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, 2011

Supply Chain Planning Arena - Which product is better amongst the best

Every single day we are going through the product evaluation phase in our buying process for our personal/household needs. Consumer buying process normally involves - Problem recognition, information search, evaluation of different options, purchase decision, and finally post purchase behavior. Organizations are no exceptions to this process and are going through the same phases when it comes to the buying any products/solutions for either gaining the competitive advantage or for optimizing the current processes.

In the last few decades, supply chain planning area has gained paramount importance due to the incessant pressure to increase the shareholder value. Most of the fortune 200 companies - P&G, Best Buy, Unilever, Kraft, etc. had realized the need of the sophisticated supply chain planning solutions long back and have been reaping the benefit of the same for many years. This can also be attributed to the gigantic scale and tremendous complexity of the operations of these companies. In the last few years there have been two noticeable emerging trends in the supply chain planning area:

·         Bigger companies are exploring the option of moving to SAP APO or Oracle APS (depending upon whether they have installed Oracle or SAP as an ERP system respectively) from the best-of-breed products Manugistics/i2 (now both under JDA umbrella)

·         Mid-size and smaller companies are exploring the option of installing new Supply chain planning product, since their homegrown supply chain solutions are not able to address the needs of the supply chain due to the complexity of the growing business.

In both of these cases, companies are going through product evaluation phase. So, in nutshell, everyone wants to know - which one is the best?

Recently I was part of couple of such evaluation exercises and this is what I think. Every company has got different requirements - like scalability, complexity that application has to handle (planning of perishable items which is crucial in CPG industry), automatic truck load building after the planning engine's  recommended shipments (by considering weight, units, volume of the products) and the disparate options available to optimize the truck load, capability to optimize on supplier costs, manufacturing costs and purchase costs by using sophisticated algorithms, user friendliness of the system, and the customer service, etc. Now, to get an answer for - "Which Product is better amongst the best", companies need to follow a step-by-step process to identify the best product to fulfill their needs. Firstly, they should identify the pain points and gather the business or technical requirements associated with it. Then they need to evaluate each of the product features by having a small demo or prototype and need to check whether the product can cater to all of their requirements or customizations would be required. They also need to compute Total Cost of Ownership (TCO) for each of the product under consideration. The final step will be - to perform a cost- benefit analysis of each option.

Here are the some of the considerations for the evaluation exercise - Firstly, the benefit of having one vendor (like SAP, Oracle) to solve the planning and execution issues Versus the benefits of rich functionalities offered by best-of-breed products. In addition, it is the common perception that with the best-of-breed products, TCO would be increased due to the integration cost and there also can be issues of having different information in planning and execution applications due to integration issues/batch job failures. Based on my experience with JDA, I can confidently mention that such occurrences are rare and are tackled almost instantaneously for maintaining data integrity. Even the cost of integration with ERP system is the one time cost and maintenance/support cost of the interfaces is often absorbed in the normal routine support cost.  On the other hand, sometimes with SAP APO or Oracle APS, companies have to invest in the customization efforts to provide the capabilities similar to the off-the-shelf functionalities offered by best-of-breed packages(like JDA's Order optimization module for truck load building for the suppliers by considering the min quantity, weight, quantity, volume is not available in Oracle APS). Companies need to consider all such aspects while evaluating the cost/benefits.

Second factor to consider here is the perceived benefit of SAP APO/Oracle APS due to the seamless and real-time data transfer between planning engine and ERP systems to avoid data integrity issues. Based on my experience, majority of the planners use "manage by exception" approach, as they simply don't have time to check the data consistency between planning and execution systems. In case of best -of breed packages, cyclic run of the interfaces are able to ensure the data integrity, if it is very critical for the companies. So, the quantification of the benefit from having real time data transfer between planning engine and ERP systems is something that companies will have to assess for themselves.

Third and the most important factor to consider here is the learning curve of the planning community. All the market leaders in the supply chain planning category (be it SAP APO or Oracle APS or JDA or Logility) offer almost all basic supply chain functionalities.  However I always experienced that no matter which planning product companies deploy, it is the "usage" of the product to the best of its ability, which is of the paramount importance to the companies to get the anticipated ROI.  If Planners can understand and master the product quickly, then only they can use the product well and reap the benefits of it. If company does not have SAP or Oracle installed, then obviously planners will take a long time to get well-versed with SAP APO or Oracle APS. Compared to these, because of its high intuitiveness, planners quickly grasp the features of JDA application and use them to solve the numerous complex supply chain problems.

