Supply Chain Management

Et Tu Toyota …

2010-02-07T19:10:11Z

Reading about the Toyota Accelerator Pedal recall (around 2.3 million vehicles to quote a figure), one can’t help but wonder how a company with its squeaky clean quality and safety reputation, a temple of learning for supplier collaboration processes, could falter on such a grand scale.

]]> The accelerator pedal in question is sourced by Toyota from two suppliers, Denso in Japan and CTS in Indiana US, with the recalled parts coming from CTS only. Now CTS is not an exclusive Toyota supplier, it also supplies similar parts to other automakers as well. But the only ones that face issues are the Toyota pedals.

Till the late 1990s, Toyota used to practice a risky strategy of having just one supplier for a part, leaving it vulnerable to production disruption. After a fire in one of the critical supplier plants shut down production for 5 days, Toyota started having multiple suppliers for same parts. Toyota as a company is considered a benchmark in the supply chain world when it comes to supplier collaboration and parts standardization, but somewhere in pursuit of risk mitigation and cost reduction in recessionary times, it did not standardize the designs for accelerator pedals across its suppliers. It seems that designs for the pedals manufactured by Denso and CTS are different.

Which begs the question: Is Toyota wrong to have two different suppliers and two different designs? Well, there is nothing wrong in having two suppliers, but for an automobile company that consciously tries to carry minimal inventory, having varying designs across suppliers is inherently dangerous. It kind of defeats the purpose of having multiple suppliers to mitigate supply risk. If one supplier goes down, the other may not be able to ramp up production with an exact substitute. Not having standardization also increases the complexity and oversight required for quality control, which may have also led to the current situation.

It will take Toyota some time to come out of the situation that it finds itself in (sales are down 16% in January 2010 and the recalls will cost almost $2 billion) but hopefully it will get back to its “Toyota Way(s)” pretty soon.

Dilemma of Supply Chain Planning in an Allotment scenario - 4

2010-02-03T09:16:08Z

In continuation with earlier blogs, we had an interesting set of conversations in the past one month within the project team. One of the ideas through the brainstorming and subsequent brain-streamlining session, was to provide capability in the tool to store realtime Allotment limits in the sales order. An interesting revelation was that one could arrive at this figure only if we use another parameter called the Checking Horizon.

]]> While one set of the business was not keen on this parameter, the other was absolutely bought over this idea. A Checking Horizon provides a realistic supply chain feasible date by when a sales order can be fulfiled especially in a supply-constrained situation.

In our solution design, we took a decision to do Allotment Check prior to Availability Check. One reason we took this decision was to confine allotment consumption to a time bucket when the material availability of a Sales Order is checked. Availability check happens as a second distinct step completely agnostic to allotment consumption that happened in first step.

A Checking Horizon thus makes possible for any remnant allocation to be consumed completely.Thus it is possible for tracking allocation consumed, remaining and the limit of allocation at any given point in time. This capability is lost when Checking Horizon is not configured.

Although we are yet to decide where we finally want to go, it looks quite likely that Checking Horizon is a useful parameter to drive the correct demand visible to the planning solution - which is the objective of one of the best-in-class supply chains.

My sale wants to grow up and become an order

2010-02-02T03:28:30Z

I currently consult across multiple clients. They all are retailers, in different segments. At one retailer, we are defining a roadmap for a order management solution. In the course of our discussions, a question keeps getting raised about the sale made in the store: Is that an order?

You walk into my store, you pick something up, want to buy it, take it to the register, pay for it and take it home. In this entire transaction, you interacted with my company. You took something out of my inventory and paid me cash. In retail lexicon, this would be called a sale. However, if you were a business, and sent me a purchase order, and I responded by creating a sales order and then shipped it to you and invoiced you, the sales order is what would be called a order.

So, a customer transaction in store is a sale, and a B2B transaction is obviously an order. What about an e-commerce B2C transaction? Other than the fact that the customer's ship to address, payment information, and bill to address is available with me, how is this different from a sale? Should I encourage my sale to grow up and become an order?

]]> I think the difference lies in how B2C transactions have led to evolution of the customer relationship. Prior to dot com and online stores, the businesses were my "big" customers. I had relationship managers and account managers for the businesses I dealt with. As far as the store walk-in customer is concerned, I was nice to them when they walked in and I encouraged my sales persons to build relationships but it was impossible to focus on each customer relationship as if it was a business we were dealing with; it just won't scale. You never knew if all the relationship building was "worth it".

As the B2C model has evolved, order management systems have evolved to enable companies to electronically pursue each individual customer. If you register on my website, I will remember your preferences, show you products that you may like, show you other products that people with similar purchase histories have bought. I will follow up after a purchase, ask you to write a review, ask you to rate your experience. I will send you emails on newer products, will send you a birthday e-coupon, I will have a relationship with you. The online OMS/e-bot/site-'thingie' is the personal relationship manager (and for a lot of people, maybe their best online friend :) - they are a facebook friend, twitter follower!). This aspect is what I think makes it very interesting for the stores.

