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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July 30, 2010

How to Measure Forecast Accuracy?

Everyone who is associated with Demand Planning and Forecasting function invariably talks about a phrase called "Forecast Accuracy". It is a measure used for judging the efficiency of the Forecasting Process. At the back of the mind everyone knows that Forecast Accuracy is the comparison of Forecast Vs Actual.

But, if it is just the question of comparison of Forecast Vs Actual comparison then why we have so many Forecast Accuracy measures? To name a few, almost every Statistical Forecasting Tool has following error measure as a part of their standard offerings - Mean Absolute Deviation (MAD), Mean Absolute Percentage Error (MAPE), Root Mean Square Error (RMSE), Mean Percentage Error (MPE), Error Total (ET) and Mean Square Error (MSE)so on. What does all of these measures mean? And in what context which measure should be used?

Answers to above questions can be found by answering following 4 basic questions in your Business Context.

  1. Error Sign - Do you want to treat Positive and Negative Forecast Error same or different? - In simple words it means, will it make any difference to you if Forecast is more than Actual Sales or less than Actual Sales. This depends on what business you are in. If you are in business of say perishable products then you will always prefer Forecast to be less than Actual as surplus production is as good as loss. On the contrary if you are in a business of selling products which have reasonable shelf life then Forecast should be always greater than Actual as loss of sales is more costly than holding inventory.
  2. Reference to Base - Do you want reference to base value while measuring Forecasting Accuracy? - In simple words it means, whether a forecast error of 2 over a forecast value of 100 and an error or 2 over a forecast value of 10 mean the same to you. Answer to this question depends of what you are forecasting. If you are forecasting dispatches from factory where KPIs are "fulfillment" related like On Time In Full (OTIF), Order Fulfill Rate, Dollar Value Fulfilled on time etc then reference to base is important since you know 100% perfection is never possible. On the other hand if you are forecasting for Point of Sales (POS) then every unit stock out cost you same. 100% shelf availability is a must and there cannot be any compromise on this count. In such case reference to base does not mean anything. For example no point in achieving shelf availability of 98% and missing 2% availability during pick times.
  3. Error Spread - Does it matter to you if forecast error is concentrated on few points or do you want forecast error to be spread evenly?- 100% forecast accuracy is utopian. Some error is bound to happen. Question is what is your preference for distribution of error? Do we want it to be evenly distributed over all points or you don`t mind if you go horribly wrong on few points and look good if calculated for entire horizon. Answer to this depends upon type of products you are dealing in. If you are dealing with product that have very long shelf life which means unsold inventory from one period can be effectively put into use in subsequent periods then we don`t mind going horribly wrong with the forecast in one period as long as we make up for that in the horizon. Forecast Accuracy of the complete horizon is more important in such case than accuracy of an individual month or a week.
  4. Weightage to History Data Points - Do you want to treat error on every point equally or you want to differentiate between individual data points based on their place in history? - For example, when you are analyzing forecast accuracy do you care if total forecast error is contributed more by recent past than by distant past. In some fashion business it does make lot of difference. Fitment over recent past is more important than fitment over distant past. Again choice of this decision depends on what you are forecasting. If forecast is meant for long term investment planning in planning for facility then all data points means same. However if forecast is for POS and influenced greatly by consumer behavior then close fitment over recent history is more important than fitment over distant history.

Now let us map commonly offered Forecast Accuracy measures to each of the above criterions.

  MAD ET MAPE MSE RMSE MPE

Measure Sensitive to Sign of Error?

No Yes No No No Yes
Measure has reference to Base? No No Yes No No Yes
Measure gives equal importance to all data points? No Yes Yes Yes Yes Yes
Measure sensitive to distribution of over data points? No No No Yes Yes No

Going forward if you face dilemma in selecting proper Forecast Accuracy Measure to suit your business context then make quick reference to above table and your problem will be solved.

July 26, 2010

Strategies for efficiently managing IT assets

When asset management becomes core business for you as a service provider, it is imperative to find out innovative strategies to improve customer relationship by quicker turnaround times and providing benefits in cost.

