Supply Chain Management

The Pareto theory resonates among all of us, specifically the Supply Chain consultants. Based on general experience, it is usually a few deviants that take all of one's attention. Not only do these deviants get all the attention, they make the process and the solution to deal with general elements very complex.

Consider for example, the most upstream activity in Supply Chain planning - i.e Forecasting. It is usually easier to forecast 80% of the products, however challenging to forecast the 20% that seemingly show no pattern. Likewise with Supply Planning, the regular safety stock planning or constrainted planning is challenging for a finite segment of the products. Even on the execution side, i.e Order Promising, it is usually challenging to be able to accurately confirm and fulfil certain demand segments.

One suggested approach in such situations is to disect the problem into these two dimensions - the regulars and the deviants. Analyze them on another two dimensions - are they critical to business or nice-to-haves. Try to address the low-hanging fruits in the first wave of implementation and slowly graduate to the next levels. Some of the biggest mistakes one could do with supply chain implementations is to aim for the sun and fall on the face - never bodes well long term.

Some ways of finding what is critical to business is to be able to make them articulate the relative value of solution feature provides with respect to the overall solution - does business stop or get crippled due to a certain feature not being implemented ?

On a philosophical side - what gets taken for granted is usually the most important - hence focus on the basics first in a Supply Chain implementation.

 

Posted by K. Srinivas at 5:10 PM | Permalink | Comments (0) | TrackBacks (0)

Supply chain risk management professionals have been designing and developing tools and techniques for capturing data, conducting an assessment and then taking mitigation actions. There have been complex mathematical formulae and statistical estimation techniques, as well as detailed business rules for any decision support system for supply chain risk management. There would be enlightened debates among the academics and the researchers about the distribution algorithms to be adopted and the forecasting models to be deployed for define an accurate picture of the future. They would enable classifying the risk sources and the risk drivers to come out with the right assessment of risk. But in this milieu of mathematics, statistics, rules and regulations one critical aspect is given the back seat…. the human factor. It is rightly said the risk appetite of an enterprise is inverse of the risk averseness of its decision makers.

Take the classic case of the recent imbroglio of the recalls from Toyota. It is expected that Toyota will recall more vehicles this year than what they will manufacture. And if the recall further hits their ECM software for acceleration, then it would be even worse. But do you really think Toyota employees actually did not know about the recalls, till they were forced to do so starting Jan-2010. Or, do you think that the NHTSA was also not very vigilant in checking trends in market complaints, till the fatal accidents actually did take place. Let me tell you, that in all such cases when these specific types of complaints start trickling in or a specific market return part begin to block the maximum space in warranty parts racks in an organization’s backyards, the organization would have sensed “Danger” right then. It is now a question: “How much is too much???”

And to answer this question, it takes the organization DNA to feel the “itch” for recalls. Every individual in the organization, at least in the Engg & Design, Production, QA, Service & Warranty, Finance & Control and Marketing & Sales would have developed their “personal” opinion about the right time. And this is a big gamble. If it is too early, then one would have raised the curtain when the stage was being prepared. This would lead to embarrassment and hilarious situation. And if it is too late, the consternation and frustration of the audience who have waited far too long will lead to a string and “violent” retaliation. And in both the circumstances the reputation of the organization is at stake.

Also one important factor is the clash of interests among the functional groups. A service engineer would be looking at recalls as a tool for replying to disgruntled customer queries, a quality engineer would be looking at recalls as a means of scoring a brownie and a marketing executive may be looking at recalls to demonstrate their evidence for a quality slogan. Engg and Production have completely opposite interest, to guard their “fortress” against any recalls. And the finance accountant would be left praying that these clashes should not upset his balance sheet beyond repair. In a nutshell, with each one having their overt and covert agenda from recalls, the gestation period to “open the Pandora’s Box” is far too long. And it is this human factor which finally defies all tools, mathematics, statistics and “Early Warning Systems”. Don’t you think so??

Posted by Sudripto De at 8:49 AM | Permalink | Comments (0) | TrackBacks (0)

Logistics is a considerable part of supply chain costs. So far as profitability goes, this can be a true driver to improve supply chain costs. Logistics is an area of best practice that can contribute to your managing rising supply chain cost.

Let me identify approaches used that drastically increase savings potential in a distribution network.

