Author Archives: thedoctor

Mid-Market Manufacturers and Distributors Need an ERP That Works!

If you’re a mid-market manufacturer or distributor, times are tough.

Your big customers are adopting e-Procurement, Supplier Networks, and e-Invoicing and want to implement end-to-end Procurement and Invoice Automation to streamline processes and reduce operational costs.

Your component and raw material suppliers aren’t always on time, and if you are not on top of your inbound supply chain, a single missed delivery can put you weeks behind and cause you to lose critical orders with big customers.

And if demand suddenly surges or shipments get delayed, sales people and account managers need to know what can and can’t be promised or the company will look bad if multiple account managers collectively make delivery commitments beyond what the organization can deliver.

How do you meet these needs?

If you’re a mid-size organization, you probably can’t afford a full SAP, Oracle, or other Enterprise-class ERP solution with all of the bells and whistles because they come with a seven figure price tag, which leaves you with few choices. Either you choose a lesser ERP, with a price-tag in your price-range, or you go open source, and pay someone to configure and link it to your systems (as most open source never works “out-of-the-box”).

However, all you get with a basic ERP is basic enterprise resource planning functionality. There is no support for e-Invoicing and order automation, no support for advanced real-time forecasting and material planning, and no supply chain visibility.

As a result, in order to service your big customers, you have to either join a Supplier Network, and probably pay a fee for every invoice you send, or use the buyer’s e-Invoicing portal, and have your Accounts Receivable clerk create every invoice twice. After all, while there are lots of e-Procurement and Invoice Automation solutions for buyers, there’s few for distributors and manufacturers because e-order fulfillment systems just aren’t sexy.

In order to keep on top of your supply chain, you have to buy a separate inventory management system on top of a subscription to a real-time supply visibility system to get a grip on what you have, what’s coming in, and where your supply gaps are.

Then, because material planning is not real time and not integrated with order management, you need to buy a separate forecasting system. That’s even more dollars on top of the dollars that you need to spend for inventory management, order management, and the Supplier Network. If the organization could afford all that, the organization could afford the 7-figure ERP system that it couldn’t afford in the first-place.

That’s why mid-sized manufacturers and distributors need an ERP option that works. It has to be affordable, serve as the counterpart to buyer e-Procurement and invoice automation solutions, allow for visibility-based inventory management, provide full order management functionality, and allow for dynamically updated forecasts based upon changes in material availability, delivery dates, and buyer order forecasts.

It’s not sexy, but in order to have an efficient supply chain, all players in the supply chain have to be efficient. If solutions are produced for some players, but not others, the supply chain will continue to only be as strong as the weakest link.

Top 12 Challenges Facing India in the Decades Ahead – Epilogue

As we have chronicled in the past 12 posts, India has a large number of significant and imposing challenges ahead of it — challenges it has to face, and conquer, to rise to the glory it aspires to. Moreover, the identified challenges of:

are just the biggest challenges that SI has identified as being the most important to solve; they are by no means the only challenges that lie ahead of India. Pick a topic. Any topic, somewhere, somehow, India is facing a challenge. Maybe it’s just minor and restricted to a small percentage of the population or a few states, but it’s there. And until the major challenges are addressed and reasonably solved, progress is going to be slow and India is not going to surpass the US to become the number two producer of GDP as some economists and futurists are predicting. In fact, if it doesn’t make progress on a number of these challenges, India, which was ranked 10th in GDP production at the end of 2012 (Source Wikipedia), is not even likely to surpass Japan, which currently holds the number 3 slot according to the UN (United Nations), IMF (International Monetary Fund), and WB (World Bank). (However, it is quite likely to pass Italy, Russia, Brazil, the UK, France, and, a few years after France, Germany to take the number 4 slot even if it doesn’t make much progress on the challenges, simply by virtue of the growth that its middle and upper classes, which constitute about 30% of its 1.2 Billion people, can produce on their own.)

But it’s not all doom and gloom! As SI will discuss in a future series, it has as many opportunities as it has challenges and if it conquers its challenges, it will have opportunities that are only equalled by the opportunities before China (and, with China, control approximately 1/3rd of the global economy in the latter half of this century)! What future lies in wait? That’s up to India to decide, but a future blog series will discuss aspects of one possible future. Stay tuned.

Don’t Be a Smeghead! Adopt the 3 Rs Now Before You Yourself Become Scarce!

Starting today, your new mantra is Reuse, Recycle, Remanufacture and all of your sourcing efforts revolve around Design for Recycle because the raw materials your supply chain runs on are running out faster than oil and fresh water.

As per this recent article over on BBC Future on what is the world’s scarcest material, China, which produces up to 90% of the world’s rare earth metals that are vital in electronics production claims that its mines might run dry in just 15-20 year. At current utilization rates, we could be out of silver in 20 years (which is only good news if current lore is correct and you are a werewolf), platinum in 15 years (which is bad news for aspiring musicians everywhere), and indium, used in electroluminescent panels, LEDs, and semiconductors, in as little as 10 years!

Why? Because we don’t reuse, recycle, and remanufacture. Currently, US residents recycle a mere 25% of TVs and Computers and less than 10% of movie phones — which is where the majority of the rare earth metals mined every year end up! If we reclaimed all of the metals that went into all of the electronics we produced, it would likely be at least a century before we’d have to worry about running low on materials, as we’d only have to mine to meet incremental demand.

