Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

February 10, 2016

Demand driven supply chain: key considerations for High-Tech industry

Supply chain innovations have helped many organizations to operate successfully at a global scale, cut down operational cost, bring dynamism and gain edge over competition. The 'Demand driven supply chain' (DDSC) is one such concept which brought the futuristic vision since its inception during last one decade. Many industry leading organizations have invested in transforming their supply chains into demand driven and observed numerous rational benefits. With the advent of global supply chain footprint, shorter product life cycles, dynamic market conditions, it becomes critical to invest in right DDSC approach which is specifically modelled for that industry.

What is DDSC?

Demand driven supply chain is based on old premise of building a network based on 'Pull system' and avoids inventory movement by Push methodology. As defined by Gartner, "a demand driven network is based on single sales forecast that drives entire supply chain; from suppliers' supplier to customer's customers". Traditional supply chains maintain inventory balances based on static forecast figures which may result in overstocking for some product-location combination and shortages and even stock-outs at other places. To counter this phenomenon various approaches are being used but many of them can cause 'Bull-Whip' effect in the extended supply chain. With the DDSC approach organization follow various measures to build accuracy in demand signals. Similarly they need to invest in supply side initiatives to build required dynamism in supply balancing.
 
High Tech Industry challenges:

Most of the high tech industry organizations face great deal of volatility in the business.
•    Usually they have short product life cycle, which means they should engineer and introduce products in market rapidly ahead of their competition. Building excess finished goods inventory is not advisable at the same time stock outs may result in losing market-share.
•    Most of the high-tech players have multi-echelon global supply chains. Many of them act as OEM (Original Equipment manufacturer) which have network of manufacturing partners and distributors spread across the globe.
•    They have different business models such as Made to Stock, Configure to Order, Pick to Order, Buy and Sell etc. Usually they follow postponement strategy and keep stock at the sub-assembly status.
•    Some critical components may have very high lead time and need specialized skills which need long term visibility of demand and good supplier relationships.
•    Usually inbound material movement and outbound distribution services are outsourced to 3PL and 4PL logistic service providers.

How technology can help enabling DDSC?

With the help of right process and technology organizations can stride for establishing DDSC in true sense. The strategies for DDSC can be broadly classified as Demand side initiatives and Supply side initiatives.
On the demand side
•    Inventory Balancing and Distribution requirement planning can help to mitigate risk of stock-outs and excess inventory in the downstream supply chain. Tools such as inventory optimizer and Distribution Requirement Planning helps with great deal of accuracy in balancing inventory.
•    Demand Signal repository: Organizations can tap the demand signal at the source of consumption such as POS (Point of Sale) devices, Order orchestration tools and use this demand signal repository to fine tune the forecasts.
•    Collaboration with down-stream channel partners with VMI or consigned inventory management can give accurate demand visibility and reduce bull-whip effect.

On the supply side;
•    Organizations can increase the planning frequency to get latest demand and supply picture and reduce information latency.
•    For intra-day demand-supply changes 'what-if scenario analysis' can prove a lot helpful. This can address supply requirements for hot demands, quantity or need by date changes to high priority demands. Also disruption in supply or logistic issues can be mitigated in timely manner.
•    Postponement is effective methodology where inventory is stored in semi-finished status and final assembly is done when firm orders are received.
 

Lead Time Constraint Impacting Customer Order Promising in Outsourced Manufacturing

Continuing from my previous blog, upon delving deeper into the lead time constraint aspect, we come upon certain aspects of the high tech industry that prima face indicate to concerns regarding incorrect or conservative lead time on the product and it's transit time to the customer.





Delivery Lead Time:

Delivery lead time specifies the transportation time required to deliver the product to the customer. Delivery lead time depends on the type of request customer places which can either be a request date to ship or request date to delivery at customer dock. This can include single or multiple legs of transportation trips depending on the proximity of the customer from the manufacturing or consolidation warehouse location. Typically in High-Tech industry majority of the production or assembly takes place in South East Asia however the customers and distribution warehouse and 3PL locations can be spread across the globe. Delivery lead time is a critical factor for accurate customer promising as the material availability date is calculated by offsetting the lead time from the customer request date to ensure the product is neither shipped early or late. High Tech complex OEM organization with matured transportation planning process often determine the best suited route considering transportation attribute like load, region, mode, method etc. to optimize the shipments. This would also mean that the shipment can pass through different regions, 3PLs which might have different holiday calendar and the planning has to be so accurately done that the hand-off between two regions or warehouses is done on a working day to ensure the truck doesn't stop.