Visibility for “Units” and “Dollars”

Creating supply chain transparency to help determine financial SCM drivers in order to achieve logistics goals is the first step. Each process that execute logistics must be measurable in terms of units and dollars relating to inventory that is in transit, on-order or stored. Opportunities for consolidation, Hidden cost of imports and closely monitoring planned-to-actual logistics execution for deviations are benefits of designing visibility for financial controls.

Process and Data “duet”

Data to control process for effectiveness and the process to create the required data sources to control process – are two sides of the savings coin. The drive to capture logistics benefits have to be far-reaching so managing processes and systems for sustained results is possible. Intuitive and early warning dashboards to measure and report on KPIs and Scorecards are the next step to transforming data into strategic supply chain intelligence.

Augment Savings through Technology

To move product as effectively as possible within the distribution network means supply chains have to invest in technology that can support such gains. Investing in both process-centered transactional systems and mobile applications can result in data-rich environment. Starting on a firm information foundation, logistics professionals can institute advanced practices such as predictive analysis and network modeling techniques that bring dramatic results and optimization opportunities.

Remaining competitive with the best in class logistics practices bring home the benefits of realizing profits both in the near and long term.

Posted by Shan Latheef at 2:54 AM | Permalink | Comments (0) | TrackBacks (0)

Often have we heard in various supply chain forums and places “ A good supply chain is a lean machine”meaning that we have minimal inventory, delivery should be Just in time and a Configure to order strategy etc. In most cases a manufacturer would want to have a lean system for the raw materials and the Work in progress. But would he want this for finished products as well at the point of sale, I think not.

Take the case of cell phones, with the lead time to introduce a newer phone getting reduced the manufacturers are wanting to keep minimal inventory levels in the supply chain and hence reduce losses due to dead sales for the product. This leads to a make to order scenario.But, does this hold good in today’s highly dynamic market condition. Today’s market requires the manufacturer to keep sufficient inventory at every Point of Sale and avoid missed business due to product non availability. Even the lead time to introduce a competitive product with better features is decreasing by the day. As another example considering the Personal computer market, the consumers usually have similar requirements with standard configuration. So, as a customer unless my requirements are very specific, I would go for a product that essentially delivers with lowest lead time. It is for this reason that we see ‘Fast track laptops’ from Dell and similar from other vendors. Even in the consumer product groups like ‘Soap’, a customer would rarely wait for a typical soap to arrive on the shelf and move to a readily available brand.
The concept of Lean does not hold true in these cases. Though a company wants to have a lean supply chain at the ‘goods in process’ leg but at the same time it wants to have a ‘fat’ supply chain at the customers end. This means the business requires a hybrid system that caters to both push and pull. Pull in terms of having an agile system that responds quickly to any change in customer demands and Push in terms of maintaining sufficient inventory at the end of the system to be able to push sales by minimizing the losses due to non availability of product.
This puts up one question - what happens in the case when the demand of the product ceases due to the introduction of a rival product? This would lead to a lot of dead inventory in the stock. I feel that the answer lies in the concepts of agility, reverse logistics and modular engineering. A high degree of agility would not only give more visibility and effective supply & demand management but also allow the management to keep track on the Inventory and the obsolescence of its products. The quick response across various points also leads to a higher customer relationship focus. But the question still remains. One still needs to take care of the inventory, which has a high degree of susceptibility to being obsolete. It is here that Reverse logistics comes into the picture. It would help in planning for the effective reuse, sale of the surplus and even disposal of these products. It will typically start from the Point of Sale and end at the point of manufacture / origin / disposal. This process would primarily help in clearing the shelf space for the new products, tend to minimize the losses due to no sale and also enable to create an effective system for reutilization of these products. To complement the process of Reverse logistics the manufacturers should also look into the aspect of Modular engineering. This means the product design be as modular as possible leading to higher reusability of the components in the event of a product getting isolated. As an example a Desktop computer should be created as modular as possible so that in the event of the configuration getting obsolete it could be deassembled and the reusable parts be put to a better use.
A typical depiction of the model described above would be as follows:

 

Is this system viable? How would such a system be designed? What are the business complexities involved? Do let me know your thought process and comments on these.

Posted by Saurabh Goyal at 7:59 AM | Permalink | Comments (1) | TrackBacks (0)

In my previous post I commented on the continuing – and expanding – need for order hubs, which I defined as a central control center for orchestrating an order from the moment of capture through to delivery and invoice.  I recently met with a High Tech OEM who has gone a long way toward reaching this vision.  With a few exceptions, they are able to provide a single view of their customer orders, which makes it much easier for them to ensure high levels of service and efficiency.  But there are gaps.  In some cases, the customer must manually key orders into the hub from data that sits on their own systems.  There isn’t the level of downstream visibility to rebates and promotions that are occurring at the distributor level.  And, getting a better handle on reverse logistics – returns – is an acknowledged area of opportunity.

