Supply Chain Management

Will there be impact of economic downturn on eCommerce platform investments?

2009-01-04T17:01:11Z

The answer is an obvious yes. In eCommerce or in multi channel retailing the focus is on cost of effective fulfillment options, reducing working capital and inventory. In the last 6 months there has been no extreme step such as eCommerce program put on hold due to the ongoing crisis. While long term strategy will be intact but eCommerce investment is likely to be spread over longer horizon. There is definitely much more emphasis on prioritizing eCommerce platform technology investments.

]]> While long term strategy will be intact but eCommerce investment is likely to be spread over longer horizon. There is definitely much more emphasis on prioritizing eCommerce platform technology investments. In one of the recent engagements where Supply Chain practice is involved in eCommerce platform re-architecture, the client wants to first consider “critical” requirements to be implemented in the first phase and also wants to ensure maximize product stack usage and minimize customization to avoid cost overruns. The investment is likely to be spread over a period of 2-3 years instead of aggressive approach of 1-2 years of solution deployment. However, it should be noted that there is no change in the long term strategy and roadmap for the eCommerce platform re-architecture. eCommerce will continue to be profitable business making it is sweep spot for many retailers.

Accountability and importance on Short term ROI. There seems to be so much importance on faster implementation and quick wins before moving to the further improvements on the eCommerce solution. Even though eCommerce technology investments are relatively small in the context of overall technology spend, in the current situation, quick wins are important and clients are looking at “time bound” solution deployment at a fixed cost. The eCommerce solution implementation partners will be accountable for the success of the program than never before.

On demand eCommerce solutions could be a better value proposition for smaller multi channel retailers . It is obvious that smaller eCommerce retailers may come under tremendous pressure under current economy situation. This may force them to focus on “core” business and ensure keep a check on cost of eCommerce investments. This essentially means that they will look at SaaS or platform based solution offerings which are directly related to their sales / order volumes or transactions. However one word of caution would be that the service provider should be a financially stable and long term provider of such on demand solutions. Cheaper options may be attractive in a short term but there is a great risk in these crisis times as some of these solution providers may not survive and put business at risk. We had one of the customers asking us to help them to replace their existing vendor fulfillment infrastructure which was an on demand solution but the services provider is shutting down with 2 months notice!

Long term roadmap and investment on eCommerce and/or multi channel retailing remains the same. The current impact of economy would be probably on “core” business and eCommerce investment impact is yet to be felt but there is a cautious approach and tremendous pressure on solution providers to bring down the cost and guarantee short term wins. Accelerated deployment will be the need of the hour. The recent Forrester‘s report (http://www.forrester.com/Research/Document/Excerpt/0,7211,47546,00.html) on impact of economic crisis on ecommerce suggest that while there has been some fallout, the overall industry still remains strong. Many companies still think the B2B and B2C has been one of the growth strategies and will continue to be!

Ownership of forecasting function

2009-01-02T10:37:58Z

Organizations treat forecasting function differently based on their maturity levels; with a lagging organization having an ad-hoc approach to the entire process. There is hardly any focus on forecasting process and a dominant function decides the final numbers that also keeps changing and always remains a moving target. On the other hand, a mature supply chain organization would try to incorporate systems in place to ensure that forecasting as a process works fine and achieves the overall business objectives. I have seen and experienced that “right ownership” of this process is a very important and critical element to ensure that the forecasts are not biased and serves its desired purpose.

]]> The usual owners of forecasts are sales/marketing functions since they are the ones closest to the customers and are responsible for getting business. But the same reason could become the bottleneck in most of these organizations since the forecast is not that data-driven, tends to remain biased and has a political element in it, as well. Ultimately, the organizations suffer from high inventory with a poor customer service since all the links in supply chain are not aligned and other key stakeholders/functions (such as finance, planning and manufacturing) are not consulted in the forecasting process. In my view, to arrive at forecasts free of bias, there should be a dedicated function headed by a Chief Supply Chain Officer. This function is independent of all above-mentioned entities, yet one which has access to and inspires collaborative confidence from all of them. This would enable best use of inputs that business needs to obtain from the market and internal stakeholders for an effective operational plan to achieve business goals. I have seen it working effectively in many organizations; although it has its own set of challenges and there is always a learning curve where one can customize the approach based on its own organization’s DNA.
Along with one of my colleague, I had also shared this thought in one of the conferences, where it got published in their proceedings. I would like to hear more views and comments from supply chain practitioners on this subject – so please feel free to comment.

