Category Archives: Supply Chain

Projects Fail — Here Are Four Proven Reasons Why!

An article over on Outsource Magazine on “Project Delusion” summarized research from a group that has been tracking UK project management for more than a decade. This group, which has seen budget overrun recently climb from 18% to 27%, investigated the minority of projects that ran more than 200% over original projections. When the causes of deviation from the plan were analyzed, the following major contributors were found:

  • Missing Focus
    Specifically, unclear objectives, poor requirements, and a lack of business focus.
  • Execution Issues
    Specifically, unclear objectives and reactive planning.
  • Content Issues
    Specifically, shifting requirements and uncontrolled technical complexity.
  • Skill Issues
    Specifically, an unaligned team, lack of skills, experience, and resource.

That’s why you should never start a project until

  • The Goals Are Clearly Defined
    along with the metrics that will be used to measure against them.
  • Disaster Recovery and Business Continuity Plans Have Been Defined
    along with processes and procedures for creating new plans for unexpected situations.
  • Change Request Procedures Are Clearly Defined
    so that requirements don’t shift and technical complexity does not spiral out of control.
  • Proper Training is Provided Before the Product Starts
    so that team has the right training, is led by the right experience, is aware of, and able to use, the resources at their disposal, and have what it takes to align toward the project goals.

Also, you should adopt some best practices based on lessons learned. Four best practices, as detailed in the article, include:

  • Manage strategy and stakeholders.
  • Master technology and the business.
  • Excel at core project management practices (as defined in the PMBOK).
  • Fail quickly and cheaply.

For details, see the great article on “Project Delusion” in Outsource Magazine.

15 Ways to Shave Costs From Your Supply Chain Part II

As per yesterday’s post, earlier this year, Inbound Logistics ran an article on 163 Ways to Supercharge Your Supply Chain that had good advice to improve your global logistics, customs, documentation, expedited shipping, warehousing, optimization, equipment, trucking, 3PLs, maritime, security, risk management, and general supply chain operations. Besides all of the obvious ways to improve your supply chain and cut your costs, and the more advanced ways that are covered regularly on SI, there are a few often overlooked nuggets of cost savings that should be singled out because they cost many companies money and go undetected. Today we will cover the remaining eight (8).

3PLs
Determine What Each 3PL Does Best
Most 3PLs excel in a niche such as global logistics, transportation, or warehousing because most of them started off focusing on one function and added others as they grew. Understand their strengths, and weaknesses, before selecting a 3PL.

Inventory Accuracy
Establish external and internal product traceability.
It’s not just inbound and outbound shipments, but internal transfers between different warehouse locations, etc. that need to be tracked. Knowing you have 10 units of a product is only useful if you know where the units are.

Lean Logistics
Manage your empty container flow.
Moving empty containers is equivalent to burning money. It’s a complete waste.

Seasonal Peaks
Know Your Overflow Potential Before You Need It!
Don’t be scrambling for overflow space and trailers, etc. when you need it — have a plan in advance.

Maritime
Bypass Distribution Centers
If you can consolidate a large shipment that can go directly to a store, or a local DC that serves multiple stores, do so — temporary storage costs money and so does unnecessary unloading and reloading of inventory.

Port Selection
Know Your Port’s Infrastructure Limits
Especially if the port is near capacity. If the port isn’t investing in infrastructure to expand capacity, or can no longer expand its infrastructure, then it should be expected that the port will hit capacity and that could be a problem for your organization in the future if you plan to do more global trade.

Security
Protect Against Malicious Behaviour By Former Employee … Credentials
It’s not just the former employee that can cause you problems, it’s their credentials! Just because an employee left on good terms does not mean that their login and access credentials won’t cause problems. A current employee trying to arrange an inside job will happily use the ill-gotten password of that esteemed former employee for their illegal gain.

Risk Management
When Selecting Geographically Distributed Vendors, Consider the Ports!
Multiple suppliers who ship through the same primary port can all be taken offline as a result of a typhoon that destroys the port.

For another 148 ways to optimize your supply chain, see the Inbound Logistics article on 163 Ways to Supercharge Your Supply Chain.