What will make it easier for them to plug these gaps in their desired capabilities is the fact that they can augment and extend the order hub itself while minimizing changes to underlying systems like ERP.  There are a lot of reasons that this is a good thing, not the least of which is a faster time to market with new capabilities.  For example, take reverse logistics.  The whole returns process is plagued by the existence of all kinds of exceptions and special rules relating the disposition of the returned product.  Is it under warranty?  Is it repairable?  Is there actually anything wrong with it, or is it just that the customer couldn’t figure out what to do with it?  Being able to relatively quickly define these rule sets and special processes (certainly by comparison to changing anything in the ERP base) reminds of the whole premise behind SOA – Service Oriented Architecture.  Namely, that developers could construct a library of reusable, componentized services that would improve overall quality (by minimizing the need for retesting) while creating a much more “plug and play” environment for deploying new capabilities.  With an order hub, one can “reshuffle the deck,” so to speak with relative ease.

I’m not sure if the SOA folks ever completely realized their vision, or if it just became the de facto way of doing IT development.  But, the order hub represents a type of business-oriented architecture that I think may be even more practical, and certainly provide more obvious benefits to the lines of business. 

 

Posted by Richard Douglass at 7:18 AM | Permalink | Comments (0) | TrackBacks (0)

The common denominator for applications in the SCM space is the fact that they are packaged, n-tiered, comprised of the application deployed in clustered and load-balanced containers, interface heavily with the external applications, and a database to persist all the transactional data.

Given the nature of these applications everything is hunky-dory if the application is running well and there isn’t any problem. But once a screen starts rendering slowly or one of the asynchronous interfaces starts accumulating messages or an application container crashes randomly everything goes haywire.

Is it the Big IP that is not load balancing well, is there a memory leak at the application server level, is it a database problem, are there deadlocks in the application server JVMs, is it network related, is there a resource contention (CPU and memory) or could it be something inherent to the packaged application. A big O Hullabaloo indeed!!!

I often see that due to un-prepped production environments any not-so-apparent problem can take a while to diagnose. Emergency tickets are raised, production support teams are involved and it goes into an eternal abyss of inter-team correspondence.

I thought of writing about these elemental logs which, if enabled, will save you a ton of time by catalyzing the troubleshooting process. Here is the list of logs in no particular order:

GC Logs: Will help you determine the way heap is consumed as the objects are instantiated and garbage collected. It will also help you determine which phase of Garbage Collection is taking the most amounts of time and the overheads thereof. It will also help you determine Memory Leak patterns. Observing the GC logs you can notice if duration of GC is a bottleneck to the throughput/response time.

Heap Dumps: Will help you compile a list of data structures (particularly the notorious collections) that could be prospects for memory leaks. It will also help you determine if the heap is fragmented (great help if you are running JDK/JRE 1.4.2 and below).

Java Core Dumps: You diagnose deadlocks if any using the java core dumps. In many of the OMS implementations it is very helpful if the order lines are not being fetched in a sorted order. You can also get a summary of different types of data structures you are using in the code and the space

DB Reports: Will help you determine long running queries, bad query plans adopted by the DB, the wait time involved in reading from/writing to the physical disks (especially if your storage layer is virtualized), database level locks all of which affects the performance significantly.

Application Logs: In the packaged s/w world it is always important to have application logs to help you determine any issues that are inherent to the packaged app.

Resource Monitoring Logs: You must have an understanding of the CPU and Memory utilization. If the CPU utilization spikes without any increase in the load, it could be because you are running out of memory. You can then focus on the utilization at the process level which will help you determine which JVM suddenly spiked its CPU utilization. You must then take a look at the GC log and Heap dump for that JVM for more information.

If you follow these 6 commandments, regardless of your religious origin, you will be able to localize the defect very quickly which is 90% of the work in any troubleshooting process especially in production environments and you are on the hot seat.

Posted by Guruprasad B. Nagaraja at 5:01 PM | Permalink | Comments (0) | TrackBacks (0)

Last week I had a wonderful opportunity to spend over an hour with two senior folks from a client of ours who offers imaging solutions. The CFO and program manager who visited us were both from the Europe arm which runs with a certain level of autonomy. The formal discussion topic was WMS, but as it goes in the SCM-world, we did go forwards and backwards quite a bit, into other functions including OMS, visibility, transportation etc. I returned to my desk with two interesting learning points to ponder over.

