Category Archives: Supply Chain

Supply Chain Disaster Lessons

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Over on Supply Chain Digest, who recently updated their list of the “top supply chain disasters of all time”, you can find a short article chronicling some of their “lessons from supply chain disasters”. Simply put, the key lessons were as follows:

  • “Big Bang” Go-Lives are Risky Business
    Despite the fact that the risks of this approach are well documented, this approach is still taken all too often.
  • Pioneers Get Arrows in the Back
    Being the first increases your odds of failure dramatically … whether it’s a new technology, new methodology, or new market.
  • Do Not Ignore Early Warning Signs
    Just about every disaster post mortem uncovers dozens of indications of emerging problems that were ignored. These warnings are usually ignored or minimized because someone doesn’t want to fess up that things are not going as promised.
  • Avoid hard cut-offs/transitions
    Many project disasters are caused by hard deadlines. Hard deadlines, especially if the project schedule is too tight, are often the largest contributor to project failure.
  • Beware the ROI trap
    Many projects go south because they whittle away key elements for success just to make an (unrealistic) ROI expectation.

And they must be taken to heart. I’ve seen many projects, and companies, fail because they didn’t heed these lessons.

Five Great Ideas for Supply Chain Value Generation

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A recent Supply Chain Management Review article presented “10 ideas for value generation” that were quite good. Here are five in particular that you should not ignore:

  • Adopt a “Follow the Sun” model for skill development
    If you’re going to have a global IT or Services support base, use it wisely. Properly globalizing your support supply chain will save you money and create value. As the article notes, it can allow you to tap into the English speaking skills in the Philippines, the tax advantages of Ireland, and the technical skills of India and deliver 24/7 support.
  • Focus on real-time updates to increase agility
    Static forecasting without dynamic updates is passe. In today’s dynamic environment, you need to dynamically adjust the plan based on real-time market signals such as point-of-sale data, purchase order activity, and competitive market factors. Although you can’t function without good forecasts, even the best laid plans will go awry, and they’ll do so before you know it if you don’t monitor against them and update them regularly.
  • Make your supply-chain, and your company, value chain-centric.
    The supply chain function in most corporations is initiated and integrated at the time of new product commercialization and continues until the product is shipped. For supply chain to truly add value, it needs to be involved at the stage of conception to help the design team select designs with sourceable components and to select those designs that use the components with the lowest cost and highest quality.
  • Shift to a product-and-services management focus.
    Product excellence and direct cost savings are great, but services (still) provide a huge untapped opportunity. Furthermore, value-added services can create “stickiness” with their channel partners.
  • Utilize on-demand processes and associated supporting technology.
    This approach will allow for the optimal usage of capital expenditures while leading to higher than average adoption rates of the process in order to derive maximum benefit. And there is a wide selection of e-Sourcing, e-Procurement, e-Logistics, and Analytics solutions to choose from.

What If Your Supply Chain Software Vendor Goes Bust?

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A recent article in Logistics Viewpoints, the ARC Advisory Group Blog, asked a very important question given that many of the smaller vendors in this space are not on the solid footing they once were — What If Your Supply Chain Software Vendor Goes Out Of Business?

It’s a good question, especially since you’ll be in bad shape if you haven’t negotiated perpetual rights to not only the application but the code-base if you’re using a hosted solution and the vendor goes under or if you haven’t negotiated 24/7/365 full data access if you’re using a SaaS solution with mandatory notices before ceasing of operations, as I have noted you must do on several occasions.

In the first case, unless you happen to have an A1 development team in-house who can maintain the code base and customize it to your liking with little impact to your overall IT budget (which is likely not the case for 99% of non-IT supply chain companies), you’re going to have to migrate to another solution. If you suspect your vendor is going to go bust, and see the gradual warning signs of multiple layoffs, lack of solution updates, increased turn-around time on issue resolution, lack of insight into the roadmap, and the run-around when you try to inquire into their financial health with (what’s left of) senior management, then you need to start evaluating your options. If you start early, you can analyze your options, find the best one, and develop a staged migration plan that will minimize interruption to your day-to-day operations. If you don’t, you’ll be relying on expensive third party maintenance and prayers to keep you running until you can accomplish a stressful, organizational wide, all-at-once changeover.

