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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August 27, 2009

Tapping Collective Maintenance Wisdom - An EAM Route?

I recently got a chance to go through an interestingly titled research report from Bill Polk of AMR going by the headline "Asset Management Algebra: EAM = ROI". In these times of increasingly deficient attention-spans, reading a 2-pager is always better than reading a 20-pager with authors belaboring the same point in multiple ways.

Apart from the usual benefits of EAM (ROCE, efficiency improvements, structured information etc) and its new found importance (movement from tactical to strategic), an interesting point which I haven't come across in many other places was about "Capturing and preserving data from an aging workforce". While implementing EAM systems, we typically think of labor management (thru the EAM app or via a little help from more high brow "Workforce Management Systems or WFMs") as a way to capture skills of the maintenance personnel thus making sure the right party is assigned to the right work order.

Here Bill comes up with a different perspective on the importance of EAM & the skills registry part of the implementation. In his words "Many manufacturing assets - heavy assets, in particular - are designed to run for decades. In fact many companies' assets are designed and built by one generation and then operated and maintained by the next. With key information oftentimes found in the heads or desks of an aging workforce, in addition to the increase in maintenance outsourcing, it’s essential to have easily-accessible central repositories of data"

This is clearly an angle we haven’t heard from our clients yet. You may wonder whether we are getting into the realm of Knowledge Management here as against plain old EAM. That may be the case and the challenge would be in capturing unstructured information gleaned over years of maintenance experience which is asset-specific, location-specific and most importantly person-specific into a structured database as part of an EAM implementation, rather than consign it in some kind of free-form text. For industries with longer asset life cycles (say an electric utility or a nuclear power plant), it may be worth the additional effort.

Elsewhere, Bill also outlines very crisply the key benefit metrics (like reduction of emergency repairs or no. of maintenance incidents prevented). Like any other cost-reduction application (say, indirect spend or HR), its actually possible to create a case for self-funding EAM, which just requires a 6-month wait period before the first set of improvements begin to save money for maintenance managers to start planning for more high-end usages like instrumentation integration real-time or asset health dashboards, which work on a near real-time basis.

Where I am a little skeptical is the fast-case implementation scenario Bill refers to, of 30-60 days lead times for vanilla implementations. Perhaps I’m tempered by the fact that Infosys plays almost exclusively in the Fortune-1000 or Global2K client base where all fast cases could end up being lost cases more often than otherwise. My feeling is that such implementations would be largely in the realm of a capability demonstration PoCs. As Bill himself says elsewhere, the real power of the software can only be harnessed when the EAM workflows go beyond the boundaries of one package and start looking at all the cost elements that impacts asset optimization. That covers ERP, plant systems and any niche applications (MRO procurement, inventory management, workforce management) which can contribute to overall goals of an EAM implementation. We can then say that EAM Algebra is truly the sum of parts being larger than the whole.

...SAP SRM 7.0 is here to stay, available to Leverage your SRM footprint: Is your On-boarding business case ready for the Roadmap exercise? – Part 1

SAP SRM 7.0 is here to stay. Shoulders high, collars up, head upright……. Here we go!!!!!!!!!! This 101 introduction blog is to set the context of SAP SRM road mapping exercise for an Organization that could be either stable / under crisis or even pushed with heavy cost reduction projects with IT landscape rationalization. In such bad weather it becomes very important for us to understand the emotions of a DECISION MAKING TEAM that could use an Application Framework to provide a 911 support to a falling business.

In the blog sequel 4 and above we will get into the Nerve of the Solution and evaluate the business benefit of every functionality, Scenario that’s delivered. Again re-instating, “Every Dollar Saved in Procurement -> Contributes to every dollar earned in Revenue”

In a downtime situation with recession flicks almost getting to all industry verticals, the challenge is to still come up with a strong business case that will cow-down the obstacles and uncomfortable questions from the CIO / CPO desk.  

May 2009, was a month of events, and one such was SRM 7.0 becoming generally available for business predators, who until now were working on strengthening the business case for an SRM Upgrade or a Green field implementation. I was inspired by these sequel driven blog rolls from Jason on spendmatters.com on SRM 101 and beyond, traction was always there, and will grow further. http://www.spendmatters.com/index.cfm/2009/5/27/Its-Alive--SAP-SRM-70-Part-1

http://www.spendmatters.com/index.cfm/2009/5/28/Its-Alive--SAP-SRM-70-in-Depth-Part-2  

The Mashed up IT and Business perception

…Lets drop 3 feet below to get into the shoes of the head of a Supply Chain IT / CIO supported by a strong SAP Center of Excellence (90% of whose application landscape is SAP, in other words a HEAVY SAP SHOP), whose been given this daunting task to work alongside Supply Chain / Supplier Relations Core Business folks to drive an enterprise wide transformational initiative to save that DOLLAR.