In the imaging products & services industry, product delivery is a completely different universe compared to spare parts used for delivering services. The strategic input here is the decreasing margins in product business and increasing focus on longer-term relationships via service contracts, which locks the customer into a multi-year commitment. Later on, when we were having lunch with our CEO and the client members, I realized that as organizations we populate different worlds, but share many concerns as well, primarily, that of moving away from a linear revenue model (more product sales or more consultant bodies equaling more revenues) to a non-linear, outcome based pricing model (pay per print for our client or pay per business entity impacted for us – users, warehouses, assets, components delivered etc).

What was going well in their supply chain? Well, most of it. The proven model of a central warehouse supplying to satellite warehouses does help to keep the overall inventory across the supply chain on the lower side. Since number of SKUs in the product business is not very large, core warehouse management was not the top-of-the-mind challenge. Interestingly, one of the core issues was that of dealing with low value item of product manuals. These and a few other similar "peripherals" are must-have components of each shipment, but is locally made by a limited set of vendors for each country, resulting in a fair amout of delivery lead time variances. In their Assemble-To-Order model of delivery, this was a crucial bottleneck in terms of perfect order fulfillment.

The spare parts side of the business had completely different challenges considering the large number of fast moving, low value items spread all over Europe. Here visibility was of concern and the existing ERP systems were struggling with their track n trace capabilities. As I mentioned at the start, this part of the business is set to rise in the coming days as the organization increasingly moves towards a service based model. Getting their act together in terms of ensuring machine uptime at each client site would be a function of spare parts supply chain planning and execution.

What were my key learning points from the discussion? For one, sometimes, the traditional focus areas of WMS (say, labor & machine productivity, ability to do complex fulfillment like merge-in-transit or cross docking or multiple waves in a day) and TMS (eg: lane-based profitability or truck load shipments) may not be what’s critical for you. Eli Goldratt's “fat boy” in the chain may be something innocuous like a product manual being published in a local language.

Secondly, any product company looking at moving to a services based model (imaging, automotive, construction, to quote three) probably need to get their act right on the spare parts side of the supply chain. This is more so, looking at the sheer number of part combinations one may need to carry factoring in current and phased out models, at various levels of sub-assembly. Supply Chain visibility would thus be the key difference between getting the right spare for that old printer out there and fixing it fast vis-à-vis having to replace it with a new printer just to avoid SLA violations.

Posted by Gopi Krishnan at 7:19 PM | Permalink | Comments (0) | TrackBacks (0)

With supply chain professionals squeezed by supply chain complexity and volatility, efficient Sales and Operations Planning (S&OP) has become an organizational imperative.

However, technological advancements and process maturity in mainstream demand and supply management functions over the years have been insufficient in increasing S&OP   effectiveness. S&OP still remains an art when organizations require it to be more of a science. While improved supply chain planning tools have made it possible to get demand and supply pictures at lowest levels of granularity, supply chain executives still do not receive sufficient information fast enough to make the right strategic decisions.

Read here my recent article published on Supply Chain Digest ,outlines some of the key challenges in executive S&OP processes and delineates a few strategies for building a robust S&OP model.

Posted by Atul Chandra Pandey at 10:16 PM | Permalink | Comments (0) | TrackBacks (0)

