Category Archives: Supply Chain

EyeForTransport Supply Chain Security Report

 

With the recent news about the terrorist plot against trans-atlantic airliners once again reminding us of the fragility of our supply chains – I thought it was timely to let you know that you can receive an up-to-date benchmarking report about the latest trends in supply chain and cargo security – Over 300 industry executives were polled on their views on this topic, and you can read the results of the survey by downloading the report now from EyeForTransport.

This report has been written in conjunction with the 5th Cargo Security Forum which is taking place in Washington DC on September 6-7 at the Washington Hilton Embassy Hotel — see the conference website for full details of the event.

Dave Thomas
eyefortransport

Demand Driven Supply Networks IV: What SAP has to say

Hot off the SAP presses is a new white paper called “Demand-Driven Supply Networks: Advancing Supply Chain Management” (@ KnowledgeStorm, Registration Required) that notes that being “demand-driven” requires an instantaneous sensing of customer demand and an immediate supply chain response to get the product to the customer when the customer wants it and that the critical element is collaboration among partners in the supply chain. Furthermore, it notes that Demand Driven Supply is the next step in the advancement of supply chain philosophy and translates into real money on the bottom line. Specifically, according to customer studies, analyst comments, and industry polling, SAP determined that consumer products companies can

  • increase fill rates by 3% to 10%
  • increase production efficiencies 1% to 5%
  • decrease freight costs 5% to 15%
  • improve personnel productivity 7% to 12%
  • reduce obsolescence and waste 35% to 50%
  • reduce inventory levels 7% to 15%
  • improve asset utilization 10% to 15%
  • decrease cash-to-cash cycle 10% to 30%
  • reduce deductions by increasing perfect order fill
  • make better use of promotional funds based on more accurate information
  • increase the effectiveness of product introductions (and phase outs)

No surprises, since this is more or less what AMR and Aberdeen have been preaching for years, but what is surprising is that SAP is not only embracing DDSN, but already has solutions that enable DDSN by combining existing technology, such as advanced planning and optimization, with the following capabilities:

  • Dynamic Sales and Operations Planning (DS&OP)
  • Global Data Synchronization
  • Radio Frequency Identification (RFID)-enabled processes
  • Point of sale-based analytics
  • Integrated Trade Promotions Management
  • Responsive Replenishment
  • Multi-tiered collaboration and shared scorecards
  • Adaptive Manufacturing
  • Event Management
  • Innovation and Design Collaboration

… and doing it while DDSN is still relatively early in its lifecycle. Considering SAP usually plays it safe and introduces new technology later on the innovation curve, this is a bit of bold move for SAP.

Although the paper does not cover anything that hasn’t been covered before, it does a good job of covering many of the key points. For instance, it notes that managers can respond proactively to deviations caused by internal and external events instead of spending their time gathering information, responding to problems, or preoccupied by ancillary tasks under demand driven supply. And more importantly, it notes that while manufacturers have always believed that long production runs lead to higher profitability, this is no longer the case since production runs that are theoretically less efficient may actually post a better ROI with DDSN because of the ability to shift manufacturing quickly to the most profitable products. Finally, DDS spans the entire consumer products supply chain and seamlessly connects all facets o the network. The future demand driven organization integrates all supply and demand elements to provide a seamless flow of real-time information to support valid decision making.

In addition to rehashing the definition of what DDS is, the SAP whitepaper also provides four steps that an organization can use to begin its journey.

  1. Harmonization
    standardize processes, data, and technology
  2. Advanced Planning
    integrate key supply and demand elements including logistics, production, new-product introduction, and trade management, refine forecasting techniques, and implement advanced planning and scheduling based on optimization
  3. Increased Responsiveness
    focus on the network by driving forecasting and visibility past the distribution center to the source of demand
  4. Adaptability
    refines the integrated network capabilities to adapt effectively and quickly to changes

These steps mesh will with our previous recommendations for each stage of the supply chain, which can each be classified as harmonization, advanced planning, increased responsiveness, or adaptability.

All in all, it’s a good introduction to demand driven supply and worth a quick read.

