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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June 28, 2010

Tight rope walking: The supply and demand balance

Most of us in SCM have always been intrigued by the balancing act of supply and demand. Whereas production, quality, suppliers, warehouses, logistics and Engg (new product development) groups have been groaning about their constraints for replenishing the market requirements, the markets have never ever been constant.  So, when the markets show sudden changes or a gradual shift which exerts pressure on the "demand", the SCM professional has to devise ways and means to see how they can maintain the balance.

One of the ways the SCM professional is able to provide the balance is to relax the constraints from the supply side. To take an example, when the demand shows sudden increase (demand variation), the SCM professional would do any of the following to meet the market requirement:
• Increase working capital by enhancing inventory levels to feed the risen demand
• Reduce the sourcing lead time sourcing in bulk
• Manage capacity constraints by shifting capacities for the specific orders
• Avoid logistics constraints by booking logistics capacities at premium or through LTL load shipments
• Circumvent   distribution networks through direct shipments to customer POS

These short-term tactics would be very beneficial to meet the immediate requirements.  But there is no innovation in adopting such tactics. So, to implement these, requires regular fire-fighting, which most SCM professionals would be seen around doing day-in-and -day-out.

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The negative aspects of such working culture of SCM professionals have some pitfalls:
• They would remain as helpless officers, always tethered to the dependencies of other supply chain functions, and cursing their "thankless" jobs
• They would be busy through-out, meet "drop-dead dates", but would hardly ever get noticed for any exemplary work done
• They would incur "exigency costs" and would always be spending time on exception approvals, as if the bottom-line impact is a result of their misdeed

There exists a third dimension to the demand and supply blocks, which determines the level of leverage available to the SCM professional. For an MTS strategy, where the replenishment is a complete "Push" strategy, the supply block constraints are taken for granted, and shipments are made to orders based on the demand block requirements.  In an MTO strategy, there are few constraints like minimum order quantity, capacity constraints and working capital which can be "managed" to meet the market requirements. And finally in a DTO strategy, almost all the supply block constraints can be fully managed, to meet market requirements. This complete pull strategy hardly has any constraints, except for the design & regulatory requirements. This "Order-fulfillment strategy" acts as an important fulcrum to maintain the balance.

This is what the SCM professional needs to understand very clearly to manage costs, resources and time. Depending on the weight of the demand block requirements, they can shift the fulcrum to create additional leverage in the supply block constraints to maintain demand-supply balance. In most enterprises and for most products the purchase and manufacturing are levers with same balancing impact. But for engineering products, which are very heavily loaded to bought-out supplies, purchase provides additional leverage for sourcing lead-times, capacities and product configurations.

Let us take the example of the beverage industry to check how they manage the demand-supply balance by conditioning their supply chain using the push-pull order fulfillment strategies. In a bottling plant for aerated beverages, during summer season when the demand is huge, the plant would be working on an MTS system. The fulfillment would be a complete push strategy to maintain market coverage. This is possible since the inventory consumption is huge. But in winters, when the demand diminishes and dealers are averse to keeping stocks, the plant should adopt an ATO system.  So the bottles would be selected based on the liquid to be filled in them, with quick change-over cycle times. In this way fragmented demand in winter would be fulfilled. In certain canteens of large corporate or single large orders for special events, where there would be constant demand, but with specific non-standard printing on bottles (for example the corporate logo along with the brand-logo of the drink), a MTO system has to be adopted.  Again when introducing a new product, where there is uncertainty of market acceptance and regular feedback is required for meeting the customer choice, the bottling plant would be looking for a "beta-test". This is more of a DTO system, where constant feedback is sought after test-launch of a product, and a second launch is injected with design change in flavor & color as well as changes in distribution and channel tiers. So it is essential that SCM professionals monitor demand patterns and make necessary shifts in "fulcrum" to maintain balance with lesser "fire-fighting".

June 10, 2010

Sterling Commerce folds into IBM - an Infy perspective

Ever since the IBM acquisition of Sterling Commerce (http://www-03.ibm.com/press/us/en/pressrelease/31742.wss), the standard questions I get asked is essentially variations around the theme of suitability and impact on our practice - Wasn't this acquisition purely for the BIS B2B integration piece which suddenly gives IBM access to 18,000 customers? Was the SCM piece of Sterling Commerce some kind of an afterthought or collateral benefit, if you may? If at all, it would fit in, where would it be? And most importantly, what happens to Infosys next, being by far (by a few light years, if I may say so myself) the leading player in Sterling SCM package related services in the SI space?
Let's get to the last question first. 

Overall, I am strongly positive on this acquisition because of multiple angles:
1. First & foremost, IBM is an IT company (and not a communications company) with a major software focus under five towering brands like Tivoli, Lotus, Websphere etc and hence the synergies are that much stronger for any software product acquisition.
2. IBM has always grown via partners, they have an excellent partner strategy (we've been beneficiaries of this on the Tivoli/Maximo side of the house) and have a large team specifically dedicated to growth via partners with KPIs purely around partner enablement and success.
3. I do agree that Sterling BIS fits like a glove with Webphere Business Integrator. That said, the SCM fitment to their Websphere business is strong as well since it plugs the gaps in back-end supply chain (MCF, COM-PCA, MCS for B2B)  with Websphere Commerce Server.