Apart from being skilled and experienced in managing relationships with suppliers and managing the resulting relationships in the same region, but Negotiating with suppliers in various global regions can bring unexpected challenges that can sabotage negotiations and relationships can challenge those are strong in domestic markets So bridging this gap can be done by training procurement professionals and others in the organization, on a worldwide basis, to understand, respect, and appropriately respond to cultural differences in the countries where they are doing business. Second aspect to this the information the buyer and seller have about the product, the relative scarcity or abundance of the product, the availability of product substitutes, and many other factors. The relative leverage of buyers and sellers determines the price and terms of transactions and the nature of business relationships. These initiatives can help to prevent problems and surprises that can occur during new supplier relationships, improve the procurement process, and promote dialogue and continued learning
Key objectives required for demonstrating negotiating skills
1) Determine the ability to question any assumptions and set expectations
2) Have a clear cut expectations set so that the potential suppliers understands and respects and values them
3) Create a methodology to ask and understand the supplier assumptions that could be a differentiating factor for a proclaimed relationship
4) Have cultural diversity as the centre point to bridge the cultural differences using cultural diversity as assets
These all behavioural objectives will help you in price negotiations in a centralized procurement and sourcing domain with better definition of required volumes and supplier consolidation. Another aspect for significant savings from negotiation can generate value engineering collaboration with suppliers, and standardisation and adaptation of specifications in order to optimise utilisation and minimise waste, the larger, more complex set of levers to use during the negotiations makes the process more complicated. Understanding the whole range of available business rules, and carefully planning when and how to use them in the negotiations, will greatly affect the outcome. Effective procurement requires a flexible, well thought-out set of strategies when approaching the negotiation process.
If you want to gain high negotiating skills then there are certain snags that you have to overcome
1) Lack of confidence and failure having assertive approach
2) Gelling debatable behaviour with problem solving
3) Using Threats
4) Having an emotional warfare
5) Details not addressed immediately
6) Failing to commit when agreement seems to be met
7) Getting distracted with the other party’s behaviour
8) Understand the other side’s interests.
To overcome these pitfalls there are some key Qualities that should be observed during negotiations
1)  Be perceived as knowledgeable, reliable, and trustworthy, and as a person who can make the decision
2) Be a good listener
3) Be patient
4) Be skilled in communicating
5) Be a good problem-solver
6) Find common ground for agreement
7) Work through conflicts that arise during the process
8) Summarize points and check for agreement
I hope this will help all the procurement professionals to have a ground for Negotiation to improvise on savings

Posted by Nilesh Dhoble at 4:54 AM | Permalink | Comments (4) | TrackBacks (0)

As a customer I have always been frustrated by the clutter created, and the effort required to manage my store sale receipts. More often than not, Murphy strikes, and I cannot seem to find the very same receipt on which a return/exchange needs to be made. Other than the frustrations that a customer like me has to go through in organizing/retaining store receipts, these receipts are also an environmental and procurement problem.

By some estimates, around 2 million trees need to be cut down every year to meet the demand for paper receipts in US. Add to this, the fact that most of the store receipts are printed on a non-recyclable ‘thermal’ paper, we have an environmental issue on our hands. Retailers also spend substantial money as procurement costs for store receipt rolls. Would it not be nice, if in some way we could make these store receipts electronic, without losing the purpose they serve? At least for the people who have access to the web and are willing to go green.

Let me list down a few basic purposes that the store Point of Sale (POS) receipts serve, and these are:

1.       Proof of sale for the customer

2.       Store policies, Terms and Conditions for the customer to read

3.       Coupons, Store promotion and marketing material

4.       Used for Returns/Exchanges, Warranty

Any electronic receipt solution approach, apart from serving the above listed purposes, should be accessible and convenient for the customer, and should be able to reach as wide an audience as possible.

One approach is to send the receipt to the Customer via email: The cashier could give the customer an option to get an electronic receipt in his/her email at the time of the sale.

Another approach would be to have a service which spawns across retailers, where customers can log in and view the receipts instead of having them in their email.

For both these approaches, the customer can use the electronic copy as a proof of purchase; maybe take a print-out of the receipt or use a smart phone bar code scan, for return or warranty purposes. The retailer can dissipate coupons or marketing information through emails or use the service to reach out to the customer account

The challenge that remains then is, how does the POS identify that the receipt for a particular transaction needs to go to the email id of the customer or the particular customer account in case of a service?

-          The cashier could ask the customer for an email id, or if the customer subscribes to an electronic receipt service, at the time of sale. But neither the customer, and definitely not a high volume retailer, would want to have an additional process at the POS to collect an email id, every time a sale is made.

-          One could use loyalty/rewards cards for setting up electronic receipt preferences, but only a small percentage of customers use loyalty/reward cards every time they make a store purchase.

-          A better way would be to use the payment method as a link between the customers and the transaction. Someone like a VISA or Mastercard could provide the service, as they are the common and the secure link between a customer, payment method and the POS transaction across most retailers. Every time a customer purchases something using a registered credit/debit card, the service could pull the receipt information and make it available for the customer online. One obvious drawback with this way is that it will not work for methods of payment like Cash, Gift Cards or Checks. And while the bigger retailers may be able to offset the cost for this service with procurement savings, it may not be true for the smaller retailers. The other challenge is the investment required to set up such a service and storage required to capture the receipt. There is also the question of the changes on the POS side, this approach would entail.  But all in all, this could be the best way to make electronic receipts convenient and available to a large set of customers.

