The Infosys global supply chain management blog enables leaner supply chains through process and IT related interventions. Discuss the latest trends and solutions across the supply chain management landscape.

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April 24, 2009

Agile SCM Cloud - How to implement one?

In the previous two blogs I have talked about the possibility of creating a cloud of SCM functions and commoditizing’ em to relieve the user from the tedious task of choosing, procuring, implementing and customizing SCM functions for his business. The general trend these days with the advent of grid and cloud computing is to focus more on the application and its use for the business rather than worry about scalability, reliability and security which are now an integral part of the cloud offerings.

Web based companies like Amazon and Google have already realized the potential of such offerings and have their own version of Cloud Infrastructure to-let for a host of different customers. For example, anywhere from a huge oil and gas company renting the infrastructure to process a portion of their new-energy-source-data-set to a small start-up that need not procure any hardware to keep its IT budget low. So what is new about the SCM cloud?

N-Tiered Applications: What the Elastic Cloud provides is the base infrastructure. Almost exactingly SCM applications are multi-tiered in nature comprising of applications, application containers, databases, intra and inter application communication buses and so forth. In other words, we would need Sterling DOM 8.0, WebSphere Application Server, 6.1 Oracle 10G, IBM MQ 6.1 etc on the cloud to be able to host ‘Order Fulfilment’ function on the cloud.

Licensing Model: I think service providers like Infosys should take the cudgel of getting a variety of vendors who fill the SCM space to sign-up on the cloud. We need a licensing model to translate a cloud user subscription to licensing cost for the application stack he uses. IBM shook hands a couple of weeks back with Amazon to host some of its products on the cloud, which in my opinion, is almost a testimonial to this thought.

SCM Function Instance (inspired by Amazon machine images of course): We also need a unit of measure to charge the user who subscribes to the SCM functions. This must be a composite cost for the infrastructure and the cost for the application stack for different products involved in rendering the SCM function.

Edgy Features: All the points I have discussed thus far will just give us the ability to host some SCM functions on a bed of unceasing infrastructure – the rudimentary SCM cloud. So what gives us the vantage point? Really cool features like the following: 

Role based access to SCM functions – distinguishing the business A users from enterprise Z and business A admin from business A end user with only one time authentication and authorization. 

Customization at a cost – providing the user an ability to further customize the SCM function offerings to suit his business. For example: if it is a Manhattan forecasting function the user is subscribing to, we should give him the ability to define the input parameters for forecasting. 

Seamless integration – End user should not distinguish the parts of his application/portal that are hosted on the cloud and from the ones that are hosted in-house. The same criterion applies to the batch mode of communication between SCM functions on the cloud and other in-house applications. Perhaps the ability to integrate SCM functions to subscriber’s ESB. 

Subscription Catalogue and its granularity – User should be allowed to choose different SCM functions and define his own application stack by providing him the ability to choose vendors for every tier of his application stack.

Mix all these ingredients and bake it at 375 degree Fahrenheit for 30 minutes and the SCM Cloud is ready!

This vision has a lot of potential. I think. It is a win-win for the infrastructure vendors, SCM product vendors, service providers and the users. In the reverse order, users because they get TCO benefits, service providers because they are the facilitators of this idea, SCM product vendors and infrastructure vendors because the cloud has opened gates to a legion of user. 

Taking it to the next level, IT developers/free lance developers can come-up with their own ideas and host it as a service on the cloud and get paid as the users sign-up. For example, a forecasting rule engine. Users can only use what they want for as long as they want. I can prepare all the inputs for a forecasting function and use it once every quarter to generate the demand forecast and unplug from the forecasting function. If vendor A forecasting did not work well the first time he can choose vendor B the next time.

In essence, ignite your whims and fancies guys and it is possible!!

April 22, 2009

DNA Therapy for Strategic Cost Reduction in Supply Chains

My recent hunt for stem cell banking information in South India got me excited on a subject of high interest in the biomedical world. Stem cell therapy is the latest medical wonder discovery and supposed to be a cure for 70 odd complex maladies of humans, especially interesting because till late these ill’s were supposed be hard to win over with the conventional medical treatment methods - treatments which were more focused on treatment of the symptom or providing a patch solution for the life threatening diseases, not usually a permanent cure.