Attribution Analysis in Supply Chain

2009-01-01T02:18:14Z

Supply Chain function in most organizations is multi-faceted and requires management through a complex hierarchical organizational structure. At one end are Forecasters who manage the most upstream function and at the other end are executioners (production and procurement managers) who manage the most downstream function of supply chain. These functions have evolved over a period of time, found to be most optimal and is based on simple principle of segregation of duties.

]]> While these functions are distinct, the key supply chain metrics are cross-functional in nature. Fulfilment rate as an example refers to the extent to which a supply chain fulfils demand in the supply chain. While carrying excess stock improves the fulfilment rate, it is detrimental to the stock turnover rates and consequently the working capital to total asset ratio. Note that these supply chain metrics collects and commingles the functions of forecaster, supply chain planner and executioner. Most of these metrics widely used across industry does not give any attribution analysis of hits and misses in the supply chain to these core functions.

In this regard, the APICS organization came up with one recommended metrics framework of SCOPA or Supply Chain Operations Performance Analysis. The link makes for an interesting read where distinction of supply chain performance is made in alignment with different functions.

The key philosophy of SCOPA is to draw a distinction in key metrics between the planning and execution function. An overall supply chain performance is based on the combination of both these functions. A planning function can be measured by making a hypothetical assumption that execution is perfect. Thus the planning service level is dependent on the actual sales, forecast and safety stock protection for a time bucket. In the same vein, execution service level is simply the function of actual and planned sales.

In one of the existing projects, we are in the process of implementing the basic framework of SCOPA. The main intent of implementing SCOPA is to understand and correct the planning or the execution as the case may be, using the attribution analysis report. This is expected to positively impact inter-departmental behaviour, make the discussion more data oriented and apolitical.

While SCOPA focuses on drawing a distinction between planning and execution function, it might be important to extend this philosophy within the planning function itself. Example a planning function depends on the forecaster (sometimes known as the demand planner) and the supply chain planner(who looks at the supply side of the chain). It may be naive to measure the forecaster based on forecast accuracy using the formula - forecast minus actual sales. The reason is that actual sales is a function of capacity constraints, downtimes of resources or even leadtimes in supply chain. A demand planner does not have control over any of these aspects. One accuracy measure could actually be forecast minus unconstrained customer orders as received in the order management system. Orders based on requirement date rather than delivery date would be the key difference between unconstrained and constrained orders. This means that customer order data is captured in the system that is not adjusted based on supply chain constraints like stock availability or stock capable-to-be-made available.

A supply chain planner instead could actually be measured based on the difference between unconstrained customer order and constrained customer order. The key function of supply chain planner is to mobilize the supply side to react, reconfigure and remodel, in some cases, to meet the unconstrained customer orders. This means the key metric is actually dependent on the stock availability and stock capable-to-be-made available.

While all of the above does not downplay the "teamwork" required by different functions to make the supply chain service levels optimal, these metrics act as important feedback factors and re-inforce the right inter-functional behaviors. After all, coming together is a beginning, keeping together is progress and working together is success. Individual commitment to a group effort makes a team, company, society and civilization work. And what could be better than these KPIs to goad this individual behavior.

What is selling in my stores?

2008-12-29T05:51:00Z

As an emerging trend over last year or so, retailers are warming up to the idea of store level collaboration with the suppliers. Supplier collaboration can enable retailers to improve the three most important store level metrics - availability, cycle times, and cost. When the retailers start sharing the POS and inventory data to the vendors in a near real time view and define business processes to support action on the data, that allows the supply chain managers at both ends collaborate to make decisions.

]]> Suppliers are the most obvious beneficiaries from the data sharing. They get a demand signal from the consumption point allowing them to manage the positioning of inventory within their supply network. Demand signal aggregation services, nowadays provided as hosted or on demand, allow suppliers to fine tune the signals for consumption by their planning systems. Apart from the business planning and inventory optimization benefits, the store demand data allows the promotion managers to have enhanced control over promotion processes. They are able to measure Promotion efficiency and micro manage the promotion spend.

