Category Archives: Supply Chain

the doctor Gives You The Top Ten Marketing Ideas … err … The Top Ten Supply Chain Improvement Ideas That You Might Overlook

Chief Marketer recently ran an article titled “Top Ten: Marketing Ideas To Consider in 2008” designed to help marketers, but, scanning it, I couldn’t help but notice that every idea was also applicable to your supply chain – in the right context of course. So, even though most of these wouldn’t be on my top ten supply management improvement ideas for 2008, I’m going to cover them anyway because they’re still good ideas – and some of them are actually quick hits that you’ll get immediate pay back from.

  • Time to Green
    Thanks, in part to Al Gore who has now invented the science of “global warming” as well as the internet, Green is on everyone’s lips these days. If your products aren’t green, you better find a clueless third world economy to sell into because you might find that, as more green alternatives hit the market, especially affordable ones, your products stop selling. Although we’re not quite to the point where it’s “Go Green or Go Home”, we’re getting close.
  • The Great Outdoors
    Get up, get out, pile in a high miles-per-gallon vehicle with the latest emission reducing technology (or at least a good catalytic converter in working order), and drive until you see nothing but trees, plains, or semi-desert. Then sit and observe nature for a day. Notice the balance and the cycle. Then go back to the office and kick your sustainability programs up a notch.
  • Get Game
    Gaming permeates society – and it does for a reason. It connects and entertains people at the same time. But, more importantly, as a few thought leading companies are starting to find out, it’s also a great training and communication tool. Instead of using the same “process” handbooks and “training” manuals, develop some customized games that help your new hires get to where you need them to be in a matter of weeks, instead of months or years. (Even oil companies are realizing that they can cut the training time required to prepare new hires to correctly and safely lay pipes in the oil-fields by two thirds with simulation gaming. Moreover, they are also finding that these new hires are more productive on their first day than those that used to get three months of dry class-room training.)
  • Mobile – I Can Hear You Now
    Take a clue from UPS and Fedex and give all of your logistics workers hand-held RFID scanners to help them more efficiently identify, track, and deliver your shipments on time.
  • Join the Club
    Use enterprise technology that takes the best (but not the worst – remember why the doctor remains faceless and spaceless) collaborative technology developments from today’s social networks to help you interact with your supply chain partners more productively.
  • Rise of the Widgets
    Select supply chain software that presents extensible APIs and configurable interfaces that you can use to customize the software to your needs.
  • Roll Video
    Your employees aren’t the only ones who don’t want dusty manuals. Communicate with your supplies using the full capabilities of today’s multi-media and video conferencing software. Send them training videos instead of training manuals when you need them to use your systems (or system interfaces) and hold visual conference calls now and again to help with team building.
  • From Behavioral to Contextual
    Stop focussing only on one-size-fits-all technology and process improvements and start looking for this-size-fits-me technology and process improvements occasionally. Some things just work better in context.
  • Focus on the Experience
    Just like consumers want to “feel good” when they buy from a retailer, your internal customers want to “feel good” when they work with you. Make working with the supply chain organization something everyone in the company wants to do.
  • … As-A Service
    The supply chain is becoming more and more service oriented – Software As-A Service, Logistics As-A Service, Warehousing As-A Service, etc. Those that master the new service-oriented approach first stand to gain the most.

Integration Point: Another Way to Get Your Trade Data in Order

I know I risk sounding like a broken record when I continually repeat myself on a topic, but some topics just can’t be ignored – and at least this time I’m introducing you to another company with a solution that I believe could help you with your trade data management efforts.

I recently had the opportunity to review Integration Point’s (acquired by Thomson Reuters) solution, and I believe that they are definitely one of the few providers with a chance to approach a solution that could theoretically be extended to tackle your global trade data management problems 100% in the future through a single, integrated, web-based platform. Right now, they’re probably a good two-thirds of the way there, and that’s currently further than any other solution I’ve had the opportunity to review so far.