Fourth and the last point is the following/checking with the market leaders/competitors. To throw one example, JDA has been supply chain planning enabler of the world's no. 2 food and beverages company for more than 7 years now..

I am sure there are many other factors as well for the product evaluation exercise. However I would like to stop here and would want the esteemed readers to share their experience of similar trends or evaluation exercises being undertaken in their organizations.  Awaiting replies/comments..

 

June 25, 2011

Capital Intensive Hi-Tech Supply Chains: Capacity Allocations Issues and Potential Solutions

The Supply Chain in Hi-tech and Semiconductor industry vertical is characterized by globally fragmented value chain partners with product design happening in Silicon valley, foundries and fabrication units spread throughout south east Asia region, software development happening in Bangalore and assembly and testing being conducted in Malaysia.

On the other hand the high capital equipment and setup cost with operational challenges ranging from high demand volatility to product line and manufacturing complexity with product life cycle spanning from less than one year for cell phone chips to ten or more years for semiconductors for automobiles, makes it imperative for Hi-tech manufacturers to not only take a microscopic look at their capacity management process but also consider a coordinated capacity investment and allocation decisions with their supply chain partners.

High-Tech companies are realizing that in order to sustain their customer base and seize revenue opportunities, they must be able to manage rapid technological innovation effectively and appropriately structure capacities in their supply chains to respond over time to the demand surge from new product introductions and market up-side. At the same time have operational maturity to absorb short-term decline due to technological migration and market downside.

capacity-mgmt-ecosystem.gif

Capacity investment in high-tech industry typically involves substantial cash exposures, volatile market demand and changing supply (technological) specifications. The cost drivers often are not material related, but rather are related to equipment depreciation. This makes resource utilization (both equipment and manpower) extremely important. At an operational level, defining capacity planning decision support models, which can be applied across different manufacturing production models and product life cycle stages suggesting optimum capacity allocation numbers (design/trial capacity, production ramp-up capacity, In-line production capacity) is extremely difficult. In addition justifying those models and criteria (based on product demand patterns, cost-benefit analysis) with capacity investment choices to overcome operational roadblocks invite unique management questions for key process stakeholders involved in solving this problem systemically.

The same management problem gets pronounced when business dimension of process structure/process life cycle stages are considered concurrently (see Figure 2) in these decisions with interdepartmental stakeholders (such as product marketing analysts, sales managers, strategic planners) from across global business units start participating and influencing production capacity allocation decisions to achieve their individual business unit goals.

capacity-planning-continuum.gif

All the above aspects converge towards making decisions regarding capacity investment, expansion and utilization, which in turn affects and influences supply chain planning and delivery efficiency and a Hi-tech firm's ability to manage capacity at strategic, tactical and operational level, which today is arguably the most critical factor for its long-term success.

Hence a systemic solution of incorporating a concerted capacity planning approach, with capacity allocation, collaboration and capacity simulation/assessment process functions is recommended to address the complex nature of the problem with the intent of timely identifying the process bottlenecks, tracking capacity utilization and taking proactive action when needed to change the share of business across starving or overloaded manufacturing entities and level load them with the objective of building a "Profit maximizing Product Mix" as per corporate business needs and goals.

Capacity allocation and simulation capabilities will help in carrying out near/mid/long term capacity assessment and decision making process regarding product-mix changes, volume enhancement or switching share of business among  suppliers, in-house or contract manufacturing entities by implementing rule-based allocation algorithms across product families, strategic business unit and manufacturing process steps dimensions.

Global visibility and collaboration strategies have often proved to reduce unnecessary uncertainty introduced into the supply chain when supply chain partners second guess each other rather than share information. As an example typically, Wafer Fabs (front end) and Assembly/Testing facilities (back end) work in relative isolation. Wafers are manufactured and probed in one facility and then shipped to another facility, often thousands of miles away. These facilities have separate factory planning organizations and so by sharing information, a company can improve capacity management between the two facilities. In that respect having a system-driven capacity collaboration capability will not only help facilitate real-time capacity information exchange among key value chain partners for better planning and negotiations but also will reduce human errors caused by manual workflows.