Immediate benefits that accrue for the retailers from such collaboration are- Improved forecasts, higher availability in store shelves and reduced inventory in stores as well as DCs.
There are a lot of mutual benefits like greater efficiency in VMI replenishment process, better capability to manage spikes in demand, role based visibility across the supply chain. As an added bonus thrown in, with the available data the retailer and suppliers can measure supply chain metrics for responsiveness of the supply network.

The road certainly is not without challenges. Retailer reluctance to part with their data, disparate data definitions and non availability of optimal models/platforms for data sharing pose challenges to such initiatives. Here are some recommendations to meet the challenges:

1. Building the infrastructure – co- investing in platforms for data sharing between retailers and suppliers. For some retailers this also means upgrading their POS system. As mentioned earlier, demand signal aggregation and analytics services are now available in market. Investing in robust order and inventory synchronization platform could be the starting point for the journey.
2. Consistent Data definition – This means adopting a Enterprise Data Management initiative to refine their internal data management processes to achieve internal and external data consistency and greater process integration.
3. Create a roadmap for cross-trading partner value-creating collaborative initiatives.
4. Focus on shared priorities and setting up objective approach to measure progress and track results.

Future of Retailer-Supplier relationship is certainly set to evolve into a symbiotic partnership. Will this downturn provide impetus to hurry the impending makeover?

Outsourcing in supply chain – a unique way to deploy global supply chain programs

2008-12-04T05:50:35Z

This is based on my recent project experience with one of the leading networking companies in US, which is running its strategic supply chain performance improvement initiative globally. Usually, companies tend to implement such initiatives as a pilot for a select few customers and markets and once the pilot is run for a certain period of time, it is rolled out to other areas incorporating learnings from the pilot phase. The rolling out of such strategic initiatives to all the markets globally is imperative to achieve the desired financial benefits, finally leading to revenue and profit growth. The key is the global execution that becomes a real challenge in a global scenario, especially when it demands a significant amount of investment in terms of time, cost, talent and effort from teams located regionally.

]]> The usual reaction could be to hire and train resources locally that might work in the near term but it has its own set of challenges. The leading organizations look for opportunities outside and do the cost-benefit analysis of various approaches before selecting the right approach for its own set of constraints and requirements. One of the unique approaches is to partner with a service provider such as Infosys to roll out its initiative in other markets. This is similar to a typical “outsourcing and offshoring” model but it is different and unique. It is different because the drivers are not just cost and quality of execution but accelerating the earnings by deploying the initiative faster in other markets. And, it is unique since it is not just restricted to transactional activities but goes beyond it to include some of the semi-core supply chain activities. This approach helps the client in out-tasking the components that help them in scaling the strategic initiative, while at the same time retaining the core components and executive decision making. The service providers must have the desired capability to support the client in scaling up and deploying these initiatives in the desired markets and geographies.

This calls for a detailed assessment of client’s current initiatives and do a deep dive in evaluating sizeable chunks or activities that can be logically grouped as components. These components can be further analyzed on a variety of parameters such as its strategic importance (core vs non-core), dependency on location (region specific), risk and infrastructure needs. Once the out-tasked components are identified, the service provider can go ahead and deploy them in a phased manner.

I think this is an excellent example of how companies can exploit partner competency by out-tasking some of its supply chain components without compromising on the quality of execution, and thus deriving revenues at a faster pace.

This has been my first such unique experience. Comments and viewpoints are welcome. If anyone has a similar experience before, please do share your learnings.

....Customer demands "Where is the tangible translation of my Compliance to revenue you promised from my SRM solution, show me? "