But it's all not all going to be hunky dory either. I anticipate some challenges along the way as well:
1. While IBM has done a great job acquiring dozens of companies over the years and integrating them fairly well, they have by and large steered clear of a direct competition with the apps providers starting with SAP & Oracle. Apart from Maximo over 4 years back, I am not able to recall any noteworthy and substantial enterprise apps that IBM brought into their fold. Sterling SCM would the second in the list and considering they're blessed with a great client portfolio, especially in retail, IBM would need to put in some focus specifically on this side of the buy and prevent it getting overwhelmed in the middleware ocean.
2. Sterling Warehouse Management offering has been suffering from weak visibility, sales and focus over the last few years (for us, that's the legacy that stretches all the way back by 15 years to the company Infosys originally spun off as Yantra Corp). I am not sure how this piece would shape-up (revival or complete sunset) post the integration.
3. While DOM (or Multi-Channel Order Fulfillment) is a clean, non-overlapping territory, it would be interesting to see how the product strategy turns out for Sterling Multi-Channel Selling (Order Capture or the Comergent acquisition) or other front-end apps like Call-Center.
4. At this time, I do not have any clear info on where Sterling Professional Services team might end up at. Considering the fact IBM Ltd doesn't keep large PS teams, some may potentially get offloaded into IBM Global Services. If that happens, today's two-horse race (between Infosys & Sterling PS) for most implementation scenarios would get that much more interesting.
5. From an event participation & evangelization perspective, as by far the most dominant SI in Sterling SCM, we've always had a major presence in Sterling Connect and its predecessor Yantra Day. However, if Maximo experience is anything to go by, IBM typically does not allow its partners to showcase their offerings/solutions etc in customer events (eg: Pulse for Maximo), so there could potentially be an impact on Sterling Connect (or whatever its going to be called in the future, possibly Websphere Impact) in terms of our presence.

Overall, in terms of Sterling Commerce capability (and especially the DOM/MCF offering), we have built such a substantial lead over everyone else in terms of the kind of clients (most of the top names in the retail industry, for eg), breadth of projects, size of the CoE/practice, geo footprint etc, that most of our competitors (both Big-4 and Indian SIs) have tried building practices and have not progressed beyond 1-2 projects in the last 7-8 years.  As the market leader, we would continue to take responsibility to "create the market" for Sterling as against taking a larger share of the pie, which is the strategy for most other packages. That would mean newer geographies (eg: continental Europe & Australia), newer customer segments (eg: B2B for manufactuers and $2-10bn retailers) and focus on solution-selling of pre-fab offerings for these new prospects.

Once the dust settles down, I'm sure the IBM alliance machine will get cranking and things would fall into the well-established groove out there. Net-net, it can only get better from here considering the criticality of the sell-side SCM function in an increasingly cross-channel world. 

June 7, 2010

Differentiators in the Transportation Management System solutions

Recently a client of ours had asked a question, which TMS solution provides us with the best capabilities. There are multiple TMS solution providers in the SCM space such as i2, Manugistics, SAP, Oracle, Red Prairie, Manhattan. Though all claim to be unique in their own respects and provide a bundle of functionalities, but there is a common search for the best. The question usually rests with the respective consultant's ability to grasp the depth of the product, client needs and the client's views of the product's alignment to the business goals. So, this blog corresponds to me putting down my thoughts on the various TMS solutions available in the market. Off course this comparison would comprehensive with expert comments from the supply chain community.

Primarily, one can categorize the TMS functionalities into planning (both strategic and tactical), execution (standard OOB TMS functionalities), Financials (Freight payment and cost allocation, though not looking at TMS as a financial tool), Fleet and yard management, door to door scheduling coordination.


In a generic sense almost all products have the basic TMS functionalities in terms of tactical planning, execution and the basic financials with a small degree of variations in terms of these capabilities. But when it comes to the functionalities pertaining to strategic planning, the more specific cases of fleet & yard management and scheduling the differences start to come up. I personally feel that i2 TMS and Oracle TM cover a wide range of functionalities and can be considered as leaders within this space. With respect to Fleet and yard management, Oracle TM has some capabilities which allow it to be ranked higher as compared to other TM products. Having spent the last few years working on TMS products (primarily i2 and SAP TM), i2 TM ranks ahead in terms of various capabilities when compared to the current SAP product. Though yes, as an obvious fact the integration between SAP ERP and SAP TM would be more seamless as compared to i2 TM. Also, the TMS solutions from Manhattan, Red prairie and Manugistics do not fall much behind the leaders in terms of the various functionalities.


Another stream where I feel that various transportation management solutions have shown innovation and created a differentiation is by offering on-demand solutions. This uses the concept of SaaS  by providing the application to the client as a service on demand. The customer here does not need to install the software on the site, but subscribes to the hosted application of the vendor. This innovative delivery model has greatly reduced the organization's total cost of implementation and thus helped in the  early realization of benefits. Currently such solutions are being provided only by the larger product vendors. I also feel that in the years to come this innovative delivery model would pave way for a paradigm shift in the way TMS solutions would be implemented , leading to substantial cost reductions and shrunken timelines.

Do share your feedback, thoughts and comments on this topic.

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