Since both manufacturing and transportation operations in High-Tech is outsourced, imagine the cost avoidance of accurate transportation planning and determining shipping/arrival date considering accurate delivery lead time across the regions. Join our session to understand how we manage to marry both supply chain planning and transportation planning applications to optimize assembly and transportation cost and also ensuring high OTS attainment rate.

Product Lead Time:

•    Mismatch or incorrect lead time set-up also impacts the scheduling results. One of the examples is a case when an Item is setup as lead time based and there is no actual lead time value setup. To avoid this situation the planning time fence adds 1 additional biz day
•    Due to the many challenges of High -Tech industries, there is a need to fix or redefine extra lead time padding for the items for a specified period of time. This lead time will be added to the original lead-times. The padded Lead Time may be due to geographical, trade compliance reasons. Ex: In the month of December, logistics across the globe hit a rush and the extra lead time may come into picture.
•    Often there arises a need to lock the Lead time for a fixed period. This is needed to avoid discrepancies in the supply chain.


 

January 24, 2016

SCM Cloud Demystified - Part II

 

Continuing from my previous blog, I am providing here my perspectives on some of the common questions asked by customers regarding Oracle SCM cloud.

 

What should be my co-existence strategy?

 

Co-existence strategies as I mentioned in my previous blog are unique for each customer and depends on the business and IT situations.  To provide some of the basic ideas, I am giving below some common examples which can be considered for most of the industries and organizations

 

  1. Procurement cloud

  2. Logistics cloud

  3. Order Management cloud

  4. MDM Cloud

     

    Procurement Cloud

     

    Oracle procurement cloud has multiple modules including Oracle Self Service procurement, Oracle Purchasing, Oracle Sourcing, Oracle Procurement contracts, Oracle Procurement and Spend Analytics, Oracle Supplier portal covering end to end business function of procure to pay cycle. 

    In co-existence model customer can get started with Oracle Sourcing, Contracting and Analytics functionality in a low cost, low- risk model without discarding their investment in the current purchasing system. Oracle Procurement, especially for indirect procurement also can be a good co-existence strategy and can work with E-Business suite, JD Edwards or Siebel purchasing systems.

      

    Logistics Cloud

     

    For some organizations, we do suggest looking at the Transportation Management cloud as a good starting point. Oracle transportation management Or Global Trade Management cloud. Implementing cloud solutions for these products makes perfect sense to start with as it is completely independent with respect to your core ERP solutions and get you started with your cloud journey. OTM cloud provides end to end support for order's transportation life cycle. It provides complete integration with Order Management, Shipping, Inventory Management, Purchasing, and Financial.

     

    Order Management Cloud

     

    Order Management cloud is a good choice if you have a complex order capture and orchestration environment. What I mean is you have multiple systems sending orders and you are applying different orchestration strategies for sourcing and fulfillment. The Order management cloud provides good Channel and Process integration options in order to streamline your order management process. It can very well integrate with SCM cloud and on premise ERP applications. This has also been very beneficial for some companies who have acquired new companies and are in the system merger and acquisition situation. Another choice for order management cloud is an extension to your quoting solution

    . 

    Product Information Hub

     

    Oracle Product information hub offers a good starting point for SCM cloud.  Customers having complex application requirements like ERP, CRM, PLM, Field service needs accurate product information to drive key business functions. Combined Enterprise Data Quality tool for Product and Product Information management helps you to consolidate product information, cleanse the data, and remove duplicates and enable governance structure for the organization.

     

      

Should I upgrade my Oracle applications or go for SCM Cloud applications?

 

As mentioned previously this depends on the customer situations. However the best-recommended practice, we suggest is to upgrade the latest APPS release, adopt standards based technology like Oracle SOA suite, AIA, Oracle OBIEE and start looking at extending the current applications with the use of co-existence strategy for cloud applications

 

What should I do with the customizations?

