Supply Chain Management

While I’m not aware of a precise estimate, I’m sure that several billion dollars are invested each year in hardware, software, and services by companies across industries – manufacturing, distribution, retail, utility services, and others – to improve their supply chain performance.

However, I’m not sure if anyone – including the companies making the investment – is completely sure of the return on investment they have achieved.

 

In most cases, I believe, that the corporate policies mandate creating a “business case” to support the request for funding the projects.  The Capital Approval Requests (CAR) are typically quite rigorous and require estimating the expected Net Present Value (NPV) and Return on Investment (ROI) associated with the supply chain improvement projects.

 

However, once the funding for the project is approved, I believe the attention shifts from estimating the potential of improving supply chain performance and thereby creating value to simply executing the project.  And in most cases, there’s no estimation of actual improvements and actual value creation after the project is completed.

 

To me, that seems, sub-optimal for the company and its shareholders.  Wouldn’t you want to know if your project is delivering the results that you wanted?

 

I’d like to hear your experiences with large supply chain transformation programs and whether they delivered results to justify the investment.

 

While we’ve all heard the proverb – ‘measure twice and cut once’, I suggest that we put it in practice with a twist - measure thrice (at the beginning of a supply chain improvement project, during the project, and then again after ‘go-live’) and cut once.

Posted by Sharad Elhence at 07:47 PM | Permalink | Comments (0) | TrackBacks (0)

This is in continuation to my previous blog on "Considering Warehouse as Profit Center".

http://infosysblogs.com/supply-chain/2008/09/considering_warehouse_as_profi.html#more

Now let's look into how a warehouse can transform itself into this new found 'avtaar'. One such aspect would be to have multiple business units within the same organization utilize the services of a single warehouse. In such a setup, business units store their goods in the warehouse in dedicated zones allotted to them. The warehouse, in turn charges each business unit for storing their goods based on activities carried out and storage space utilization, thereby creating revenue for itself.

Another source of revenue generation would be value added services that a warehouse is capable to provide its users. These can be label printing, kitting, assembly, shrink wrapping and so on. The warehouse sets up its price list for these services that can be charged as an when they are used or as a single monthly charge.  

Warehouses capable of providing special handling equipment for goods is another case for where such services are charged to customers. These could be handling hazardous and inflammable items, liquids or fragile items that need to be handled with care. 

Last but not the least, 3PL business from the warehouse aspect, is purely to create revenue from lending space. Charges are based on warehouse space utizilation for the period of storage and activities carried out during inbound and outbound operations.  

Posted by Lokmanya Rawat at 04:41 PM | Permalink | Comments (2) | TrackBacks (0)

As one of the bloggers (Chandradeep) posted earlier, companies look to optimize their inventory levels (or "Sell Nothing") while maximizing their sales per customer footfall/click through. (http://infosysblogs.com/supply-chain/2008/09/how_to_sell_nothing.html#more)

One key aspect is to define the ‘Available to Sell’ Strategy. In layman's term, ‘Available to Sell’ is what the company can promise for a delivery in a specified time window. This includes the current uncommitted inventory at a fulfillment location and any open purchase orders. This can even be extended to supplier finished inventory, WIP inventory and scheduled plans.

Building a glass pipeline view of the supply chain as mentioned in previous blog helps define the ATS strategy. Though seemingly a simple recommendation, building an end to end pipeline visibility has many implementation challenges. This requires an Order orchestrator that also acts as an Inventory Synchronization hub with near real time visibility to the ebb and flow of inventory levels. This also requires developing agreements with suppliers to enhance Inventory and Shipment visibility and investing in the collaboration infrastructure.

An order management system implementation without putting the ATS strategy and support infrastructure is a quick fire recipe for disappointment. This just translates to having to say "I'm Sorry" hundreds of times even after accepting the orders. An integrated order orchestration platform provides the ability to offer stocked, non-stocked special order and custom products and services through all channels while managing cent percent fulfillment of them.

Over next few blogs we would continue to discuss the building blocks of integrated order orchestration platforms. I would be happy to hear your thoughts on how your company approaches the "Available to Sell" conundrum.

 

Posted by Amarpal Sanghera at 09:44 AM | Permalink | Comments (2) | TrackBacks (0)

If I were “environment”, I wouldn’t have had it better. At-least not since the dawn of the industrial revolution. The two words - “environment sustainability” - have been in circulation like never before (thanks, I must say, to the humongous success of the award winning documentary “An inconvenient truth”). No wonder then that a Google search gives more than 3.3 million results.

Organizations, small and colossal alike, have embraced this term like never before and are rolling out one initiative after the next. And unlike previous times, companies are not shying away from sharing internal data pertaining to these initiatives. In fact, environment sustainability initiatives at most global companies occupy prime real-estate on the company’s web-site (P&G, GM, Boeing, Microsoft, Infosys to name a few) and are increasingly finding a presence in the company’s annual report. Naturally, trade magazines, publications, forums, summits, coalitions and partnerships have mushroomed to track and share “green information”. 
 
Explaining the justification of this blog on this site, supply chain management is perhaps the primary choice for a global company hoping to realize significant benefits from a green initiative. The sheer potential that this domain offers – green sourcing, logistics and transportation optimization, packaging, warehouse management, inventory reduction, asset maintenance, product design….. – can be too tempting to ignore. In the coming weeks, I shall focus on the green initiatives under-taken in each supply chain function and also on how supply chain consulting companies are leveraging this trend to carve out a new revenue channel.

As for the title, it goes without saying, that any initiative in any walk of life will have an everlasting effect only if it sustains itself. Drawing a parallel to the game of Tennis, Roger Federer had a tough journey to become world #1 in 2004, but what would have been tougher is his consistent ranking at the top for a record 237 consecutive weeks. This consistency aka sustainability distinguishes the winners from the also-rans. Only the time ahead would tell which companies view this as a passing craze and which ones are truly committed. 

Posted by Amit Tambi at 06:34 AM | Permalink | Comments (2) | TrackBacks (0)

Last weeks hurricane Ike that hit Galveston coast and passed through Houston left a long winding disruption in services in one of the five largest cities in US. While one really can't be 'too much prepared' to face such large scale force of nature but following basic Asset Management practices can ease out some of the suffering.

The old Adage "prepare for the worst …." is very much applicable here. If anything can go wrong it will, especially at wind speeds in excess of 120mph. So right from stocking water bottles, batteries, flashlights, paneling windows, topping up cars and gensets to ensuring that the contraflows are opened at right time for evacuations determine how effectively we could "…hope for the best".

Timing is important. While you may not want to trim trees for the next year's hurricane season,  advance planning of some of the long lead preventive measures, like building levies, gates and seawalls, will mean that these can be activated within very short time interval. Sufficient funding need to be made available for continuous maintenance of these important assets so that they perform their critical task effectively when and whenever they are called upon to do so.