As our society becomes more environmentally conscious and technologically savvy, our leaning towards paperless receipts will become more pronounced.  Doing away with the paper receipts is a win-win for the consumer, the retailer and the environment.

Posted by Sameer Prashar at 12:47 AM | Permalink | Comments (9) | TrackBacks (0)

IBM’s annual service management fest Pulse concluded last week in Las Vegas (21st – 24th Feb 2010). What an event! This was one of the most well organized events I have attended thus far. While the attendance was close to around 5000+ customers and business partners (1000+), it felt like being in an Oracle Open World which usually has 30,000+ attendees. Sessions were well organized and distributed across tracks. I especially liked the separation of topics between general session and the track session. The general sessions were very helpful in providing overall IBM’s approach in the service management space.

 

The key theme this year was presentation of ISM – Integrated Services Management – as a key enabler of growth in the emerging economy. Positioning ISM in “Smarter Planet” backdrop was perfect and IBM sealed it with Al Gore’s keynote speech in the opening general session on Day1 (22nd Feb) of the event – there couldn’t have been a better candidate to endorse it. While (at least ) I went in to primarily to listen to Al Gore, I was impressed by the sessions before the keynote speech driving clearly how ISM enables service management. The “Smarter City” session (Chesapeake, VA, Venetian , Las Vegas, Swiss Federal Railways) by Laura Sanders and team performed in dramatic setting was quite impactful in driving home the point smarter service management backbone and smarter asset management can offer significant value to all constituents – reduced cost, reduced energy / carbon footprint, smarter / intelligent infrastructure which can proactively detect and correct disruptions.

From technology perspective, combining Asset Management (Maximo) with Security, Storage Network Management and Automation the projected ISM services market offers significant potential to tap into for technology service providers and create new innovative solutions combining these various nuggets of the emerging service management systems.

However this may not translate into equal opportunities across all industry sectors(which is recognized by IBM and the ISM bundle is being offered with specific Industry solutions template). My view is that this will be relatively easier for Energy & Utility services where the core business operations itself is very asset intensive, than some of the other sub-sectors in manufacturing (especially high tech which is heavily outsourced). Nonetheless, this is still a paradigm to pay attention to and even in Manufacturing there is significant potential to offer great bottom line results through smarter asset management – especially in Auto and Industrial manufacturing sectors which have large number of physical assets.

Though sessions were focused on IT implementation and upgrade of Maximo, GM and Ford’s sessions provided some useful insights into how smarter asset management can help in minimizing operations cost.

Overall I think IBM has found the perfect groove to drive new business growth leveraging service management in the increasingly device oriented world which is not only there to stay but grow and explode. My view is that this new frontier will provide IBM with significant inroads back into the technology business which was lost in the battle of enterprise applications dominated by SAP and Oracle today.  

Did you visit Pulse this year? Would love to hear your thoughts and comments.

Posted by Atul Chandra Pandey at 11:56 AM | Permalink | Comments (1) | TrackBacks (0)

According to Gartner and Celent, it costs the average real estate company $21.00 per invoice to manually process paper invoices. Most people are shocked to learn this. Multiply this to the tens of thousands of invoices a facility management firm process every year and this amounts to a fairly significant administrative cost. Automating accounts payable reduces much of the labour and materials associated with paying bills, thereby saving time and money.

Realcomm Advisory, identified A/P automation as the hottest topic of the year. Here I present my experience in helping one of our facility management clients’ automate their A/P process.

Currently Infosys is implementing Maximo 7 SP for a leading global facility management company. One of the key challenges was to automate the A/P process. Going paperless was the obvious solution but not all suppliers/service providers in the real estate space were large enough to have their own EDI setup. Most of these suppliers were small plumbing/cleaning firms with a man-in-the-van setup. An effective automation strategy would have been ineffective without taking into account the technical limitations of the suppliers. Hence, the right approach was to have a cost effective A/P process that addresses both a paperless as well as a paper based invoice processing system.

EDI interface was developed for registering electronic invoices and a ‘shared services’ strategy was recommended for the paper based invoices. Having a centralized shared service centre for invoice processing frees up a large number of resources at the managed site. Integrating Maximo with scanning solutions and optical reader solutions helps to considerably reduce the time taken to register a paper invoice in the system.