From a process perspective capacity planning plays the role of Master Planning at the corporate level. It results in making the key decisions of allocating the capacity to each participating divisions (internal and external), assessing capacity requirements for demand and forecast profile across product lines, and time capacity expansions. Given that it takes a while before one can add additional, expensive production test capacity when demand picks up, or suffer low utilization in times of low demand, a coordinated systemic capacity planning approach will help Hi-tech companies improve their aggregate capacity planning decision making capabilities. Consequentially they will move towards achieving operational excellence and becoming a high performance integrated supply chains driving increased customer service levels with improved inventory turns and reduced obsolescence.



June 22, 2011

Going green - a Marketing gimmick, Cost saving tool or Sustainability?

Long time back, when I was managing shop-floor operations, I was asked by a senior production manager from another company "Why do you give so much importance to green in your operations, whereas it is a marketing gimmick for many?" My answer to that was it has a marketing angle, cost saving potential and is a sustainable approach. Is it true? Yes, there was a time when green initiatives always used to fall in the tail end of organizational initatives' presentations . But now it is more likely found on the initial slides of such presentations.

It is a fact that greenness of the supplychain is playing an important role in current world. It shows to the world that the organization is sustainable and responsible. However Greenness is yet to be accepted as an Order-winner, but in many of the current opportunities / bids it surely plays the role of an Order-qualifier. There are so many compelling reasons for an organization to go green, such as - Global concerns of climate change, rising energy costs, regulations which are getting stringent day by day and above all increased public awareness about the subject. It also serves as a marketing tool, though might not be the primary aim of an Organization. In a recent survey it is found that people and organizations are ready to bear a little extra cost to adhere to a green solution.
The Critics could always ask, what are the advantages an organization gets by going green? Isn't it a waste of money and resource? The answer is Going green doesn't necessarily mean going expensive. A global glass manufacturing giant was able to save a considerable amount by replacing a part of wooden box packs with re-usable iron frames. This is one of the many green success stories I have seen.
How to measure the greenness? There is no single metric to capture greenness. It is measured across various indices - carbon footprint, environmental footprint, solid, liquid and gaseous waste generated and % of waste recycled are few of the named measures.
An important question that is foremost in many minds, "is measuring greenness all enough? I feel, Greenness is only the effect, but the emphasis should be on what caused that increased greenness or less greenness.
One promising method to study/understand the causes is Environmental accounting. Environmental accounting is that type of accounting where environmental interactions are captured and accounted to the process. Here the costs like costs for water treatment, electrostatic precipitator, pollution treatment etc. which generally go as overheads in standard accounting practices are captured and accounted for. Just to elaborate - suppose there are two processes (Process1 and Process2) for producing a product A. Process 1 generates more waste water than Process 2. Everything else remains same. If the standard accounting principles are applied - Process 2 appears to be more costly than it actually is, because it has to bear some part of the overhead cost due to increased water treatment for Process1.
Similarly going forward, I see an increased need for the SCM/ ERP applications to enable environmental accounting principles for capturing environment data in similar lines with time and cost, to support a sustainable supply-chain or an enterprise.
In my subsequent blogs, I will elaborate on my take on the different measures for greening the supply chain. Do share your thoughts and comments on the prospects of going green

June 17, 2011

Fraud vs Customer Centricity - I

In my current engagement at a large retailer in the UK, I came across the seemingly paradoxical requirements between the Fraud Management team and the Business team. This has become an almost common theme across the various Multi-channel Order Management implementations that I have been involved in.

The business continues to harp on charging the customer as late in the Order Cycle as possible citing better Order Conversion and Customer centricity.  The Fraud Management team on the other hand wants upfront payments since they believed that the fraud risk is too high. And this discussion is all the more heated if the maturity of the retailer is not very high in the online space since the fraud team is more attuned to the store processes.