2008-12-03T01:39:56Z

Has a post implementation experience ever hunted you down with such statements from the customer?
Are you ready with the metrics, have you even thought about how to have these metrics strategized and signed off even before you could possibly track them.
How can you measure it, how will you show that realization from day 30 post go-live, 1month would be a very tight time frame to really show benefits on the P&L, but today’s customers, for sure are going to.
Trying to pitch in for a recent SRM proposal, I have been asked these questions on what your strategy is going to be, to make me realize on post implementation benefits.
Are you going to fool us in the rhetoric of an opportunity by showing flashy Aberdeen figures on what best in class people have reaped, and wash your hands off, post implementation, or you’ll assure us with metrics, track them post go live.
Will you reassure us of getting feedback from the CFO desk comes back saying “what a wonderful solution you’ve implemented, you’ve reduced transactional, operational costs with the auditors being really happy with the compliant transactions, processes etc, WOW we can see the affect on the P&L, great job done!!!!!!
Now let’s go one step below trying to collaborate the thought process of the SRM fraternity to arrive at some strategy, can we build a template that’s true by itself to help consultants keep their face upright with metrics to address heavy customer questions.
What are those possible metrics?
Q) What are those metrics that can translate compliant transactions to remarkable tangible savings (indirectly the revenue)?
Track maverick spend before go live and directly compare with contractual spend post go-live
Q) Should we do this category wise before and after the implementation
Identify those top 10 categories accounting to the highest spend, give a percentage that is achievable and then track it post go-live
Q) Implementation of Enterprise wide Contract Management v/s a customer situation with no such traces
Most companies wouldn’t have had the thought for Buy/Sell side Contract management, will this before and after comparison help?
Q) Analyzing Spend and giving them the facts about their very own state of affairs with the existing SRM landscape if any
This would typically translate to running the spend analytics tool and giving them a picture of their spend health, where they stand in terms of compliance, maverism, their weak links, whether they need strong backing from kicking off Sourcing projects (typical category management) or even do a business process re-engineering before opting for a full blown implementation.
This is what all I could think of, if there are real facts that you’ve faced in the demanding regime of tough customers, let’s arrive at a broader discussion frontier
I would say there is no demanding customer, lets reasonable customer. We are all Customer’s at the end of the day.
“Why would I be investing in a solar powered heating system in my house, would I benefit on lowering my electricity bill, on an average I want to see @least 200 bucks saving every month, so do you call me demanding or questioning something I’ve been promised of”.

Let’s work towards building some metrics around these lines coming handy in getting the customers, Value for their money, their lean IT budgets.

I repeat what I ended the last time with, "Whatever it is it has to be real"

-Tridip

Capturing Warehouse Costs and Margins

2008-11-26T17:14:36Z

This is my third blog which is an extension of my previous one, "Channels to Leverage Warehouse Revenue". In this blog, I will explain what a WMS software needs to scale up to in order to capture revenue related information.

First, it must be able to capture costs for warehousing tasks carried out or space utilised. Having said this, tasks carried out will be treated under activity based costing, wherein each activity carried out within a WMS transaction will have an certain cost associated to it.

]]> Let us understand this with an example. Take the case of Kitting that needs to be carried our for a certain product before it needs to be packed into a shipping carton. The cost associated with the kitting task would be labour cost, equipment cost, consumables used,and so on. This would all pile up to the cost that incurs to kit a finished product.

The WMS needs to provide capabilities to define such costs. Next, there needs to be a margin applied to each of these cost and also a overal margin over and above the total cost. This will define the profit that the warehouse will make when product comes out from this kitting process. The cost plus margin is then charged as customer who utilizes the kitting services of the warehouse.

There may be many such activities that can be defined within various warehousing transaction for which a customer can be charged for. Cost of other expenses can also be factored in like Pulley cost, Batteries, Labor unloading from Truck, Security Cost, Salaries of Labor, Cleaning Expenses and so on. These costs need to be associated with relevant warehousing transactions and need to be tracked as and when these transaction are being executed. These costs are accumulated over a period, say a week or month and billed to the customer, of course, with the margins added to each of them.

Next, we will delve into the other side of costs that can be defined and charged to the customer utilizing the space. This is known as storage based costing.
This can be defined as Storage Unit of Measure (UOM) based costing, Package UOM based and Fixed rental based costing. These are the three types of costing that can be defined, tracked, captured and billed to the customer.

In my next blog, we will delve much deeper on each of these storage based costing on how they need to be setup, with real situational examples.

The Other Side of Supply Chain

2008-11-22T20:21:40Z

Supply chains have been traditionally linear in nature. Let me explain what I mean by a linear chain.

Raw materials are procured from sources such as vendors, transformed into a sub-assembly and/or into a finished good again at factory and transported to a distribution center or a warehouse. The number of echelons in the chain vary based on industry structure and resulting dynamics. Each echelon adds a finite value by either transforming the product into something more worthy of consumption or moving it closer to a consumer. This chain quickly became a network when organizations felt strongly about leveraging core-competencies of other organizations and developing one of their own.