The post activities are mainly prioritizing and resource mobilization. The key for achieving  quicker normalcy is the ability to quickly restore the basic infrastructure and enable essential services like power and communications. Prioritization could be based on parameters such as importance or criticality of the asset and its dependencies with respect to other assets. Such studies should have been completed much in advance. The 'next thing to focus upon' should be based on using those priorities mixed with ground realities (availability of skills, spares, tools and safe access).

Incorporating new learning from success as well as failures for a better and efficient next cycle pre-planning activities is critical as well. They lead to better design going forward. It can be seen in Houston that learning's from hurricane Rita were effectively used to prevent unnecessary panic and being more managed during hurricane Ike. Local authorities rightly deserve  a pat which also leads us to expect that next time, the turn around time for getting power restored will be far quicker.

And we continue our journey as  humans, who with each passing challenge have adapted ourselves to the environment more efficiently and effectively.

Posted by Kiran Mandrekar at 09:42 PM | Permalink | Comments (0) | TrackBacks (0)

Very recently I had the good fortune of having an hour long conversation with CIO of one of our very reputed client organizations. The organization is a leading 10 billion USD+ entity with an illustrious history in the area of Imaging. The client organization has 3 concurrent tools for forecasting used by different internal businesses, a few mainframe applications involved in doing factory level production planning and SAP's evolving solution in the area of supply chain in general. The organization has thus lived and evolved with its supply chain landscape starting all the way from mainframe applications, to best-of-breed and now ERP II planning applications.

One of the very interesting decisions that was taken not so long ago by one of the businesses of this organization was to go with one of the best-of-breed product vendors for Forecasting. This was in context of a decision to go with ERP II for Supply Planning application which is downstream to Forecasting. Some of the reasons cited to go for best-of-breed product vendor for Forecasting were superior statistical forecasting capability, point-of-sale forecasting and ease of navigation/use for general planners. This was in comparison with the ERP II vendor.

Our team was involved in integration of the best-of-breed application with the Supply Planning application. Needless to say, the integration process was painful and any trouble-shooting exercise called for mobilizing teams from best-of-breed, the ETL, ERP II and also the business. Over a period of time we realized that the time spent on application integration was way too much that perhaps we initially bargained for. However most of us did not have the bird's eye view perspective, the general feeling was that all this struggle was probably worth it since business was deriving superior benefits with such a diverse application architecture.

In one of my rendezvous with the CIO, I happened to bring up this topic that was bugging me for a while. One of the confessions from the CIO was clearly that given a second chance, the organization would not have gone for a diverse IT supply chain landscape. A superior best-of-breed application can only get the business so far, and there are quite a few process-specific big-hitters(read productivity gainers) that the business could have focused upon. All in all its the process more than superior statistical capabilities of the tool that drives the business better. Ofcourse, I was unable to get the opinion from business side on this one.

One thing that clearly came out from the conversation is that, having a common platform for all applications is the key to bringing down total cost of ownership of various tools. Granted there are bolt-ons and best-of-breed applications (some of them proclaiming to be "seamlessly" integrated with ERP applications) out there that all customers should be aware of, but when it comes to taking the plunge - one needs to factor in the increased cost of managing the integration. In many circumstances, the perceived gaps in ERP II product vendors vis-a-vis best-of-breed tool can be filled up with low effort customizations. The ERP II vendors also offer capability to use interfaces to call that one specific function in the third-party tool that the business wants desperately to do their work with. Its important thus to mark all the business requirements as must-haves and nice-to-haves, and get this list parsed through not only business experts but also skilled experienced IT personnel.

Having worked in a diverse supply chain landscape, my views resonates with that of others coming from different backgrounds. At the end of the day, these supply chain applications are not the end-all but just a naive tool in the hands of a smart planner.

Posted by K. Srinivas at 02:08 PM | Permalink | Comments (0) | TrackBacks (0)

Consolidation has been traditionally looked as a mechanism to bring in economies of scale. Of late, organizations that operate across geographies are investing to standardize processes, execution models and technology in the warehouses. The context of warehouse processes and information resident in there, has changed in the supply chain architecture. Warehouse level information now is being "consumed for efficiency and better customer response" correlating to order/demand and inventory position information in more real time. Consolidation programs that embed process, technology and operational standardization therefore can greatly simplify journey towards this "enhanced warehouse awareness" in their supply chain and help differentiate the fulfillment execution.

As an architect, I have been involved with a number of such programs and have seen that warehouses being execution centric, a standardization approach needs to consider factors specific to every warehouse like working policies, use of automation and robotics technologies, handling of specific goods and delivery of value added services apart from warehouse layouts. Given such local dependencies, WMS consolidation initiatives must allow reuse or adoption of local mature practices while conforming to the template of global practice and design.

Standardization approaches that cross-pollinate the local and global best practices through a productized platform assumes importance since rollout of such initiatives across the organization could incur cost and time overruns in the absence of a well defined structure or "template" across the layers of process and operation.

A number of package vendors indeed address this need by providing a multi-WMS modeling capability through their products. The rationale being to introduce a product model that digitize local and global concerns and then uses one set each for every warehouse as its WMS application. All such WMS are logically within a single product container or instance, creating a cluster of WMSs. I have seen interesting words been used to describe such a collocation like "nWMS". While such products do provide foundation to streamline processes while minimizing technology sprawls, interesting new practical problems crop up in this equation.

As an example, it is very common to have WMS information flows interleave with material handling equipment through automated interfaces to execute a local move operation. In a centrally hosted model where the WMS application resides in a remotely accessed datacenter, network latency can cause material handling equipment to halt. For any fairly distributed fulfillment network, a network infrastructure to support coordinated floor level automated execution from a centrally hosted WMS container is quite a capital expense implication. Additionally given today's fulfillment approach of integrating fulfillment centers beyond organization control boundaries (that of a 3PL or of a drop ship supplier), it is not easy to realize such a level of investment across the board.

As a counter alternative, hosting the WMS application within the warehouse network would cause TCO of consolidation to exponentially increase given the server capital expenditure implication. Additionally rooling up to the multi-WMS product model would need additional information technology costs and lead times in terms of investment of additional extraction and load mechanisms to the central store. In terms of supply chain architecture, the "enhanced warehouse awareness" starts getting into an increasing cost spiral.

On top of this, there is also a need to factor in change effects that creep in over time such as acquisition of a fulfillment company to expand network reach (this would just set back consolidation progress by a few quarters considering the WMS which comes along it!!) or changes in physical technologies that were used in the warehouse floors following end of life. We have been grappling with this challenge of addressing the right "physical location" for the multi-WMS product based programs few years back and realized that "instance strategy" needs to be in control for consolidation programs to keep moving ahead.

