Market-Driven

The Supply Chain Insights Global Summit is a week away. We are currently tabulating the results to publish the report, “Top 15 Supply Chains to Admire.” In this report, we track the progress on balance sheet performance of companies by peer group and chart the relative improvement for the period of 2006-2013. This work has taken us two years to finish.

As I look at the results—and reflect back on my ten years of experience as an analyst with these companies—I find the differences between a leader and laggard boil down to five things: supply chain leadership, talent management, active design of the supply chain, strong horizontal processes, and being good at supply chain planning. While consultants and technology providers may preach that you need the latest and greatest technologies, I often see companies implementing the wrong technology, doing it badly, and sending them backwards. Supply chain leaders that make the biggest difference build supply chain potential and make small, incremental progress over time.

A Closer Look at Supply Chain Talent

For most, supply chain talent management is challenging. In the recent report that we completed, Supply Chain Talent – A Broken Link in the Supply Chain, we shared data from a recent study that only one in three companies today thinks that they are managing supply chain talent effectively. When I look at the performance data, I think that it matters.

Figure 1.

Ease or difficulty of filling supply chain positions

Talent management is not trivial, and supply planning is at the nexus of the talent problem.  Today there is a shortage of mid-management supply chain talent; and as shown in Figure 1, some of the toughest positions to fill are in the area of supply chain planning. Supply chain planning requires a good understanding of the business, strong influence skills and deep analytic capabilities. These are hard to build, and the loss of a great planner can hurt.

Job satisfaction for supply chain planners is low. As a result, companies are churning planners—they are moving from one company to another. Due to the unique skill mix, it is difficult to recruit supply chain planners. Which makes me wonder, if we gave our supply chain planners more good old-fashioned love, would we have fewer open positions? And, if the position was more desirable, would the job have higher satisfaction causing others within the company to want to do the job more readily? I think so. Here I share my point of view.

What I See in the Data

From time to time at Supply Chain Insights, we do quantitative assessments of individual companies to understand the dynamics within the supply chain organization. These are private studies that we do for clients, and we keep the results of these studies confidential. However, time after time, we see a consistent theme in the data. Supply chain planners do not feel appreciated. The job is tough and the obstacles are many. Here are the seven issues that we see most frequently:

  1. Changing Priorities. It is hard for a planner to keep up with ever-changing priorities. Planning takes time and the use of optimization requires a clear objective function. With conflicting and ever-changing priorities, it is hard to do.
  2. Rewarding the Urgent. No Time for the Important. Most organizations reward the fire fighters. Planning requires a focus on the important and allowing planners time to plan. Culturally, this is a tough shift. 
  3. Giving Planners Time to Plan.  Good planning takes time. When an employee is always fighting fires, they do not have the time to plan.
  4. Making Their Positions Meaningful. At the end of the day, when we turn turn out the lights in our offices, we all want to think that we make a difference. Supply chain planners want their work to be used. They want to make a difference. Too few companies actually use their plans to make better decisions. The degree of this gap has grown greater in my time as an analyst. The good have gotten very good, and the average companies have gotten worse.
  5. Giving Planners Technologies That Are Easy to Use. The right supply chain planning tools have the right data model that is set up to adequately model the environment, and the planners are supported by easy-to-use business intelligence tools. As you can see in our reports on technology satisfaction, Voice of the Supply Chain, and Maximizing the ROI in Supply Chain Planning,  both are an issue right now.
  6. Creating the Right Work Environment. Politics, and the lack of understanding of the basics of supply chain, are issues for supply chain planners. The planners see the gaps in the organization first, and they need leadership help drive alignment.
  7. Clarity of Career Paths. In the early days of creating a supply chain planning group, the positions were entry-level and there was high turnover. In the companies that do it well, there are established career paths that reward planning.

What I Hear in Discussions.

When groups are doing well, you don’t hear stories like these:

  • “Yesterday, I presented the demand plan to my boss. He asked me to go back to my desk and create a better plan. When I asked him to define a “better plan,” he said that it would be one that showed the company growing with less demand error. When I asked him how to do this, he said just work on the plan and make it better. I shook my head. I cannot change the basics of the business.”
  • “Good news travels fast in our company, and bad news is seldom communicated. So, when we run a demand plan on market data and see that products are not selling, our jobs become very uncomfortable.”
  • “My boss criticized our work today on the demand plan stating that the demand error was too high. He mentioned to one of my colleagues that he wanted to recruit a new demand planning team to reduce the error. He just does not understand that the demand error is characterized by market conditions and what you are selling in the market. He thinks that he can just get a new team and that the demand error will magically go away.”
  • “My general manager believes in having a high bias. He thinks that if you forecast high that you are going to sell more, then you will sell more. When I tried to explain the issues with over-forecasting on waste and inventory obsolescence, he was dismissive. We have to keep two sets of ‘internal books’. One set has the marketing and sales bias and the second has what we think that we are really going to sell.”
  • “We are always on the hot seat. Whatever goes wrong, it is attributed to issues with the demand plan. I often feel that we are the scapegoat.”

Unfortunately, we hear these stories more than we’d like. So, on this sleepless morning, as I sit in Stockholm trying to recover from jet lag, I want to ask you a question. Have you given your supply chain planner some love today? If not, why not stop by their office this morning and make the first step. I think that it matters.