If my POS system could register the customer and treat each retail sale as a B2C order, I can unleash my entire relationship suite and try to build a connection with every foot fall. This may not lead to a long term relationship for every customer, however my actual cost per transaction is just my system whirring away. Storing the retail sale as an order against the customer is key to success since every aspect of the customer's interaction needs to be visible to my virtual e-relationship manager.

What are the questions and challenges this throws up?

Post publish edit: 5 seconds after I published this I notice this very interesting entry by Guneet on this blog on nearly the very same topic :)

Retail Customer Order Management Blog Series: Part 1 - An Introduction

2010-02-01T05:27:49Z

This blog got triggered by a series of events that I experienced recently. We were asked recently to analyze a 'simple' retail and online integration for enabling the order management and fulfillment process for kiosk orders which were placed and paid for in the store. Lack of existing documentation forced us to go to the store multiple times to place 'test' orders for elaborating the various scenarios. Some of our experiences have been documented in a previous blog by my colleague Sameer.

This actual 'cross channel' experience combined with a similar large implementation for an earlier client convinced me that I should spend some time providing an introduction to Retail Customer Order Management and its specific nuances and challenges. My focus is not to describe the traditional order management process typically associated with a single channel i.e. the steps required for managing the lifecycle of an online order or a retail replenishment order but instead highlight the cross channel benefits and challenges of managing a customer order from a retail stores perspective.
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While it is understood by retailers and retail practitioners that online sales are growing at a fast clip, there is a much more limited understanding of the fact that as customers are exposed to a multitude of channels they expect these cross channel experiences to be seamless. Recent consumer behavior studies have shown that more than 50% of consumers researched a product online and purchased it offline thus influencing in-store sales. These cross channel customers tend to be younger, more valuable and sophisticated as compared to their single channel cousins. They conduct more research, sort through multiple information sources while making buying decisions and on the whole lead to greater average order values if the retailers can manage to attract their loyalty. Other reports are predicting that the number of cross channel shoppers will increase significantly in the next few years. It has thus become a business imperative for retailers to do some internal soul searching to assess their cross channel capabilities, identify gaps and put together plans to enhance or transform them.

The objective of this series of blogs is to share insights and experiences from just such cross channel capabilities analysis and transformation initiatives of some of the leading retailers and retail practitioners. As the name implies cross channel capabilities analysis is a rather ambitious concept that encapsulates all the functions and capabilities required by a retail organization to enable a seamless experience for customers irrespective of the channel through which they interact. My focus in this blog series though, would be on the challenges and enablers within the context of ordering within a bricks and mortar store - thus retail customer order management.

Let us begin by going back to my example of a customer Joe Shmoe walking into an electronics store to buy a TV. He would try to locate the relevant 'video' section of the store and start browsing there. He would browse through the various TV models and sizes based on various factors such as size of his living room, his perception of the brands available based on recommendations and reviews of friends and experts, the capabilities of the TV, the price range and so on. He probably consults with a knowledgeable sales associate to fill in the gaps of his understanding. This would be classified as the 'Find and Decide' stage of his decision making process.

Based on all these factors, he chooses a TV to buy. He now starts thinking of how he can get such a large TV back to his home and whether he would be able to setup such a complicated piece of equipment on his own. The sales associate reassures him that a delivery truck would deliver it to his home the next day. If required he would be accompanied by somebody who will install the TV and walk Joe through the process of using it.

He then walks to the nearest register with the details of the TV he wants to buy. He asks questions about what kind of warranties and return policies exist for his expensive investment and decides to buy an extra 3 years of protection. He pays for the TV, the delivery & installation the warranty and taxes using a combination of a gift card he got for Christmas and a credit card. He thus completes the 'Buy' phase of his traditional retail store buying experience.

From a retailer's perspective this translates to the following series of steps and processes. To enable easy and intuitive Find and Decide, the store must stock a large variety of TVs. It must provide a large amount of information about these TVs and make sure this information is easily accessible and understandable to their customers. This function is typically provided by an item or merchandise management system. The store must have sufficient quantity of each TV displayed so that when a customer decides to buy one, they can walk out with one. This thus is an availability function managed by the inventory systems.

In order to ensure that a large product gets to a customer's home on time, the store must have a fulfillment and delivery system. This must not only take care of the tangible products bought by the customer but also the scheduling and delivery of intangible services such as installation and warranty support. When the customer wishes to pay, the payment tendering (POS) and accounting systems need to support the many means by which a customer chooses to pay for his purchases. Also if in the future, Joe wants to return his TV, the returns management system must be able to pull up his original sale transaction, return the product and refund Joe the amount he paid for the TV.