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The network quickly became complex as the nodes were either geographically dispersed or did not talk the same language as the other. They used different tools for communication, were bound by a local legal structure and sometimes had divergent/adversarial/competitive positioning compared with other entities in the network. What came out of the mass fragmentation and dispersion was a complex supply chain structure dropping under its own weight no longer nimble as before.

Then came a phase of consolidation and tool revolution where the partners in the network started or seemed to start working towards a global objective of serving the customer - the only objective agreed upon or could have been agreed upon by all the entities in the network. Good sense prevailed and the common objective gave a common ground for innovation and service to the customers. So far so good.

However one aspect of supply chain that was not able to get due attention and focus was the service side of supply chain - the after-sales service. This is pertinent towards Hi-Tech supply chains in particular. As the customers become more demanding, the after-sales service model became increasingly complex requiring tracking and management at multiple service points. Supply chains of today have become increasingly more complicated on this reverse side of supply chain.

Some of the broad challenges that Hi-Tech supply chains in particular are facing in the service side include
- Increasingly complex service models towards customers requiring guarantee schemes that are very difficult to price
- Due to miniaturization and complex designs, full part replacement has become popular but very expensive for supply chains
- Product Portfolio proliferation has led to maintenance of increasing pipeline inventory in terms of service parts
- Shortening Life-Cycles add even more complexity to service side business. Though laws require 7 years of service, as an example, the composition of the installed base of finished products is a dynamic target for planners to chase for planning service parts
- Aggressive selling in forward supply chains burdens the service supply chain, since this leads to consequent "freak" sales-returns
- Fragmentation in the forward supply chain leads to a huge complexity in the service supply chain, since the failure component needs to be replaced/repaired by coordination with a diverse set of component suppliers
- Forward supply chains have to absorb, adapt and adjust to the "regurgitation" levels in the supply chain to come up with a better evolved forward business models

This has made the supply chains of today non-linear in nature and very different from what we understood conventionally. There are entities in supply chain that are becoming core-competent in service side playing sometimes equal role as the forward side entities. All of the above has created a market opportunity for software product vendors to come up with appropriate tools to address this service side of supply chain. The marketplace of today have forced businesses to evolve from a point offering positioning to a an end-to-end offering positioning.

Times of today and future will be very interesting for service side supply chains.

Well, on a philosophical note, selling an offering to a customer is a lot like being accepted for a marriage proposal. As one wise old man said - all marriages are happy. It's the living together afterward that causes all the trouble !

Automate, Integrate, Extend….err Exploit

2008-11-19T09:08:14Z

Continuing from one of my previous blog post on the need to make Information Management central to spend visibility initiatives, I offer my views today on the pivotal role spend visibility initiatives play in Procurement transformational journey. And I do so, on the back-drop of three simple yet powerful words - “Automate, Integrate and Extend”.]]>

Often used to describe the road-map journey of an e-Procurement program, these three words (or correctly put, phases) represent in simple terms the crux of what needs to be done. e-Procurement transformation leaders aim to build the foundation by automating manual procurement processes there-by eliminating manual buying and moving towards electronic transactions. They focus next on integrating the planning and execution systems to move initially towards contract compliance and eventually towards an Analyze-to-Source (or Source-to-Analyze) closed loop mechanism. And finally, they aim to not just reap the obvious benefits of their investments incurred in the first two phases but Extend it by generating a self-sustaining “benefits momentum” via enhanced supplier collaboration, design/engineering collaboration, opportunity analysis, cost analysis, supply risks assessment and governance and control.

While the ROI is seen in all the three phases, it is usually in the “Integrate” and “Extend” phase that the initial drizzle has the potential to turn into a down-pour. And key to the benefits down-pour is a 360 degree enterprise wide Spend Analytics initiative. A recently published white-paper, Managing Costs by Leveraging Procurement Information Intelligently, offers a comprehensive yet refreshing look at achieving this 360 degree view of an organization’s cost structures via an ‘inside-out’ and ‘outside-in’ approach. “To overcome cost management challenges it would be imperative to get comprehensive knowledge about enterprise dollar outflows and the available opportunities (internal or external driven) to control it” says the paper. This statement couldn’t be more true today when the down-turn is causing the CPO to find innovative ways to reduce cost. So much so, that the mantra, Automate, Integrate and Extend, has right-fully given way to “Automate, Integrate and Exploit”. It is time to look “inside”, to review the investments made, to open up those flashy business-case with promised savings to make sure that those investments are truly exploited

Where do I start Supply Chain Risk Management in my supply chain?