Emotions

 - What are the top 10 Agenda items on his / her mind to achieve this?

 - What emotions are he / she going through during this tough phase?

 - Will he/she be able to show the underlying savings that are theoretical currently?

 - With being a heavy SAP shop and commodity expert’s pressure pushing him heavily to evaluate non-SAP BEST OF BREED product lines in the SRM space, how will he/she sell SAP SRM?

 - Will he / she be able to identify KPI’s to strengthen the business case and the corresponding ROI’s for an SRM 7.0 upgrade / Fresh Green field implementation?

 - Will Rapid Prototyping help in getting a sneak preview of the final solution to support the transformation?

 - Outsourcing or not?  

- Is IT trying to get ahead of business in delivering something that will probably remain unpacked?

……I can probably identify 100 questions more; coz the mind doesn’t have an endpoint and doesn’t know where to stop.

However encroaching Web Real estate will only be 1-way traffic, I want this to be interactive, so let me wait to hear from you on at least 20 more questions before we could actually freeze the denominator to those 10 areas that go a long way in decision making and inputs to a strong business case with a promising ROI. We will analyze the excerpts of these emotions that lead us to our next blog on “Sign-off the SAP SRM 7.0 Road mapping exercise for an Enterprise” Regards Tridip Chakraborthy

August 26, 2009

Supply Chain “Proverbs-to-ponder”

IDENTIFYING CAUSES FOR UNSUSTAINABLE BEHAVIOR

Efforts for sustaining supply chain benefits have been under fire. Business requires supply chain programs for implementing their strategies. Variability, especially uncertainties in operations dim the chances for even the best solutions to return results in a consistent manner. Sustainability, is taking center-stage for CXOs and I see them scramble for ideas that have demonstrated results.

I have witnessed such variations in supply chains that present themselves as both daunting and a worthwhile pursuit. Here are 3 approaches that can help with sustaining your supply chain initiatives, whether it is for planning or for execution. I call them the “3 Proverbs to Sustainability”. (I know most of you think of GREEN when you hear of sustainability)

#1: In calamity, 50% is danger and 50% is opportunity
Considering supply chain uncertainties as keys to unlocking value is the first step. Each supply chain process has a constant and a variable that drives its efficiency. Understanding the trade-offs between sure and unsure aspects of a process will ensure that you can determine your supply chain’s KPI (Key Performance Indicators) accurately. As an example, On-time delivery as a KPI can be overly different for measuring the same process if the calculations are based receiving an Order- Date of Order, Date of Processing/Releasing Order or Date of Shipment. It is critical that Retailers and their Suppliers get these definitions correct prior to setting their KPI baselines.

#2: Everyone knows how a ship can be saved; after it has sunk
Most supply chain intelligence (a.k.a Performance Reports) delivers for metrics “after-the-fact”. Solutions need to adapt to early warnings (preemptive analytics) as much as they report performance measures. Supply chain visibility can offer businesses to identify problems when they are ready to appear. My observation of supply chains shows that there are tremendous opportunities to unlock value if we design supply chain visibility solutions horizontally. If a Retailer’s buyer creates a Purchase Order for a Supplier abroad; and lack of visibility into a vessel booking process “x” days prior to or before the receipt of goods by Supplier informed via their ASN (Advanced Ship Notices) can become a prospect for failure. Supply chains must anticipate risks early on. See Infosys approach by visiting www.nextgenerationsupplychain.com

#3: To change and to improve are two different things
Solutions promise change. Improvement is a whole different point. In my viewpoint, the extent to which a Solution or Method must allow for betterment to current business metrics need to be part of designing and implementing Technology for business process improvements. Continuous improvements, though very challenging, must be at the helm of supply chain innovation.

You’ll all agree that supply chain leaders must reevaluate their Solution capabilities. Including practical metrics to consider the impact of uncertainties, improving visibility alongside proactive alerts and adapting to continuous improvement practices through innovation in design can convert risks into benefits that are sustainable.

If we take a second look, it will cost us nothing to practice these proverbs.

August 5, 2009

How risky is present Supply Chain risk assessment?

