? Purchase pattern (trend) analysis? (Competitor) Supply (Strategy) benchmarking? Revenue Forecasts? Economic Forecasts? Scenario Planning?
    • How will truly strategic categories be identified?
      Most critical problems? Highest TCO? Lowest Value to Cost Ratio? Highest margin (potential)? Supply uncertainty and/or risk? Inventory / asset utilization (or lack thereof)? (Market) Leadership requirements?
  2. Set Holistic Value Focussed Goals
    • How will the top priorities be determined?
      Most critical problems? Highest potential ROI? Implementation difficulty (of new strategies)? (Potential) Future impact? Available value contribution from suppliers?
    • How will the goals be set?
      Where will the primary focus be: the organization, the supply base, or the distribution partners? How will the various goals be weighted: metric improvement, revenue improvement, cost reduction, sustainability, and/or future value?
    • How will the performance levels be tracked and measured?

Our next post will highlight the remaining key issues that an organization must address to insure that it heads down the right VFS path.