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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May 30, 2010

Challenges of Dealing with Quality Inspection Stocks in Supply Chain

Quality Inspection Stock is defined as a stock that is quarantined for inspection and is generally not available for unrestricted usage for customer orders. The process of Quality Inspection could be a long drawn process involving multiple kinds of product checks to as short as couple of hours involving some kind of sampling technique. Most of the ERP systems available in the market have their own Quality Management module along with other modules such as Plant Maintenance or Production Planning. By implementing a Quality Management module, it is possible for supply planning systems to take into account realistic release dates of quality inspection stock into unrestricted stock. With such release dates being accounted for, the Supply planning system can accordingly propose incremental supplies in the network based on demand supply calculations as a function of time.

One very interesting challenge in such a Quality Management context is the handling of inter-plant movements vis a vis customer order replenishment. While the customer orders can only be serviced out of unrestricted stock, it is usually not the case with inter-plant movements. While different organizations have different practices, in general inter-plant requirements are not subjected to the same level of scrutiny as is the customer order replenishment. In some unique scenarios, the inter-plant movement time takes into account the time needed for products to get "ripened" and be finally made available for customer orders.

Complex ERP systems do not take into account the possibility of differential treatments of quality inspection stock for different streams of demands i.e Stock transport orders, dependent demands through Production Orders and Customer Orders. Inevitably thus, one has to build countless pieces of customizations on the application to finally make this requirement to work.

Some such options include:
1. Make certain portion of quality stock as always available. This gets us somewhere mid-way but not wholly accurate.
2. Build different kinds of demand streams for Stock Transport Orders that bank on Quarantine replenishment. This is very accurate, however very intensive on customization and fraught with technical risks.
3. Make all quality stock as always available - which leads to a false positive signal while confirming orders. This would mean that the final shipment process has to account for possibility of stocks not being at the warehouse which again could be an ugly process.
4. Make all quality stock as unavailable - which leads to a false negative signals at order confirmation. This would mean that the inventory levels of Supply Chain would generally increase.

Based on the four above solution options, each organization may have to pick up the best and most convenient solution to meet the business need.

May 25, 2010

Is Service procurement a Big Challenge?

I was in a discussion with one of the customers for ERP Implementation and their main focus in implementing the procurement module was to achieve savings and the concern area that they identified was Service Procurement, so that thought created some anxiety in me why customers have started thinking on Service procurement to have an insight how service procurement can be managed. In recent times spend on service procurement is growing day by day and hence it is gaining attention and so the procurement managers wants more visibility in service spending, compliance to savings target and want to collaborate with suppliers for achieving effectiveness in performing better. So service procurement can be defined as one of the key elements in managing resources which have complex categories like maintenance activities, contracted labors, IT services so the challenge here in such kind of service procurement is undefined quantity, duration and after consumed the price is known and deliverables are all based on time based and milestone based which becomes difficult to quantify with the framework of service procurement as the business priorities and goals have to be met, by collaborating with different business lines and having an effective supplier management which can drive values and savings and have a seamless end to end processes.
If services procurement is handled ineffectively it may lead to following situations:
1) Poor visibility - A decentralized control over services spend can lead to poor visibility of suppliers leading to throttled relationships in business
2) Adhoc purchases - Maverick purchases for appropriate resources can lead to unauthorized suppliers being on boarded
3) Disintegration of manual processes - There could be some manual process that are not integrated which may lead to slow processing of purchasing documents
4) Less Savings - As for poor visibility the savings opportunity is not captured
5) No clear visibility of suppliers - Suppliers don't get completely involved in the business definitions and procurement processes leading to ineffective supplier collaboration
So what could be an appropriate approach to address these issues that are faced in service procurement to add value to the business?
1) Centralized Management - With different service categories available there can be centralized control which will give a top view of different categories purchased
2) Supplier Collaboration - Making suppliers apart of the business by collaborating them in business processes like bidding, confirmations and invoice management
3) Realized savings - Reduce the cost through identified entities
4) Automated processes - Many manual processes can be automated giving the buyer for time to spend on analytics
5) Acquiescence enforcement  - Proper enforcement of compliance for negotiated rates and supplier confidence
These are the drivers for enabling business value like:-
1) Aggregation of demand and increasing of procurement power
2) Providing easy to use tools for both the employees and the suppliers
3) Having visibility of spend on services
4) Mapping complex business processes
5) Usage of best practices centrally to increase the compliance level
I hope some questions are answered we will also have an insight in my next blog of how SAP SRM has enabled service procurement in all new way.

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