While this is a normal reaction that I have seen in most places, I do believe that Fraud Management and Customer Centricity are not necessarily contradictory requirements. There is a middle ground which does work for most situations.

The aim should be to decouple fraud prevention/management from the customer charging strategy.

Credit card fraud is just part of the problem as far as prevention goes. Fraud prevention is now becoming a standard procedure which involves using well known Order parameters around fraud (for eg. Flag for fraud check if Billing Address is not the same as Shipping Address), integrating with third party fraud management providers (like ReD, 3rd Man) and maintaining internal fraud repositories (blacklisted addresses, blacklisted customers, blacklisted cards). These checks and balances carried out offline in the Order Management System once the Order is placed would be key to reducing the fraud risk.

On the other hand, the strategy around the timing of charging customers is not a standard practice. Depending on the country and the type of retailer, this strategy varies quite a bit. While online retailers in the US are legally forced to not charge customers till the item is shipped (or nearly shipped), the UK does not have any such specific legal restrictions. Here it becomes more a decision around customer positioning and system limitations.

I believe that this strategy can to be tackled along two main lines. One would be to utilize the AVS/Authentication/Authorisation process provided by the various gateways intelligently. The second piece would be the modelling of the underlying Order Management process to handle this inherently.

I will discuss this in more detail in my next post.

June 14, 2011

Supply Chain Analytics Fact, Fiction or Fantasy

Supply Chain Analytics is a very hot topic today and has gained considerable mindshare among our customers too. I can vouch for this interest across sectors Retail, CPG, 3PL and even large agri based players from customer interactions we have had over last few months. But analytics as an area and current idea of the same from different quarters reminds of the old Indian fable where blind men perceived and described the same giant elephant as akin to different and unique objects. The story is the same about Analytics as a subject (would dare not call people blind here!). Too many areas/subareas have been attributed to analytics and claimed to be a part of analytics.
Broadly what analytics leads to is superior business performance through data driven intelligence. In order to achieve the different levels of intelligence(simple to advanced predictive analytics), it requires an organizational dimension based on inputs in terms of Processes, Policies, Procedures and  Practices( incidentally 4Ps).Also it requires a computational dimension fired by data. Both of these dimensions form the basis of the analytical intelligence an organization can leverage on. It is this intelligence which leads to insights for a supply chain planner or a warehouse manager for him/her to act up on in such a way that it leads to superior performance.
I would touch up on few of perspectives on Supply Chain Analytics( few prevalent already and few emerging) in this blog series.

Organizations worldwide are keen to capitalize this new way of doing business. Organizations that started with merely reporting and to an extent drill down capabilities are today looking at exploiting analytical prowess to have end to end visibility into the extended supply chain enable management by exception. This foundational capability is helping organizations monitor and manage events which are common (example tracking where is the shipment or why is it getting delayed) and rare (effect of an earth quake or a hurricane disrupting the container movement at ports). Today's Supply Chain innovators are trying to be pro- active and are clearly heading towards a notch higher than management by exception. Classical management by exception is the fundamental premise for all Supply Chain Visibility programs. This is enabled by defining events based on the business process, understanding and establishing norms which fit into the definition of an exception and generating action points (based on breaching/meeting of norms) for supply chain managers. This framework often encapsulated in most IT enabled supply chain solutions today is helping organizations to drive an end to end visibility of their supply chain. The information derived out of  historical data can further be organized, sliced, diced and served on a dash board for insights into key performance indicators. That underlines the importance of consensus on the KPIs which need to be tracked on daily, monthly and quarterly basis along with accountability/ownership defined for each of those areas. The above flavor of analytics is today the one of most popular which organizations are applying in their daily operations across the phases of plan, source, make deliver and return.

 
Talking of returns, we recently recommended to a leading retailer that this horizontal capability layer of event management in conjunction with returns and reverse logistics processes can help track and provide visibility into shipments returned from any kind of facility being picked up by a vendor or a 3 PL partner. A centralized and standardized capability to provide visibility in to all returns happening at retailer, with analytics iced on top of it can generate sufficient insights to tweak one's return policies or take corrective action at multiple touch points in the supply chain. An example of how analytics can enable true closed loop supply chains in terms of Material, Cash and Information flow.
Few Supply Chain and collaboration heavy business like 3 PL companies are exploiting Visibility and analytics as a strategic weapon by conceptualizing a control room/tower (akin to an air traffic control room or a turbine control room of a nuclear station) which will give them round the clock visibility to the extended supply chain, help monitoring supply chain events and KPIs and help control and mitigate risks them to a large extent.