(Note: Parts I (An Introduction), II (Stages and Implications), and III (Challenges and Implementation) were posted on e-Sourcing Forum [WayBackMachine] this past weekend.)

Customer Data Management

About the same time Aberdeen released “The Spend Intelligence Benchmark Report: Turning Data into Action”, which we discussed last Sunday in There’s No Such Thing as Spend Intelligence, Aberdeen also released “Customer Data Management: How Leaders Attain Tangible ROI” that found more than 85% of survey respondents plan to invest in Customer Data Management solutions within the next 24 months.

Why? Maybe it’s because Aberdeen research reveals use of timely, complete, and accurate information leads to improved customer service levels, reduced operational costs, increased revenues, and higher customer satisfaction and retention rates. In addition above average performers attained >20% annual improvements in these key metrics:

  • Customer retention rates (84%)
  • Data accuracy / match rates (76%)
  • Partner/customer satisfaction rates (68%)
  • Revenues (56%)

Or maybe it’s because good customer data leads to good metrics and good forecasts, and creating the right product at the right time in the right quantity is one of the keys to overall supply chain success. After all, the wrong product results in lost opportunity, an insufficient quantity results in lost sales, and the wrong time results in stale inventories. Moreover, this hurts your customer as well as you, who might leave you for another provider.

Regardless, customer data management is important, and it has a lot in common with the development of a spend intelligence solution, to use Aberdeen’s terminology. Consider the top three challenges identified by the Aberdeen report:

  • Extracting & Normalizing Customer Data Captured from Multiple Sources
  • Verification of Data Accuracy or Completeness
  • Extracting & Normalizing Customer Data Stored in Legacy Data Marts

These are essentially the biggest challenges in implementing a good spend visibility solution

  • Extracting & Normalizing Spend Data Stored in Multiple Systems
  • Verification of Accuracy and Completeness
  • Extracting and Normalizing Legacy Spend Data for Historical and Trend Analysis

Therefore, if you are considering an enhanced spend visibility solution and an improved customer data management solution, you might want to take advantage of the synergies and tackle both projects simultaneously. Chances are, you’ll need to integrating a lot of the same feeds and systems, so you might as well tackle all of your data needs at the same time.

Aberdeen’s Global Supply Chain Benchmark Report

Aberdeen Group’s “Global Supply Chain Benchmark Report: Industry Priorities for Visibility, B2B Collaboration, Trade Compliance, and Risk Management” report, released in June, contains an alarming statistic, especially in today’s information technology driven networked world. An astounding 90% of all enterprises report that their global supply chain technology is inadequate to provide the corporate finance organization with the timely information it requires for budget and cash flow planning and management.

Furthermore, 79% of large companies say that the lack of supply chain process visibility is their top concern. Considering that, as we pointed out in yesterday’s post, understanding your supply chain is key to success, this is a serious concern. After all, if you have no visibility into your supply chain, how can you map it out and understand the real impact of any decision you might make with respect to your supply chain?

Fortunately, this excellent report also contains some solid recommendations for action to get you started.

  • Extend supply chain visibility.
    Move to exception-based management of global supply chain activities and slowly increase the number of milestones you monitor. Start executing against a longer-term roadmap that adds escalation policies, inventory pipeline visibility, mobile asset management, root cause analysis, and financial settlement and financing integration.
  • Scale business-to-business collaboration.
    The most productive collaboration processes are collaborative forecasting, inventory management, and replenishment, so focus on scaling those first.
  • Go corporate-wide with trade compliance.
    Move toward a single corporate-wide trade compliance platform and comprehensive origin and trade agreement management. Smaller companies should look to on-line tools for restricted party screenings and total landed cost calculations.
  • Institutionalize risk management.
    Make risk assessment and contingency planning part of your standard operating procedure. Institute supplier remediation programs for high-risk providers and increase logistics and supply agility to improve recovery capabilities.

Of course, before you can improve collaboration, and identify key milestones, you need to know where to begin. This is where next generation spend analysis systems that provide true visibility into your spend and the inter and intra organization and product relationships, often referred to as spend intelligence systems, and described in Aberdeen Group’s “The Spend Intelligence Benchmark Report: Turning Data into Action” that also came out in June, play a significant role.