Considering the many moving parts to the puzzle, Girish, Gopi and I attempted to create a equation that helps to assess and more importantly "control" instance location decision at a given point in time taking relevant organizational, business process and information technology dimensions as inputs. 

With emergence of SOA, benefits of mega consolidation initiatives have been challenged as an alternative route has emerged. SOA directly solves warehouse information integration within supply chain architecture in a shorter lead time and help track metrics of operations across warehouse facilities. The separation of service consumer from service provider through a well established relationship infrastructure (called contracts and policies) helps to stop worrying about the option (and the underlying cost and change implication) of standardization to achieve "enhanced warehouse awareness"

SOA, although appears disruptive to consolidation, in my view, can be applied to de-couple the consolidation programs from the "need to deliver results immediately" pressure. As an example, consider acquisition of a fulfillment player by another, a SOA based architecture can ensure that acquired WMS landscape is not altered and therefore avoid operational disruption while allowing information integration to "feed" the network. This loose-coupling allows consolidation programs the latitude to choose the right time to bring the acquired ecosystem within consolidation's focus probably coinciding this with technology refresh or end of life trigger. In effect we would be giving the much needed time to change the enterprise building blocks (at business, technology, operation) one at a time and avoid physical and information technology realities from disrupting the consolidation by reducing moving parts and their complex effects. 

Interestingly, we are seeing two key trends in enterprise technology space. One is the adoption of streaming as a concept in enterprise operations. Today desktops are streamed from a central location to aid what kind of work an individual requires to undertake. Second key trend is increasing emergence of a culture of business driven IT configuration; web2.0 and enterprise mashups are the case in point. Streaming as a concept lends well to the WMS consolidation where the WMS for a specific warehouse having intelligence and configuration for of its local "realities" is streamed to the facility promoting a local execution but central governance model. Mashup culture can invade the local process configuration subject and make the warehouse become a center for operational innovation driven by on-ground experience getting centralized in the unified configuration repository. While it is quite obvious that such concepts require lot of agility in infrastructure and information technologies, the fundamental need of managing effectiveness balancing impacts and end objective becomes even more crucial. 

Instance strategy looks to be one of the right control levers as the pursuit of standard common ecosystem for "WMS"s across the enterprise and supply chains continues to become realities from utopia.....

Posted by Satadal at 06:33 AM | Permalink | Comments (1) | TrackBacks (0)

Many organizations have complex multi-level hierarchies for forecasting not only in the product dimension but also in geographical dimension. One of the standard practicies in most organizations is to do Bottom-up forecasting, followed by Middle-out forecasting and Top-down forecasting. The forecasting done at lower level of detail is very crucial since it determines the proportional factors for forecasts done at higher level. In other words, forecasts at lower level of detail helps come up with the right mix. Forecasting done at higher level helps come up with the right volume.

One of the predicaments of designing a sustainable self-correcting Forecasting system is to understand the level at which forecast errors should be measured and also what is the right type of forecast error. Based on two project experiences that I have been very closely associated with, I have found that

1. It makes sense to measure and monitor Forecast error at middle levels of product and geographical hierarchy. At lower level, usually data is very sparse and intermittant and any forecast error metric will tend to capture disproportionately long list of planning objects. This is counter-productive in an exception-based planning setup. At very high level, data may be smooth and forecastable, however it is disconnected from supply planning and any forecast error metric will tend to capture disproportionately short list of planning objects. Although planners tend to ask for error metric at each and every forecast level, it makes sense to monitor at only one level and this is in interest of time spent in a forecast cycle - given that most planners tend to spend lot of time negotiating and drawing consensus with various stakeholders.

2. Measure Bias errors on manually intervened and adjusted forecast. A statistical forecast is swayed by historical patterns and may lack some of the judgemental capabilities that planners bring in. However to make sure that these judgemental interventions from planners are moderated, a measure of bias error makes sure that they do not underforecast or overforecast over a period of time - thereby giving right signals to downstream supply planning applications.

3. Optimize the number of levels to manage and run forecast processes. Although business prefers flexibility in terms of being able to run and manage forecasts at all possible levels/combinations in a forecast hierarchy, it makes sense to only run forecast at handful of levels. Simple reason is that is manageable and sustainable.

 It is important that the team does not go over-board on designing complex forecast solution that very few people understand. All complexities are better tucked in and hidden from general users. At the end of day, planners tend to use systems that are easy to use, work with and feel worth spending their productive time.

Posted by K. Srinivas at 07:43 PM | Permalink | Comments (0) | TrackBacks (0)

Last week, I was at the IBM Consultants & System Integrators (CSI) conference at Goa, a wonderfully event-managed event where to my utter delight, even verbose senior folks were brutally cut down from their loquaciousness by the time-keeper's flag. I was invited since Enterprise Asset Management (EAM) is one of the domains I head in my portfolio here at SCM practice. IBM, as many of you would know got into EAM in a big way post acquisition of Maximo app from MRO software. But this post is less on EAM and more on a topic I'm thinking and reading up a little bit these days - end2end SCM and more specifically - why should it just remain at a domain level and not be inclusive all the way down at a deeper infra level?

Apart from the EAM session, the other two terminologies that caught my attention were Green IT and Cloud Computing, both splendidly vague terms, if I may add. Green IT these days cover everything from infrastructure streamlining to saving on power consumption (my father would fanatically love that!) to optimize resources of all kinds to monitoring systems in EAM that helps reduce emissions/carbon footprint in any device, whether its a transformer, an central A/C system or a full fledged plant. Cloud computing covers so many things - utility computing, grid computing, virtualization at all levels, I'm not even going there. Sure, there's overlap between the two, but both Green IT & Cloud Computing seem to be evolving on their own terms, though the latter is still more a CIO-level discussion.

Sitting in soaking-wet, monsoon-lashed Goa and listening to all this got me thinking on the applicability of these philosophies in end2end SCM. There's no morass greater than SCM application landscape in any major Fortune-500 or Global-2000 company, the wider the globalization, the more tangled the SCM web is. Unlike the ERP behemoth, what we have is an endless series of best-of-breed apps, legacy bolt-ons and some modules of ERP all performing various components of SCM and not necessarily in the best of talking terms with each other.

At the top of this hierarchy, we have the SCM functions or depatments - Demand Planning, Transportation/Logistics, Warehouse Management, Order Management, Procurement et al. At the next level, we'll have the plethora of apps - an i2 Demand Planning system with a Manugistics network optimization talking to a Red Prarie WMS and a Manhattan on-demand TMS with orders coming with SAP SD is not an atypical case. Add to it special apps for fraud check or RFID integration or route planning, you take the complexity level by another few levels.