Before we dive into their capabilities, let’s step back and define the problem again. If you review the Introduction to Global Trade wiki-paper over on the e-Sourcing Wiki [WayBackMachine], you quickly realize that Global Trade is quite involved, with the basic import and export cycles taking (at least) 14 steps each in the average case. Furthermore, in order to execute global trade, you need to effectively tackle ( 1 ) customs, security, and classification, ( 2 ) free trade / secure trade zones and agreements, and ( 3 ) regulatory compliance. Effectively tackling each of these challenges requires the ability to track and instantly access large amounts of data to create the forms and documents that different regulatory bodies require for the purposes of import / export, security verification, and regulatory compliance. Add extra emphasis to the “instantly” – the information needs to be accessible in real time – and this includes the ability to query up-to-date classification codes, tax laws, regulatory requirements, and denied party lists in real time.

As far as I can tell, with respect to the key supply chain destinations that compose most global supply chains (mainly, North America, the European Union, China, and India), Integration Point, with their extensible modularized web-based platform, has effectively solved the core customs, security, and classification challenge as well as the free trade / secure trade zone challenge. With solutions that address import and export classification (HTS codes), import documentation requirements, export documentation requirements, C-TPAT, AEO, denied party screening, FTA qualification, duty deferral, customs warehousing, customs control processing, and advance security filing – they have most of what your average multinational based in the US or the EU needs. Furthermore, they’ve built their platform to be extensible so that if you have additional classification or security needs, they can extend the solution to meet your needs. Maybe that’s why they already have over 80 multinationals as clients, including 11 of the Fortune 100.

The solution also integrates with a wide range of ERP and competitor trade platform software – including SAP, Oracle, JD Edwards, MAPIS, BPCS, MFG/PRO, American Software, EXE, Manhattan Associates, PKMS, and Infor – and they can usually integrate with additional software in reasonable timeframes since everything was built in house on a single, .NET-based, platform.

This only leaves regulatory compliance – which is a difficult challenge for any vendor because most of the major acts, like REACH, RoHS, WEE, etc. in the EU, require significant amounts of low-level manufacturing and product design details that are only found in, often archaic, PLM systems. However, their platform can track any product-specific data you like, can store any regulatory-specific requirements you like, and they can build custom searches and custom-matches as required by their customers – often in just a few hours – so if you know what the concerns are, you can track them and make sure they are checked before each award is made or each shipment approved, so if your needs are elementary, with some effort, you can extend it to serve as a basic regulatory requirements tracking system. However, it won’t be a full solution until they build in basic PLM data integration, tracking, and matching capabilities as well as the requirements of the major regulatory acts in North American, the EU, China, and India.

Integration Point also has the right viewpoint when it comes to global trade management – it should be proactive and not reactive. You don’t want to know about exceptions after a shipment has been approved, you want to prevent shipments with known problems from occurring in the first place. You want to make sure that the customer is not on the denied party list, that the distributor or 3PL has the proper transport licenses, and that you have the right export licenses before you even approve the order. You want checks to occur automatically as soon as each relevant piece of information is entered, every time something changes, and again just before the shipment is loaded – since denied party lists can change daily.

It’s definitely worth checking out – as they have more integration than Global Data Mining. However, that’s not to say that Global Data Mining isn’t a valuable solution too – as they are particularly good at mining your transaction data to find inaccuracies in classification or tariff & tax overpayments that a transaction-based compliance system like Integration Point isn’t customized for. The reality is that global trade is so complex that one solution probably isn’t going to cut it for a long time, if ever, but I do believe that starting with a web-based platform, like Integration Point’s, is a good start. For your reference, other players in the space are TradeBeam, QuestaWeb, Kewill Systems, and Management Dynamics.

i2 – Still Truckin’

You may not have heard much about them since my last post almost a year ago, and I know that I haven’t, but I did get a chance to catch up with them recently to ask them about how the transformation was going, and it seems that they’ve been making some good progress. In one instance, where they took over an electronics manufacturer’s on-line business, sales increased 500% as a result of the inefficiencies they were able to introduce and in another case, where they took over supply network planning for an apparel company, the required lead times were almost quartered and profits rose sharply.

