Category Archives: Services

MCA Solutions – Bringing the Aftermarket Forward, Part II

In Part I, we re-introduced you to MCA Solutions, a Philadelphia, PA company that specializes in after market service (and service parts) optimization, and noted that they were still going strong despite some recent shake-ups in the market (and the noteable acquisition of Servigistics and Click Commerce by Marlin Equity Partners, who also acquired Emptoris not too long ago). We noted that, in addition to completing a strong SAP integration, they’ve also added a considerable amount of new functionality in the last two years around reporting, plan analysis, and reporting management.

Since we covered their new reporting and plan analysis solution in the last part, today we’re going to cover their performance management solution. Since you can’t manage what you can’t measure, and the best way to measure is often with a balanced scorecard, it’s based on scorecards, but since managers don’t like columns of numbers, it’s implemented using a dashboard, but since MCA agrees with me that traditional dashboards are inherently dangerous and dysfunctional, they realized that the only way the application would be truly useful was if it clearly identified not what was right, but what was wrong (since a goal of after-market service is exception-based management so that you only expend resources where needed). More importantly, the scorecard dashboard would only be useful if it allowed you to quickly discern what was wrong and do something about it. So what MCA built is a dashboard scorecard that not only highlights any metric that is out of bounds in red, but an interactive graphical scorecard that allows you to drill down into the metric retrieve all of the data associated with that metric in a single click.

Just like you can drill into a spend cube, you can drill into any metric on the scorecard. The first level drill will bring up all of the metrics the high level dashboard is composed of, and highlight which metrics are a problem. You can then drill into those metrics and bring up all of the associated raw data. So, if you brought up the scorecard and saw on-time delivery was only 80%, when anything under 90% is unacceptable, you could drill in and see the problem ports are LA and New Orleans and that San Diego, Washington, Vancouver, Boston, and Halifax were all meeting or exceeding their on-time delivery targets. You could drill in again and see that at these ports, most of the late deliveries were from West Coast Warblers and East Cost Easies and instantly know that either these suppliers have performance problems or that you’re not allowing them enough time in your inventory network design to transport the parts require to replenish your North American stock from your foreign suppliers. But since you can also drill into the application and the underlying model associated with any part, location, or supplier you can quickly determine if it’s a performance problem or a network design flaw. For instance, lets say you only allow 14 days for replenishment of goods in your LA warehouses from Shenzhen. Considering that sailing time is typically 12-15 days, and that it probably takes at least a day to get your goods unloaded at the port, and another for them to clear customs, get loaded onto the truck, and transported to your warehouse, there’s no way you’re going to get that part in less than 14 days by sea and it’s probably going to take at least 17 days on average, especially if these carriers are running slower ships. Then you know you need to adjust your model, and measure the supplier against a more reasonable delivery time. But if you are allowing 21 days, and your third party carrier is consistently late, then you have a supplier performance problem.

Moreover, the scorecard dashboard is completely customizeable. Each component is actually a dashboard report, and with their new flexible reporting capability, you can build any report you want. So you can design the dashboard to focus only on reporting problems. That way you can ignore the 90% of your network that is running smoothly and dive right into the 10% that isn’t running right, analyze the situation, revise the model, analyze the revision, implement an improvement, and see if the situation improves over time. If not, you can dive right in and try again. And if everything looks too good, you can define more metrics, more sanity checks, and find new problems to work on. Which is precisely what an actionable scorecard should allow you to do!

And your suppliers in China and Japan can use it too. The product is double-byte Unicode compliant and, in addition to a number of European languages, has also been translated into Mandarin and Japanese. With these recent improvements, you should be able to plug it right into your follow-the-sun operation and, once it’s configured and your data is complete, close the loop on your end-to-end after market service (parts) operation.

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MCA Solutions – Bringing the Aftermarket Forward, Part I

MCA Solutions, a Philadelphia, PA company that specializes in after market service (and service parts) optimization, is still going strong despite the recent struggles of a few of its direct competitors (namely Click Commerce and Servigistics who were recently acquired by Marlin Equity Partners). If anything, the recession (although it did considerably lengthen the sales cycle) only bolstered the need for after market service (as no one could afford new equipment) and optimization thereof (as everyone is strapped for cash and every penny counts).