15 Ways to Shave Costs From Your Supply Chain Part I

Earlier this year, Inbound Logistics ran an article on 163 Ways to Supercharge Your Supply Chain that had good advice to improve your global logistics, customs, documentation, expedited shipping, warehousing, optimization, equipment, trucking, 3PLs, maritime, security, risk management, and general supply chain operations. Besides all of the obvious ways to improve your supply chain and cut your costs, and the more advanced ways that are covered regularly on SI, there are a few often overlooked nuggets of cost savings that should be singled out because they cost many companies money and go undetected. Today we will cover the first seven (7).

Global Logistics
Collect Data About Your Products
Not only is understanding product composition vital to correct classification, which determines your tariffs, but it makes sure you don’t get any surprises when you product gets detained at the US border because your new hard drives with built in encryption were designed primarily for industrial information security and do not automatically qualify under Category 5, Part 2 of the Electronic Code of Federal Regulations like your hand-held personal digital cameras.

Customs
Focus on What You Can Control
When it comes to customs, you have no control — but you can create a position for a Customs Compliance Officer and make sure everything you do is fully compliant, fully documented, and fully auditable at a moment’s notice to prevent unnecessary delays when some newbie mistakes your fig paste ship for hash.

Documentation
Confirm Document Receipt
Just because you sent the documents, it doesn’t mean they were received, even if they weren’t returned (or the e-mail didn’t bounce). For critical shipments make sure the documents were received and noted in the system before your goods hit the border.

Expedited Shipping
Eliminate Padding
It’s a typical situation where everyone along the logistics chain adds “safety” time to ensure on-time delivery. It only takes a few layers to transform a shipment required by 9 am into one that is required by 5 am which requires expensive expedited shipping. Make sure unnecessary padding is not added to the delivery time.

Warehousing
Processes Need to be Quality Based
When a mistake happens, get to the real root cause. As per the article, if a forklift knocks off a sprinkler, don’t just ask why it was so high and how to prevent the forklift from getting so high again, but if it should even have been there in the first place. It might not just be a storage height issue, but an overall storage plan issue. If boxes are being stacked to the ceiling in multiple locations, maybe you need a new storage arrangement or maybe you need more storage space!

Equipment
Recognize the Environmental Impact of Your Pallets
Plastic pallets, which require oil, cannot be repaired and must be melted down to be recycled — requiring more energy that likely uses more oil. Wood pallets are easily repaired and recycled.

Trucking
Place your production facilities close to major cities.
Metropolitan areas have a substantial concentration of LTL trucking firms and terminals, which minimize your freight charges.

Come back tomorrow for Part II.

Segmentation Strategies for Success

In their IdeaBook 2014, the editors of DC Velocity and Supply Chain Quarterly published a piece on Supply Chain Segmentation: 10 Steps to Greater Profits that stated that segmentation lets companies boost profitability by tailoring their supply chain strategy to each customer and product in their portfolio. The paper aimed to outline 10 key practices that would ensure success.

The purpose of segmentation is to align supply chain policies to the customer value proposition as well as to the value proposition for the company as a whole.
A company that adopts segmentation will develop multiple virtual supply chains that run against each physical supply chain and move towards a portfolio management approach where they have a portfolio of customers and channels, a portfolio of products, and a portfolio of suppliers and supply modes.

Success depends on doing it right. The ten keys to successful segmentation presented in the paper are good ones.

1. Regular Demand and Cost-to-Serve Analysis.
The goal is to tailor service agreements and supply chain policies in order to raise the overall profitability of the portfolio. It also helps you to provide value to the business by highlighting both profitable and unprofitable product and service lines. A truly valuable Supply Management department can guide the organization down a more profitable path in addition to saving coin.

2. Differentiated Demand Policies in Core Functions.
Not all products are as equally profitable, or equally critical to business operation. While a company can’t stock-out on critical pats to keep a production line running and shouldn’t stock-out on the products that are in the highest demand by its customers, there will be little or no detriment to occasionally running out of office supplies or forcing a customer to wait an extra few days for a part that is rarely bought. Thus, expedited orders should not be placed promptly when (potential) stock-outs are detected for non-critical products but should be when a critical part is out of stock and production or profit will be impacted considerably.