So if you think rare earth metals are expensive now, think about how expensive they are going to be as supply becomes even more restricted! Until SpaceX and Virgin Galactic have solved the everyday problems of space flight, merge to form Jupiter Mining Corporation, and build Red Dwarf, you’re going to have three choices:

  1. Completely switch product lines to something that doesn’t require rare earth metals — like fashion or low-tech household goods,
  2. Pay the ever increasing premium until your customers can’t absorb it and you go down with the corporate ship, or
  3. Spearhead a reuse, recycle, and remanufacturing effort with your customer and supply community to reclaim as many rare earth metals as you can and reduce your newly mined raw material requirements to the point where they can double in price and not affect your operating cost.

Obviously, choices #1 and #2 will both result in your position, and you, becoming a thing of the past — so unless you’re looking for a career change, only a Smeghead would choose anything but option #3.

Top 12 Challenges Facing India in the Decades Ahead – 01 – Politics & Democratic Complacency

A democracy on its own is not the solution to any of the aforementioned problems. China had many of these problems and solved most of them as a single-party socialist state and Russia as a Federal semi-presidential constitutional republic. Even monarchies, under a benevolent ruler, can solve most of the aforementioned problems. Egypt flourished for centuries as an absolute monarchy, and recent evidence suggests that many of its citizens were much better off than Hollywood would lead us to believe (and that the pyramids were not built by slaves but by farmers who were employed as workers during the off-season).

Like every form of government, democracy has advantages and disadvantages — with a major disadvantage being that a majority of the representatives have to agree before a law can be made or an action can be taken. And when you have a country with six recognized national parties and forty-seven recognized state parties (and approximately twenty more unrecognized state parties), this can be an enormous challenge. After all, the United States couldn’t even keep its government running last fall and it is effectively a two-party system!

Then there is the apparent unwillingness to challenge the status quo, focus on controversial or taboo issues that a country as progressive, modern, and rich as India shouldn’t still be dealing with (such as dalit, a lack of access to modern sanitation for the 55% of households that still practice open defecation, extreme poverty for the 33% of the population below the official poverty line and the 36% of the population that are not much better off, wide-spread under-nourishment and low life expectancies, and so on), or even take on industry (as noted by Dreze and Sen in An Uncertain Glory when they noted that the Finance Minister of India backed off from his proposal to introduce a small excise duty on gold and precious metals used for jewelry when jewellers and other influential people whose interests were effected responded with massive protests). If India wants to become a real first-world country, then it has to be willing to tackle the tough issues, make the tough decisions, and move forward. Populism does not progress make.

Not only does India have the challenge of having to deal with six recognized national parties and forty-seven recognized state parties (and approximately twenty more unrecognized state parties) across thirty-five states and territories, but it also has to deal with the fact that its constitution promotes local control. In some respects, the federal government faces the same challenges as the EU when it tries to standardize trade laws, for example, as India’s constitution (which is the longest constitution in the world at over 117,000 words) allows complete local autonomy in key arenas, with “schedules” (or lists) for the central government, states, and both to share.

And, as noted in William Antholis’ book on “Inside Out India and China”, India’s centralization effort led to the creation of a dark-side in the central government’s efforts to appease the different states and territories that threatened secession in the early days of the union. In particular, the end result was an elaborate system of license requirements and regulations, as well as carefully crafted spoils and quotas to placate different communities. This “License Raj” has helped to stifle the economy and led to massive local mismanagement and corruption at all levels — mismanagement and corruption that has to be addressed for India to prosper.

Again, a democracy on its own is not the solution to any of the aforementioned problems. There needs to be a willingness to accept the problem, address the problem, and work together towards a solution for the common good, regardless of the consequences, for any progress to be made. Until India politicians accept, and embrace this, en masse, progress will (continue to) be slow — and may not even materialize at all in some of the backwater states and territories (which would be happy just to obtain the quality of life promised by an Amish Paradise).

The New Supply Chain Manager – Global and Local

Supply Chain Digital recently published an interesting piece on three core trends impacting UK supply chain skills in 2014 where they noted that, even across the Atlantic, globalization is taking a new spin.

According to the article, complex supply networks are now deployed to offset inventory risk, balancing low production costs of far away places with short-lead time replenishment from factories closer to market. This allows for an initial order to be made in the Far East and then supplemented by more local sources if sales demand. This allows the buyer to balance cost vs. lead time / stock out / quality risk and indicates that, like the US, the UK is now focussing more on total cost of ownership and optimizing the total supply chain cost and not just the landed cost (even though the transportation costs from Eastern Europe and parts of Asia are much less for them then the transportation costs their North American counterparts need to bear). It’s a good sign, and SI has always maintained that the right sourcing methodology is best-cost country sourcing, and that often means, when the full life-cycle cost (and risk) is analyzed, home-country sourcing is the way to go.

The need to be local is further emphasized by the evolving purchase patterns of the local consumer. E-commerce is being widely adopted and the Amazon effect is taking hold. Consumers want to shop at home, get the goods delivered to their homes, and if something is broken, return the goods from their homes. This is forcing retailers and distributors to adapt to complex and challenging operating models as they need to not only manage the home-delivery process but the home-return process, often getting products back to the factory from which they came for repair, refurbishment, or recycling (as strict laws in the EU, such as RoHS and WEEE, often prevent outright disposal of anything with electronic components).

Finally, it all comes together in the last trend which revolves around the need for a broader skill-set to manage the broad nature of today’s Supply Management initiatives — initiates that are hugely complex in nature and require Supply Management professionals to know how to manage suppliers, production facilities and freight movements across a multitude of countries and time-zones. It’s not easy, but it can be fun!