As I indicated in my first post on MCA Solutions and their strategic service parts management platform, many large manufacturing, semiconductor, high-tech, aerospace, defense, and oil & gas companies often have tens of millions, if not hundreds of millions, of dollars tied up in inventory in their attempts to meet specified service levels, and every dollar in inventory costs them money in overhead. Since many of these companies typically have 10% to 20% more inventory than they need, they’re tying up tens of millions of dollars in working capital needlessly as well as throwing away millions of dollars in inventory holding costs — a situation which is easily remedied by a service level optimization platform that can optimize your multi-echelon parts inventory storage network such that your contracted service levels are met but your costs are minimized. Furthermore, as per the value of after market service in a down economy, done right, this optimization will also improve cash flow by roughly 10%, reduce inventory by 15% to 50%, and even improve service levels by 5% to 20%.

Since the last time I covered MCA in depth, which was almost two years ago, they’ve made a number of significant enhancements to their platform, the most notable being flex reporting, performance management, and plan analysis. Of these, flex reporting and plan analysis excite me the most, because the former lets you construct any report you can imagine (if you’re willing to write some SQL*) and the latter lets you build, optimize, and compare as many what-if scenarios as you want, which is the (one of the) most powerful feature(s) of any good optimization platform.

Their plan analysis tool not only allows you to define your service parts strategy (fill rates, inventory/investment caps, number of echelons to consider simultaneously in stock planning, etc.) and run an analysis on that strategy (to determine total cost and inventory distribution), and not only allows you to compare one strategy against another (how much do I save by sacrificing 1% of fill rate? how does inventory distribution change? etc.), but also allows you to define a rules-based sanity check that can be run against every model and the resulting inventory solution. For example, if the inventory levels change by more than 20%, the overall investment changes by more than 10%, shortages or excesses at any location exceed pre-defined maximums, etc., the product will immediately warn you that the new model might not be an acceptable replacement over the current one. Also, each of these rules can be defined by location, SKU (or family), or segment (or lane), which gives you a lot of flexibility in your analysis and sanity checks. (Other checks can include replacement rate, forecasting model [parameters], export mode, horizon, manual overrides, time factors, intermittence, thresholds, and other relevant measures tracked and/or computed by the platform.) Furthermore, they’ve also added the ability to generate plans by Average Customer Wait Times, which is becoming important in aerospace and defense, oil and gas, and other sectors where you have equipment that can’t be unavailable for more than a very short amount of time and service (availability) levels aren’t good enough.

While we’re talking analysis, they’ve also added a new multi-period budget report which is a system generated report that is very useful as it not only calculates total forecast, condemnation forecast, repair forecast, overall metrics, TSL, average inventory position, scheduled demand, new buy, and cost across your entire operation to anywhere between 12 and 36 months in the future, but does so using a successive series of automated optimizations where the output of one period is used as the input to the next. It will take anywhere from a few minutes to a few hours to run, but it clearly allows you to see the long term effects of any change to your aftermarket service (parts) strategy.

In the next post, we’ll talk about their new performance management solution.

* Yes, I’ll admit that I’m not your average user but I have to applaud them for acknowledging their expertise is not in the creation of report builders, that no set of canned reports, no matter how extensive, will please everyone, and that the right thing to do is expose the schema and let power users do what they want — which isn’t dangerous when you also give them the ability to make as many copies (partial or full) of the database as they want and to mess around with the copies, and not the production data.

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Opportunities for Transportation and Logistics Operators Part I

In addition to the presentation of 18 theses around the continued scarcity of energy resources, Volume 1 of the Transportation & Logistics 2030 report on “how supply chains will evolve in an energy-constrained, low-carbon world” by PriceWaterhouseCoopers and the Supply Chain Management Institute also identified some (emerging) opportunities for transportation and logistics operations that are worth close scrutiny by any provider looking to differentiate themselves in the marketplace.

The report provided opportunities in four areas:

  • Products & Services
  • Finance & Accounting
  • Processes & Organization
  • Strategy & Policy

Today, we’re going to overview the products, services, finance, and accounting opportunities.