This report also had some solid recommendations to get you started on the road to improved visibility.

  • Securing Executive Sponsorship.
    This is critical for just about any major undertaking, especially one involving an extensive information technology investment. If you don’t have a project champion who can make the case to senior executives, find the one who can offer the most clout.
  • Building a cross-functional team for enterprise-wide spend intelligence.
    Have an intelligence-gathering plan and key stakeholders in place to draw up the goals and expectations of a spend intelligence program.
  • Demonstrating quick hits by assessing spend intelligence opportunities in one or two spend categories.
    Showing the results of a small pilot program can help make the case with senior executives.

Support has to come top down, everyone needs to be involved, and you have to start small and work your way up. But the effort is worth it. After all, the report found that best in class companies reduced sourcing cycles by 19 to 25% while increasing contract compliance rates by 31 to 35%.

The Secret of Supply Chain Management Success

Back in May, Jaume Ferrer and Johan Karlberg of Accenture published “Supply Chain Management: How to Build a Successful Global Operations Model” in the Accenture Outlook Journal where they noted that despite the facts that 93% of respondents to a recent survey reported global operations to be a central component to their business strategy and 97% were attempting to upgrade their global operations, only 50% of respondents reported successful implementation of critical capabilities. (The results were based on 305 online interviews with sales, marketing, and supply chain executives and almost equally split between the United States and Europe, and are thus statistically significant.)

According to the article, the reason for the lack of success was that most companies have been attempting to establish a global footprint by working through functional or regional silos when they should be taking an integrated, global approach. Brining together the worlds of product, market growth and operations strategy is a prerequisite to success in both new and existing markets. Companies that attempt to penetrate new markets without a specific product portfolio redesign and without rethinking channel approaches, make-or-buy strategies and back-office capabilities are in for a rough time.

In addition, the article notes that although there is non one-size-fits-all approach to global supply chain management success, there are six key capabilities that are required at the foundation level.

  • An effective global, integrated sales and operations planning process for key markets to ensure customer service, time-to-market, inventory and cost objectives.
  • A procurement, manufacturing, distribution and R&D network designed to deliver a quality product, in the scheduled time frame, at a target cost-of-goods sold and time-to-market objectives.
  • Tight links with customers and suppliers to enable improved demand visibility, customer service, and reduced working capital and cost-of-goods sold.
  • Logistics partnerships to ensure efficient and time-effective low-cost-market sourcing and penetration.
  • Effective supplier recruitment, certification and alignment programs to ensure quality and service objectives in addition to cost.
  • A go-to-market strategy (product portfolio, channel, network, make or buy) for emerging markets.

In brief, integrated sales and operations planning, procurement-based manufacturing and distribution R&D network, tight-linkages with partners up and down the chain, logistics partnerships, effective supplier management programs, and a go-to market strategy. It certainly sounds like it covers all of the bases, right?

Not really. Although each and every one of these elements is necessary for a successful global supply chain, just like each and every one of these elements is necessary for a successful regional, or even local, supply chain, there is one implicit, core foundation, element that is missing.

Understand your supply chain.

Before you begin any transformation process, you should fully understand your supply chain. And by this I mean that you should have your supply chain fully mapped out from sources (suppliers) through to sinks (retailers and customers) at multiple levels of detail and from multiple viewpoints. For example, you should have a distribution map that maps the primary routes and transportation methods from your suppliers to your plants and from your plants to your customers. You should have a process map that maps the flow of materials as they enter your facilities to finished products. Etc. The distribution map should detail the third party logistics carriers used and usual transportation times. The process map should detail the equipment used, the business units involved, and the process times.

This way, you can fully determine the ramifications of a potential change before you make it and insure that every affected party is appropriately dealt with. For example, before you switch to a new supplier, you could determine that production is going to need more lead time, you are going to have to find a new third party carrier, and the impact on your cost models. You could get change specific feedback from sales and marketing with respect to the expected lifetime of the product. You can much more easily work out the impacts and required changes with respect to the six core elements of success outlined in the Accenture article. After all, they key to reaching your destination efficiently is to know where you are starting from.