 

One of the first steps in assessing the cloud fitment for your organizations is to review CEMLI- (Configurations, Extensions, Modifications, Localizations, and Integrations). The number of CEMLI's and the complexity (High/Medium/Low) can affect the approach to cloud solutions. For customizations following steps are recommended while moving to the cloud 1.Reduce your customizations only to what  it is absolutely needed and cannot be handled by the seeded functionalities2.Make use of the extension/personalization framework to achieve the functionality3.Make use of PaaS for SaaS offering for extending your applications 


What should I do next? How can Infosys help?

 

Infosys Oracle SCM Cloud experts will work with you in a 2 day workshop on understanding the current business situation,   current system landscape, and future objectives

 

We work collaboratively with the customers and work out a detailed plan in next 2 to 3 weeks about upgrade strategy, co-existence options, integration options, conversion options, road map for future adoption, etc.

 

Infosys team also works on providing the short term and long term Return on Investment analysis, helping IT organizations receive a buy in from their CXO leadership about the cloud transformation.

 

Summary

 

Every organization is looking at some scale to move their applications to the cloud. Coming out of the Upgrade cycles is one of the major advantages business users see and are looking forward to either moving some of the SCM functionalities in cloud Or enhancing existing footprint with the co-existence model.  We have seen IT organizations are caught in a conundrum between drawing co-existence strategies, integration options, Returns on investment and a long term plan. If your organization is also going through similar challenges it is time to step back and decide your long term upgrade and SCM cloud strategy road map. We @ Infosys Oracle  Supply Chain Cloud practice have the required skills, tools and experience to work with you and help succeed your business on your Oracle SCM Cloud journey

Contact

 

In case you have additional questions or need more detailed discussions, please drop me a note @ vishwajitshankar_b@infosys.com.

 

Connect with Infosys

Infosys is a gold sponsor this year at Modern Supply Chain Event. You can listen to Infosys clients discuss industry leading best practices in the manufacturing track panel discussions. Discuss with our thought leaders on how Infosys can help you realize measureable business value from your supply chain management investments.

Join us at booth #410 to learn about our cutting-edge offerings and supply chain management solutions.

 

January 21, 2016

SCM Cloud Demystified


What Is Your Path for Oracle SCM Cloud Solutions?


Over the past 2 years I have interacted with many of our customers and lot of them deliberate and/or ask, is Oracle Supply Chain cloud real? And is it right for me?  Or is it only for the new implementations. ?  I have a customized environment will it be able to support my existing business environment? Do I need to move to cloud completely?

With the new SCM Cloud offerings and lot of market talks , presentations, demos seen  , customers gets impressed with the functionalities and the UI, but have subsequent questions around how do I get there ? Where should I start?

Some of these are really great questions and the answers to these depend on the business situations, IT systems and landscape. Each customer will have its own unique path to the cloud.

We advise clients to look at the co-existence strategy in order to get started with the SCM cloud. It is in a way a smart move as you are not investing in a huge infrastructure to set up the instance or a big commitment. Start small, see the technology, business benefits you can get and build upon it.

In this series of SCM fusion blogs, we have tried to summarize what are some of the common questions that our clients ask us for your SCM Cloud strategy and how Infosys can help the customers with their SCM Cloud journey. This is the part 1 of the blog where you will get an understanding of the current situation and what are the common questions customers asks for the SCM cloud.

Those of you, who are closely following the Oracle Supply Chain Cloud releases, might be aware that Oracle SCM Cloud is coming up with its newly added tracks and functionalities in Release 11.  Those include 1. Enhanced Order to Cash flows 2.  Source to Settle (including Procure to Pay and full direct material support) 3. Ideas to commercialization 4. Plan to produce

Customers will have more choices to make from different cloud options like -

Inventory& Cost Management in Cloud

Manufacturing Cloud

Procurement Cloud

Product Master Data management Cloud

Logistics Cloud

Order Management Cloud

Product lifecycle Management Cloud

Supply Chain Planning Cloud


Now with these offerings supported in the cloud, the key question is what customers owning Oracle applications should do with these OR how can they leverage the cloud in their existing landscape


Let me try to provide my perspective on some of these common questions below -

1.      Can we really run our Supply chain in the cloud?

We always think that cloud is for Customer Facing applications or Sales, we don't believe that ERP applications such as SCM can be run in the cloud?