Now, if you look at all these departments and their various applications, it doesn't take a wizard to guess that infrastructure also would've been acquired along the lines of "I need my boxes under my desk - every last memory card of it" philosophy - add dev, system test, QA, integration test, production, golden environments...you have just multiplied the box count by 6 times. I am not an expert in virtualization though I understand what's meant by virtualizing at Desktop, Server, Storage & Network levels, but the opporunity to consult on this should be huge. In the infrastructure wasteland of 10% utilized UNIX machines, applying the cloud principles should automatically result in greening and can hopefully create end2end SCM beginning with the lowest layer of the landscape block diagram.

Bringing these three disparate layers - business functions, IT applications and IT infrastructure and starting from the bottom on the philosophy of "sharing perishable & intangible computing power" - btw, that's from Wikipedia - and how that would help in an integrated view of SCM wouldn't be a task for the faint-hearted. We're making some humble steps, will keep you posted based on the direction it takes. In the meantime, would like to hear your views on this as well.

Posted by Gopikrishnan GR at 01:23 PM | Permalink | Comments (1) | TrackBacks (0)

In the good old days shopping trips were simple. I lived in town A, went to a store in town A and bought whatever I needed. Sometimes I would go all the way to big city B. If they didn't have what I wanted in big city B, the people at the store might order it for me.

Today (in these convenient new times) I am in town A, log onto an ISP in city B, that connects to a site hosted in country C; the site belonging to a company headquartered in country D; that fulfills my order from a distribution center that could be anywhere in the world.

So the question is: When tax laws require triangulation between point of order capture, point of sale and final ship to address, how do we figure these out? When nearly everything is electronic, which tax jurisdiction do my bits live in?

In the standard brick and mortar example, the customer, the point of sale and the transaction all happen at the same place and time. I go to a store, get what I want, pay for it there. Everything is simple.

When I order online or over the phone, what is my point of order capture? Is it the call center's  location, or is it the site location, or is it the company's headquarters?

What is my point of sale? Is it related to when inventory changed hands? Or is it when money changed hands? Often such questions involve us talking to the company legal team, and this discussion morphs into a larger discussion on cyber laws, jurisdiction of cyber transactions and that's a lifetime of research in itself. 

The challenge we face in our multi channel implementations is that we need to interface our transactions with tax calculation software and we just need to tell the software all the information that it needs to triangulate and figure out tax. And this opens up the whole discussion on the geographical location of the transaction. Unfortunately cyber space has no latitude or longitude.

The usual solution is to go with what the local "normal world" laws.

So how have you solved this problem? How have you figured out where your bits are from ?

Posted by Chandradeep Bandyopadhyay at 10:44 PM | Permalink | Comments (1) | TrackBacks (0)

Forecasting has been rated as one of the top supply chain issues in the globalized world. Organizations are striving to predict customer demand as accurately as possible. Accurate forecasting kick-starts demand and supply chain planning. A large number of products-geography-customer combinations require system enabled forecasting capabilities. A holistic forecasting system brings in Statistical Rigour and Modeling, Dashboards and Simulation capabilities and automatically tunes its models to suit changing business requirements. Sharing here excerpts from one of our working paper – the criteria in choosing the holistic forecasting system.

1. Ability to Model Demand:
Ability of a forecasting system to generate forecast at the most granular level across Time, Geography, Product and Customer dimensions, with the highest accuracy. This will also decide how effectively the system has been able to model the business requirements.

2. Statistical Rigour:
Forecasting systems need to have exhaustive library of statistical models - starting from simplest to most complex. This can help in choosing the best forecasting model which truly represents demand, yet manages model complexity. For example, there are cases where a simple “Moving Average" model may be adequate, whereas there might be cases that demand more sophisticated models (such as “ARIMA"). Moreover, there might be occasions where a combined model is chosen with a weighted average of different models. As a result, the system should not only provide the means through which different models may be easily applied but also facilitate the collaboration between these models for a true representation of demand.

3. Accuracy and Forecast Generation Time:
The preliminary requirement of any forecasting system to generate accurate forecast may not be enough. For example, an organization requiring daily forecasts for the planning purpose may not be able to use the forecasting system if it takes 10 hours to generate forecasts, regardless of its accuracy. Timely availability of forecast is as important as the accuracy it provides.

4. Interpretability:
Statistical error measures (e.g. MAPE, MSE) are popular yet widely misunderstood and misinterpreted. Quite often, end-users are not equipped to interpret the forecasting accuracy through such error measures. Forecasting system should enable business users with dashboard capabilities that communicate such measures in visually interpretable mediums.

5. Accommodate external issues:
Selecting the best forecasting model may not be enough. In majority of the cases, accuracy could benefit from the consideration of external components. These components could entail information such as the dates of forthcoming national holidays and the occurrence of exceptional events such as marketing campaigns. Hence an automated system should be able to understand such components and should be able to seamlessly combine them with basic forecasting techniques.

6. Automatic self-tuning:
An automated collaboration of the various components generates an additional consideration. When various models are combined, collaborative operation and self tuning becomes a major issue. The challenge arises from the relationships among the models. Although manual operation is a solution, it is associated with two major problems. Firstly, efficiency is reduced due to the required time and secondly, selection of models may be compromised in order to choose simpler alternatives. Hence an automated process for self-tuning would increase the flexibility and efficiency of the system.

7. Generic data representation:
Different applications will be associated with different forecasting parameters. Typical examples of such parameters include geographical areas, types of product and priority levels of service. This list could be enriched as diverse application scenarios might be considered. As a result, the design of a generic and fully automated forecasting framework requires the definition of a generic data representation. This data type will hide the low level details and present an abstract view on which the generic forecasting framework may operate on.

Excerpt from the working paper – Shah M., Owusu G., Shoban B.,  Balkundi N., “Improving Forecasting Accuracy of Traditional Demand Planning System” (2008) 

The original blog was published here.

Posted by Mitul Shah at 09:00 AM | Permalink | Comments (0) | TrackBacks (0)

Preventing accidents in an office environment could be as easy as putting a notice in front of a shredding machine that reminds us to secure our Tie ends. But how about this …..stormy night , deep sea  oil platform, 13th day of the hitch and a 16 inch rusty valve to be turned ….where should we put a cartoon poster?

Safety has to be ingrained in culture of a company and some like the Oil Companies spend billions of dollars to make safety as a matter of habit. For a novice who has gone through the training et al it may take some time to get safety in his blood . He has to rely on the operating procedures, job tasks and his supervisor's oversight. Here is where a good Enterprise Asset Management system can help a bit. It ensures that all the operating procedures are available when executing a planned work order.