A three way matching of the invoice was recommended as a process. This would help in the auto processing of the invoice once it is registered in the system. Intelligent rules were built on the customer site and vendor record to enable auto payment of invoices. Auto approval threshold was set on a customer site record. This identifies the invoice value that can be considered for auto payments along with the auto approve flag on the Vendor record. Sensitive suppliers were identified by making use of the Company Type information in Maximo and were subjected to manual invoice approval.

Once an Invoice is registered successfully in the system, a matching process matches the invoice with the receipt quantity and the PO quantity. If the quantity matches and if the invoice value is within the tolerance value, the invoice is flagged as MATCHED. Another automated process picks up the matched invoices and checks for the invoice auto approval threshold and the auto approve flag on the vendor. If all the rules are matched, the invoice is auto approved for payment. There is no manual intervention and the invoice sails through the system. This complete solution was built using the workflow architecture of Maximo and there was no customization.

Posted by Suresh Patel at 2:14 PM | Permalink | Comments (0) | TrackBacks (0)

Opportunities galore when it comes to pruning down cost in Supply Chains. Firms focus both internally i.e. within their own house and also externally by partnering with their customers and suppliers. But in their singular objective to cut cost, firms often focus narrowly and tend to forget that cost cutting initiatives ought to apply to the whole chain. If a firm benefits at the expense of its suppliers and/or customers, it is power play and gaming at its best (and supply chain partnerships at its worst).

 

In this context, we often come across a widely quoted analogy. Pardon me for repeating it, but it serves to drive home the point. Aren’t we all particular about keeping our premises clean? But would we do that at the expense of our neighbour’s premises? We better not!! Just imagine, collecting the garbage from our home and dumping it clandestinely into our neighbours’ premises. And since we happen to own the biggest house in the neighbor-hood and thus carry the “big guy” tag, our neighbors take this transgression mutedly.

  
To lend credence to this analogy, let me recount a case we came across on one of the FMCG majors in India. Facing tremendous pressure on its margins due to stiff competition, the firm aggressively focused on reducing its working capital cycle (the time elapsed between paying its suppliers and receiving money from its customers). Knowing that a reduction in working capital leads to an increase in cash flows besides freeing up capital for investments, the firm aimed for a zero, if not negative, cash cycle. Thanks to its aggressive culture, it achieved its goal and as was expected, showered with praises on effectively managing its supply chain. But a closer scrutiny of its balance sheet revealed that the firm engaged in sheer power equations with its suppliers. While the firm reduced its inventories (kudos to it for doing so), the bulk of the reduction in working capital was as a result of extracting greater credit terms from its relatively smaller suppliers. Such was the extent of the increase in credit that the firm’s operations were, in effect, financed by its suppliers.
 

While the firm managed to clean its premises, it effectively increased the overall cost of the supply chain. How? Simply because the cost of capital for a small unknown firm (in our case, the suppliers) is much more than that of a major and established name (the FMCG major). Certainly the suppliers would have found another way of recouping the higher cost – either through higher margins or through longer-term contracts. In as much the same way as our dumping on our neighbors premises would dirty the neighborhood and bring a bad name to it; causing the real estate prices to fall. Guess who would take the maximum hit – the biggest house naturally.  
 

The moot point – before embarking on cost cutting initiatives, do consider its impact on the entire supply chain (the big picture view). And be well aware that if you opt for power equations instead of supply chain partnerships, you are bound to get hit sooner or later via some other way.
 

Note: Author is on a sabbatical pursuing a one year MBA program at Indian Institute of Management, Bangalore.     

 

 

Posted by Amit Tambi at 7:05 AM | Permalink | Comments (1) | TrackBacks (0)

Work process effectiveness has direct impact on the profitability of the overall business it supports. As the saying goes, a good process is required to develop a great product; it is essential for businesses to review their current processes for improvements in areas like work style and collaboration, cycle times, accuracy, emotions and essentially TCO- Total Cost of Ownership.

Work bench offer a platform (one of our customers calls it sweet solution) for businesses to collaborate, manage exceptions and risks preemptively, set and monitor goals across the entire organization chain of command for desired outcomes. Work bench solutions can offer Supply Chain leadership with the required tools to improve visibility and quality of processes such as procurement, inventory management, sales, transportation and logistics and other areas that require metrics to sustain profitable operations.