2008-11-18T10:34:44Z

Implementing Supply Chain Risk Management (SCRM) is as much about changing the mindset of people, as much it is state-of-the-art tools and processes. I firmly believe that if every person operating within the supply chain is made aware of the risk associated with each decision, half the distance to success is traversed. Ability to foresee and assess the impact of the risk is probably the toughest thing to instill across supply chain, rightly so, for multiple reasons.

]]> 1. Operations managers across supply chain typically operate in silos. Although they are extremely well versed with their functional area, their understanding of how their function will impact the entire supply chain is often missing. They are not to be blamed for this, as they were never required to develop that view. This is the first major obstacle in implementing SCRM program. Developing a holistic view of multiple supply chains within the organization and how each function knits, is the first and foremost requirement.

2. My first reason could be wrong as I have come across Operations Managers, who are in effect, are supply chain managers in all aspects but the designation. The holistic understanding of supply chains is a hygiene factor, but that’s not enough. Ability to assess and quantify risk scenarios is of vital importance. Quantification uses anything from gut feeling to experienced speculation – and not always scientific tools and techniques. Organization needs to invest into researching and designing methodology to assess risk across all supply chain functions and processes.

3. Supply Chain Risk Management is in a nascent stage. Early adopters have developed in-house solutions to enable few processes. However, enterprise-wide SCRM solution remains a white space. Such a solution can contain simulation capabilities to aid business users in making informed decisions in context of Supply Chain Risk. It could also contain integrated view of supply chain processes and how, mitigation strategy employed in one area could benefit the entire supply chain. It should provide dash-board capabilities where the Supply Chain Owner could monitor on day-to-day basis, how much risk he/she is posed with.

While such tools are under evolution, one need not sit idle. Supply Chain Risk Management starts from - bringing the change in mind-set which by itself is a herculean task. Enabling “risk-conscious decision making” approach is the next step and that can aided by a plethora of research done by academicians. Supply Chain Operators can be equipped with simple excel tools to assess and report Value at Risk (VaR) on periodic basis – starting on a monthly basis and reducing the frequency as the process reaches the desired maturity level. The assumptions for the assessment should be well documented and reviewed monthly by monitoring council within each function. The same exercise needs to be repeated at organizational level with key stakeholders such as marketing/sales, finance and operations/supply chain functions being involved. Early adopters should leverage this opportunity for creating awareness to shareholders about the best practice for gaining their confidence.

Good and bad news in Supply Chain improvement programs

2008-11-13T07:24:47Z

I have had several discussions with clients and prospects in the last few weeks regarding their supply chain related transformation initiatives. Despite (or perhaps driven by) the macroeconomic challenges, most of the companies I have come across are moving forward with such transformation initiatives. It’s possible that there’s a sampling bias here and I may only be in touch with those companies that are actively pursuing a supply chain related transformation program. Irrespective, I consider that the good news.

However, as you might have guessed, there’s some bad news too. Let me illustrate the bad news with a specific example of a client that I recently met. This is a large F100 class company with a well-known track record in supply chain excellence. The client organization is expanding in new markets and channels and is clearly hurting in the supply chain aspect of that expansion. The challenges exist at multiple levels – strategic issues of where/how to compete at one end and tactical issues of supply chain execution at the other. The challenges the client organization faces are, however, so significant that the organization seems completely consumed by it. Each individual seems to have their own view of what the #1 issue is. There doesn’t seem to be a clear prioritization based on shareholder value (or similar metric) and no clear roadmap that helps resolve the various perceived #1 priorities. So the bad news is that some clients are finding themselves in a situation of panic where “we are so busy that we don’t have time to prioritize”. Are you seeing a growing sense of ‘do something’ panic around you?