Just before an equipment is commissioned, experts usually provide all the operating and maintaining procedures with built in safety procedures. Another important document sets are the 'Lock-out' and 'Tag-out' procedure sequences that are used to isolate energy systems. Using these in jobplans and deciding preventive maintenance schedules in the asset management system will make a things a lot easy when these experts leave.

However for some unplanned work there are no preset working instructions available. The asset management system should then, in addition to these lock-out tag-out steps, provide for an energy view in the form of either hierarchical or network system. These inputs provide important insight in how the energy flows through the system and help in deciding how and which systems should be locked and tagged out to enable a safe working environment. Links to the P&ID documents or any animated assembly movies are valuable. Did I say animated movies? That's another blog…..

Another important feature an asset management should have is the knowledge of 'hot work' and 'cold work'. When a planner plans for any work in a particular area he has to ensure that there are no two 'hot work' happening in the vicinity at the same time.

All said there is no denying the safety is a attitude. It’s a choice we all make whether to take that next call when driving our car …it’s a choice we make for folks waiting at home and those may not be just ours. Is that so difficult?

Posted by Kiran Mandrekar at 07:46 AM | Permalink | Comments (1) | TrackBacks (0)

Demand and Supply go hand-in-hand. One would be forgiven to associate such a statement with best-in-class supply chain supported by best-in-class IT support systems. This could be a distant dream for few other aspirants. However what I am referring to is the not-so-obvious-but-omnipresent power sector.

Having worked in a pumped-storage hydro unit first of its kind in India for two years and subsequently having worked for number of years in some of the supply chain projects all over the world, the seemingly disconnected verticals have something very profoundly similar. Let me try to draw parallels between the two - a pumped storage unit and a resilient best-in-class supply chain.

1. For one, a pumped storage unit can do two things at different times during the day. During the peak power requirement period, the pumped storage unit converts gravitational energy of water into electric power. And during lean periods, it picks water from a lower elevation to a higher elevation converting electricity to gravitational energy. In the process a pumped storage unit flattens power usage profile reducing variations in the distribution network.

In the same vein, a best in class supply chain adopts a hub-and-spoke model. In this model, a "hub" location can consolidate demand from different "spoke" locations reducing the supply variation in the supply chain. The "spoke" locations could have different demand patterns. The net effect is a distribution network that is efficient.

2. A power unit such as a hydro unit, is symbolized by a situation where supply is always equal to demand. The factory or the  generation center has governor systems that can detect the grid frequency (a lower frequency represents a situation of demand greater than supply and vice versa) and very quickly change the volume flow rates of water to react adaptively to changing demand.

An adaptive supply chain can, in a similar fashion, detect the offtakes from retail shelves and connect the true demand signals to the factory. The factory can react with adaptive takt rates of production.

3. In a distribution network of electricity, there are high voltage institutional customers such as railway networks, factories or airports and then there are general retail customers.

An efficient supply chain organization also does different kind of planning for their key accounts. A big retail geographically spread out chain would be treated and planned for at an account level compared with small time retailers or direct-sell customers. The latter would need to be consolidated and planned for at a customer grouping level.

These similarities ( and let me touch upon the dissimilarities in a follow-up blog) are definitely worth contemplating, and an excellence-aspiring supply chain still has a lot to learn from a seemingly different sector.

Posted by K. Srinivas at 11:24 AM | Permalink | Comments (0) | TrackBacks (0)

Corporations are increasingly focusing on the systems that help them manage their demand, their sales and ensure every connect converts to a sale and every sale is fulfilled. 

As a supply chain consultant I discuss optimal processes and practices with companies. In meetings and solutions we propose lean inventory, order on demand and efficiency of process. As a consumer I go to multiple stores, e-stores looking for what I want, at the best possible cost and with the fastest in hand time.

How do various companies marry the conflicting needs of "right" inventory levels with the real time fulfillment demands of an increasing finicky customer? In a limiting case, how do I keep nothing on stock but still sell everything and get it to customers before they look elsewhere? (Of course, "nothing in stock" is hyperbole for optimal inventory levels)

This is akin to the revenue v/s margin conflict that a lot of corporations grapple with. How do we convert this conflict to a revenue and margin opportunity?

A likely solution for a retailer with access to multiple order taking and order fulfillment channels is:

1. Identify the core (and dedicated) fulfillment channel that takes care of 90% of realistic planned demand.
2. Identify overflow (and non-dedicated) fulfillment channels that can fulfill the remaining 10% of the realistic planned demand plus an overage of 20+%
3. When the sales start coming in, create real time triggers that alert you when the core fulfillment channel has nothing left. Sales continue against your overflow channels.
4. Based on the alerts, either stop selling the items, or raise procurement requests for further inventory, depending on your suppliers' abilities.

For instance, for sales flowing in through the call center, the call center fulfillment center is the dedicated channel. The overflow goes to the stores. The overflow from the stores go to the fulfillment center. And whenever the buyers see that sales are "overflowing" they can raise POs if they think that the overflow fulfillment channels may not have the inventory to physically fulfill the orders.

So, what could be other solutions to this challenge? How can I sell "nothing"?

Posted by Chandradeep Bandyopadhyay at 11:23 AM | Permalink | Comments (0) | TrackBacks (0)

Let me start with a clichéd statement - forecasting drives supply in your network. It sets the tone of supply chain planning. In many different contexts, we have heard about what different proponents of forecasting are saying- a one percent improvement in forecast accuracy saves sometimes millions of dollars in inventory and other short-term working capital requirements. Granted all this holds lot of water and consequently, we will probably have millions of dollars spent in forecasting and related consulting projects in coming years.

Well the intent of this blog is not to talk about the obvious, however talk about something that has been a subtle but very powerful learning over a course of two very diverse forecasting related implementation projects. These two projects spanned across different organizations, completely unrelated industry verticals and yes, different technologies altogether.

Two very important learning from these forecasting projects were:

1. Forecast is not about numbers, but about people
2. Focus on business process workflow is far more effective than the tool per se in a Forecasting project

Well let me talk a bit more about them. Quite often forecasting is made synonymous with statistics and consultants/organizations spend most of their time developing forecasting algorithms that can detect that slight trend or cyclicality or changing seasonality pattern. In most cases algorithms work on numbers that may not be even “forecastable”. Organizations sometimes not even draw a consensus on what numbers to forecast upon. There are unanswered questions like - when should an organization realize sales, how should returns be treated, should billing cycles be accounted for, should an organization forecast on shipment, invoice date/quantity or better still point-of-sales. Sometimes organizations are also constrained by what information they have and can get or have control over. Given all these variables, it is very difficult for a forecasting organization to process actionable projected sales numbers from even best of algorithms.