The above describes the microcosm of customer and retailer interactions within the traditional store buying environment. Now imagine that the store runs out of the specific TV, Joe has so painstakingly decided to buy. This then is the point where our story of Retail Customer Order Management begins.

Multi Channel Order Management Go Live: How early should you plan Cutover/Rollout?

2010-01-30T19:29:28Z

Last month, I was in UK for one of our retail clients to conduct a short workshop to assess the impact on existing system landscape, as they plan to implement Sterling Commerce order management suite to replace legacy order management. Multi channel order management programs typically end up as highly integration intensive solutions. In such a solution, cut over and the rollout planning tends to become complex. ]]> During initial stages of the program, it is quite natural to start thinking about high level solution, integration architecture, project phases and execution approach for the implementation. The cutover and rollout planning end up taking backseat since implementation timeline could vary anywhere between 10 months – 24 months. The implementation team tends to believe that there is enough time to plan application cut over and rollouts. Delaying solution rollout planning can prove to be very costly due to influencing factors such as 1) Parallel running of systems for longer period 2) Business risks in big bang rollouts 3) Operations and support team training implications 4) Data migration complexities 5) Master data and transaction data implications during cutover period 5) Architecting a solution that will work during transition period 6) Minimize throwaway integrations 7) Design changes directly influenced by the rollout approach and so on.

I was pleasantly surprised to see this client dedicating almost 2 days of the workshop to discuss cutover and rollout planning! Few examples on order management cutover and rollout planning which I shared during this workshop are –

· Soft Launch – In this approach, only a small subset of multi channel end customer get access to the system. For example, internal customers (employees of the retailers) are exposed to the system for first few weeks/months and then the full launch. Even though it is subset of the customer base it would expose the large part of the order management solution and thereby reducing the risk before the full launch

· Sales Channel– Certain specific order channel and fulfillment of such channel specific orders could be considered for initial cut over. For example corporate orders (B2B) could be considered for the first release of go live. Alternatively, .com could go live first and then catalog call center. However, order changes or customer service operations for the .com orders needs to be clearly defined in this approach.

· Product line – Rollout planning can be such that certain product lines can flow through the new order management solution. New product lines are added over the rollout period. In this approach customer may receive multiple shipments when certain order lines flow through the new system.

· Geo based- Customers based on some specific geo (can be zip code, county, area, state etc) can go live in phases. This way order sourcing and fulfillment happens in new system for certain low volume geo and then slowly scale up in volume.

· Fulfillment Channel- Cutover can be also planned based on certain fulfillment channels. For example all drop ship orders can flow through the new order management during initial release. Later releases can include distribution center (on hand inventory fulfillment from DC), store fulfillment and order fulfillment based on incoming purchase orders (incoming future inventory)

The approach may differ on case to case basis and it could even be combination of above. I would always suggest clients to run “Solution Release Planning” as a separate “work-stream” in the program which closely works with the application implementation team. This way, solution development team has a constant imagination of cut over/rollout, throughout solution design and implementation.

Leveraging SRM techniques to build business teams

2010-01-29T09:59:55Z

One of the key objectives in the existing challenging environments is to develop long-term, productive relationships with the internal customers who are stakeholders within the procurement business team. This is interesting observation and SRM techniques can help organizations in building strong relationship with internal customers through foothold strategies that leverage long term relationship.

]]> Let us take a look at how these strategies can build a positive sense among internal customers to stride them towards excellence.
Let us take a look at the four arms of any SRM technique used in approaching customer relationship management.
Whenever we are formulating supplier relationship we should be keen to have the best of the lot and build the application across
Sourcing 2) Selecting 3) Developing and 4) Retaining to get into deeper insights lets observe these arms closely
Sourcing: We need to identify internal customers whom we want to target to have the right kind of talent and diversity, internal customers would thrive for achievement hence recruitment is the key for the right choice. So right talent hunt needs to be done from the right source. This process is very traditional, includes setting up talent search places where a snowballing program is designed with higher-level assignments than they would find at many other companies, I too believe that the world is flat so scaling the resources to have access to the upper levels of the organization immediately is the key. This provides them with a lot of early experience in leading and managing team.
Selecting: We need to create a strong first impression when a new customer arrives to the organization. This may be as simple as a charming welcome in their hotel entrance but it's a gesture to set the relationship off on the right foot.
The next step is a formal interview process, customers can be interviewed with various people throughout the day with different set of questions where they can be judged with elements of behavior required in day to day life and communication and can be also assessed on their interest levels. This will help to ensure the most thorough investigation, as well as help in putting forward the company's best face.