Our recent experience with a Food services distributor was a fitting example of the use of Work bench. Within procurement functions the need to remain a metrics-driven supply chain calls for creative solutions besides transactional applications that help them procure from their suppliers meeting quantity, value and frequency requirements of their business. Most times, effectiveness and overall TCO have been measured and guided by Reports that are extracted from the transactional systems that help run their day-to-day operations. These reports remain the lynchpin for improvements to their current processes.

The notion of controlling the process from the outset brings new challenges and opportunities along. A procurement workbench can create a enterprise-wide platform for collaboration with peers and line command while following departmental and organizational goals that happen as business happens. Ability to communicate exceptions, warn early on and mitigating risks before they appear based on the strong analytical capabilities resident within the procurement workbench helps gain process visibility and control for supply chain officers. Further setting goals and key initiatives and following it through each transactions brings attention to detail connecting business leaders to see root causes eye-to-eye.

Other internal controls include mapping business process metrics to personal and divisional goals. Through initiatives-driven scorecards and KPI (Key Performance Indicators) dash boards, work bench provide provisions to business process owners to view, analyze and track measures that impact positively or otherwise. On the external front, work bench extend the platform to partners to communicate and share both strategic and tactical information creating opportunities for all entities to minimize risks and explore profitable steps together.

In closing, the customer summarized the benefit areas of work bench as a collaborative platform managing exceptions and risks alongside delivering a sustainable model for goal setting and tracking. Not to mention the early-to-market realization of such solutions that start delivering ROI value in months as opposed to long-term implementations typical of enterprise solutions. For more information, visit http://www.nextgenerationsupplychains.com/ProcurementWorkbench.aspx

Work bench is a best practice for organizations to adapt to managing processes that impact your bottom line.

Posted by Shan Latheef at 2:53 AM | Permalink | Comments (0) | TrackBacks (0)

Well, this blog of mine is focused very specifically to ‘demand planning’ role in a supply chain organization. Most of us would appreciate the difficult conflicting goals that a demand planner faces in industry, and I believe, it is becoming increasingly more stressful for them to manage these goals. Being a demand planner myself in the past, I can empathize with their pain and would like to share few operational challenges that add to their stress levels, if not attended effectively. I would urge each one of you to provide your experience, comments, and advise how demand planners can effectively work to mitigate these issues to improve business performance. Read on…

Let me take you step by step to present my view point. There are three sections of this blog:

A)    Ever increasing “operational” challenges:-

Just think about the total number of SKUs that a demand planner has to manage on an average in supply chain. I know of examples wherein the XL runs into few hundreds of rows of SKUs that a demand planner works upon in every forecasting cycle. Assuming atleast a one year forecast time horizon, you can guesstimate the humungous task that a demand planner has to go through, during every planning cycle (which is most likely a monthly rolling cycle). The situation gets worsened due to factors that are largely governed by business and competition, couple of them being:

·         faster pace of new products introduction thereby, increasing the number of SKUs in product portfolio.

·         the forecasting cycle is being revisited time and again, and pressure is always to reduce the cycle time to close the forecasting process (moving from a monthly bucket to fortnightly and then to a weekly bucket)

 

B)    Typical demand planning responsibilities at an operational level:-

The demand planner is usually overworked throughout the month with probably just very few days during the middle of a monthly planning cycle where he/she gets little bit of breathing time. There are several activities that keep him/her busy, though, most of them seem to be very operational in nature but are absolutely critical in achieving the desired supply chain targets. Some of these activities are:

·         managing demand data (ensuring data quality is maintained)

·         review past performance (how the KPI numbers look like)

·         do statistical forecasting (understand demand patterns closely)

·         ……

The important thing I would like to highlight is the effort that is involved in managing all these activities and ensuring KPI numbers improve over a period of time.

 

C)    How does all this impact a demand planner:-

With the changing business landscape as highlighted in section A above, I feel it is more difficult and strenuous for a demand planner to execute activities as mentioned in section B. It is a tightrope walk because it is impossible to compromise on the execution quality as it will have a direct negative impact to his/her performance. As planning time frames shrink, a demand planner needs to look for more innovative ways to accomplish all the activities else it becomes more stressful for him/her.

This is all what I wanted to share and would appreciate if you can provide your comments. Feel free to contradict in case you feel otherwise but please do share your view point.

Additionally, would you like to comment on “What are the various steps that a demand planner should take in order to accomplish his/her responsibilities?”. Using an IT tool’s capability more efficiently could be one solution. I want to hear from the group if they have thoughts on such a burning issue…

Posted by Aatish Goel at 9:08 AM | Permalink | Comments (0) | TrackBacks (0)