DNA is the building block of all life and living on this planet. They are the smallest finite elements which determine the characteristic and personality of any individual. DNA or gene therapy gets to the root cause of the problem. They provided the paradigm shift in medical treatment from the symptomatic treatment of the yesteryears to treating or correcting the diseases cells at source.

What has DNA therapy got to do with Supply Chain Management?

The market conditions are really harsh and organizations having to work really hard to stay fit and survive. Just coming out of a good market situation not so long age, never having anticipated a sudden exposure to such conditions and caught off guard, most organizations are working to shed of the extra flab of complacency in terms of supply chain inefficiencies, inventories and costs. Most resorting to crash diets by tactically cutting on costs heads like head count reduction, process improvements, asset rationalization etc. Often some of the tactical decisions are in conflict with the overall objectives like reducing people while needing to increase overall competencies, reducing inventory while needing to improve service levels. The KPI is to reduce cost (at whatever cost) for every individual, there is no one view to how this is impacting the entire supply chain and the organization for the future.(At 40 pounds overweight myself and having been through crash programs, I have personally felt how hard it is for a successful long term solution to trimming)


So the question is - Is there a one view holistic approach which gets to the fundamental building blocks of the organization’s supply chain and works of those elements to shed the extra fats “at source”. Can organization supply chains have a DNA which is very characteristic to the individual company's personality and the industry which determine how the supply chain operates? We are looking for a “Strategic Cost Reduction” approach to supply chain to treat the root cause of supply chain obesity. I have come across various models of cost reduction and personally feel a one axis view would always by tactical and for a strategic approach one needs to look at a multitude of factors

Sample illustration of a possible supply chain DNA model for cost reduction
Figure 1: Sample illustration of a possible supply chain DNA model for cost reduction

(Cannot profess to have a good understanding of DNA structures (not yet), the above diagram is not possibly a technical representation of the actual DNA helix but an attempt to explain the complexities & the solution approach conceptually).

As with human DNA’s (AGCT for Adenine, Guanine, Cytosine & Thymine), the supply chain DNA have 4 building blocks as indicated in the table below. Call this the MOCI framework, Model, Operations, Costs and Integration.

Building blocks of supply chain DNA 

Figure 2 : Building blocks of supply chain DNA

These building blocks can be visualized across the functional components of supply chain, namely – Design, Plan, Source, Make, Deliver, and Service. While the first 3 (MOC) could be viewed as independent blocks, that last (I) – Integration visualizes on how the others effective synchronize to work in unison. The gaps in integration, if any, are pores where cost losses could be avoided, distances reduced between decisions and results and enhance accuracy.

The target is to get to a lean and mean supply chain machine which runs through the extended ecosystem to build and deliver value at the “Optimal Total Lifecycle Cost”. One size does not fit all, Meyer Briggs type indicator tells us that there are broadly 16 types of personalities who react differently to situations and stimulus. A holistic approach to strategic cost reduction can be built once we are able to perceive the pulse and personality of the supply chain.

The important question then is – How do we create a scan imprint (w/o the microscope’s, CT’s and MRI’s) of the organizational supply chain DNA??
Will be glad to hear experiences on Supply Chain DNA and your thoughts on its relevance to current challenges & cost reduction approaches.

April 17, 2009

Reduce your TCO with migration to SRM MDM Catalog

How to optimize and to what extent? This is the need of the hour and terms that has been and will always be of interest to the CPO and CFO desk. It isn’t very difficult to conclude whether a catalog migration project is a “must do” for SRM customers, we will learn how the SAP on SAP advantage will benefit them from a TCO standpoint.In this blog I will discuss on my experience with a successful catalog migration project for a health and Beauty retailer and how it benefited the operational procurement team.

What were the typical challenges faced by the catalog management team?

Problem: Catalog managers often faced issues with Supplier data; unmanaged catalog data was inaccurate, incomplete, full of discrepancies, and led to poor business decisions. After running a data rationalization project prior to commencement of the actual migration, the final output revealed the most disturbing question from the client, “Why is the same product in my catalog represented in 2 different ways” how can I avoid this and how can I sustain the quality of data”

Solution: The answer to this was very simple, but the approach to fixing the erroneous approaches in master data load was the key.
The support and the validation parameters in the Catalog Management tool played a very key role. Adoption to SRM MDM catalog became very easy due to the fact that catalog application came with pre-delivered business content, repository schema and a plug and play configuration highly intuitive, easily configurable by the catalog management team with very less training efforts.
Problem: Data Validation at the time of import: It was difficult to handle complex scripts that are required to validate the data during import

Solution: In this case configuring the validations was made easy with the MDM workflow comprising of validation rules and an appealing Visio interface.This led to TCO reduction as lots of manual excel comparisons, matches merges and offline approvals were eradicated. The import Proforma that’s provided by the supplier was built with intelligence that reduced cumbersome data integrity checks that were earlier a key responsibility of the catalog management team.