Developing: Investing a lot of time is the key in developing internal customers,

Make the customers understand philosophies on supply management and on how to conduct performance management and develop the network, Put every internal customer through a very rigorous talent evaluation process where the top management gets involved to monitor the needs and the development of every customer and wherein the customer has development plans for the supply management organization as a whole. Part of this is "skill gap closure" involves identifying skills that may be missing in supply management. There is also a future skills process, which looks ahead to where the business wants to be in five years. From there the supply management organization determines where it needs to be in order to meet the needs of the business.
Retention: One result of the comprehensive development process is that internal customers appreciate just how much time the company spends working with them and expressing interest in their future. In addition, the company can have quarterly business meetings where management talks about what is happening in the business in general. The organization can have a "career tiering" chart. This gives internal customers the opportunity to consider some other jobs, either within supply management, or elsewhere in the company.

As a result of a comprehensive program to source, select, develop and retain internal customers through SRM techniques a positive environment can be built for better efficiency.

SCOR -S Certification; a boon for students

2010-01-29T02:58:22Z

Great news awaits students expecting to launch their careers in supply chain. The SCOR Scholar (SCOR-S) certification program has been launched by Supply Chain Council in 2010-2011. Designed for university students who do not yet possess significant on-the-job experience, SCOR-S certification will demonstrate a basic understanding of how to use the SCOR Framework for supply chain management. “The SCOR Scholar certification will be one of the only programs in the world that provides students professional certification of a methodology for managing supply chain performance,” says Caspar Hunsche, SCC Chief Technology Officer. “In addition to core supply chain management knowledge, SCOR-S certification will send a strong signal to potential employers of a student’s interest and ability to excel at a supply chain career.” A detailed training catalog can be downloaded from Supply Chain Council. Workshops include SCOR Framework, Implementation, Integration, Benchmarking, Performance based Logistics (PBL), Cost Modeling and Supply Chain Risk Management. In a way, such specialized training programs open thinking and real-world practice possibilities for students. Besides, such forums and certifications bring relationships with SCOR practitioners and teachers who meet and resolve practical supply chain challenges in their day to day operations. Let’s discuss the significance of the SCOR-R certification. Students can get an insight into supply chain basics and industry processes from experts. Understanding of SCOR benchmarks and process drivers by specific industries help align supply chain academic knowledge with indicators one must look for to realize business performance. Next, such certification helps students edge out competition when it comes to presenting themselves to prospective employers. Ability to relate to critical aspects causing a business constraints become clearer compared to trivial facts. Inter-relationships between various operational entities are key to finding a resolve to today’s supply chain problems. The SCOR-R experience will enable students to balance supply chain risks and rewards more effectively. This is just a few from the list of many benefits that students can gain from this certification from the Supply Chain Council. Well started is half done. This cannot be truer especially when it comes to beginning a career in an exciting profession of supply chain.

Automotive manufacturers of 2009: Numbers convey their Supply Chain behavior

2010-01-28T15:43:08Z

So the “Report cards” of the automotive manufacturers in US are out!! There are contrasting realities and some startling facts!!!. Do the Japanese and American car manufacturers behave the same way in the face of recession? How do their manufacturing and supply chain strategies reflect on their overall performance? Are there any “dark horses” among the American manufacturers who would pose the biggest threats to the Japanese in future? Are there laggards among the Japanese who would have to face the threat of survival in future? The numbers convey their behavior!!

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Figure-1: The numbers of 2009 which tell a story in US Automotive market

As sales were slashed by an average 20% due to the plummeting consumer confidence and the tightened credit, most automotive manufacturers saw erosion of their capacities. Utilization which had reached 70% levels now declined to 30% levels for most manufacturers. The Capacity utilization changes for other Japanese manufacturers have reduced in the range of 20%. This is in line with the Japanese philosophy of evening out utilization so that there are no major roadblocks during capacity ramp-up or ramp-down. In contrast, the capacities of Chrysler and GM have been slashed by above 50%, which lead to instances of plant closure, huge layoffs and the like. This provides a behavioral difference between the Japanese and the American manufacturers. In this pack Ford is a startling contrast, which has only reduced capacities by 17% and is in league with the Japanese. Also to be noted is the trend of Nissan which is drifting away from the Japanese philosophy of being frugal on capacities.

In these times of excruciating pressure of sales dip, Hyundai has kept its flag aloft with an 8% growth in volumes. Corporate philosophy says it was due to sharp focus, but industry practitioners know that most it was driven from the 1,00,000 kms warranty sop they provided to their customers.

From the Inventory position, the drop in sales has driven the drastic decimation of the inventories by about 50%. A closer look at the Sales change and Inventory change rates show that Hyundai is away from the pack. This is the only manufacturer which has shown boldness to reduce inventory in the face of increase in sales. This is only possible when a manufacturer is able to device lean supply chain. This is possibly the major cause of profits displayed by Hyundai. This does not in any way indicate that others who could not emulate Hyundai were non-profitable. It only demonstrates that the opportunity which Hyundai utilized to derive margins from a lean supply chain could not be used to that level by others.