2.      What should be my co-existence strategy?

3.      Should we upgrade our SCM applications or go to SCM Cloud?

4.      What should we  do with the customizations ?

5.      What should I do next? How can Infosys help?    


Can we run our supply chain in the cloud ? And is it really like CX Cloud or Sales Cloud?

Things have changed over the past few years, many organizations are thinking of adopting Cloud Supply Chain strategy for their organizations and slowly migrating the applications. Many industry experts believe that today's on-premise solutions will eventually move towards more cloud solutions with only a few still continuing on premise-app.  Business users are pushing IT organizations towards cloud solutions as they do not want to continue on long running upgrade projects, want to be current with the functionalities and features. SCM cloud adoption is also seeing a similar trend.  Merger and acquisitions also an important factor in SCM that is considering many customers to think about cloud

Defining your SCM cloud strategy is clearly the first step to map which applications make sense to move to the cloud

Cloud strategy involves comprehensive analysis of your IT landscape, Business requirements, Business challenges, Architecture readiness, People skills assessment for your future organization.

This involves defining key business and IT drivers for moving to cloud. For the customers who are moving to cloud for the first time, it is absolutely an essential step to have this road map outlined with a clear long term goal.

In my next blog, I'll discuss the rest of the questions ( 2 to 5) and specifically co-existence strategy around SCM cloud applications.  Oracle SCM cloud is real and R11 is promising. We are ready to help clients be successful in this Oracle SCM Cloud journey.


Contact

In case you have additional questions or need more detailed discussions, please drop me a note @ vishwajitshankar_b@infosys.com.

Connect with Infosys

Infosys is a gold sponsor this year at Modern Supply Chain Event. You can listen to Infosys clients discuss industry leading best practices in the manufacturing track panel discussions. Discuss with our thought leaders on how Infosys can help you realize measureable business value from your supply chain management investments.

Join us at booth #410 to learn about our cutting-edge offerings and supply chain management solutions.












Supply Constraint Impacting Customer Order Promising in Outsourced Manufacturing

Continuing from my previous blog, upon delving deeper into the supply constraint aspect, we come upon certain aspects of the high tech industry that prima face indicate to concerns regarding lag or mismatch of information, genuine loss of data (systemic and manual) which I will touch upon briefly.

1) Due to the inherent structure of an outsourced high tech environment, there is no single source of truth (SSOT) for supply data. Each partner/vendor maintains his supply information in different ways. Horizons may vary. Some maintain gross values while others go with Net. Some get hourly updates from suppliers while others may work on the daily model. Consumption patterns may reflect differently. Given these disparities, it is evident that there will always be discrepancies between the actual supply and what is reflected in the system of OEM

2) Down the supply chain, the allocation of these supplies to different classes of customers leads to allocation issues. Some customers cannot be made to wait. Systemic segregation rules may not always allocate enough for such contingencies. In other cases, we are left with excess supply for priority customers while lower priority customers are made to wait. Maintaining a fine balance between customer satisfaction and idle inventory becomes more art but science is quite applicable to an extent.

3) ECO transitions affect supply picture across the supply chain. Variants of a component which can be practically used as alternates but maintained differently lead to a skewed picture around the time frame of transition. Systems may not be able to identify the interchangeable nature of components leading to a higher promise date for the customer while the technician on the shop floor knows he has enough to fulfill the demand on time. 

4) When any out of system corrections happen to get around the systemic issues, it further aggravates the problem of supply accuracy. For this reason, it becomes imperative to build systemic checks to ensure any system reflects the ground reality accurately.

Join our session "Reliable and Accurate Customer Promising" to understand how a major High-tech OEM deals with such issues with a combination of process constraints to rein in time lag variations to keep it consistent for all partners (by means of EDI cut off timings) and systemic interventions to combine supplies for different versions of components for planning purposes. In addition, consistent monitoring and manual corrections are done to keep the supply picture as current as possible.