These were two major benefits that I’ve showcased out of the many we achieved.……Now coming to the specifics on what’s the need and the corresponding business benefits to customers, let’s read further on how we can leverage over the existing investments in the SAP SRM Space

Why migrate to SRM MDM catalog?

-          SRM customers who are still using Requisite Bugs Eye catalog have to support it themselves, as SAP’s standard support for requisite has ended in 2006
-          SAP on SAP advantage: the catalog application and the Procurement application are on the SAP platform, easier integration capabilities to SAP and non-SAP systems.
-          It’s based on SAP NetWeaver Master Data Management that happens to be a focus area providing catalog customers a flavor of Mater data management.
-          The license for SRM MDM catalog is free with SRM 5.0 and greater versions.
-          Its easier to upgrade to the higher versions of SRM MDM catalog than going for a requisite upgrade
-          It brings in a lot of options to a catalog administrator to slice and dice data adding strength & flexibility into the catalog application….for people who have worked with disparate catalog management applications, some of the technical benefits mentioned below would be of interest
·        
Data modeling flexibility is unmatched and key differentiation. Modeling is intuitive and easy and can be completely user-defined with APIs to support development and cross-platform integration.
·         Data Management flexibility is equally unmatched and powerful differentiator including drag and drop management of taxonomies, import management, data cleansing and mapping with a single path for consolidation from multiple disparate sources.
·         Catalog publishing capabilities are unique to any other MDM solution with advanced parametric and multi-dimensional search features to enable quick search and comparison of products for informed buying and support requirements.
By now, customers who are already looking at a catalog migration project in near future will have some pointers to build a strong business case.

In my next blog, I will prescribe some key considerations for a successful SRM MDM catalog migration project.

April 13, 2009

What’s the right forecasting approach in the current business environment?

I am talking about short term operational forecasting here, since that’s the one that drives business on an ongoing basis and has a direct impact on the financial performance of an organization. Forecasting has been a very statistically driven exercise with too much weightage given to quantitative techniques. Quantitative techniques take historical data as the reference or basis for forecasting, and therefore, the results are acceptable as long as the industry and other players work in similar economic environmental conditions. Now, when the consumer demand is extremely volatile and sentiments are down across almost all the industry segments, the historical consumer sales data cannot be considered as the right reference for generating forecasts. And therefore, dependence on quantitative techniques may not be the right approach and might lead to serious consequences such as rise in excess and obsolete inventory, increase in blocked working capital and finally, shortfall in achieving sales targets.

It is a known fact that the recession and slowdown in economy has impacted organizations on both their topline and bottomline, leaving no room for error in any process. Since the tolerance levels for absorbing inefficiencies are at its minimum, organizations are doing a critical health-check by identifying non-value adding processes & cost elements and eliminating them as far as possible. In such an environment, it is highly imperative to re-look at one’s forecasting approach and adopt techniques that are more appropriate, implementable, and let one stay conservative.

In my opinion, I feel that quantitative techniques should be used to generate just a baseline forecast that should get further fine tuned and refined to make it a final forecast, and this final forecast should be used to drive the entire planning process. Doing this at a SKU level may not be feasible, but demand planners should definitely attempt to do it at a product category level and then break the aggregated numbers to SKU level with right business rules. Now the most important part is the fine-tuning of this base forecast, where I feel that demand planners should adopt a two-pronged collaborative forecasting approach and work very closely with:

a)      “Internal stakeholders such as marketing and sales teams”. The marketing and sales teams play a very crucial role in boosting sales in a downturn economy, by creating innovative strategies to drive channel push and consumer pull. Usually termed as ‘demand shaping’, its end objective is to drive consumer demand and preferably, organizations focus their efforts to just key brands and geographies. Demand planners should work with these teams to gather inputs and insights about such programs and get an estimate of expected impact on consumer demand. The final forecast can then be prepared by fine tuning base forecast based on these critical inputs which otherwise would have been lost, if there was no such collaboration process in place.