Not trailing far behind Hyundai are the Japanese biggies Toyota and Honda which have shown discipline in large cuts in inventory against sales decline. This ratio is to the tune of 2.5. This is a core “Japanese behavior”. Even though Toyota had drifted away from its lean principles when it built up components inventory in the wake of supplier bankruptcies, but is has never left its lean principles when it comes to vehicle supply chain. A sharp contrast to this trend is observed with Nissan, which has shed inventories in a very conservative manner. Against a sales decline of about 20% in Honda and Toyota, they registered an inventory decline of 50%, but Nissan could only achieve a decrease of 35%. Nissan shows a ratio of 1.78 against average Japanese trend of 2.5. These ratios are shown in Figure-2.

Compare this with the trend of Chrysler (ratio of 1.39) and GM (ratio of 1.65). Whereas GM has been able to manage their inventories better than Chrysler, but they are far away from their Japanese stalwarts, Honda and Toyota. This is what I say is an “American behavior” in vehicle supply chain management. Nissan, being a Japanese manufacturer shows a more “American behavior” with conservative inventory declines against the sales decline. And for those who prefer eyeballing trends than getting into the mess of data crunching, this behavior is very well displayed when we plot the sales change% with Inventory DoS change% in Figure-2

Figure-2: The Correlation Trend of Sales decline and Inventory decline

Whereas Chrysler, Ford, GM and Nissan show similar movements, when this is compared with the trends of Honda and Toyota, there is a sharp change in alignment. This is similarity is accentuated by Correlation coefficient (r) calculations as shown in the Figure-2 above. This coefficient denotes that if the values are positive and closes to 1, there is a very strong converging trend. The lower the value of the coefficient from 1, the weaker is the similarity of trend. So a value of r = 0.97 shows that with the decline in sales trend, these organizations (Chrysler, Ford, GM and Nissan) show similar rates of decline in their inventory DoS trend. The value of coefficient r = 0.61 means that when we club this group with the Group of Toyota and Honda, the value deteriorates, as the behavior of these two groups are different.

Just like Nissan has adopted an American behavior in supply chain, Ford shows a contrast and displays a close-to Japanese behavior in supply chain. Their ratio of 2.11 tells the difference.

These figures bring out the basic cultural mind-shift among the American and Japanese manufacturers operating in US. The prudent capacity utilization and the lean supply chain philosophies are going to be the “Guru Mantra” for these manufacturers to survive in the US market. Ford has shown drift in the right direction and promises of bright future ahead. This is borne out by the fact that their present Executive Chairman Bill Ford Jr. is personally attached to make structural changes to make things happen. Chrysler and GM are still to settle with their new leadership. It will be interesting to watch how the new leadership of these two heritage carmakers are able to make path-breaking breakthroughs. And with this is a challenge to Nissan to re-invent their Japanese basics to continue “hold fort” in the US market.

Multi Channel Commerce & Mobile Apps - Wishlist 2010

2010-01-28T10:42:32Z

Sterling Commerce recently announced mobile applications for their Order Management application. Sterling Mobile Store Channel and Sterling Store Associate Mobile app for iPhone allow customers as well as business employees to search for products, place orders and track shipments through their iPhones. While discussing these new developments with business users at my current client, i tried to scribble down a wish list from a Retail Store manager's perspective. The expectations are beginning to go beyond the traditional find inventory, find store and place order.

]]> 1. Integrate bar code scanners apps on iPhone that would allow a Sales Rep to immediately get prices from competitor websites and allow real time price match offers for customers

2. Real time heat map of Store sales activity for promotions allowing managers to react quickly

3. Workflow integration for escalations and approvals

4. Delivery and TMS integration for to get shipment status updates but also trigger Stop shipments or re-routing the deliveries on the fly

5. Turn customer iPhones into mini Kiosks to allow them to scan not only the in-store inventory but also do price comparisons with web channel and place orders for through their choice of channel

I also sensed a need for proactive real time business alert framework that not only fed the manager with information but also enable the manager with data to react quickly from his mobile console. What do you think are the unique asks from your business for mobile applications?

Have you had the Supply Chain Mobile Apps discussion yet?

...SAP SRM 7.0 is here to stay, available to Leverage your SRM footprint: “The Implementation: What's the sandwich filling? ” – Part 4

2010-01-28T02:26:19Z

In my previous Blog, I discussed about the Roadmap and the project kick-off, in this blog I would like to elaborate on what we actually crafted, “As a Solution for Plan Driven Procurement” and also the future functionalities fitment into the procurement landscape.

]]> The out of the box requirements were funneled into a “product backlog”, there were simply “zero” developments that were in scope, since we used BADi’s in SRM to actually work over the vanilla functionalities that needed to be customer business driven.