Products & Services

  • Virtual Delivery
    e-Document providers capable of quickly and cost effectively digitizing any type of document (received by any traditional means of communication) and reproducing an exact copy at the destination will gain a short term advantage as companies begin the slow journey to true paperless operations.
  • Eco-Consultants
    Companies who recognize the market for green logistics and SCM early and develop an expertise will have the opportunity to provide eco-consultancy services to their customers.
  • Slow Transport
    Companies that provide slower, but much more energy and cost efficient, transport options might see a booming business as the eco-conscious consumer starts to dominate the market.
  • Co-opetition (Competitive Collaboration)
    Cooperation between competing businesses as a way to cut costs and achieve competitive advantages will gain increasing acceptance. For example, logistics providers have an opportunity to collaborate on “last mile” deliveries and significantly reduce associated costs with network and route planning optimization.
  • Low Cost Logistics
    Going beyond co-opetition and allowing a customer to assemble logistics services according to their needs, which could be limited to the actual transport of goods (where the customer takes over administrative processes and work steps) could be a booming business. (Of course, these providers will need to implement a sophisticated real-time infrastructure with cost transparency to enable this service.)
  • Fabbing Supply Chain
    Fabrication of products using a computer and a 3-D printer could be common by 2030. Providers who offered this service to consumers who bought “blueprints” over the internet could see a booming business.

Finance & Accounting

  • Mobility Account
    Environmentally aware companies may start introducing mobility accounts and monitor the carbon footprint caused by their employees business trips. Providers that offer (SaaS) solutions for mobility account tracking could see a booming business.
  • CO2 Ticker
    Companies tracking carbon emissions will start reporting all carbon emissions associated with product and transport with a CO2 Ticker. Companies who can reduce this number will see a competitive advantage.
  • Green Credits
    Green Credits, a positive incentive system to act in an environmentally friendly way that grants credits to employees who engage in activities to improve environmental conditions, might catch on. Providers who offer such credits to customers who select greener alternatives might gain a competitive advantage.
  • Total Emission Monitoring
    CO2 emission tracking is just the tip of the iceberg. In the future, sulphuric dioxide, nitrogen oxides, noise, and other pollutants will also be monitored. The first to market with Total Emission Monitoring solutions will have a clear advantage.
  • Sustainability Rating Agency
    Third party sustainability ratings will be as important as third party credit ratings in the future. Logistics companies with high sustainability ratings that could improve the ratings of their customers will be looked very favourably upon in the future.

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The Role of Optimization in Strategic Sourcing – Implementation Issues

This series discusses the recent report from CAPS Research on “the role of optimization in strategic sourcing”. The primary goal is to highlight, clarify, and, in some cases, correct parts of the report that are important, confusing, or incorrect to insure that you have the best introduction to strategic sourcing decision optimization that one can have.

The chapter starts out with a list of ten questions designed to help organizations evaluate the appropriateness of optimization for their sourcing event. And while I still contend that every event can benefit, the question list will help you determine how beneficial optimization could be. In short, the questions were:

  1. How complex is the buy?
    The more complex the buy, the more value decision optimization will offer but, unless you are an expert, the more likely you are to need provider support (at least in the beginning).
  2. What prior experience do you have?
    There is a learning curve associated with optimization.
  3. Do you need a suite or will a stand-alone solution suffice?
    If you can get by with a stand-alone solution, you can often get off to a faster start.
  4. Do you have accurate and clean data?
    You need clean data to create historical baselines and accurate models.
  5. What do you expect to get from using optimization?
    Does a more thorough and powerful analysis have a good chance of finding a significantly better solution?
  6. How powerful does the optimization software need to be?
    Will the software you have in mind cut it?
  7. To what extent is training provided?
    Implementing optimization requires trained buyers, trained customers, and trained suppliers.
  8. What is the sourcing strategy?
    Optimization does not establish sourcing strategies, it merely plays a role in them … and it plays a much stronger role in some strategies vs. others.
  9. Are there global suppliers who will require language translation?
    Does the software support the languages of your supplier base or are there resources available to do the necessary translations?
  10. How much creativity can your organization accommodate?
    Optimization allows you, and your suppliers, to get quite creative.