Imagine another situation where planners have to do forecasting distinctly on multiple geography-specific hierarchical structures or complex dynamic product hierarchical structures. One cardinal and painful truth that most organizations discover only after-the-fact is that a very complex forecasting business process breeds a very unmanageable demand planning solution with numerous customizations. The management consequently spends its attention and investment-worthy capital on maintaining this complex landscape. They spend time and energy in procuring and installing more powerful machines.

Forecasting solutions fail or do not deliver expected results if - either the solution is not embraced by the stakeholders or is way too complex to catch anyone's imagination.

Some recommended steps in a forecasting implementation would be:

1. Re-engineer the forecasting workflow to make it simple, repeatable, exception-managed and reportable.
2. Make sure you invest on people since they are bound to do a better job in conjunction with a forecasting system solution than the two working in isolation.
3. Clear integration of forecasting workflow with S&OP planning.
4. Tracking and enabling a feedback loop of ex-post released forecasts to reinforce unbiased forecasting management behavior.
5. Always driving a consensus with Marketing, Sales, Finance, external partners, Production and other important stakeholders.
6. Sharing and collaborating forecast numbers with downstream supply chain partners.

Whoever said Forecasting was number crunching! It is much more than that and may be none of that.

Posted by K. Srinivas at 11:21 AM | Permalink | Comments (0) | TrackBacks (0)

 Of late, I’ve been noticing an increasing appearance of the term “On-demand SCM” in the web-world. Inscrutable as it sounds the first time, what got me thinking was the obvious overlap in most articles between SCM as a function as SCM as a collection of IT systems. Standing behind the many wonders of IT-enabled supply chains (and being completely blinded of everything else), we may be forgiven (or burnt-at-stake, depending on who you're asking) for assuming SCM equals SCM apps/integration (Akin to arguing that “child is INDEED the father of man”!)

SCM (the function, that is) has been the pioneer in terms of working with partners, communities, sub-cons, suppliers, marketplaces, global outsourcing and their moms and pops and pet dogs and NONE of these relationships started with systems. Extending the argument a step further, any work not being done by the core team can be termed as sourced – insourced, outsourced, near-sourced, co-sourced…take your pick, but all these would qualify  as on-demand. Going to the office travel department for an air-ticket when you need it or walking to the nearest Staples to buy a bunch of binders for an afternoon presentation or calling Fedex to ship-by-air a sample fabric design that’s late to your client buyer is all variants of on-demand transactions for me. In that sense, separating on-demand SCM function from on-demand SCM applications is crucial. I got one BIG CAVEAT here in that I wouldn't like to include planned material movements in the on-demand category. The extrapolation might be theoretically fine, but that's one heck-of-a stretch. (takes me back to first year Marketing Management course in B-school where Philip Kotler talks about vision statements with a pencil manufacturing co calling themselves as a "communication services provider".)

Getting back, on-demand SCM systems on the other hand mean different things to different people or may I say different solution vendors – like that Pet Shop Boys lyric which goes "I sometimes think I’m too many people…whoever I decide to be depends on who is with me". In pure frequency of usage, I'm seeing more of Supply Chain Event Management (SCEM) Big Bad Wolf philosophy dressed up as on-demand SCM Grandma - of course, I've also heard this being called as "near real-time" analytics to supply chain visibility to separate it from traditional data warehouse dungeons. The chief bottleneck of the SCEM pretender here could be the span which the on-demand SCM system needs to have - if you're talking of say a large retailer like Walmart or Adidas with global sourcing and hundreds and thousands of partners and diverse applications and decision centers AND if you’re dreaming of building a single centralized command center of an on-demand supply chain visibility system, God be with you. I’ll try crossing the Atlantic in a raft instead.

Something like on-demand SCM visibility (see, I’ve already narrowed the scope) would unconsciously touch upon all the elements of Six Sigma's DMAIC methodology or even ITIL v2's Service Support side of the house (incident management, problem management, release management et al). Essentially, one would need some kind of (a) Sensing/Discovery piece for outages or weaknesses (b) followed by an Alert & Event Management functionality to unleash the fire fighters on the simmering or burning fires (c) an ability sit down and do some analysis - what-ifs, future scenarios, impact assessments and then finally (d) something neat and pretty to show the Attention-Deficit-Disorder-infected bosses the good things you’ve done. Dashboards, Score-cards, kitschy 3D gizmos from Star Trek days, anything to hold them on to the message.

On a discrete function basis, we've had so many different IT sub-systems of SCM being "on-demanded" over the last few years - TMS has been a good success story especially load planning and Route Planning/Optimization, so has Indirect Procurement, primarily of the transactional variety. To give a vendor example, most of the customers of Frictionless Commerce (now SAP E-sourcing, with potentially some friction added I guess) have been on the on-demand strategic sourcing mode and SAP would prefer to keep it that way in the future as well. I've read cases of Demand Planning being done this way though none of our customers that I know of has gone thru this experiment. On a broader theme, sector leaders like the 3PL giants take responsibility of a function (discrete supply chain execution pieces or integrated logistics involving WMS/TMS and some part of Order Management/Web-commerce) combining operations with their IT-expertise as a boxed offering to their clients.

As a final thought, I anticipate On-demand SCM finding more and more print-space going forward. Watch out for good ol' supply chains being prefixed by the SCEM vendors with words like dynamic, adaptive, agile, responsive, shock-proof, gymnastic, triple-summersaulting, arm-twisting, convulsing, epileptic...ok, not the last few may be, but you get the idea.

 

Posted by Gopikrishnan GR at 11:20 AM | Permalink | Comments (1) | TrackBacks (0)

I remember organizations, in year 2002, raise spend visibility issues – “I do not know how much my company spends with supplier a”; “on what am I spending the maximum dollars?” Six years down the line, with the immense progress made in this field – variety of product vendors, ERP and best-of-breed alike, touting the latest in technology; the bouquet of service offerings including data cleansing and enrichment; the symposiums, seminars and analyst papers harping on the do’s and don’ts – one would expect to confidently bet his money on the demise of such issues. But why then do we still come across the same rues and cries?

Rarely, would you have come across a scene where the demand (read as CPO/CFO’s desire to view 100% of his/her organization’s spend) has steadfastly remained the same over number of years; but in-spite of the tremendous advancement in the supply scene, the gap does not seem to narrow at the same rate. Ironically, this pain is felt the most in large global organizations where the need is the most. Let me clarify though, the reason is not for want in trying. Almost every company worth its salt would have had its fair share of exposure to spend visibility initiative – a few already on their path to next gen analytics (market analysis, supply risk analysis, opportunity analysis…)  but the majority of them do seem to still struggle with the basic spend analytics.