January 20, 2016

Inventory Accuracy - Control Negative Inventory

Negative inventory occurs when over consumption/issue happens from a location as compared to its actual on-hand quantity. This can happen because of many reasons like - Error in Bills of Material Maintenance, over reporting of Scrap and Production Quantities, wrong UOM Conversions, Delayed Transfer to transacting location, wrong Counting Transactions etc. Although it is a temporary phenomenon, its impact is more significant mainly in Planning and Inventory valuation reporting. Negative inventory acts as a demand for planning engine resulting in inaccurate inventory value statement.


For a Manufacturing Organization, not allowing negative transactions can stall the Production Line, even though material is physically available, thereby impacting Finished Good Reporting, Schedule Attainment, Line stoppage and Customer order fulfillment etc. On the other hand if we allow negative, we may hide many pertinent problems which will remain uncaught and then passing the onus to cycle counter/inventory controller to run around in finding the reason and fixing it. It gets more complex when organization has complex Product Structure and complex warehousing operations.


But, Yes - I intend to say that maintaining Inventory accuracy is as important as ensuring uninterrupted production. Since Oracle does not have a solution to allow Negative for some items (ex. Low value items), so we are left with following options, and mixed mode approach is one of the best suited solution for manufacturing organizations. We should weigh each option and assess organization's preparedness adopt on of these.


Option

Pros

Cons

Do not Allow Negative

Root Cause can be analyzed and fixed

 

Accurate and reliable Inventory Reporting and Planning

Can potentially stop Production Line and affect schedule attainment KPIs.

 

Root Cause Analysis may take longer time and can cause significant disruption to the Production Line

Allow Negative

No Interruption of production as back flushing can drive inventory negative indefinitely

No detection and control over the erroneous transactions or erroneous data.

 

Difficult to detect the root cause as the time progresses.

 

Data is not reliable for Inventory reporting and planning.

Mixed Mode

(Allow Negative During Back flushing)

Production can go smooth till inventory goes negative at the Organization level. i.e Back flushing happens from the Lineside sub inventory till total on-hand at organization level goes negative.

 

Inventory reporting and planning at the organization level is accurate and reliable.

 

In a case where back flush is not allowed because of the total inventory going negative, root cause analysis should be done quickly. But this option will narrow down the root cause analysis.


Contact

In case you have additional questions or need more detailed discussions, please drop me a note @ Saroja_Nayak@infosys.com

Connect with Infosys
Infosys is a gold sponsor this year at Modern Supply Chain Event. You can listen to Infosys clients discuss industry leading best practices in the manufacturing track panel discussions. Discuss with our thought leaders on how Infosys can help you realize measureable business value from your supply chain management investments.
Join us at booth #410 to learn about our cutting-edge offerings and supply chain management solutions.

January 19, 2016

Multi-org Structure - A Balancing Act between Operational Efficiency and Financial Segregation

For most of the multi-nationals a supply chain transformation to become a global organization is a critical journey. Achieving operational efficiencies through re-organizing the supply chain is often the target however it presents a unique challenge of not losing critical financial segregation/legal statutory requirements especially in local markets. An optimal setup of Multi-orgs in Oracle to support Company's vision of achieving key business objectives for operational efficiency and financial segregation is the need of the hour.
As always there are curious case of conflicting requirements where Consolidation is required for Supply Chain efficiency, Global Planning E2E Supply Chain solution and Shared Services approach (PO/OM/Regional WH) vs. Segregation of segment reporting to generate plant/business specific P&L B/S and Ownership of Assets and Liabilities, i.e. Raw Inventory, GRNI
So, the solution revolves around how best we can define our org structure to allow us
1)    Supply Chain flexibility
a)    Ease of change to configurations, ability to quickly adapt to strategic direction.  Data conversion is more timely and less complicated.
b)    Aligns to operational/strategic alignment for items such as Centralized WH operations, Regional OM, Purchasing Org by BU.
2)    Faster implementation/Common Approach
a)    ERP roll out simplicity, speed, & cost.
b)    Ease of integration new plants/new warehouses
c)    Ease of rolling out new modules, functionality, upgrades/patches
d)    Simplifies support by reducing duplication/data/setups - Help Desk/Training
e)    More efficient structure to support accounting process changes (BC structure, I/C), legal entity changes, and/or tax strategies.
3)    Efficiency
a)    Simplify and speed up monthly closing