3. Differentiated Inventory Policies.
Just like non-critical parts and products should not be unnecessarily expedited, stock-levels of non-critical parts and products shouldn’t be unnecessarily high. An occasional stock-out on a non-critical product is worth the shipping savings obtained by buying an appropriate volume that generates the appropriate product and shipping discounts.

4. Differentiated Customer Replenishment Programs.
Just like some products and services will be much more valuable than others, some customers will be much more valuable than others. In addition, your contracts will dictate that some customers receive higher service levels (and, if the person executing the contract did her job right, the service level each customer receives corresponds to the value of the customer).

5. Differentiated Supplier Allocation Programs.
Just like some customers will be much more valuable than others, some suppliers will be much more valuable than others as each supplier has different capabilities. For example, nearshore facilities will provide opportunities for quick replenishment, but offshore facilities will often provide opportunities for low-cost high-volume replenishment. Use the right supplier for the right order at the right time.

6. Regular Total-Landed-Cost Sourcing Analysis.
As SI continually insists, it’s important to do a total cost analysis before making a sourcing decision because it’s not what you pay per unit, it’s what the buy costs you overall! If you’re having difficulty, obtain a real strategic sourcing decision optimization solution.

7. Differentiated Allocation and Order Processing.
Allocation is the process of reserving inventory and/or capacity for certain customers or groups of customers. The intention is to make sure that the needs of preferential customers are always met. Similarly, orders are processed in order of customer preference.

8. Incorporate Monthly and Weekly Tradeoffs into S&OP.
S&OP once a month isn’t enough — demand patterns change weekly, and in some fast-moving verticals, even daily. Be sure to update forecasts, inventory levels, and allocation strategies at least weekly.

9. Business Optimization Centre for Continuous Learning.
In order to progress to the next level on your Supply Management journey, your organization will need a Supply Chain Center of Excellence whose mission includes establishing, implementing, and monitoring segmentation policies, and then continuously learning as such policies are executed over time.

10. Automated Policy Management.
Not only is the supply chain centre of excellence responsible for policy analysis, deployment, and management but it is also responsible for ensuring that the various policies related to promising, fulfillment, inventory, transportation, manufacturing, and sourcing are coordinated, aligned and synchronized in time. In order to succeed in any strategy, segmentation or otherwise, it’s critical that the organization continuously improve.

Furthermore, even if your organization isn’t looking to apply (much) segmentation, it’s all good advice for any Supply Management operation.

What are the Retail Keys to Success?

Retail is hard. Really hard. Razor thin margins. Demanding customers. Unpredictable trends. Unreliable carriers. Financially unstable suppliers. The list goes on. But there are steps a retailer can take to make sure their odds are better than their competitors. Specifically, they can take steps to strengthen their supply chain — and a recent article over on Supply Chain Digital on untangling the retail supply chain with real-time analytics outlines four steps a retailer can take to strengthen their supply chain.

1. Obtain an end-to-end transparent view of the supply chain across both traditional and online business units.

You can’t run brick-and-mortar and online stores as separate business units. They are one brand and your customer expects one experience. If it’s in the warehouse, it needs to be available to customers who frequent your store as well as to customers who visit your online storefront. Moreover, pricing needs to be comparable. If you charge significantly less online than in the store for the same product, then why should your customer come to your store? Especially if you’re offering free shipping to build your online presence?

2. Implement the capability to identify bottlenecks and problems in real-time and the agility to take corrective action before the customer experience is impacted.

Your end-to-end view needs to go beyond simply identifying inventory levels across the organization, but expected delivery dates, ship dates, and late shipments / deliveries that will increase stock-outs and impact your ability to serve your customers.

3. Integrate once diverse and siloed sources of data across the business units to offer coordinated and quality service levels for the omni-channel shopper.

You need to not only offer superior service, but service your online customers in your stores and your store customers online, because, online or offline, you’re one organization, one brand, and you need to offer one consistent quality of service to maintain that brand.

4. Leverage historical data to set baselines and then analyze data against those baselines on a regular basis to make more reliable and timely predictions and better manage the business.

Past purchase patterns are just that — past purchase patterns. As tastes and trends change, so do purchase patterns — and the sooner new patterns are detected, the sooner inventory levels can be modified to prevent stock-outs of popular items and expensive over-stocks of items in disfavour.

It’s not a complete list of actions retailers can take, but it is a good starting list.