A key strategy worth exploring is to maintain standby assets at service provider sites nearest to client location. When a service request comes for a critical asset and if the diagnosis takes times, you can replace the faulty asset by a standby asset. This helps to reduce the downtime on the client side, reduce the pressure on the logistics team of service provider and provide a buffer time on the procurement side (in case of part replacement). This strategy becomes beneficial if your branch or site is closer to one or more client locations so that you can use the same standby asset for multiple locations or multiple clients.

Another key strategy is to analyze the part failure history from immediate past (can be months, quarters or years) to arrive at the demand for frequently failing parts. Say, if a specific part fails frequently; the problem can be poor part quality, usage issues by the end user or merely diagnosis errors. You can reduce the part quality issues by inspecting the vendor supplies before receiving the stock into warehouse. You can monitor the usage issues closely and can provide tips to the client to avoid frequent failures or can provide a report to client about part failures due to usage issues. For diagnosis issues, it can be training the service engineers and explaining the cost implications for service provider. In addition, you can educate the service engineers about correct diagnosis of service requests and the subsequent cost benefits to client by reducing parts replacement costs.

I would continue this topic in my next blog by covering other key strategies including replenishing parts based on failure history so that you can meet the SLA for most of the service requests and forecasting long time spare parts in advance so that you can have minimum required stock in hand to meet those SLAs.

July 14, 2010

PAS 55: The New Standard for Asset Management

Many relate "Asset Management" with 'more professional maintenance', or 'asset tracking', or simply a 'work management software' while for the financially attuned ones it means corporate mergers & acquisitions and Return on Capital Employed. In order to clear the air a bit and define what a physical asset management strategy needs to include the British Standards Institute published the PAS (Publicly Available Standard) 55 standard. PAS 55 encompasses a life cycle view of an asset which includes appropriate capital investments, operations, maintenance, risks, performance and sustainability. This standard is already being adopted by industry regulators as a checklist of good governance.

The PAS 55 standard is typically relevant for all asset-intensive industries. PAS 55 defines asset management as "systematic and coordinated activities and practices through which an organization optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organizational strategic plan." By clarifying and defining what asset management is (and isn't), the specification allows organisations to develop good practices for the sustainable, long-term administration of their assets; thereby demonstrating that assets deliver the required level of performance of a service or product at an optimal cost.

The PAS 55 standard is independent of an asset distribution or asset ownership structure and is based on the concept of the PDCA cycle (Plan-Do-Check-Act), meaning that measurable continual improvement is an integral part of the approach. This makes the PAS 55 standard an ideal complement to certified management systems that may already be in place such as ISO 9001, ISO 14001 and/or OHSAS 18001. Using the standard provides assurance to the organization and to its external stakeholders that physical infrastructure assets are managed in an optimal way as a result of an independent third-party audit.

The relevance of effective asset management is becoming more and more apparent in present times as asset risks appear more often on the boardroom agenda. Organizations are placing a clear emphasis on cost containment, price management, return on investment, and increased overall asset value. The bar is being raised by a worldwide interest in lean principles, asset management, and asset performance. Many sectors are seeing increased expectations from consumers about quality and service delivery as well as green initiatives. On top of this, there is an increased complexity of assets, tools, and equipment as assets become more interconnected, instrumented, and intelligent.

The PAS 55 standard can benefit companies not only from the regulatory point of view, but also to help them gain competitive advantage by ensuring that they are effectively managing their assets. Using this standard methodology for comprehensive asset management can drive cost savings and service improvement.

Aligning to PAS 55 standard enables an organization to truly manage assets across its lifecycle and align with company's overall strategy. PAS 55 also challenges and replaces the time based maintenance approach with a risk-based management approach. It positions the asset management specific accountability from the shop floor to top floor. In my next blog we will deep dive on the PAS 55 process and its key elements.

July 12, 2010

Virtual Locations in a Warehouse

Have you ever thought of a location in a warehouse which has a physical pallet, but actually the location does not exist? Strange, isn't it? Well, let's dig into this.