I talk about this matter today because I am in the midst of a similar such pain felt at a global health-care major. But this company is not alone. Quoting AMR research, “only 42% of large firms (having >$4 billion in spend) surveyed, can view their spend at the detailed level needed to drive informed decision.”  While one can write an epic on the failure reasons – lack of master data management, poor analytics, disparate data sources, inadequate technology, poor data quality to name a few – they all point to the same root-cause: that the organization failed to put “information management” central to their decision making.  

The companies that have made the cut have been those that have not let organizational (people), process and technology issues supersede information management; that they viewed every decision in light of whether it made them move closer or farther from their goal. More often than not, IT and procurement departments in such organizations work in alignment to attain the spend visibility goal. This, I believe, holds the key to a successful spend visibility initiative.

Posted by Amit Tambi at 11:19 AM | Permalink | Comments (2) | TrackBacks (0)

With multi channel retail becoming the latest buzz about the retail town, most retailers today allow their customers to interact via multiple channels, offering a combination of stores, call centers, and web sites. Surveys have indicated that customers want to be engaged in a consistent way in all channels, else the retailers risk losing them. Many retailers do claim a "Shop anywhere, Pay anyway and Return anywhere" offering, however due to the disparate infrastructures that typically underlie these individual channels, consumers who cross over the channels as part of their shopping cycle often face an experience that is fragmented, inconsistent, and annoying to the customer.

Particularly in Returns, customers face completely varied processes in different channels. They face different return policies for products bought in different channels, different level of service in each return channel and end up being confused about the retailer's positioning. For example, many retailers do not allow customers to do a return via web site and instruct them to call a toll free number, while same customer can walk into a store and get the money back in a matter of few minutes. In a similar way for many retailers stores do not have any visibility to website orders. Though they process the online purchase return, they end up questioning the customer much more than a call center representative because the CSR is able to look up the order history and spare the customer questions about the merchandise. This difference in customer experience works against the customer's expected service levels- they expect a Sales Rep standing in person before them to know more about them than a voice over the phone.

Organizational dynamics and multi channel strategy is usually the first barrier to success. Most retailers considered website and catalog as informational tool for their store operations, and often ran them as separate business centers. This fragmented approach drove growth of legacy IT systems that were developed to serve each channel's processes. Hence during the phase of integration, IT systems specifically the Master Data Management, Inventory Management and Accounting pose challenges to successful delivery of an integrated system that allows customers to move seamlessly through each channel without any barriers to arriving at the ultimate goal: the sale and a happy loyal customer.

At risk of repeating the obviously known, I want to stress the urgent need for retailers to develop an integrated back end for their multi channel initiatives. The core piece is an integrated order management system that orchestrates orders across various channels, serving as the broker for fulfilling the customer orders, maintaining inventory snapshot across fulfillment channels and managing returns and refunds. The integrated order management system also allows retailers to build integrated capability for detecting cross channel return frauds. Though many retailers have already started the journey, notably a leading electronics retailer in US, many are still caught up with an average 3-4 order management systems and myriad inventory management systems.

Posted by Amarpal Sanghera at 11:17 AM | Permalink | Comments (0) | TrackBacks (0)

Business expansion and growth, nowadays, through mergers and acquisitions are inevitable – Fact: 42 FORTUNE 1000 corporations were acquired in 2007, biggest buyout frenzy since 2000. Apart from managing the risk of workforce events and re-structuring (Human Resource Harmonization) caused by M&A, organization begins the journey with – “quickly integrate mergers and acquisitions into my enterprise processes and systems”. Talking about process consolidation and IT integration, Sourcing and Procurement processes and systems cannot be left behind. Please remember - Saving $1 in procurement equals $15 to $20 in revenue.

Procurement Challenges resulting through this Business Expansion of M&A is huge. First thing first - Multiple divisions in different countries with disparate processes and systems leading to inefficiency, little spend visibility across the organization, greater supplier variability, data management and different naming conventions multiply the complexity. Over the last 10 months, I was involved in consulting assignments with couple of Fortune 100 corporation post M&A – process unification in Contracts Management & Spend Analysis and system integration for S2P (Source to Pay). My initial thoughts – understand the process and systems followed / used by the parent company and roll it out to the acquired company. Lots of people endorsed my thoughts. Believe me, within few days, I realized that, it is big NO.
Sourcing and Procurement Process is very simple, everyone do it day in day out, as long as you know there is a BIG difference on the way you buy tender coconut and apple and from where you are buying that. But if you start comparing the way your wife buys the same item with the way you buy, I am sure you will realize how different it is. If you try to copy the way she does the business, you might not succeed. (Similar is the process comparison between 2 organization post M&A)Here are some tips (3 tips to start with) while doing the procurement process unification and system integration post M&A –

“It is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring”. Though the parent company is big, in business for long time and has stable processes - that does not mean that the process and system can be copied exactly. As a consultant or system integrator, take quality time to grasp the process as it really is, map and match the processes with the parent company’s template, identify the “must haves”, build a business case to incorporate the must haves into the template and finally provide the best way to build this add-on. Copy intelligently is better than copy exactly. Look out of the Legal Entities Model – Your current supplier might become your affiliate later, your spend might be reported differently, your delegation of authorities might change and so on….Understanding the complete Legal structure and the legal implication will help you to construct the stable process and a rigid technical solution (just a note: I read somewhere – do not try to build a flexible solution, this means your process is not stable. Probably right)
TCM (Transition Change Management) – Post process design, trying to educate the end users on the newly defined process, I sometimes hear - we will follow the parent organization process. If the process is transactional in nature, probably okay. But the strategic players should know the reason for the change. As a process owner, I think it is our moral responsibility to explain why there is a change in the process and how to manage the change. Understand the problem that exists between chair and table and make sure that there are no big elephants in the room unnoticed.

Final thoughts, how many times we have heard – Change is the only constant. But in optimistic view, it happens only because you are trying to put the right process and people in place for success. Right process always does not mean world class process – it just need to be good enough for the business and YOUR business…

Posted by Raj Rajendran at 11:13 AM | Permalink | Comments (1) | TrackBacks (0)

Accuracy of the supply and demand planning forecasts for direct sourcing and allocation is very important for an integrated and effective Supply Chain.We run into many scenarios when the forecast figures at a company level are either too conservative or inaccurate and that leads to lots of issues while planning for the downstream activities.One process consulting approach could be to slice and dice the historical data and present the output of the analysis to the planning team to adjust or if needed revamp the planning models and approach used.What can be the variety of approaches that can be used to streamline the planning processes in this scenario?

Posted by Raghu Dhenuvakonda at 11:11 AM | Permalink | Comments (0) | TrackBacks (0)

....everyday, i get 4-5 articles, saying -("A" is looking at Hosted) ("B" is already performing on hosted)  & for ("C" its hosted, all the way), i really wonder if thats the way ahead for product companies to have that "Non-Linear growth pattern", but if everyone goes the hosted way does this mean that, no more consulting, no more consultants

Is the future just going to work in a way "that customers give master and related data en routed through secure VPN's to get businesses running in future, will there still be Business Blueprinting" will there ever be a necessity for consultants to help customer's adapt to Products, still bringing in their domain expertise to mash the product to suit their requirements", will the services companies merge with the product companies, Will there ever be any work for consultants any more, read more.....

