Category Archives: Technology

Manufacturing Process Optimization

New methodologies and standards can make the difference between a relatively smooth-running, flexible infrastructure or a maelstrom of competitive and proprietary systems that can only be modified by vendors at an annual cost running in the millions.

Lance Murphy, “Process Optimization : Fine-Tuning the Manufacturing Enterprise,”  Supply & Demand Chain Executive

This is important because many management teams don’t understand that their current operational infrastructures may have reached critical mass because most of their so-called heterogeneous environments consist of patchwork layers of new and legacy applications and systems, often hard-wired, point-to-point integrations designed to perform yesterday’s tasks with an every-changing array of co-conspirators. Even though, in manufacturing, there has been an almost exclusive focus on powerful design and collaboration tools to stay ahead of escalating product complexity and global complication this has just further complicated the interopability challenge.

So, what can be done to improve the situation? Process improvement based on “business flow” and not just function. Apply Product Lifecycle Manufacturing (PLM) methodologies to manage not just the product development, but the process behind it. Identify and evaluate critical path processes and focus on streamlining and managing those while eliminating any process not on the critical path that does not provide any added value.

Furthermore, you can take advantage of advances in XML standards, application programming interface (API) design, web services, business process management (BPM), and service oriented architecture (SOA) frameworks to develop and integrate the PLM processes you need to streamline and manage your critical process flows.

And it works. According to Lance’s article, a Canadian company that has led the market in the design and manufacturing of state-of-the-art aircraft engines that employed PLM-based process optimization substantially improved their process for managing corrective action requests. Seventy-five percent of these requests, which have averaged around 5,000 at any one time since program inception, are now processed in minutes rather than days – a savings of hundreds of man-years annually! In addition, the resources required to manage these requests has continued to plummet and standardization has reduced risk and streamlined processes, making most operations easier to modify and adapt to changing conditions.

(e-Sourcing Helps You) Save Billions the Easy Way

Not that long ago, Oregon State University released a press release stating that its computer scientists have created a new, much simpler approach to fixing errors in spreadsheets, a system that is easy to use and might help businesses around the world reduce mistakes and save billions of dollars.

According to the article in the United States it has been estimated that 11 million people create about 100 million spreadsheets a year, which in turn might be managed by up to 60 million users … but they are notoriously prone to errors. And that most users of spreadsheets are overconfident, they believe that the data is correct but that it has been observed that up to 90 percent of the spreadsheets being used have non-trivial errors in them. In fact, one auditor has said he never inspected a single spreadsheet during his entire career that was completely accurate.

Thus, the new approach to fixing errors, which allows a non-specialist to identify and fix a problem by selecting a fix from a short list of change suggestions, is expected to be quite beneficial. The system, which attempts to try and identify the ways that humans commonly make mistakes and then suggest what the correct approach might have been, can suggest several programming mistakes that might have created the error when an error is found and allow the user to sort through them and identify the root cause. The system is currently performing rather well. In 80% of the cases, the fix is in the top five suggestions and in 72% of the cases, the fix is among the first two suggestions. The GoalDebug System (short for “Goal Directed Debugging of Spreadsheets”) gives end users the chance to explore, apply refine, and reject suggested changes, a systematic approach that allows people with comparatively little training in programming and spreadsheet development to identify and repair errors.

However, as far as I’m concerned, this is not good news. All I see is tens of thousands of man hours and millions of dollars of research funding wasted on a patch solution that doesn’t address the real, underlying problem – spreadsheets are bad!

As far as I’m concerned, the answer is the development of appropriate financial applications that contain the calculations and report creation abilities end users need and negate the need for them to develop these huge complicated spreadsheets. Then there wouldn’t be errors to track down in the first place.

Fortunately, for your procurement department, there is an answer – and the answer is e-Sourcing complete with spend analysis and decision optimization. That’s the easy way to save billions.

The Supply Chain Innovator’s Technology Footprint

About six weeks ago, Aberdeen released “The Supply Chain Innovator’s Technology Footprint 2007”, “A Benchmark Report on Companies’ Technology Investment Plans for Gaining Immediate and Strategic Payback” that noted, among other findings, that five times as many study participants plan to spend more on new supply chain technology in 2007 than plan to spend less. I’m glad to hear it since good technology investments in sourcing and procurement can yield returns that are multiples of what a firm invests.

The report noted that while cost control is a strong desire, 72% of companies have other higher-ranking motivations, such as the ability to better meet customer’s top fulfillment requirements, the ability to better manage increasingly global supply chains, and the ability to minimize supply-demand imbalances. Add risk management to the list, and one would be able to say that companies are finally starting to understand there’s a bigger picture to e-Sourcing and e-Procurement than just cost reductions.

The report also found a sharp distinction between strivers, defined as companies striving to reach industry average with their supply chain technology roadmap, and innovators, companies looking to create new supply chain management innovations. Strivers are still much more likely to continue to focus on reducing costs with their supply chain initiatives while innovators are focused on delighting customers with tailored fulfillment capabilities and streamlining fulfillment across multiple channels. In other words, strivers have a myopic focus on cost reductions while innovators realize that better processes and customer service lead to more efficiency and sales, better supply chain visibility, and fewer returns. This will, by default, reduce costs and risk.