A  few years back I had been to a country in the Far East to carry out business process study for multiple warehouses for a marine food processing plant. Here the raw material was mainly fish which were of all kinds of varieties; these would arrive in trucks and unload the lot in a sorting area where they would be segregated based on the weight and size. They were then placed in large steel containers and then putaway into a large cold storage at sub zero temperatures around under -40 degree Celsius.

The cold storage had a peculiar way of storing these steel containers. The cold storage did not have a racking system, any aisles or bays; it was just a large room. Location numbers were on the floor and the same was painted exactly opposite to it on the ceiling above. This was done so that once a container was placed on the floor, its position in the cold storage would be not visible, therefore the location number on the ceiling was used as an alternative to identify which position the pallet was placed. These steel containers were placed in rows with upto 7 pallets height, placed one over the other, forming a 'bay'. In the same way multiple bays were created for additional pallets, thus forming an 'Aisle' between these bays.

A set up of this kind would be a challenge for any WMS to handle such a composition of containers placed in such a manner. One would generally treat this as a bulk location, but again, stock was placed based on FEFO, fast moving items etc, which meant containers having fish expiring early had to be placed at the 7th stack (on top of the 6th container) and the ones expiring next on the 5th level and so on.

A similar situation prevailed for a ceramic manufacturer in the Middle East. In this case it was about finished goods placed in a massive yard, where ceramic goods were placed in pallets, shrink wrapped and then placed one top of the other upto a maximum of 3 levels since these were ceramics and each pallet could hold the weight of 2 pallets on top of it.

The challenges in these two scenarios are as follows:

1.Maintain stack sequence for each location. Most WMS packages do not maintain this aspect. The location code along with the stack sequence will identify each position. The system will generate a stack number each time it putaway a pallet to the location and stamp it to the pallet number to locate its location. Say for Location L102, when the first pallet is putaway, the location will be L102/S0, meaning the pallet is placed in location L102 and ground level S0, when the next pallet is placed on top of this, the location will be L102/S1 which means location L102 and stack sequence S2, i.e. its placed above L102/S0 and so on.

Most WMS systems in this case have to be customized to store max stack heights for each location upto which it can putaway pallets and also identify at which stack height locations have reached, before carrying out further putaway to that location. This solution would be required in case there is a need for identifying the exact location of a particular pallet in the warehouse.

2.Since there is no racking system, it is not possible to provide any location address for each location. It may be as a single location but with a maximum capacity of n pallets that can be placed one over the other.

3.LPN may help to identify a pallet, but again, any WMS would not be able instruct which pallet will be on top of which one, since stack height sequence may or may not be maintained in any WMS, unless it is considered as a customization.

4.Pallets with different SKUs placed in the same location would reduce efficiency, i.e. if the pallet to be picked is right below three other pallets having different SKUs, it would lead to removing the top three ones, then take the required pallet and placing the other 3 back on the same position, which would consume time and also needs additional space to carry out such a task. So it would be advisable to have the same SKU pallets to be placed in the same location.

5.FEFO will work only if pallets of the same expiry date are stacked up in a single location. This would not be applicable for the ceramics company, but for the cold storage, definitely yes. Other way round would be to a have a logic to putaway pallets expiring earlier on the top and the ones much later in the bottom of the stack.


These are some of my thoughts around 'Virtual locations' in a warehouse, which exists only due to the presence of a pallet and non-existent when the pallet gets picked. I presume there would be other ways in which these requirements have been met, but this is the closest I have come in resolving them!


Postponement strategy: what are the key drivers and design elements

Through this blog, I would like to share critical drivers and few design principles for a right postponement strategy and urge each one of you to give comments, share your opinion and point of view.
As most of us know, postponement is one of the strategic initiatives adopted by companies to build an AGILE supply chain. There are various ways in which companies adopt postponement in supply chain. More prominently, it can either be a Manufacturing postponement that aims at delaying the differentiation in product offerings to customers or a Location postponement where goods are customized either at factory or a DC based on physical proximity to customer locations. Ultimately, it's about postponing some value-adding supply chain activities until a customer order is received.
Why do companies resort to this strategy? What's so special about it and what are its pros and cons? Please read on and do let me know your experience - really look forward to read your comments ...