In the Plan Driven procurement implementation, we actually went ahead and configured the system to over-ride the base functionality of Extended Classic to make it behave like a Classic deployment.

The Plan Driven model process flow implemented is explained below in the figure.

Typically, the Plan Driven process is crafted on the Extended Classic framework, so the Purchase requisition that is routed into SRM from ERP will have to be fulfilled from SRM.
This brought in 2 big challenges
1) Make the Purchase Order Changeable in ECC, this doesn’t happen without implementing a BADI since the system pushes the PO as an ECDP SRM Purchase Order, we made this modifiable in the ECC side
“Ask me how; I’d be glad to explain”
2) Contract Compliance : The SRM Central Contract No -> Replicated as a Backend Contract wasn’t possible out of the box since we made the Purchase Order Modifiable, we worked around this too
Finally, we crafted the process that brings benefit to the client via the Strategic Sourcing Process (RFx – Bidding) coupled with Downstream Contract Management to drive contract compliance specifically for Direct Materials that do not have a valid source of supply for a plant that needs it.
In the days to come, the MDM Catalog will replace most of the maverick procurement channels focusing to curb it through decentralization.
The future aim is model SAP E-Sourcing into the application landscape to drive the eSourcing / CLM Auctions from the SAP SRM sourcing cock-pit, since there is no standard integration of SAP E-Sourcing with SRM, this makes it more interesting and challenging.
The Sourcing team also wants to get greater control of the procurement processes to eliminate Sourcing and Procurement project management currently managed via disparate spreadsheets and emails and folders.
…we will empower them with the activation of the Category Management functionality in SAP E-Sourcing.
All in all, the entire Procurement Portfolio of the SAP SRM suite will be blessed with the Business Process cutting across each of these applications, diligently.
Lastly the process instrumentation which is the Business Application Monitoring coupled with BPM will sit on the entire process to give a greater control to the “Procurement Folks” to monitor the efficiencies.
…Soon, we will look into SRM Analytics as soon as we have enough water to wade in….
Let me know if you’ve implemented SRM PDP in a way we did, or have a more efficient experience in your approach, I’d be glad to connect.
…Tridip

The Pit Stop - An Agile Supply Chain

2010-01-27T22:34:36Z

I had the opportunity to attend a seminar on "How to Gain Competitive Advantage with End to End Supply Chain Visibility" sponsored collectively by Sterling, Deloite and GS1 held at Oxfordshire, UK sometime in November last year.

Deloite presented how important it was to maintain focus on business operations, with a clear emphasis on working capital optimization.
GS1 (They design and implement global supply chain standards) delved on the need of standard based solutions that enable organizations to gain visiblity of specific assets and how this in turn is driving process improvement throught the entire supply chain.

]]> Sterling demonstrated how leading companies are focussed on improving their supply chain execution, using real time inventory and better supplier information.

One of the presenters explained the concept of an agile supply chain with an interesting analogy. He took the example of a Pit stop, where parts need to be changed the moment the formula car enters it. There are generally 29 men at the pit stop, who have to replace the tyres, refuel the tank, tighten the bolts, carry out multiple status checks etc, etc., in just 7 secs. And you know what is their collective goal? To beat the competition, to better that 7 second timeline each time. To acheive this speed of service, it takes 12600 practice session by each pit stop personnel to achieve that 7 second deadline. The rate determination factor in this case is arrived by the time it takes to refuel the car, that's how they arrived at the 7 second timeline.

An Agile supply chain replicates the Pit stop model. If you are not able to deliver the right goods, to the right place at the right time, there are other competitors out there on the look out to replace you. Agility and visibility are the two key aspects that need to be given most importance while running your supply chain as they are crucial for business success and competitive advantage.

Decide where you integrate: MCO does not equal MCC!

2010-01-27T14:08:32Z

It’s the beginning of the year and our campus here at Bangalore is abuzz with client visits, with sometimes the Bangalore campus alone hosting 4-5 client visits in a single day. Budgets are being cast, everyone is looking for the right drop box to put their IT dollars and wait for maximum magic for the amount spent. While I am not involved in a majority of these visits, there's one industry vertical where SCM practice consistently gets invited to present their point of view, viz., Retail. My reasoning for this is that there’s really no other industry where one encounters so many best-of-breed SCM packages strung together by each of these retailers in a collage uniquely their own.

]]> Without a single exception, going to those meetings means playing bingo with the mother of all transformational thoughts in retail - MCC. One really cannot talk supply chain to a retail audience without starting off on Multi-Channel Commerce (MCC) within the first 10 seconds of the conversation. However, what happens afterwards many a time is a tangential leap into the glories of e-commerce, site building tools, content management, search & browse capability, elegant design of shopping carts, personalization, loyalty management...the works. Before you realize it, the world would have shifted inexorably to a discussion around web-channels and how to leverage them better.