 
I would like to classify the above under "prevalent" in most organizations as a capability[mostly in pockets]. In a recent experience with a global customer where we did an assessment on the Supply Chain Visibility endstate capabilities across 3 continents, one of the points we observed in the process was the aspect of enterprise readiness. An enterprise wide, rather an ecosystem wide aggregation of high quality data enabled by collaboration with trading partners across the globe is a pre-requisite to make this initiative successful. Well informed supply chain leader understand the significance of this aspect before embarking an initiative like this.

Dear esteemed readers, what is your defention of Supply Chain Analytics? how are you leveraging the prowess of data residing in throughout your organization? is it a fact, fiction or still a fantacy... I would be keen to know.

What's on the Minds of Supply Chain Teams- A Perspective Derived from this Past Conference Period

Guest Post by

Bob Ferrari is the Executive Editor of the Supply Chain Matters Blog and Managing Director of the Ferrari Consulting and Research Group LLC.  Bob is a guest contributor to the Infosys SCM blog.

This spring's supply chain conference season is drawing to a close and it has been a rather busy one. With the economy and optimism slightly improving in the U.S., conferences dedicated to supply chain came back in a resurgence during this first part of 2011.
It seems that the topic of supply chains, along with their capabilities, challenges and shortcomings contrasted to a continued era of business volatility has once and for all become a common theme for discussion and discourse.  In this Infosys guest commentary, I will summarize what I found to be common themes and topics of discussion among supply chain and procurement professionals these past weeks.

Clearly, one top-of-mind topic has been supply chain disruption and risk.  The tragic earthquake and tsunami that impacted northern Japan has been yet another acute reminder of where vulnerabilities can lie across supply chains and that manifests itself in monetary impacts to business.  A survey conducted by Japan's Nikkei business newspaper has pegged direct disaster-related costs for listed Japanese companies at $25 billion.  That number could be higher when other global company impacts are quantified. While many companies are responding much quicker than originally expected, the topic of conversation revolves around how or can you prepare adequately for such a "black swan" event.  Some take the position that you cannot, but quickly add that there needs be very responsive business continuity processes identified that can be activated in such occurrences.  Other companies observe that at the very least, every organization needs to analyze where critical vulnerabilities such a sole supplier sourcing of an important component, or sole provider of a commodity exist. The one common theme, I believe, is that risk and disruption events are becoming all too frequent, and every organization needs to have a plan for identifying, responding and cost-effectively mitigating supply chain risks.

The IBM Impact 2011 conference brought reminders of the increasing adoption by consumers of sophisticated online buying tools, including the increasing use of smartphones and mobile technologies to secure buyer intelligence and ultimately make buying decisions.  Multi-channel commerce and indeed the business models of large and smaller retailers will all be impacted by these trends in the coming months.  Consumers now demand real-time information regarding product availability, in-stock inventory and status of their orders.  Supply chain business processes and information technology will have to rise to the increasing need for finite information being provided on a real-time basis.  As existing supply chain, product marketing and IT teams sort the required elements of a multi-channel fulfillment strategy, there is a need to prioritize which specific capabilities should be implemented first, and that often involves overcoming existing data management and process complexity.

Another similar and reinforcing theme for overcoming complexity came from the 2011 OpsInsight Forum where many of the speakers and attendees reinforced a message that technology and tools are often not the real challenge today, but rather overcoming business and organizational cultural challenges.  Overcoming business cultural challenges involve active leadership and continual reinforcement from top management, the ability to balance many different aspects of business process capability, and that it's the recognizing that little things that can make a big difference for teams.

Other insightful signposts to current top-of-mind challenges came from Supply Chain World North America conference where I not only had the opportunity to speak with attendees, but also facilitate a panel discussion among key industry influencers.  Three other current themes that resonated with attendees of this and other conferences included:

Current business cycles that continue to reflect constant product demand volatility, requiring an agile response capability, rather than a constant focus on achieving forecast accuracy. A new thinking is emerging to embrace demand volatility as a constant, with an emphasis on elements of scenario and what-if contingency planning as elements of a response management capability.