Few well know drivers for adopting postponement are:
• As SKU proliferation has increased manifold, it is extremely difficult for planners to accurately predict forecast numbers.
• Customers are very demanding and there is high competition with low switching cost. Companies are forced to have low response time (lead time) to fulfill customer orders.
• High product variety and competition leads to high customization.
• Increase in total inventory, high obsolescence is one of the big contributors to company's bottom line. Reduction of inventory in the system without affecting Customer service levels is one of the prime focus areas for companies.
Looking at the drivers and such conflicting trade-offs, it becomes very clear why postponement is a great strategy that has done wonders for companies. We are familiar of great companies which have been pioneers of postponement implemented in varied degree of maturity levels. Sony, Toyota, Dell, Ikea, Xilinx, HP and Asian Paints are great success stories.
But designing a postponement strategy involves various aspects - not every product or supply chain needs postponement. Some of the characteristics of ideal candidates for postponement are products with:
• Short life cycles
• High variety / options to customers
• High value profile
• Standardized components and modular design
It is important for companies to carefully evaluate its product portfolio and pick right products based on the above criteria (it is not an exhaustive list, of course).
There are typically 3 design elements for implementing an effective postponement strategy (I suggest supply chain practitioners to go through APICS research work published on postponement - it has lot of great insights):
a) Picking the right candidate and right level in product hierarchy for postponement: build a check list of criteria as mentioned above.
b) Work on products and manufacturing process: induce standardization, modularization in products and components. Improve master data. Redesign manufacturing processes and increase collaboration with external partners.
c) Identify an appropriate stage in value chain that decides the customer decoupling point.

July 9, 2010

Rx for Healthcare Supply Chain part 2

In my last blog entry, we addressed core SCM concerns like special transportation needs, inventory management and reverse logistics and how these are instrumental for an efficient healthcare function. Breakdown at any point in this function has life or death implications. Taking this discussion further, let us touch on the need in this sector to collaborate better to leverage on the supply chain efficiencies of the intermediaries involved.

The Association for Healthcare Resource & Materials Management (AHRMM) and Centre for innovation in Health Care Logistics (CIHL), at University of Arkansas conducted a survey of Healthcare professionals to assess the state of health care supply chains. One of results that stands out is that, more than half of respondents indicated working in an immature supply chain with fewer than one in twenty respondents indicating the existence of an extended supply chain. In this context, let's touch on a few aspects particularly on the importance of player inter-relationships.

4. Procurement and relationships 

Relationships with trading partners hold the key! Most efficiency is derived by strong relationships between suppliers, wholesalers, and healthcare pharmacies. Typically it has been observed that wholesalers dominate the relationship with the buying and selling organization. The contracts are managed in such a way that the pharmacy is eligible for volume discounts as well as system related support for the much needed enablement of automatic order capturing and processing. This would pave way for processing larger amounts and volumes.
From a manufacturer's perspective it is of foremost importance to get in to the demand driven mode and eventually develop strong relationships with its customers. The pharmaceutical giant Abbot in the year 2006 carried out this exercise to think outside in and injected the feedback to its supply chain management philosophy. This gave the company to reach out to its diverse customer base, track the service they provided on agreed KPI s and develop methods to co create value

5. Logistical and behavioral aspects

A lot depends on who manages the show. Anybody would agree that to deal with uncertainty, keeping the buffer stock near the consumption point, i.e. postponing the push-pull boundary in the supply chain to the maximum extent. In a ground breaking joint study conducted by MIT and World Bank, named the "Zambia pilot", it was revealed that in pharmaceutical supply chains, a cross-dock level postponement was a better alternative than point of consumption.The reason cited for this "counter intuitive" result was the behavior of the staff at pharmacies that had become "complacent" that the inventory was not far away. This added to the laxity in the ordering process which negated the advantage of local inventory positioning.Getting a pulse of stakeholders, partners including pharmacists and physicians is found to be of a great benefit to improve efficiencies. There is a need for bidirectional knowledge transfer between partners on operational methodologies, guidelines and strategies to be followed.These processes (for example, inventory replenishment) can be streamlined to a great extent by technology-enabled SCM interventions.