Five 'I's' of Supply Chain Visibility

2008-11-13T05:14:29Z

While reading a thought provoking blog on a speech by David Allen, famous author of “Getting Things Done”, I could not help but find a corollary between capabilities, what he calls as five “I’s” , of personal productivity software and an ideal supply chain visibility solution. A day in life of an executive is a quite interesting corollary for Supply Chain. There are constraints, demanding customers, reluctant suppliers and unforeseen meetings/happenings that continuously disturb the meticulously planned schedules. Executives pay a lot of attention to their personal planning gadgets and hire great assistants who help them maximize their day’s worth. Just goes to explain how much would be the worth of a supply chain visibility solution that allows the supply chain managers similar control over their processes. ]]> Summed up eloquently by David as the Five “I’s” the five capabilities that would make for a great personal productivity software also can be extended to become the critical capabilities of an ideal supply chain visibility and control solution:

Interception: The solution must be configurable for line managers to place process sensing “listeners” that actively seek process deviation. For example a fulfillment manager might place a “listener” to intercept any delays in picking an express parcel due to labor shortage in the warehouse. An elegant solution would have an easy to navigate visual modeler that can be quickly configured by business managers and process owners.

Interpretation: A signal becomes a message only when it is correctly interpreted. The visual representation capability of the solution must allow the managers to quickly deduce the impact of the event intercepted by the “listener”. For example the alert from delayed express shipment should not only trigger alert to the fulfillment manager but also display if any linked shipments to the customer need to be rescheduled or expedited. This can be specifically useful if the express shipment was a part of customer’s scheduled plan for a critical project and it needs appropriate communication and resolution.

Investigation: A supply chain event cockpit would provide the manager a single control dashboard to not only monitor and interpret the critical events across the supply chain but also to quickly access other required information to take the corrective action. This goes beyond the plain vanilla BI offerings and should have “what-if” scenario generation capabilities to help manager quickly decide the best solution to get out of the soup.

Integration: Once the manager is through with the interpretation and investigation, the application must go beyond being the visual dashboard and analytical tool. Capability to trigger changes in other applications or start workflow do seem surreal like a Star Trek pilot control board, but with companies on their way towards SOA enablement and a robust portal strategy, this capability would certainly deliver the maximum bang for the buck.

Implementation: There are many products in the market that promise the proverbial manna of complete supply chain visibility but not many are easy to implement and integrate with existing applications. An ideal solution should cause minimal disruption to existing processes and infrastructure and act as an “ether” layer on top of other applications.

Now where do I start looking for such solutions?

SCM in a time of downturn

2008-11-11T13:15:14Z

With recession fears taking over large swathes of economy and the new mantra - actually pretty old really - being "cash is king", how would this impact SCM as a domain? There’s a fundamental business angle to this and then there’s an IT program/project side to the story as well. At its core, SCM needs to look at three constituents, suppliers at one end (including the folks toiling for you in the intermediate chains), customers at the other end (retail or B2B across various channels) and the partners through the supply chain, primarily your logistics providers (the movers). ]]>

Inducing the customers to part with their money would be the first part of the course of action. This could be via any number of variants of the currently much-maligned “enjoy now, pay later” model or something more innovative – what about pay-per-use for a finished good – akin to the rental businesses, even for B2B? At the supplier side, there may be greater focus on contract management - terms & conditions would get rewritten, supplier rationalization could trigger a wave of consolidation across commodity or geographic lines and contract compliance projects could get a second look. However, in these times, I feel that more than the sell-side and the buy-side supply chains, there would be renewed focus on the delivery vehicle as well. Of late, we’ve seen a spurt in requests on viewpoints around WMS consolidation (my colleagues Sat, Girish & I had written a paper also on this available in the white paper section http://www.infosys.com/supply-chain/white-papers/WMS-consolidation.pdf ), Multi-channel commerce initiatives, transportation optimization, inventory sync and so on.

The reason that here at Infosys we haven’t see a whole lot of slowdown in SCM domain could be that SCM is core to the business and hence is not considered a cost centre – not anymore anyway. Even functions like procurement, in lean times like this, can look at self-funded projects which should be able to feedback savings from quick hit initiatives back into more significant ones. The tie-in to a business case would become a whole lot more rigid, but SCM would be swinging ahead anyway, even in times like these.

I can’t see you but I want to be nice to you.

2008-11-10T18:32:35Z

Brick and mortar retailers have focused on the customer experience; store layouts, customer amenities, sales people, returns policies all contribute to the customer experience. There are retailers for whom the customer experience is an integral part of what they mean to their customers. So, when such retailers start selling through multiple channels, how do they ensure that the customer has a seamless experience across channels? Even more difficult to understand is, if one of the cornerstones of the experience is the “nice” feeling customers get in the stores. Over the phone I could still take orders and leave you with a nice feeling. How do I ensure a nice online experience? As a retailer, I can be fast and efficient. But when I can’t see you (and usually can’t talk to you) how do I be nice to you?