Strategic alignment of the supply chain with the company's changing business goals, and in some cases, requiring the need for segmentation of supply chains to properly match fulfillment capabilities with expected customer fulfillment metrics. Dell is a recent example of new emphasis on supply chain segmentation

A growing skills gap across supply chain management functions, particularly in the growing developing regions of the world where value and supply chains continue to be matured.  This skills gap is often characterized as having broader cross-functional management awareness and general management skills, coupled with the abilities to formulate ideas, plans and initiatives that manifest both global governance but local execution uniqueness. It is also characterized as supply chain management teams possessing the skills to not only master their functional responsibilities, but more importantly, the soft skills required to constantly sell ideas and innovation.

Global supply chain teams have their plates full.  Constant variability and more dynamic business cycles, a more demanding and sophisticated customer, continuing pressures for efficiency coupled with agility, and a growing management skills gap are all top-of-mind.  While information technology has an important role in assisting teams to address such challenges, it is often the business cultural,  change management and senior management communication  obstacles that tend to provide the most challenge.

June 13, 2011

Growing significance of Drop Ship Business Model Part II

In my previous post we discussed about when Drop Ship business model is used in retail industry. Now we will discuss about the benefits Drop Ship business model offers to the business.

The most obvious benefit of Drop Ship business model is reduced inventory levels. The supplier is able to control the lead-time component of order point better than a retailer with thousands of suppliers. Additionally, the supplier takes on a greater responsibility to have the product available when needed, thereby reducing the need for safety stock. These factors contribute significantly to lower inventories. Additionally, Risk is dramatically reduced for the retailer, who no longer has cash tied up in stock that he may not be able to sell.
 
The supplier keeps track of inventory movement and takes over the responsibility of product availability, resulting in a reduction of stock outs, there-by increasing end-customer satisfaction. Suppliers can increase their market reach and build a network for fulfillment that will make them more attractive to other retailers they are hoping to sign up.

Both the retailer and the supplier have greater visibility of orders and stock. This enables them to forecast activity much more accurately by analyzing previous performance, monitor current activity and plan promotional activity much more quickly to meet market opportunities. As the supplier does the forecasting and creating orders based on the demand information sent by the retailer, the retailer can reduce the costs on forecasting and purchasing activities.

Many suppliers prefer drop ship model because it reduces uncertainty of demand. Infrequent large orders from retailers force suppliers to maintain surplus capacity or excess finished goods inventory to ensure responsive customer service. Drop ship model helps dampen the peaks and valleys of production, allowing smaller buffers of capacity and inventory.

Drop ship model helps in reducing Transportation costs. This approach helps to increase the percentage of low-cost full truckload shipments and eliminate the higher-cost less than truckload (LTL) shipments. This is achieved by allowing the supplier to coordinate the resupply process instead of responding automatically to orders as they are received.
 
Finally, Customers are offered a wider selection of goods delivered through the channel that suit them best.
 
In spite of all above advantages drop ship business model is not panacea.  There are tradeoffs, in terms of control over stock levels and the risks attached with working with a third party.

If suppliers are not reliable for delivery of product, retailer brand value can erode very fast. Managing returns and exchanges can be a headache.  Ensuring consistent quality of product can be challenging. Retailers need to have an Order Management system capable of communicating customer orders to suppliers on regular basis.

Thus a drop ship business model may not allow retailers to get rid of all of their warehousing activities. What do you say?

June 3, 2011

What Products Should Be Campaign Manufactured?

Every marketer dreams of a manufacturing facility that is without any constraint. If marketing people had their way, they will expect all the products available "On Demand" whenever customer places order. However real life manufacturing does not work on such utopian considerations. Every manufacturing facility in the world, howsoever sophisticated it may be, has some constraints. Hence not all products can be made manufactured "On Demand". By extension few products have to be manufactured in Campaigns. By Campaign, I mean, manufacturing them at set frequency (Example - Once every quarter at scheduled date). Forecasted demand between campaigns is aggregated and campaign quantity decided accordingly. Campaign manufacturing is common practice across all types of manufacturing - Discrete, Repetitive and even Process manufacturing. This is because every technical asset has some sort of limitation and cannot manufacture everything "On Demand".