6. Standards Adoption and transaction improvement

Last but not the least, there is a need to adopt global standards to improve day-to-day transactions. Pioneering this initiative is GS1, a not-for-profit organization globally responsible for making information exchange and traceability of goods seamless. This is particularly significant in this complicated value chain inundated with intermediaries. For decades Hospitals and suppliers have been playing the cat-and-mouse game over price, volume and scheduling discrepancies resulting in manpower loss. 
The aim of this initiative is standardizing the electronic vocabulary and to take this sector to similar milestone where retail industry is pertaining to bar code scanning. The use of Global Location number and Global Trade Item Number would give the much needed fillip to the collaborative nature of the business. The Success story shared at the GS1 site, shows that adoption of GS1 standards is a positive step in "eliminating costly EDI errors in pursuit of the perfect order. This example is a much needed encouragement and motivation for stakeholders and decision makers to champion the need for greater collaboration in their organizations.

Analyzing all these points I would be glad to know from readers if they think this sector is unique when we talk about supply chain initiatives? What do you feel about Supply Chain as a management philosophy specific to this sector?
Should there be a public private partnership model needed in this sector which could save millions of lives in developing and underdeveloped world? Would be a pleasure to know your thoughts.

July 8, 2010

Would SCM be a differentiator in your Apps Portfolio?

Dennis Gaughan of Gartner in his blog dated 29-Jun-2010 wonders whether its time for corporations to rethink their enterprise applications portfolio strategy (http://blogs.gartner.com/dennis-gaughan/2010/06/29/is-it-time-to-rethink-your-enterprise-application-portfolio-strategy/). Well, I think organizations are thinking about it all the time, sometimes when they do their annual planning and are reminded of the morass in their application landscape and sometimes thanks to M&A (esp for financial institutions) forcing them to look at what to sunset and what to fold in.

In the medieval times, so to speak, all app categorization was done purely on technology basis. For eg:, all java applications whether its claims processing or labor skills management or web order capture would be lumped together with disastrous results on value addition from the IT team to the business. Why? All requests would be seen as tickets to be fixed or enhancements to be completed rather than based on their business criticality. Of late, with business-IT integration increasingly being a reality, its typically done along the lines of departments (finance, HR, supply chain etc) or functions (procurement, sales, logistics etc)

But what was interesting in Dennis' blog was the categorization of all applications into three buckets,
1. System of Record
2. System of Differentiation
3. System of Transformation
This in turn translates to naming these buckets as applications to "run the business, grow the business and transform the business" with progressive reductions in life-cycles.

I am not sure about the life-cycles part though, a lot of master data blues that large organizations face today is because their lumbering old systems are just not in a position to even categorize their item master along UNSPSC lines, instead turning to one kludgy, band-aid fix after another.

The second point I was not in complete alignment was in terms of seeing the word "transformation" (much bandied these days) and "short life-cycles" in one sentence. May be its a mind-set, but I am used to business transformation being typically large-scale, multi-year, mega change management initiatives which cannot gel well with something which Dennis says are developed out of "ad hoc processes", funded out business budgets and having "short life-cycles". IT-led Business Transformation these days is typically used in global-scale examples like instance consolidation, template roll-out and such.

But as a way of looking at the portfolio, this classification is definitely a powerful way to go.

Now, when we take a look at supply chain applications, its clear that those need to come in the second or third category. We've had instances of some of our clients arguing strongly of keeping Sterling Commerce Distributed Order Management or IBM Maximo Enterprise Asset Management as systems of record leading to some intensive discussions (!), but seriously, no one in their right mind would use core SCM applications as a system of record for master data. That said, a lot of SCM apps can be the system of record for transaction data. In the previous scenario, Sterling DOM can be the "single source of truth" for all orders in the enterprise while Maximo can function as system of record for all "work orders" across the enterprise.