My favorite finding, of course, was that when compared with their peers, innovators are more likely to priortize price optimization and short-term forecasting. Cost reductions are great, but you get more bang for your buck when you minimize input costs and maximize output costs. Furthermore, inventory in the warehouse costs you money, empty shelves cost you sales, but the right inventory at the right place at the right time minimizes product storage costs and maximizes sales revenue – and the best way to tackle both of these problems is through optimization.

Another great finding was that innovators are two-and-a-half times more likely to want to leverage on-demand for sourcing and global trade management. I’ve written many times about the benefits of SaaS and On-Demand (including last summer’s 3-part weekend series on e-Sourcing Forum [WayBackMachine]) and am pleased to see that industry is catching on. Unfortunately, only 24% of respondents indicated they were looking to use new packaged applications from a best of breed vendor to extend their current capabilities as compared to the 38% of respondents that were focusing on upgrading current packaged supply chain applications from their ERP or SCM vendors. Oh well, I guess every company can’t be best-in-class.

But for those that want to be innovative, the study indicates that innovation can be achieved with commercial technology via one of four methodologies for most companies:

  • employing existing packaged or on-demand software in ways that are ground-breaking for the industry
  • creating new ways to leverage the data and decision-making smarts of commercial supply chain technology for other parts of the organization
  • using commercial software but collapsing the gap between planning and execution cycles
  • using a composite application approach to create new workflows across multiple commercial applications

As usual, the report concludes with recommendations for action that focus on the technology priorities for strivers, best-practice seekers, and innovators. The priorities for innovators are worth mentioning:

  • a profit optimized supply-demand balanced S&OP plan
  • short-term forecasting
  • true multi-echelon inventory optimization
  • warehouse process flexibility
  • preferential trade agreement optimization

the doctor’s Guest Posts: The Year in Review

Over the past year, I’ve blogged a number of guest posts over on eSourcing Forum, including forty posts last summer as part of the weekend series. For new(er) readers to the blog, here is a list of all guest posts over on eSourcing Forum with direct links.

Weekend Series Posts on e-Sourcing Forum [WayBackMachine]

Purchasing Innovation I: An Introduction
Purchasing Innovation II: TRIZ
Purchasing Innovation III: The Verifier Approach
Purchasing Innovation IV: Innovation Continued
Purchasing Innovation V: Sourcing the New Organization
Purchasing Innovation VI: CrowdSourcing
Purchasing Innovation VII: The Road Ahead
Purchasing Innovation VIII: Transforming New Product Development
Purchasing Innovation IX: The Purchasing Evolution!

On Demand I: The Good
On Demand II: The Not-So-Bad
On Demand III: And the Coming Pretty …

Cost Reduction and Avoidance I: An Introduction
Cost Reduction and Avoidance II: Metrics
Cost Reduction and Avoidance III: Incentivize for Success!

Supply Risk Management I: An Introduction
Supply Risk Management II: Risks and the Need for Resilience
Supply Risk Management III: Managing Risk

Supplier Performance Management I: An Introduction
Supplier Performance Management II: The Road to Success
Supplier Performance Management III: Best Practices

Demand Driven Supply I: An Introduction
Demand Driven Supply II: Stages and Implications
Demand Driven Supply III: Challenges and Implementation

Center Led Procurement I: An Introduction
Center Led Procurement II: A Center of Excellence
Center Led Procurement III: Best Practices

Procurement Outsourcing I: Is it right for you?
Procurement Outsourcing II: Selecting a PSP
Procurement Outsourcing III: Getting the most out of your PSP

Optimization I: A Powerful Tool
Optimization II: Why it was Relegated to the Shadows
Optimization III: Why it’s time is finally here
Optimization IV: POE or BoB?

Six Sigma I: An Introduction
Six Sigma II: Innovative Quality
Six Sigma III: Value Based Strategic Sourcing

Weekend Series Wrap Up I: Process and Technology
Weekend Series Wrap Up II: Supply Chain Management
Weekend Series Wrap Up III: The Innovation Revolution

Miscellaneous Posts on e-Sourcing Forum [WayBackMachine]

* Lead Time Optimization: Groundbreaking New Technology or just Applied Total Value Management-based Decision Optimization in Disguise?
* Sustained Sourcing Success
* Are there any limits to procurement’s role?
* Outsourcing Gets Tough
* Design for Supply
* The Benefits of an End-to-End e-Sourcing Suite
* Accelerating Value with On-Demand: An Aberdeen Perspective
* Supplier Enablement Enables Savings

And just in case you missed it, here’s a link to the chaos-causing post on Emptoris’ optimization over on Spend Matters:
The Doc’s Perspective on Emptoris’ Optimization*

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Technology for Procurement

ISM may be over, but that doesn’t mean that conference season is. There are still lots of events to come. One event in particular that I am going to point out is EyeForProcurement’s Technology for Procurement event coming up next month – June 19-20 at the Holiday Inn Golden Gateway Hotel in San Francisco.

In the spirit of EyeForTransport events, they are focussed on bringing together a wide range of leading industry practitioners and executives to share their stories, tactics, and strategies for success – something every practitioner can benefit from. Furthermore, their events are usually in the “decent size range” – not so many attendees that you feel lost but not so few that you feel that it was not a good use of your time. (It’s one of the few events in the first half of this year that I’m actually hoping to make. I was hoping to make Synergy, but I needed to be somewhere else at the time.)

Product Innovation Summit later this month. And if you like technology, and are an Aberdeen sponsor or subscriber, you might also want to consider attending Aberdeen’s