It is the longest recession of the last four decades; and economists are gathering to discuss the possibility of a double-dip recession. It will not go away anytime too soon.
All that is known is the unknown. As 2010 winds to a close, three things are certain for supply chain professionals:
- The links of the supply chain are weaker
- Demand is more uncertain
- Supply is more volatile
These three factors make horizontal processes like S&OP more important. In my research with Fortune 500 companies, I find that companies with strong horizontal processes sensed the changes in the 2009 downturn and aligned their supply chain 5X faster laggard (http://www.supplychainshaman.com/supply-chain-economic-recovery/good-forecasting-matters/). They were also able to achieve better year-over-year results in Days of Working Capital (DWC) (http://www.supplychainshaman.com/uncategorized/mirror-mirror-on-the-wall/) .
One of the factors that differentiates leaders in S&OP is the use of “what if analysis”. They focus on “What if analysis that focuses on & with the end in mind.” If you are scratching your head, please read on. It will become clear.
I am currently heads down finishing a report on S&OP technologies. What is clear to me from three months of research is that the gap has grown between the offerings of ERP expansionists and best of breed providers, that Software as a Service (SaaS) technologies are now a viable alternative, and Excel has a new birth. What-if capabilities and industry-specific data models differentiates the providers. Traditionally, S&OP technology selection has been a choice between Business Intelligence Vendors (BI), ERP expansionists (ERP), Advanced Planning Solutions (APS) or build-it-yourself. Today, there is a new category of software designed specifically for S&OP that has been largely ignored by the ERP expansionists (INFOR, Lawson, Oracle and SAP) and is under-served by traditional APS and BI providers.
Last week, prior to finalizing my report, I had the opportunity to present on this topic to 100 supply chain leaders on a Kinaxis webinar. When asked, “has what-if analysis increased in importance in 2010?”, over 60% of the respondents said yes. When asked, “do you have what you need in what-if analysis?”, the group was mixed. 45% of the respondents were just beginning to use what-if analysis and 42% said that there was a significant gap in what was available in the market with only 13% stating that they have what they need to perform their jobs today.
The gap for most lies in selecting technologies that can adequately model the “what-if” capabilities of their supply chain, and then agreeing on what good looks like.
For most that have been lulled to sleep– like by the Lorelei sirens of myths of old that lured the sailors to their shores – by the promise of an integrated end-to-end supply chain, they find themselves on the rocks in these uncertain times. Their first challenge is defining “the end in mind”. As teams focus on solving the problem, they find that have not thought hard enough on what drives value in their supply chain. Today, this is not trivial. It is ever more complex as companies balance goals and trade-offs for: corporate growth and costs, customer service and inventories, corporate social responsibility goals and cycle times, and tax efficiency versus sustainability. Once they align on what good looks like for their supply chains, they find that they are stuck. Their IT systems are unable to meet the requirements for what-if analysis. As a result, the teams cannot align against trade-offs and improve supply chain outcomes. In this world of uncertainty, they find that their deterministic outcomes of their installed IT systems assume certainty. They are stuck. Fixed integration of an unusable outcome.
They only become unstuck when they focus on the & or “what-if analysis” with the end in mind (e.g. the right trade-offs that drive the most value in the value chain for that company at that point in time).
What do you think? Do you also see this as a challenge? What are you doing to over-come this problem? I would love your input. Please share with the over 2000 readers of this blog.
This week, I am vacationing on the North Carolina shores. I am loving being lured to sleep by my own Lorelei–the winds that blow each night on my cottage– at the beach. I feel lucky to have been able to escape both the hot temperatures in the Northeast US and the oil pollution in the gulf.
Next week, I am spending time with three companies discussing what drives supply chain excellence and how they perform “what if-analysis” for their supply chain. With any luck, I will be able to publish the report on this topic by the end of the week. Please let me know your comments. I would like to include your feedback.