In the latter case, you still have to migrate to a new solution, but if you negotiated full data access in a standard format, it’s just a matter of selecting the next best SaaS solution, loading all of your data, and then hiring a third party integrator to re-create any linkages to your current applications for automatic data exchange. You’ll have extra work while you manually export and import data until the new linkages are live, but since you’ll (again) negotiate full data access and the ability to export and import what you need, when you need it, with a bit of training and documentation, the interruption to your staff’s daily routine should be moderate at most.

Why Do We Still Have The Seven Timeless Challenges of Supply Chain Management?

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A recent article in Supply Chain Digest listed “the seven timeless challenges of supply chain management”, as described by Dr. J. Paul Dittmann, the Director of the Office of Corporate Partnership at the University of Tennessee. While I have to agree that these challenges are “timeless” in that we (needlessly) see them again and again and again, I don’t understand why … since all of them are solveable with today’s technology. More specifically:

  • Too Much Product Complexity
    Most companies have too many SKUs, and, to be precise, too many underperforming SKUs. But a good “spend analysis” with a modern data analysis package, which includes profit and loss data, can easily identify these SKUs which can be phased out and eliminated when contracts end.
  • Too Much Slow-Moving and Obsolete Inventory
    While good forecasting and demand planning can never eliminate obsolete inventory, a regular “profit” analysis that factors in the carrying cost to date and current price point makes it easy to identify when it costs more to hold on to inventory than to get rid of it at a discount, making it an easy decision from a loss-prevention perspective.
  • Supply Chain Considerations Not Part of the Product Design Process
    Simply do a total cost of ownership in the design phase and your critical supply chain considerations come into play right away.
  • No Supply Chain Strategy
    This is an easy fix. Sit down and define one.
  • Ineffective Matching of Supply with Demand
    With a slew of (near) real time supply chain visibility solutions on the market, all you have to do is implement one.
  • Physical Network Problems
    There are a number of strategic sourcing decision optimization platforms on the market that can perform detailed network analysis at very reasonable price points. Get one, and if necessary, get the consulting help to do it right. A few hundred K on a network optimization project can easily save you a few million.
  • Global Issues and Outsourcing Problems
    With a number of expert niche consultancies and deal architects that are very affordable, this problem is easily solved as well.

The True Costs of a Counterfeit Supply Chain

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I know this is Norman Katz’s area of expertise, and while I thoroughly intend to allow him to lead most of the discussion on this topic in his new column here on Sourcing Innovation, ISM’s e-Side Supply Management recently ran a great article by Robin B. Gray Jr., the Executive Vice President of the National Electronics Distributors Association that had some great facts, and tips, I just couldn’t ignore. Here’s the jist:

  • Counterfeiting and IP piracy amounts to 250 Billion a year (FBI),
    resulting in lost sales totaling as much as 600 Billion (WCO).
  • Counterfeiting and piracy have resulted in the loss of 750,000 jobs in the US alone. (CBP)
  • Eliminating counterfeit parts could create 250,000 jobs in the automotive industry alone. (FTC)

According to the Office of Educational Technology (OET), 50% of counterfeit electronic components were bought from brokers (30%) and unauthorized distributors (20%). While you might be able to find genuine parts from unauthorized sources, can you afford to take a chance? Not only are you at risk for lawsuits if something goes wrong because of a counterfeit part, the damage to your brand and reputation is potentially huge!

So, before you buy a product, not only should you make sure the source is authorized (which is often as easy as checking a manufacturer’s web-site or picking up a phone), be sure to:

  • assess the seller’s reputation,
  • determine the seller’s financial stability,
  • practice quality control,
  • determine the product’s traceability,
  • assess (your) legal liability, and
  • ask for documentation.