If you remember, last time I told you that they were in the process of re-architecting all of their modules and major sub-modules as Service Oriented Architecture (SOA) enabled components to run on a new AGILE business platform that allowed them to integrate just the components you need. To this end, they’ve re-organized their offerings around ( a ) planning, ( b ) supply (& inbound visibility), ( c ) channel, ( d ) retail, ( e ) inventory, and ( f ) transportation offerings that they can pull together as needed by a customer.

This allows them, unlike the i2 of old where you often had to go for the full implementation up front – an implementation which would often take years and millions, if not tens of millions, of dollars – to a new i2 that can start small – with solutions that they can often deploy in months (or weeks) at starting prices in the six figure range.

They’ve also been working on their service offerings, so that they can manage the systems and implementations on behalf of their clients, and real-time reporting capabilities, so that they can give their clients just the information they need, when they need it. This includes a new i2 intelligence offering that has a large number of pre-defined supply chain KPIs already built in, as well as 200 standard reports. (Future versions will allow the KPI repository to be extended by the user, but I do not know if they have an expected date for this capability yet.)

They’ve also broadened their definition of supply management to include supply availability and physical supply risk management, which is now part of their supply offering. This is part of their definition of, and newfound focus on, revenue enablement – which is about balancing costs with supply availability and risk in your supply chain.

All in all, as supply chain solutions go, I think they’re on the right track. I still wouldn’t consider them a sourcing or procurement solution per se, but supply chain goes beyond that, especially global supply chain management, and once you make the award and approve the order, you need something to manage the logistics process – and you should start by looking at those companies that have been doing it for quite some time and that are trying to bring some innovation to the process, like i2 is now doing.

While I’m writing about them, I should also point out that they have an upcoming free event in New York on Sunday, January 13, 2008 (at the Grand Hyatt New York) on The Value of Fast that is addressing the topic of Speed to Market: Are you setting the pace or following the pack? that is co-sponsored by Kurt Salmon Associates and features representatives of AMR, JC Penney and Citigroup. If you’re in the area, or looking for a supply chain visibility and management solution, it might be worth checking out.

AT Kearney’s Sustainable Supply Chain

Last month, the Supply Chain Management Review published “The Sustainable Supply Chain” by Daniel Mahler that was based upon a joint study to assess corporate sustainability practices by A.T. Kearney and the Institute for Supply Management. The study found that sustainability efforts have started in a number of firms, and that it appears that a growing number of companies have started to put in place specific, comprehensive sustainability strategies for internal operations and external relationships. However, this also means that a number of firms have not yet embraced sustainability.

The article notes that it’s time for “wave two” sustainability – for companies to move beyond simply saying what’s right to doing what’s right and make sustainability happen – and I have to agree. Especially since the process of moving to sustainability, at a high level, isn’t that hard. It’s just like every other initiative and can be summarized as per the article:

  • Devise a Sustainable Strategy
    This will require a lot of research, rolling up the sleeves, and putting in the hours to get it done – but considering that 36% of firms surveyed have a formal sustainability strategy for managing their supply chains, it’s obviously doable.
  • Retool the Organization
    The study found that more than one-half of companies evaluate supply management executives against some sustainability standards. For sustainability to be taken seriously, everyone should be measured against it. We need 100% of companies adopting standards and making sustainability a priority.
  • Manage Supplier Relations
    Your supply chain isn’t sustainable unless it’s sustainable end-to-end. You need to make sure your suppliers also institute sustainable practices, and work with them if they need help.

The article also offered up some guidelines for going forward that weren’t too bad. In summary:

  • Survey the Strategic Context
    Start by understanding your economic, environmental, and social priorities.
  • Understand Risks and Opportunities
    A primary goal of your strategy should be to limit the exposure of your supply chain to social and environmental risks as well as future supply-demand imbalances.
  • Get Ready.
    Update your strategy, processes, and operations as required.
  • Set Priorities.
    Set formal priorities for implementing plans based on ease of implementation and expected value. Make sure the targets are measurable and visible!
  • Go!
    Just Do It!