Not for a moment am I discounting the importance of internet as a channel to increase your sales revenues. In fact, soon it may become your default channel, if not for actual buying, at least for making all the buying decisions. Thus, all the buzzwords that I liberally sprayed across above are all important and critical, but does that make it MCC? Well NO, not by a big mile. For years, retailers, large and small, have been running an online channel, a call center channel, a stores channel and other sundry channels (EDI-based, direct order transfers, long-term contracts, special orders for large/national accounts etc) as separate establishments which meet only at a financials level. I prefer to call this MCO or Multi-Channel Operations, rather than Multi-Channel Integration (MCI) which is the precursor to enabling true MCC. Running disparate channels and integrating them during financial consolidation for the purpose of reporting quarterly results is not the way MCI happens. On the contrary, MCI happens during supply chain design itself where we need to weigh the process flows among the gamut of functions enabling customer order fulfillment (order capture, sales order management, order fulfillment, inventory management, replenishment planning, purchase order management etc.) and then take calls on where one wants his/her MCI design to converge.

Using Sterling Commerce, we've enabled multiple retailers to have a single source of truth regarding orders at an order header/order line/unit quantity level, keeping track of whatever supply chain exceptions are important to each client. SterComm's Multi-Channel Fulfillment (MCF) solution can do this pretty well, but for retailers looking at further convergence, enabling global inventory visibility and having allocations based on this visibility is the next level of evolution (with SterComm itself or otherwise). Regardless of whether we have a single order management system consolidating/tracking the life cycle of orders captured from diverse sources, if inventory is still disparate, the efficiencies one realizes would still be only partial.

I do agree that holistic views of inventory and its synchronization is easier said than done (all such discussions finally trace themselves back to the importance of master data management, at least at an item/customer level). However, if your back-end supply chain can deal with the complexity, the improvement in inventory turns across multiple holding points would be a significant benefit that merits taking this route. Further back in your supply chain, if one has the appetite for it, retailers can try some level of PO consolidation as well. Again, POs can come from multiple sources (starting with the replenishment POs spewed out by the demand planning system/s), but like we did with one distributor some time back, if parent-child linkages can be effectively established, we can trace each shopping cart SO all the way to the consolidated PO that goes to the supplier and keep the link intact until both the linked SO and PO are closed in their respective life cycles.

Each of these thoughts may merit more discussion and I would welcome your views. Meanwhile, if someone says they have an MCC strategy, do check back with them where exactly the channels are converging in the supply chain and what information is shared across them. Chances are that they're talking MCO and limiting convergence to their accounting books.

Profiling Paradigm Shift in the Package World

2010-01-25T04:37:27Z

The way applications are resourced these days have a number of applications on a single virtualized bed of infrastructure be it private, public or hybrid deployment models. Application vendors are talking about multitenant models. Service providers are hosting tailored application platforms for their clientele. The dynamics of hosting, appropriation of resources, and application customization is quiet different. In my previous blog here I urge on a stronger and proactive production environment. So what is necessary ingredient to bring that level of sophistication? The answer is the ‘profiling horizontal’. So how and why is it relevant to particularly SCM and generically packages. I take Sterling OMS as a case study to convey my view points.

]]> Tomorrow, when a host of SMEs are on a cloud using Sterling for managing their orders on a platform that a service provider has created and is maintaining, using System Management Console to see the performance of every JVM, every service and API is extremely cumbersome. Considering the multi-tiered nature of Sterling, the OS, the data base server, application server, messaging middleware such as MS MQ and the database server employed by the messaging tier must also be profiled.

To further emphasize my point, today we use the Web Sphere Admin console to diagnose the performance of WAS, use OEM for Oracle RAC instances, and MS MQ console. Silos of performance monitoring tools! Multiply that by the number of clients! Result is a monitoring nightmare! Further, merely monitoring the CPU utilization and memory utilization is not enough to indicate an expensive query, a leaky data structure, or a bad template for getOrderDetails API in an Order Search page. I mean the internals of the applications are not known. So any level of external profiling tool can only help so much. Here is an illustration...

Solution: Make the profiling a horizontal across all tiers as illustrated in Figure 2. This could be picked by the really strong resource managers at the data center level to not only alert the application admins but also narrow down the problem to a data structure in a tier for a given application. If each tier can offer APIs that provide insight into the internals of the application for authorized personnel, then profiling takes its correct meaning and will not only reduce but also in many cases eliminate the need to further reproduce the problem. We could directly fix the problem. Here is a depiction....