Whenever I see the term "grow the business", my immediate connection is with the sell-side supply chain functions or the revenue earners. In that vein, anything that's customer facing (eg: order capture systems) would be the place for maximizing revenue growth. Transformation is a broader word, substantial improvements in existing supply chain (say aroung logistics model or fulfillment options) or even stringing together apps/functions in a unique way would mean transforming the supply chain to something differentiating vis-a-vis the competition.

While we all realize where SCM functions/apps need to fall, the choices would be around what needs to go in which bucket (differentiation vs transformation) when an enterprise looks at its complex, matrix organization built around suppliers, customers, partners, the various business functions they support aligned to the core SCOR philosophy and the applications that help enable these functions. The implications of the new criteria is where Dennis signs of - around vendor selection, security, governance, integration etc - all of which are very valid points within themselves to be deliberated before making the baby steps towards a new portfolio rationalization strategy.

Rx for Healthcare Supply Chain

Healthcare has been a market defined by its own challenges. It also has customers (its patients), and being in business of saving lives, the emphasis on value creation, customer service and profit motive is in no way insignificant to other sectors. Even so, it remains strikingly similar to the conventional market place.  In the context of our discussion, this blog entry in two parts looks at healthcare supply chain which comes with its share of complexities.

Having a huge number of intermediaries, high value of products and service levels needed to accommodate highest levels of emergency etc., underlines the battle which supply chain personnel wage on an hourly basis. The sheer nature of this industry makes supply chain inefficiencies a matter of life or death.

Supply Chain Management (SCM) both enabled by critical process and systems, continuously creates value for customers. It conforms to economists' view of value created, in terms of the utilities which are of "form", "possession", "time" and "place".
SCM in Health care is quite often considered by practitioners to be more complex and an interesting management concern. This is more so because it deals with a "bouquet" of products and services that make up the philosophy of "Patient Care". It starts with necessary dietary/food supply chain for a hospital, drugs, medicines and goes on to encompass the gamut of medical devices and equipments needed to service the patient. This bouquet is extended further with the portfolio of services including procurement and transportation, taking into consideration the constraints signature to the industry.
Supply Chain segmentation is a methodology which helps us answer how many supply chains do we run in an organization and what kind of distinct interventions are needed across the product/service portfolio. By SCM segmentation we mean categorization of your products and services with the customer and his/her requirements in mind. It should also encompass the different channels that are leveraged to serve different customers (for example retail /institutional customers).

We shall delve into few of these distinct SCM interventions which can make a difference to healthcare and the way constraints are dealt with, with the help of these interventions.

1. Inventory Management and Rationalization

Surgical equipments, drugs, patient support equipments and devices need to be subjected to inventory management techniques on a routine basis. The problems faced by traditional pharmacies include the lack of a standardized process for stock taking, visual inspection of on-hand quantities and reconciliation of received goods against the bills.
A rationalization can be carried using the velocity - value analysis more commonly known as ABC analysis. Here, the categorization can be carried out based on the velocity and value and different stocking benchmarks can be set for each of these categories. On a different note some experts look at this as just a mathematical model and argue that in healthcare every drug is important, but this method approaches the issue scientifically.
The unique challenge here to have an efficient process to analyze, monitor and manage the lead times of SKUs needed. A classification for SKUs can be carried in terms of the supply lead times taking into consideration the critical, non-critical and scheduled pre-operative cases the healthcare organization is going to deal with.
Applying the classic concepts like EOQ for inventory benchmarks can make up for lost time in emergencies.

2. Temperature controlled needs

The American Pharmaceutical Review points to the fact that roughly more than half of the total pharmaceuticals sold in the world have temperature sensitive transportation and handling needs. Regulatory enforcements from bodies like IATA, United States Pharmacopeia have enforced special rules for handling, storage and transportation of temperature sensitive products. In a report by WHO, 25 % of all vaccine products reach their destination in a degenerated state. This further emphasizes the need for system-enabled cold chain data management, monitoring and transportation services to ensure perfect order fulfillment in the desired state.

3. Reverse Logistics for waste management

Often neglected yet the environmentally responsible side of  healthcare supply chain is the reverse flow of waste including  disposal, recycling and picking up from the point of usage. Here the intervention is in the form of a well defined reverse logistics policy post-classification of the waste, for example - radioactive, hazardous, bio degradable or infectious. Each of these categories could have differentiated handling policies including mode of transport.