On the other hand, even if technical assets of company are capable, economic considerations does not allow all products to made available flexibly at all times. For example, if manufacturing facility requires a long set up time during each changeover of product then even though technically it is possible to start manufacturing every time customer places an order but practically multiple set ups will reduce manufacturing capacity to such an extent that overall profitability will come down to unacceptable levels. This brings me to the topic of this blog - "What Products Should Be Campaign Manufactured?" and by corollary what products should be made freely available to marketing "On Demand". Before we answer these questions, let us list down factors which affects this decision making.

Technology Limitations

This is prime factor that warrants Campaign Manufacturing. Let me give some common examples.

a) In Steel manufacturing rolling mill operations are mandatory. Rolling technology puts constraint such that narrower sections have to be rolled first, followed by medium width sections and then only high width sections. Even if you have big order from customer for high width section, you cannot escape narrow and medium width sections before jumping on to high width rolling.

b) In paint industry or for that matter any operation that require dealing with paints, a particular sequence has to be followed for colors. First light colors are taken up and gradually the operation move towards darker colors.

Research and development in recent years have lifted many of the manufacturing constraints but still almost 30% of all manufacturing facilities still get paralyzed by constraints similar to mentioned above. These factors predominantly decides what products to be Campaign manufactured.

Forecastibility of Products

Assume for the time being that there are no manufacturing constraints. Second factor that decides products for Campaign manufacturing is "Forecastibility". Few products in portfolio are very easy to forecast and few are very difficult to guess. There is obvious danger in manufacturing hard to forecast products in Campaigns. Either we will manufacture less than actual demand or we will manufacture more than required quantity. Consequently we will end up with either stock out or excess inventory. Both the outcomes are unpleasant so only easy to forecast products are good choice for Campaign manufacturing.

Business Importance

Some products in portfolio are very profitable and some are not. Objective is to encourage sales of profitable products and discourage sales of low profit making products. One of the way to encourage sales is to make products available "On Demand". These high profit products should get preference in manufacturing. They should not be manufactured in Campaigns. On the contrary, there is business case to manufacture low profit making products in campaigns and marketing should manage customer demand to fall in line with campaigns.

Manufacturing Productivity Constraints

Some products in portfolio require high set up times. Taking multiple manufacturing runs for these products will reduce available capacity. This will bring down the productivity numbers. Production Managers will always prefer long manufacturing runs for these products and thereby recommend to manufacture them in campaigns. On the other hand products that require lesser set up times can be made available "On Demand"

However real life is more complex than factors mentioned above. Biggest challenge is faced at the intersection of these factors. For example, what should be decision if product is highly profitable but require long set up time? Should it be campaign manufactured? There are no easy answers to such questions. It is balancing task between multiple objective. My experience of last 15 years in supply chain planning suggest that these decisions are normally taken arbitrarily. Generally person responsible takes myopic view and just consider one factor and takes a call. My recommendation is to follow differentiated supply strategy for your product portfolio. At the beginning of the year, take all these factors into considerations and decide on Campaign manufactured products. You may chose to make high set up time product available on demand instead of campaigning since it is profitable. However make sure that you have estimated number of set ups and taken its impact on productivity into account. Generally technology limitations are hard to overcome in yearly planning but if this factor is limiting supply chain from achieving its goal then you can consider investment in technology to lift this problem. Other factors are more operational and should be managed through consultation between marketing, production and finance by agreeing upon numbers at the beginning of the year. In some cases marketing should prevail over production and in few cases it should be vice versa with Finance calculating bottom line impact of all decisions. Best practice is to categorize the products at the beginning of the year and then review the campaign product portfolio every quarter by validating assumptions made at the beginning of the year. Once product is decided as Campaign manufactured, marketing should try to influence customer demand to fall along campaigns. Strategic safety stock can also be considered for few campaigned products.

As always this problem is also solved through Team Work between various functional streams.

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