The answer to all of the above lies in a distinct change of functionality which Oracle has introduced in R12.
Legal Entity (LE) & Operating Unit (OU) have been separated.
a)    11i
-    LE and OU are quite identical.  No specific functionality at LE level.
b)    R12:
-    LE organizes financial compliance
-    OU organizes operational structure and processes.
-    New Modules are organized around LE, not OU functions (Banking, EB-Tax, AGIS)
-    Sub-ledger Accounting (SLA) allows dynamic configuration quite independent from Op. Unit

Using the above functionality one can create an OU structure where multiple Legal entity are associated with a single Operating unit helping us achieve the ultimate operational flexibility without compromising any segregation required for financial reporting.

Contact

In case you have additional questions or need more detailed discussions, please drop me a note @ sanjay_talati@infosys.com

Connect with Infosys
Infosys is a gold sponsor this year at Modern Supply Chain Event. You can listen to Infosys clients discuss industry leading best practices in the manufacturing track panel discussions. Discuss with our thought leaders on how Infosys can help you realize measurable business value from your supply chain management investments.
Join us at booth #410 to learn about our cutting-edge offerings and supply chain management solutions.

January 17, 2016

Codeless Programming for Design Thinkers

 
  Mobile device with its many sensors including touch and actuators provides great application opportunities.  The software development techniques have not evolved significantly to keep with the pace of hardware development.  The conventional method of programming is time consuming and prone to errors that are caught only through tedious testing process at various levels. Hence the dependencies on the coding experts to get the end solution still remains.   Moreover this has the challenge of synchronizing the understanding of the requirements and functionalities between the functionality designers and developers.  Hence the developing software even for the mobile is still done using the desktop and then migrated to the mobile.


How about this?  The new subcontract manager of a company wants to collaborate with his vendors using mobile device by sharing the forecast and firm demands. For that a simple mobile app is required to connect to his database, read only the forecast and display. He connects to the codeless programming kit in his mobile, picks a container frame to hold the functional components, places the spreadsheet component that has three inputs- item, date and quantity, places the database connector with the SQL query to return the data required by spreadsheet and connects the component ports using the virtual connectors to allow the data flow from database connector to the spreadsheet.  All this is done directly using the touch screen and with very less text entry.   His simple collaboration system is in place within some hours and now he can consider scaling it with new functional components from the kit.


This method uses assembling of various functional components rather than instructing the system. The virtual functional components are already tested for input and output with well-defined digital interfaces for connecting.  Most importantly these components are handled and integrated or assembled by hand. This facilitates quick visualization, faster building of digital solutions and directly on the device that will be used for operations.   The advantage of this is tremendous for the companies and individuals who would like to leverage the technology for their application at very low cost and time.


A framework is necessary to build the virtual functional components, its connectors and the base containers.  The elements of this will still need developers to build, ensure that proper interfaces are in place and form a code programming kit that the end user can use his hands to assemble and get the desired solution. This will lead to developers focusing more on the architecture and the specific functional components without getting bothered about its impact on end to end data flow.  The functionality designer or the end users assemble these components on base containers or frames. Several of these assemblies is linked to form a process.  This is very much like the having the manufacturers of components of integrated circuits, wires and base boards focusing on its development and coming up with new improved versions without compromising on the interfacing standards.  The end users then assemble them to get the desired results.


As per Gartner,  by 2017 the market for mobile apps development will grow five time faster than the ability of the IT organizations to deliver them.   The forecasted 2.1 billion mobile device sales by 2019 will only increase the demand for apps development in future.  What is the better method of making that happen than giving the power to program to the users themselves?

