Category Archives: Technology

Inventory Accuracy Isn’t Rocket Science! Why Are You Still in the Dark Ages?

A recent article in Supply Chain Digest on Measuring Inventory Accuracy started off by nothing that the experts are saying that there’s no clear answer because there are so many ways to calculate inventory. WTF? Did I read that right?

The article then went on to say that the editorial staff at Supply Chain Digest did some informal networking and found that the answers were all over the map. Really? Who did they ask? Cave Trolls? We’re not in the supply chain dark ages anymore or, at least, we shouldn’t be.

So what did the editorial staff find in their investigation for an inventory accuracy calculation which defines the expected variance between book inventory and actual count? They found:

  • Jim Tompkins of Tompkins Associates offered the following formulas:
    • Financial: (Reported/counted Value inventory-System inventory Value)/Expected inventory value
    • Operational: Total inventory UOM Variation/Total Expected Inventory
    • Locational: Number of locations with variances/Total locations
  • Dave Piasecki of Inventory Operations Consulting noted that:
    every accuracy measurement is flawed in itself in that it can’t by itself show you a true picture of your accuracy and that you have to devise an appropriate “composite score”
  • Ken Miesemer of St. Onge recommends:
    cycle counts by location or geographic counts (an aisle or two at a time)
  • Doug Baker of Istoner states that:
    they rely on absolute and net dollar variance as well as unit variances from the cycle count processes

Ugh! I don’t get it. I know each of these experts has heard of RFID and the Internet and should know that this isn’t a hard problem anymore. At a high level, here’s what you do.

  1. Slap an RFID on each shipping unit — be it a unit, box, or palette — as it’s produced and enter it into the system.
       Now you know how much you’ve produced.
  2. Each time it enters or leaves a location, scan it.
       Now you know how much should be at each location.
  3. Use a supply chain visibility solution to link up with your retailer’s POS systems and have them upload a feed of units sold every day.
       Now you know how much is left at the retailers and you instantly know, at any time, the upper limit of how much inventory you have in the chain. Actual inventory is last count minus sales since last POS feed minus theft since last physical count.

Now, if you also use the system to track thefts and calculate average historical theft rate by SKU category (by day) and average daily sales rate, at any time you can produce an inventory count that is expected accurate within the sum of the (daily) theft variance and sales variance. Pretty easy, eh? And all you have to do is use the modern supply chain technology systems you should have been using for at least the last half decade. Any questions?

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Browser Wars — For the Techie in All of Us

A recent visualization over on Axiis, the open source data visualization framework, displays the W3.org’s Historical Browser Statistics from January 2002 to August 2009. It’s definitely worth checking out … you can see the rise and fall of Mozilla, Netscape, IE, AOL, Opera, Firefox, Safari, and Chrome over time.

Hat-Tip to Matthieu Cormier, of Cocoa Mondo, a fellow Haligonian.

Want That New Analytics System? Join Forces With The CIO!

A recent article in Supply & Demand Chain Executive on “What’s on Your CIO’s Mind” noted that leveraging analytics to gain a competitive advantage and improve business decision-making is now the top priority for CIOs, according to a new study of more than 2,500 CIOs by IBM.

This is good news for sourcing and procurement professionals if you need a modern spend analysis system, because real spend analysis, which should start every sourcing process and end every procurement process, is just a subset of real data analysis. That means your chances of getting the system you need doubles if you join force with your CIO who could also use a good data analysis system to sift through the vast amounts of data she has to deal with.

Now, you may argue that the needs of the CPO, who needs insight into spend data, and the CIO, who needs insight into energy and application utilization (for example), are very different, but they’re really not. For starters, both have to categorize the data on the relevant dimensions (department and category for spend data, data centre and server for energy utilization, and department and application for utilization), both have to create summary reports (total spend, total energy utilization, and total number of users by application), and both have to create comparisons (year-over-year, department by department, etc.). A real data analysis system will do that and be powerful enough to serve the analytics needs of the CPO and the CIO.

And once you join forces on analysis, you can also join forces on risk management and compliance, which are also big needs for CIO as well. That’s going to be really hard for the C-Suite to ignore when two departments are proclaiming the need for these much-needed applications. Don’t believe me? Try it!

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Why You Need Visibility

The simple act of placing data in front of people changes their behaviour.