Checking Horizon: The confluence of ATP and Planning

2010-01-24T14:50:48Z

One of the most interesting business discussions in any Available-To-Promise (ATP) project is that on Checking Horizon. This seemingly unassuming horizon, determines the timeline within which supplies are actually assessed against demands. The supply within the horizon is valuated as feasible, and thus a Sales Order within this horizon can be truly promised. A Sales Order outside of this horizon is deemed always feasible assuming that the supply chain can always react to the demand without any constraint.

]]> The products depending on the industry we are dealing with can be Engineer-To-Order, Make-to-Order, Assemble-to-Order or Make-to-Stock. The ATP engines in the software can offer multiple ways to be configured depending on the industry being considered for such an implementation. The Checking Horizon would thus be very long for an Engineer-To-Order situation since one needs to take into account all the supply chain lead-times for availability calculation. In the same vein in a Make-To-Stock situation, the product is already in stock and thus the lead-time to fulfill a demand would be very less. Consequently the Checking Horizon would be short.

Consultants are often asked scientific ways to arrive at a Checking Horizon. Some rules of thumbs include consideration of Procurement Lead-Time or Production Lead-time based on whether the product is procured or produced. One would also add the Goods-Receipt times to be more accurate. However each industry is different and each product segment in a portfolio has its own dynamics. Some supply chains are very supple reacting to varying demands in a seamlessly responsive manner without any phase-effect. While others would take a while to react.

In a scenario where demands are fulfilled by manufacturing the product - one needs to look at Planning Time Fences. This is a time fence, within which planned orders could be converted to production orders based on true demand. And by true demand we mean the Sales Orders and not the Forecasts. However a supply chain cannot react with new Planned Orders within a Planning Time Fence. If Checking Horizon is longer than the Planning Time Fence, the planning systems would have the capability to build up supply inside of Checking Horizon. Any Sales Order falling outside of Planning Time Fence, however within the Checking Horizon would thus fail an availability test as the order gets created leading to a false negative in the system. In the same vein, a Checking Horizon shorter than Planning Time Fence leads to a false positive in the system. The ATP engine assumes supply chain can reach outside of Checking Horizon in direct conflict with what the Planning systems can do within the Planning Time Fence.

All in all, if the Checking Horizon is configured incorrectly in your design, it leads to a state of unstable equilibrium. Imagine a marble ball on top of a steep hill - this is a state of unstable equilibrium - a little nudge leads to the marble ball searching for equilibrium indefinitely. We also call this bull-whip effect in the supply chain. In contrast a stable equilibrium can be visualized as a state of the marble ball in a valley between two hill mounds. A nudge on this marble ball brings it back, searching for the same state of equilibrium - also known as simple harmonic motion.

Now who does not want stable equilibrium in your supply chain? This state is arrived at by the most optimal setting of Checking Horizon in your ATP design - one of the most crucial settings that can make or break the harmony between a Planning and ATP engine.

So if your Planning and Order Management stakeholders are just about to brush away Checking Horizon as an academic topic, ask them to think again!

Being Lean in Supply chain

2010-01-22T11:08:34Z

Well, this blog of mine is different in many ways, from the ones that I have posted so far. I am not going to write too much to describe this topic but I am more interested in knowing what you all know. I want to reach out to each one of you to know what you have seen in industry either as an operations guy or as a consultant. Even if you have not seen it being practiced in real life, I am sure you would have some serious opinion on this matter.

The topic is very simple and well-intuitive. My question is: Have you seen “lean principles” being practiced in supply chain in any industry (preferably consumer goods/discrete manufacturing). I know the term “lean” has been used or mis-used very often, but I am open to hear anything from you – just take a pick, think and find out instances from your experience, that you can bucket under being “lean in supply chain”. Do not just restrict yourself to manufacturing...

Let me give you one example: recently, I had a discussion with a Supply Chain Head of a leading consumer goods organization and they intend to implement a “pull based” system in their supply chain.

Consumer goods companies have been pioneers in supply chain and their performance in supply chain has been best-in-class by any standards. Traditionally, we have seen organizations especially, consumer goods, running a typical push model where sophisticated forecasting is done to predict demand, goods are manufactured and distributed to various POS locations as per the dispatch plan. The product is actually pushed down in supply chain and focus is to improve forecast accuracy because that really drives everything else.

On the contrary, here is this company that would like to implement “pull system” and do away with forecasting to the maximum possible extent. To me, this is one true example of being lean in supply chain. I have always seen companies focusing on improving traditional push model that I described, but I have never seen a “pull model” running anywhere and hence this blog…

Going back to my question to all of you:

Do you think such practices exist in companies (esp. consumer goods)? I don’t know any company implementing a pull methodology in supply chain (please provide examples other than Toyota)? How do you marry push and pull in the supply chain, and where does it exist? Where is the Customer decoupling point? What tools do you use? How do you drive this initiative – what are the critical success factors?

Please share your experiences and insights – looking forward to hear from this great group of supply chain leaders…