We will be discussing the issues and opportunities with supply chain talent in greater detail at our upcoming Supply Chain Insights Global Summit. We hope to see you there. If not, try to join us by ustream. Supply chain talent and the role of supply chain planning are topics that I think need to be elevated.

 

Let the Design Begin…

by Lora Cecere on June 29, 2014 · 0 comments

This week, I spoke at the LLamasoft Summercon Conference. It was held at the University of Michigan in Ann Arbor. The conference was low-key. The University building was old, and well-worn. The doors hung precariously on their hinges, and the steps were uneven. The shelves needed a good dusting and the air was musty. It was far a cry from the neon and glitzy hotels of Las Vegas where I am often speaking.

On Wednesday, the theater at the Michigan League was bursting at the seams to hold over 500 attendees. The theater was packed. The attendees were sitting on the edge of their seats to hear about the next release of LLamasoft software. As I listened, I began to reflect.

Reflections

I remember the first time that I met the founders, Don and Toby. Don was quirky, and the company story was different. They came to Boston to tell us the story of LLamasoft. They also brought me and my colleagues at AMR Research stuffed Llamas. We laughed, and felt a bit silly, leaving the conference room holding our new furry tchotchkes. “What a crazy name! I wonder if they will make it?” we would exclaim.  In a fit of giggles, we slapped each other on the shoulder in the coffee room and kibitzed, “Can you believe they brought US these crazy animals?” And from time to time, when we were behind deadline, and teasing each other about the looming weekly post, we would throw our llamas from cubicle to cubicle.

Figure 1.

Design as a Standalone Process

Today, LLamasoft, and the management of design processes, is no laughing matter. The company has skillfully navigated the market to survive and now thrive.

Ten years ago LLamasoft was an unlikely contender. The market for network design tools was growing at a moderate rate, and most of the market had invested in technologies from either i2 Technologies (then termed i2 Strategist) or Logictools.  With the purchase of i2 by JDA, and Logictools by IBM, manufacturing companies serious about network design started looking for a company, with a well-established community, that was more serious about network design. The reason?

Today, supply chain design has become a process all to its own. In mature companies, it is no longer under the shadow of planning. As shown in the process flow, the design of the supply chain has become a closed loop process with planning and execution.  Why? There are seven reasons:

  1.  Customer Service. Demand and Supply Variability. With the rise in demand and supply visibility, it mattered more.  It could no longer be just about inventory levels. Instead, the design needed to be more encompassing. To balance new requirements for customer service with a wider product platform, the focus needed to shift to be on the form (raw, semi-finished goods, and finished products) and function (design of cycle inventories, seasonal builds, safety stock and customized product strategies) of inventory. This analysis needed to be completed monthly and fed to newer forms of inventory optimization technologies.
  2. Mergers and Acquisitions and the Management of Global Operations. With mergers and acquisitions, and the management of global operations, it could no longer be an ad hoc process. Instead, it needed to be steps of continuous designs. As labor costs in China increased, the network needed to be more flexible. With the shifts in tax structures, the network design needed to morph. As a result, the financial and strategy teams became more interested.
  3. Ensuring Profitability. As Sales and Operations Planning became more important, supply chain design became more systemic. The goal was to translate volume and unit-based data into a profitability “what-if” analysis. The advanced LLamasoft user has a model on a computer tablet (Sherpa product) that enables the visualization of S&OP trade-offs within the S&OP meeting.
  4. Criticality of Corporate Social Responsibility. As corporate sustainability initiatives became more important, the design for carbon needed to be determined. As shown in figure 1, the gap in measurement and design for carbon is still a major opportunity.
  5. Resiliency. To build the right buffers in the supply chain, it was no longer just about designing physical flows and buildings; instead, the focus was shifting to designing process flows and decoupling points.
  6. Value-based Analysis. While discrete industries are good at the management of cycles, and process industries are good at the design of flows, as companies worked on Lean programs for value-stream analysis, they found that it was about the design of flows and cycles together. Network design tools were essential to manage the improvement of both together.
  7. Cost-to-Serve and Top-to-Top Meetings. The largest opportunities for companies lie in the gaps between the links of the supply chain. As companies attempted to implement new programs, downstream customers asked for suppliers to redesign for value.

It does not look the same at all companies; and no company is actively modeling against each of these goals. In fact, design as a standalone process is still evolving. In our research at Supply Chain Insights, we find that one in three companies greater than $1 billion in revenue has a supply chain center excellence; but only 50% are satisfied with their capabilities.

The gap is tough. Most companies are still struggling with “what good looks like” and “what defines supply chain excellence.” Most companies do not know how to manage this thing called supply chain, that is a complex system with increasing complexity. What they do know is that supply chain design helps.

Design Processes Grow Up

What is clear is that more and more companies are not willing to inherit their supply chains. They are on the journey of active design. The design of cycles and flows is becoming more important. It is serious business. So, as I cleared my throat to present at the Summercon conference, I looked into the eyes of over 500 supply chain professionals. It was the  gaze of a serious crowd.

I smiled as I began to present the story of the “Metrics that Matter.” I was excited to share that companies that more actively design their supply chains outperform against their peer group on the Supply Chain Index. I encouraged them to be aggressive.

I look forward to writing their stories…. I am convinced from three years of work on the Supply Chain Index that it matters.