What if SAP & Oracle, the two biggies who already have the vision for Non-linearity and to some etent already are realising the latter in a smaller scale, go the hosted way completely, could you possible reason out atleast 5 things that could show immediate affect

Licence costs doubling !!!!, Support costs tripling, "Spend/Volume based transaction models at gun points", "Procurement/Commodity specialists all poached into Product majors" immediately taking effect

there are positives and negatives to it, for whom is it POSITIVE, & who's stung NEGATIVE, whose Non-linearity hits whose linearity, is still a story to tell, we have to wait and watch to see the future for SaaS aka Hosted when suddenly all Product majors realise, no more partners, there's only one way for us !!!!

Posted by Tridip Chakraborthy at 11:09 AM | Permalink | Comments (2) | TrackBacks (0)

Warehouses have come of age. So have the technologies that run them.
Not so long back, warehouses were treated as cost centres, always taking the back seat when it came to formulating business strategies for revenue generation. But times are changing.

This leads to my next thought. How do we look at warehosues as profit centers? what does it it takes to leverage a warehouse to generate revenue?
One sure way whould be to bring down operational costs by adopting to best practices, optimizations techniques, bring in efficient material handling systems and so on. All this needs to be thought of in granularity, i.e., whether its feasible or not, how to implement them, cost reductions it will bring in,  impact to revenue, etc. 

Coming to the Warehouse mangement system available in the market today; are they geared up to analyse and bring forward revenue generation aspects on warehouse operations over a period of time? Is this visibility a part and parcel of such systems today? Are customers keen on looking at such figures? 

This leads to my next blog on the various aspects that lead to income generation from warehousing operations - 

http://infosysblogs.com/supply-chain/2008/09/channels_to_leverage_warehouse_1.html#more 

 

Posted by Lokmanya Rawat at 11:04 AM | Permalink | Comments (3) | TrackBacks (0)

Attended two interesting conference last month. “Next Generation Manufacturing Supply Chain and Digital Economy Research Collaboration” – organized by by Engineering and Physical Sciences Research Council, UK and European Union. Another one was “Supply Chain World – Asia Pacific Conference” organized by Supply Chain Council. Following were the ‘hot’ topics among supply chain practitioners and academicians.

• Supply Chain Risk Management (SCRM)
• Green Supply Chain
• Skill shortage in Supply Chain

The EU Conference was inaugurated with a mind boggling fact thrown at the participants by a professor. According to his research, major supply chain metrics across the world have remained same over last 15 years!!! There may have been an improvement by an individual organization or an industry, but when you take an average of more than 800 organizations across industry & across continents for last 15 years – the numbers do no change. However, the risks today’s supply chains are posed with, have grown by 3-4 times!

Plethora of research is available on Risk Management, supply chain managers are still grappling with how to bring this practice in their day-to-day operations. To say that it’s not done at all, would not be correct. In my opinion, implicit Supply Chain Risk Management practices exist in supply chain operations. Quality checks on manufacturing floor, inventories at various levels in supply chains, use of derivatives in procuring commodity raw materials, forecasting, S&OP – this are all classic examples of such implicit practices. Then why such a huge cry about Supply Chain Risk Management! Below are few reasons for this.

• Many of the above mentioned supply chain processes (and others) are not executed with the end objective of doing Risk Management.

• Although, such supply chain processes may end up doing Risk Management implicitly, they do not mitigate all potential risks supply chains are posed with. 

• All SCRM practices come with the cost. There is a need to uniformly carry out risk management across all the supply chain functions with a consistent view of organization’s risk appetite and cost of hedging.

• Risk events affecting supply chain processes may not necessarily happen at an operational level only. Some of the geo-political, natural, man-made risks can challenge strategic direction of the organization. Some of these
events can happen without any precedence. Day-to-day supply chain processes will not be capable of withstanding such events.

• With globalization, CEOs/CFOs have felt the need of having single view of supply chain risk across all products, markets and operations.

I will continue to discuss the need of SCRM in next posts. Below are the 6 essential steps in carrying out SCRM Program at organizational level as defined by Supply Chain Operations Reference Model - SCOR 9.0.

1. Build: Who is the sponsor?
Attain organizational support and executive sponsorship for SCRM Program.

2. Discover: What will the program cover?
Define Pilot & Supply  Chains. Set the objectives SCRM program will achieve. Define Project charter, Team members, timelines, interim goals, budget etc.

3. Analyze: What are the risk management goals of your each supply chain?
Look at the existing supply chain from various perspectives through benchmarking, suppliers and customer requirements, competition, business strategy etc. <strong>

4. Assess: Where and how big are the risks?
Identify all potential risks – operational and strategic, repetitive and without precedence, low and high probability/ impact, in suppliers and customers environment. Categorize them into a quadrant of high-low probability vs high-low impact. Arrive at monetized value of each risk component.

5. Mitigate: How the risks will be mitigated?
Define mitigation strategies and costs associated with them for each of the risk events.

6. Sustain: How the risk mitigation strategies will be sustained in day-to-day supply chain operations?
Define processes, process owners, metrics & reports for ongoing SCRM across various functions.

Each of these phases can be an interesting discussion topic in itself. I will try and throw my thoughts on each of them in next posts. Let me have your views/comments.

Posted by Mitul Shah at 11:02 AM | Permalink | Comments (5) | TrackBacks (0)

In this age of matured collaborative supply chains, E-Marketplace exchanges are being fast adapted by increasing number of Supply Chain leaders ranging from Manufacturing to Retail Industries. Also the new advancements in IT like SOA and Saas enables these companies to offer their suppliers, customers, and other ecosystem participants—a safe & secure access to parts of their IT architectures and hence their operational excellence.

On one hand, this business model best suits the asset intensive business – factories, truck fleets, data centers, networks to achieve high utilization rates and therefore their returns on invested capital. On the other hand, it helps the entrepreneurs and companies scale up their business with quick access to these assets at no fixed investment cost and hence achieve a competitive equity. In effect business are getting to run on the variable costs with no/less fixed costs and hence keeping their balance sheets light.

 All is well as long as these leaders can match up their supply with the demands. However what happens when the demand exceeds the supply, will the single supply chain powerhouse be able to promise indefinite/endless supply capacity to its suppliers & eco system. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

Posted by Sujatha Shanmugam at 10:55 AM | Permalink | Comments (1) | TrackBacks (0)