Remember, sustainability is not only a chance to contribute to societal good, but also a powerful source of competitive advantage in the burgeoning environmentally-conscious economy.

Capacity, Inventory, and Lead Time

Recently, Supply and Demand Executive published an article called “The Three Things You Need to Get Right in Your Extended Value Chain” by Steve Mehltretter and Vadim Kapsutin which suggested that there are only three critical operational resources that businesses need to balance and get “right” in order to succeed:

  • capacity
  • inventory
  • lead time

Although I don’t agree that the problem is this simple, I do agree that these are three key operational levels that need to be well understood if a business wants to improve its operation and that the authors are right when they state that most companies struggle with effectively optimizing these resources holistically and in an integrated fashion across the extended enterprise. I agree that few companies understand their interactions well enough to make explicit and accurate trade-offs between them and take a “silo” approach to optimizing each resource independently and that this frequently leads to poor cost, quality, and delivery performance. These issues really need to be looked at as a whole, and not as three distinct problems.

The authors also note that operations research experts can derive the interactions and trade-offs on a mathematical basis, but the question of how managers can use the insight to make the right decisions within their organizations still goes unanswered for the most part. They also note that most managers don’t understand how each of these operational resources individually affect quality, price and (reliable, on-time) delivery – the dimensions that matter to the organization’s customers. I have to agree here as well. I also think that until the right optimization & simulation based tools to understand the tradeoffs are acquired by an organization, the situation is not likely to change.

Diving in, capacity is defined as machine capacity, labor capacity, and the physical space required to achieve a desired level of output within a desired period of time. It’s something that every business measures and controls, but few appropriately take the notion of demand “uncertainty” into consideration when planning and fewer still look at capacity in conjunction with inventory requirements and inbound/outbound order-to-delivery lead times. Volatility of demand and order-to-delivery lead time need to be an integral part of the overall resource planning exercise. This is the only way that an organization will be able to accurately determine where capacity should be located, what form it needs to take, and what levels need to be available.

Inventory is defined as the number of finished goods on hand as well as the number of unfinished goods and raw-materials on hand required to produce the finished goods. A high level of finished goods inventory (theoretically) allows for shorter order-to-delivery cycles and better customer service, but can come at a high cost. A low level of raw materials inventory can lead to significant idling of capacity or long lead times when demand suddenly spikes.

Lead time is defined as the amount of time it takes to get new raw materials into the processing plants and get finished goods from the plants or warehouses to the end customer. When not well understood, procurement may grant excessive lead times for piece-price reductions that cost the company more than it saves or finance may require unreasonably low levels of inventory that have the same negative effect when demand spikes.

The authors than include a nice chart that categorizes key trends, their drivers, and the resulting impact on critical operational resources.

Trend Drivers Capacity Impact Inventory Impact Lead Time Impact
Globalization new market emergence & low-cost labor locations more capacity required more transit stock and finished goods inventory longer and more variable lead times
Extended Enterprise technological and functional focus on “core” less capacity required more transit stock and finished goods inventory longer and more variable lead times
Product Complexity niche market, product localization, & shorter life cycles more capacity required more finished goods and raw material inventory longer and more variable lead times
Capacity Consolidation fixed and variable cost reduction, market share, new markets less capacity required less finished goods and raw material inventory longer lead times

Finally, it finishes off with some recommendations of the solutions that companies should employ to come to grips with these problems, which include:

  • Develop Buffers to Improve On-Time Delivery Performance
    Capacity and lead time can also be buffered like inventory. For example, telecommunications and computing always reserve redundant capacity and companies can pad lead time requirements for non-critical or non-fad goods.
  • Make Differentiated Customer Service Strategies a Reality
    Understand what each customer segment values in terms of cost, quality, features, and delivery performance. Don’t promise more than is necessary up-front, leaving room for buffers if needed, and balance inventory, capacity, and lead time to meet each customer need even in extreme situations.