b)      “External supply chain team such as distributors and channel partners”. The other critical piece is working with channel partners and distributors, atleast, the A-class partners and geographies and receiving consumer preferences and signals as early as possible. Termed as ‘demand sensing’, its end objective is to be as close to the consumer as possible, so that any demand signal can be quickly picked up and made visible to all members back in the supply chain. Demand planners should work with these partners through periodical consensus planning meetings and get involved in their forecasting process, help them in improving it and use it as the basis for fine tuning its own generated base forecast. Again, let me emphasize here that, it is nearly impossible to capture this precious information through the historical data an organization has. Having very close and continuous interactions with channel partners is a very significant step towards getting the forecast numbers right.

 

Now, having said that, it doesn’t mean that it will result in a perfect forecast but yes, definitely, it will have all the supply chain members signed in for the final forecast number that drives all the other planning processes. The risks are shared and organizations will take less time to react to any untoward instances especially, when we all are in the middle of this crisis situation. Please do share your comments and views on this; I am willing to hear your experiences and feedback.

April 6, 2009

Designing optimal customer order allocation by taking into account of inventory fluctuations can be quite complex....

In the recent times, many multi channel retailers are increasingly focusing on designing the systems that help them manage variable supply and demand situations.  Hard tying demands to incoming supplies will make system very rigid. Customer demand management in multi channel commerce requires a well thought out pro active response to handle such fluctuations.

 

Quite often, order promising based on on-hand and incoming supply appears simple. Order promising and allocation can be based on the simple sequence in which order management receives order unless there is some priority orders. However, designing system that can respond efficiently considering following scenarios can be quite challenging –

  • Promise date at the time of order taking is based on the supply picture during that time. Post order confirmation, order management should check opportunities to better the customer promise date. i.e. assuming inventory updates are coming to order management “near real” time, there is every possibility that supply picture may have a positive (or negative) impact on the customer promise date. Order management should optimize the allocation based on the latest inventory picture
  • Demand variations can positively impact existing customer order promise date. i.e. If there are cancellations, existing orders which are already allocated should have higher priority for bettering the promise dates and not the new demands which entered order management
  • Customer promise date may be based on hand inventory during order entry. However at the time of allocation, the on hand inventory may no longer be available due to inventory adjustment (ex: bad inventory, QC check etc) updates from WMS. In this case order allocation should be considered based on the earliest possible incoming supply. In other words, demand realignment should happen based on the latest inventory update.
  • Incoming supply date changes, inventory quantity changes and/or supply cancellations should re-align the promise dates of the customer order. Inefficient demand management hard tie incoming supplies which results in sub optimal supply usage. Dynamic re-alignment of demands to the changed scenario in incoming supplies is very important.
  • Incoming supply status (can be described as supply quality) will have implications on meeting the customer demand. For example, incoming supplies may have different dates of receipts. However the highest quality supply should be considered for order allocation instead of simply going with the supply arrival dates. For example – PO shipped status is of highest quality in comparison with PO placed irrespective of the date of receipt. This situation may be due to updated PO arrival date not received from the supplier (ideally PO Shipped date < PO Placed date) or certain supplier always misses ETA!
  • Order which have been back ordered should get the priority when an incoming supply is received. Inefficient order allocations tend to hard tie the on hand or incoming supplies (a specific purchase order).
  • For all the situations described above, there is a potential change in the promise date. This may require customer communication. However, it should be noted that highly responsive allocation management may trigger several date change before the order is finally released for shipping. Care should be taken to determine a minimum threshold date change range to avoid unnecessary communications due to minor date changes. In case of positive changes to the promise date it may not be necessary to communicate at all. Customer will be happy in any case!

Dynamic allocation of demands to the most suitable supplies is very important in case of customer order allocations. It is necessary to make sure that the customer orders which have been received earlier always get the inventory availability in the same precedence. Also if an unplanned supply got received or gets cancelled, the existing orders get realigned to the available supplies to ensure most optimum usage of supplies and ensure maximum customer satisfaction. Some of the examples mentioned above are not exhaustive, however it should be noted that highly responsive customer order allocation design can become quite complex.

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