Next it goes on to discuss the resources required. While you will need each of the resources identified in your organization, you won’t necessarily need all of the resources on each team. For small projects, all you will need is a category expert with an intermediate level of optimization knowledge and a support person who can assist the suppliers in entering their bids. For reference, in addition to support personnel from your optimization solution provider who should be available as needed, the resources that need to be available to you in your organization if you are to make full use of sourcing optimization include:

  • team leaders
  • category experts
  • optimization champions
  • optimization power users
  • training and education resources
  • internal IS/IT resource

Then it goes on to discuss the different types of solution models you have to choose from, which basically fall into three categories:

  • Full Service
    The solution provider, working with your category manager, handles the event on your behalf and you never touch the tool.
  • Hybrid Service
    The buying organization uses the tool and runs the event and the solution provider is used for support as needed behind the scenes.
  • Self Service
    You do everything.

It concludes by discussing a number of awareness and training issues and process requirements. Some of the more critical awareness issues include:

  • the fact that optimization can improve sourcing decisions
  • change management is necessary
  • the support of an expert to facilitate implementation is necessary in the beginning
  • there will be a learning curve
  • training will be necessary for anything beyond simple models
  • every project should have a plan that includes the strategy and goals

Finally, the following implementation tips should be heeded:

  • the sourcing process must be established
  • specifications, the statements of work, and the RFX must be clear
  • supplier inquiries need to be responded to in a timely manner
  • any requests for bundled bids must be attractive to a sufficient number of suppliers
  • expectations must be reasonable in light of current market conditions

Next Part V: The Optimization Sourcing Cycle

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So You Think Shared Services Are the Way to Go

Continuing on yesterday’s theme of Service Management Mistakes, the Shared Services & Outsourcing Network also has an article that describes “10 more mistakes made when starting shared services” that points out some questions you should ask before you consider making a move to a shared or outsourced services model.

  1. Will the Service Centre Accurately Estimate Your Needs?
    If you’re a small operation, it’s possible that the needs and requirements of the larger clients of the Shared Services Organization (SSO) might force themselves to the front of the delivery queue. Does the SSO understand what you will need, when you will need it, and what your priority tasks are?
  2. Are its allocation and chargeback models coherent?
    This is crucial to insure that you will be paying a fair price for the services received since you should be charged on actual utilization and not expected utilization.
  3. Does it have sufficient implementation-focussed governance mechanisms to insure success?
    A strong governance team is critical before transition to an SSO, during transition to an SSO, and after transition to the SSO to make sure that services continue to be executed efficiently. Not all issues will rear their ugly head during the prescribed implementation timeframe … some might wait a few more weeks, or a few more months.
  4. Is there an adequate change management architecture?
    Many projects fail due to underestimation of the amount of effort that will be required for change management and the support that will be required. Does the SSO have a well defined change management strategy that they will use to support the transition?
  5. Are interfaces addressed?
    Improved process can lead to great efficiency gains … which can be lost in a sea of disruptions unless you understand where the inputs are coming from, where the outputs are going to, and what other business units will be affected. Make sure that you don’t create more problems in your attempts to fix the ones you know of.
  6. Are you planning to transfer the right processes?
    A good SSO can managed transactional and knowledge processes. While they might not be able to strategically source your direct categories, they might be able to negotiate better savings on your telecommunications and office supplies contracts with greater leverage, or just collect the information faster.
  7. Do you have a clear SLA?
    While sensible SLAs are crucial to success, they have to be clear and comprehensible. According to Dick Locke, who has an entire state on his side, as a contract, they should have a reading ease of at least 40 and be comprehensible to someone with only an 11th grade education.
  8. Have you internalized the wisdom?
    While there’s no shortage of extremely useful guidelines to get you started, there’s no one-size-fits-all methodology for migration to SSO — be sure to have an experienced advisor on your side before attempting a transition.
  9. Have you identified the real constraints?
    While there will always be constraints with respect to finance, space, bandwidth, etc … accepting the constraints put in front of you without at least challenging them (in an effort to overcome them) will mean the difference between a world-class SSO relationship and one that merely gets the job done. Which organization would you rather be associated with?
  10. Have you accurately estimated the working costs?
    Have you costed the relationship to the nearest cent? Are you sure? There are operational costs, usage costs, management costs, oversight costs (which include communication and travel) and change management costs, for starters. Do you have to buy more software? Do you have to do custom integration work? Do you have to do process redesign? etc.

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