January 14, 2016

Integrated Supply Chain with Contract Manufacturer

In today's competitive world, Manufacturing Organizations subcontract many of their key processes to gain competitive advantage in operational efficiency, operating cost, capital expenditure and several other benefits. Comparatively, manufacturing organizations need a tighter bond with its outsourcing partner(s) at various stages of its manufacturing cycle. Today's supply chain processes demand an end-to-end integrated & interactive view to enhance collaboration with subcontracting business partners. Current outside processing functionality is rather insufficient to solution this gap.
Oracle's Outside Processing Functionality is not sufficient enough for end-to-end system driven transactions and visibility with varied business processes and complex subcontracting supply chain. Then you have Oracle Outsourced Manufacturing - a complete integrated supply chain module. It is integrated to core manufacturing, planning and distribution modules, it provides the required visibility, traceability and scalability to implement many variants of subcontracting processes.

Overview of the Outsourced Manufacturing Transactions:


Integrated Planning and Execution:


Contact

In case you have additional questions or need more detailed discussions, please drop me a note @ Saroja_Nayak@infosys.com

Connect with Infosys

Infosys is a gold sponsor this year at Modern Supply Chain Event. You can listen to Infosys clients discuss industry leading best practices in the manufacturing track panel discussions. Discuss with our thought leaders on how Infosys can help you realize measureable business value from your supply chain management investments.
Join us at booth #410 to learn about our cutting-edge offerings and supply chain management solutions.

Importance of Accurate Customer Order Promising in Outsourced Manufacturing

Driven by strategic importance and strength of internal capability, industry leading Original Equipment Manufacturers (OEM) often outsource sourcing, manufacturing and logistics functions to partners but retain supply chain planning and scheduling/ATP largely in-house. While outsourcing confers sharper focus and reduced costs in general, outsourced Supply Chain Planning has many high-impact risks for OEMs like

•    Loss of competitive advantage
•    Reduced quality of planning output
•    Coordination and synchronization miss
•    Limited supply chain flexibility
•    Slower responsiveness to customers

With in-house planning, the Available to Promise (ATP) response cannot be made instant but at best with a lag due to the fact that there would always be a difference in supply statement in the system when compared to partner sites. Companies especially in High-Tech industries who have Build to Stock, Build to Order and Configure to Order products often promise their customer within the target lead time goal across different product families. With lighter configuration, shorter lead time, high volume and perishable demand, planners and backlog management functions are under tremendous pressure to promise customers within the goal to meet revenue targets. With companies scheduling orders too conservatively or incorrectly and later having to re-schedule to be able to ship within the goal would impact following performance metrics

1.    Scheduling against target lead time: Ability to provide a promise date to the customer with in the lead time goal from the order entry date
2.    Scheduling touches: Backlog management activities to pull-in or push-out dates from initial scheduling
3.    Customer satisfaction: Customer dissatisfaction due to inability to provide accurate initial promise date



Impact to performance metrics has a direct bearing on the business not limited to:

1.    Customer dissatisfaction : Multiple touches and repeated date changes develop nervousness and loss of trust in customer
2.    Unpredictable sales revenue: As promising dates extend beyond the goal, revenue targets get impacted and increases backlog management activities.  
3.    Excess inventory in channels: As supply planning is based on the revenue targets, excess inventory lies in the channels as the scheduling attainment rate is lower than anticipated
4.    Increased number of touches: As companies try to improve revenue targets by pulling in the orders, it increases the touches
5.    Increased support cost: OEMs have to pay additional charges to Manufacturing Partners, B2B partners for change in assembly and shipping completion date

There are many reasons why companies in outsourced manufacturing find it challenging to attain high promising accuracy and it can broadly be classified into three

1.    Supply Constraint: Inaccurate supply picture, B2B delays, incorrect allocations, supply lost between engineering transitions etc.
2.    Lead time Constraint: Conservative transit lead time across geographies, incorrect application of holidays, and extended lead time on components etc.
3.    Configurations: Incorrect lead time, calendar, sourcing rule and other item related attribute set-up's


 

In my next blog, I'll explain how these causes impact scheduling performance and what approach one should take to address it. Please join the session "Reliable and Accurate Customer Promising" session at 4:30 PM on 1/26 in Oracle Modern Supply Chain Experience conference at San Jose to learn how a leading High-Tech complex OEM improved its scheduling performance from 55 to 80%


http://www.oraclemsce.com/solution/supply-chain-planning  (Executive Ballroom 210 CG)
Infosys is a Diamond Sponsor of Oracle OpenWorld2015
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