For example, as per this recent blog post from Andrew Winston’s Harvard Business Blog on “5 Ways to Use Green Data”, if you put an energy meter inside a home and show people total usage in real time, a miraculous thing happens: they use about 10% less energy. This is because data makes people smarter and inspires them to make small changes to save money.

So get yourself a real data analysis solution. And by this, I don’t mean a “spend visibility” system that gives you a high-level spend report once a day that isn’t useful to anyone. Nor do I mean a “spend analysis” system that doesn’t allow you to drill down and re-dimensionalize your data on the fly to find out not only which departments are spending more money on telecommunications or energy than they should, but why. Knowing that marketing is driving up your phone bill is useless if you can’t find out it’s because they never switched to your new long distance carrier. Knowing that a particular manufacturing plant has a 30% higher than average energy bill isn’t very useful if you can’t pinpoint when they are using the energy and who they are buying the energy from at that time. Maybe they are buying too much energy from the back-up supplier at a higher rate, maybe one of their machines is drawing too much power, or maybe they are just inefficient. You’ll never know if you can’t drill into the data and provide the plant manager with the information he needs to track down the reason.

You need a solution that lets you do analysis … anything else is just flash without substance. And, as David Bush astutely notes in this dead reckoning post over on e-Sourcing Forum, unless you’re shopping for lemons, beware the Purchasing Magazine list. At least half of the “solutions” on this list are not spend analysis solutions as far as the doctor is concerned.

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B2B Connex: e-Document Management for Small & Mid-Size Manufacturers

B2B Connex provides a web-based sourcing and procurement document management solution that is a great fit for all types of small and mid-size manufacturing organizations that need simple e-Sourcing and e-Procurement functionality at a low price tag. It’s basic portal solution, that plugs in to your existing ERP & MRP solution, can be acquired for as little as $30,000 (plus 20% annual maintenance) for a small operation. Mid-size operations are generally priced by the number of locations and users, but even their larger customers don’t pay much more than 100K. (Pure SaaS configurations and pricing are also available, but most of customers with traditional on-site ERPs/MRPs generally prefer on-site installations.)

Designed to fill the niche in the small and smaller mid-sized business market left by the big end-to-end e-Sourcing and e-Procurement suite vendors whose solutions often come with a big price tag, the B2B Connex solution allows you to easily manage the following e-Document types (among others) and efficiently conduct your day-to-day procurement operations.

  • RFQs
  • Purchase Orders
  • Kanban Orders
  • Shipment Notices
  • Payment Inquiries
  • Invoices

In addition, it can also handle the CRM side of your business and allow you to manage the following e-Document types (among others):

  • Inbound RFQs
  • Sales Orders
  • Inbound Shipment Inquiries

It’s implemented as a simple web-based portal solution, that can be accessed as needed by your procurement personnel, and it integrates with your back-end ERP and/or MRP systems. (Right now, they support about a dozen ERP/MRP systems with no or minimal configuration work, including SAP, Oracle, JDE, Intuit, Avantis, and Mapics.) And since it handles all the key document types, it allows you to do m-way matching and insure that the invoices are accurate (and represent actual shipments and agreed upon pricing) before you pay them. Since the lack of this capability is one of the two biggest reasons that up to 60% of negotiated savings never materialize (with the other being maverick spending), it’s a good one to have!

In addition to document status (such as new, acknowledged, reviewed, accepted, etc.), the system also supports state management, and a supplier can, for example, accept, reject, or mark each line item for negotiation on a purchase order. This is a useful feature for spot buying, which is common for MRO, SG&A, and low dollar spending in smaller organizations. Also, each e-Document can have an unlimited number of e-Document attachments, so your RFQs can contain detailed item descriptions and sample contracts and your purchase orders can contain detailed specifications and shipment terms and conditions, etc.

If you’re a small or smaller mid-size manufacturer still on EDI and holding off on an e-Procurement system because you think it’s too extensive for your needs, or you think it won’t integrate with your ERP/MRP, or you think you’re too small for such a solution, it’s certainly a system you should check out. Plus, they have an ROI guarantee. If the system does not pay for itself in a year, they’ll refund the purchase price. However, considering the implementation of even a basic e-Procurement e-Document management system such as this generally comes with at least a 25% productivity improvement across your Procurement department, it’s pretty hard not to see savings (especially since the automatic matching will reduce payment errors and the built-in e-Negotiation capabilities on spot buys will help you get price reductions).

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