]]> A dipstick survey of most retailers’ online stores reveal an attempt to get the customer quickly to the merchandise, help them to easily choose, to easily get better views of the goods, and then to help them checkout faster. Check out any retail site and the pattern is: Search of items, add to cart, (add more to cart), proceed to checkout, login/register/continue unregistered, address details, payment details, (attempts to cross sell and up sell), order confirm, thank you screen.

Customer experience is enhanced in some cases by making this process non linear, where the customer is allowed to do things in any order and the ability to hop between steps. Some sites let you edit the cart from any page, some sites show you the cart contents at all times, some show the order total. Sites strive for efficiency and many do achieve that objective. The experience is further enhanced by achieving true multi channel visibility, allowing customers visibility to inventory in their local stores, allowing them to reserve and pick up. This still does not get into warm fuzzy feeling territory.

So the question I have is how does a site make me feel nice about the shopping experience. Is being efficient good enough? While working with a few large retailers recently, I could not figure out an answer to this question. In your experience, what have you seen retailers do in this space? If we think efficiency and convenience is all there is to it as far as the online experience goes, then that is not really a differentiator, because every good retailer is already there or will get there soon. So how do retailers give customers a nice feeling online? Does this matter at all, or will this be the next evolution for online retailing?

Managing risk for sustainability

2008-11-06T08:17:21Z

Many companies are focusing on supply chain sustainability—looking beyond pure financial results to minimizing the environmental and societal impacts of operations. Ultimately, sustainability is an effort to preserve the long term operations of a company, its supply chains, and its community. Building a sustainable supply chain requires a keen focus on long-term strategies; maintaining a sustainable supply chain requires a focus on operational excellence and management of risks in the supply chain. In fact, effective risk management is an essential component of any sustainability strategy.

]]> •a comprehensive, formal risk management approach;
•clear, structured identification and quantification of risks;
•coordination of risk management throughout the organization and across supply chain partners;
•and effective conversion of mitigation strategies into operational reality.
Across these four elements, the team found the Supply Chain Operations Reference (SCOR) model to be an excellent framework for structuring, communicating, and executing a supply chain risk management program. Using SCOR ensures the risk management program achieves real business results.
SCOR provides a structure that allows managers to overcome some of the common pitfalls in implementing risk management programs. Using the SCOR model forces a comprehensive view of the supply chain and, therefore, a comprehensive risk assessment. SCOR also adds structure to risk programs, which focuses effort and supports effective prioritization of risks.
The core of a SCOR-based risk management program is a common metric for quantifying risks so they can be prioritized according to their potential impact on operations. To do this, SCOR uses Value at Risk or VAR. VAR measures risk in terms of the probability of the event occurring and the financial impact to the supply chain if the event does occur.
For example, if a distribution center is located in an area that has a ten per cent probability of experiencing a hurricane, and a hurricane strike would disrupt the supply chain resulting in $1,000,000 in costs and lost sales, then the VAR for this one event is $1,000,000 * 10% or $100,000. In reality, this measurement would be a continuous curve ranging from the probability and impact of a storm that disrupts power supply for an hour to a direct strike from a category five hurricane that disrupts operations for weeks.
The power of VAR is the ability to put all risks—adverse weather, labor disputes, equipment failure, etc.—into common terms for comparison and prioritization. VAR also takes risk out of supply chain terms of late shipments and stock shortages into terms that make CEOs and CFOs take notice: financial impact. This also, in turn, makes it easier to allocate resources to mitigation programs because a clear return on investment can be calculated. VAR also supports collaborative efforts with supply chain partners. With risk in financial terms, companies have a foundation for cost or profit sharing arrangements that reduce risks across the supply chain.
Supply chain managers are increasingly being asked to take a more comprehensive view of supply chain success and sustainability. To accomplish this, managers must broaden their perspectives of efficiency and effectiveness to include the environmental and social impacts of operations and the impact of disruptions in the supply chain. A well structured, comprehensive risk management program is a critical component of a sustainability strategy.