We shall discuss few more interventions along with observations from the industry in the next blog entry.

 

July 1, 2010

Contract Negotiations - The Trust & Technology factors!!

If government policies dictate supply chains, Contracts are the essential glue that keeps the supply chains chugging. After-all, without a contract in place, no sane buyer and supplier is going to transact for long. For the past two months that I have been swamped in contracts - one recently signed with a client and the second one currently under intense negotiations with a product vendor - I have realized how painstaking the negotiation process can be; particularly when the stakes are high, when uncertainty prevails due to complexity of work and geographical barriers and when you do not have a past relationship.  

 

Not that I am a veteran at this stuff. Prior to this experience, I only flirted with this subject as a process consultant devising sourcing & contract processes. Nevertheless, I cannot help highlight the ironical role of Trust. Ironical because when you draft a contract, you do so keeping aside this "Trust" so that you can think of all possible eventualities and cover yourself for it. But when you negotiate, the speed of your negotiations is governed by the same Trust that you kept aside earlier. Over the past month, we - line managers and legal team from both the parties - have spent numerous hours in arriving at the elusive 'common ground'. We, expectedly made significant progress when the trust factor was high; and vice-versa, we haggled on the minutest of the clauses and debated on non-issues when the environment was devoid of it.

 

This is where the second 'T' i.e. Technology comes in (no, I am not referring to video-conferencing though it has its obvious benefits in eliminating geographical barriers). Having the entire drafting and negotiation process automated and transparent fosters a positive environment besides easing the process. I found that an application that identifies clearly proposed changes to the draft contract (using highlights), retains version history and tracks and identifies who makes the changes to be most vital during lengthy negotiations stretching over weeks (MS Word suffices for all features barring having a trail of the versions; but when you need contract compliance & automated renewals, you are better-off having a contract lifecycle management solution). This becomes all the more important when there are more than two parties involved in the contract and the positions of each need to be recorded unambiguously and made visible to the rest.  

 

Wrapping up, the singular factor that can hasten or stall contract negotiations is the perception each party has of the other. And Technology's underlying role in this other-wise game of human minds is, to say the least, invaluable.   

Sell-side Supply Chain and the importance of User Experience

Of late, I've been trying to think through the root cause of some of the customer specific expectation mismatches we faced on the web-commerce side in a couple of our accounts. Around two years back, fueled by Sterling Commerce's acquisition of Comergent in the B2B e-commerce space (Order Capture offering, later re-christened into Sterling Commerce MCS or Multi-Channel Selling) and by a few opportunities in ATG Commerce, we at SCM Practice moved into the front-end of sell-side supply chain, both B2B and B2C. Among the most important of all the learning we've had since then have been the important of user experience at this end of the supply chain.

As back-end Supply Chain specialists focusing on OMS, WMS, TMS and further beyond (eg: planning or procurement), we've always focused on core process design, business rules and the "usability" factor thus leaning heavily on function over form. As we move to the front-end of the supply chain via Sterling MCS (B2B domain) and ATG Commerce (B2C), we're being forced to think about the importance of (a) User Experience and (b) End Customers (as in customer's customer, hence the resultant higher panic levels if something goes wrong since the revenue impact to the business is instant).

Doing some reading around this topic, I stumbled upon an interesting blog by R J Owen titled "The Difference between Usability and User Experience" http://www.insideria.com/2010/01/the-difference-between-usabili.html . Though there are obvious overlaps in many cases, the blog tries to distinguish these two facets which together make a great UI-centric application. This is not about choosing one over the other, for successful implementations of such customer-facing applications, both become equally critical, which could also explain the reason why web-apps (B2B or B2C) are a lot more living and dynamic compared to say, back-end fulfillment rules in the supply chain. 

Drawing a parallel from the auto-world, while we need solid, well-crafted engines in cars, the sheer fact that these engines are not in public eye all the time means that they don't need to change every year, unlike the body and exteriors, which would need a face-lift (literally) every year.

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