Assessment of Supply Chain risk is gradually evolving as the critical core competency for organizations struggling to cement their footprint. Most organizations especially the public listed enterprises have developed ways and means to identify enterprise risks and develop strategies for mitigating the same. But when it has come to supply chain risk assessment, the vision is blurred by parochial operational silos which deploy separate techniques for risk assessment. Even the spectrum of supply chain risk is limited to supply and distribution functions. The “Big Picture” image gets lost and this leads to huge risk of erroneous prioritization, procrastination and delayed action. One of the major causes of this scenario is the challenge of a system in place which enables a “comprehensive risk assessment”.

Let me drill deeper into this with some “slice-of-life” scenarios. You would observe a Sourcing Head assessing the supply chain risk related to supplier selection & development, supplier delivery reliability, supplier quality assurance, supplier technology evaluation and supplier insolvency assessment. On similar lines a Production Head is interested in assessment of risks related to raw material or bought-outs availability, machine reliability, operator productivity, production quality, inventory position and order fulfillment. They are comfortable in their own “glass houses” oblivious of the impact one risk within his territory impacting the performance of the other. Many a times these “glass houses” are so opaque, that a risk event occurring within a territory is kept under carpet till the impact has overgrown its natural size.

 

To take care of these types of operational silos, forward-looking organizations have invested heavily on ERP packages. What these packages do is to bring out any risk event on real-time (here processing time would be more appropriate) across the organization. But these ERP packages are designed from an accounts perspective. So, every event is assessed only on its financial merits. This limitation is slowly becoming a major challenge for any supply chain risk. The following example will drive home the point.

 

A global retailer faced a major supply choke due to delay in imports into USA. The issue was the absence of certain documents to meet C-TPAT compliance. The consignment was about USD 1.2 Million causing a huge risk of charges on capital blockage, demurrage charges, Port-to-DC transportation commitment payouts etc. The total risk exposure was to the tune of USD 340K. Compare this with another risk event of 3 cases of fire hazard due to a toy malfunction observed in the market. The risk exposure was as low as USD 27K including “mild recalls” and redesign costs. As both these events have low occurrence probability (due to first time events), the financial risk impact provides a natural priority to the first event. It is here that the limitation of the ERP systems come to the fore, making the "comprehensive risk assessment” techniques more relevant.

 

These ERP systems only support financial impact prioritization. These systems are unable to provide a holistic view of the impact. To take the above example, the following impacts were completely neglected:

§         Operational impact on distribution planning and scheduling

§         Customer impact on reputation and future revenues

§         Legal impact of contractual obligations and regulatory punishments

 

In the absence of these risk impact assessments, the consignment at the port takes precedence over the “perceived miniscule” incidence of fire hazard, due to the financial enormity of the former.

 

The financial driven risk assessments have been so much ingrained into the enterprises that they have financial wizards as Chief Risk Officers. This dominance of finance and accounts has also led to hegemony of finance techniques for risk mitigation. Any supply chain risk can be mitigated using three techniques. These are:

§         Risk transfer (e.g. insurance )

§         Risk sharing (e.g. supplier chargebacks etc.)

§         Risk avoidance

Risk transfer takes the highest corporate precedence, as financial wizards identify the risks and devise methodologies to insure these risks. But with the changing scenario as these enterprises are becoming more and more cash-strapped, their preference to put money on insurance premiums is becoming less and less likely. The focus is gradually shifting towards risk sharing and primarily risk avoidance. It is here that the Operations Heads have to pitch in. I would not be surprised if organizations have Chief Operating Officers taking up parallel roles as Chief Risk Officers as well.

 

So organizations across industries are either investing of their own or enabling research agencies to develop complex algorithms for “comprehensive risk assessment”. The prioritization is slowly getting shifted from a financial decision making to a holistic decision making involving all aspects of impact. Even the ERP product vendors who have the advantage of setting up platform technologies across the organization functions are taking up this challenge to develop product enhancements which are bolt-on solutions to incorporate “comprehensive risk assessment” techniques. As enterprises become increasingly resource-strapped a correct approach for deploying these limited resources across multiple risk events which may occur simultaneously, would be the most critical decision making need in supply chain risk management.   

 

And for those who wanted to know what happened due to the erroneous prioritization, the retailer spent a fortune to free the consignment. But by the time this was done, the “neglected” cases of fire hazard in the market had been blown beyond proportions in the media and legal forum, dealing irrevocable damage to its brand reputation. And that is not the end but the beginning of it all……

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