Supply Chain Talent: A Broken Link

by Lora Cecere on August 1, 2014 · 0 comments

These are the grim facts. Only 9% of companies feel that they manage supply chain talent better than their peers. The issues are growing. Job turnover is 15% and new positions remain open for 4 months before they are filled. I think that supply chain talent is a broken link in the supply chain. I also believe that the adoption of new mental models is a barrier to progress.

On August 5th, I will be hosting a webinar on supply chain talent.  I will be joined by Keith Holliday of Sunoco Products and Jacqueline Faseler of Dow Chemical to discuss the research results of a talent survey that we are completing. The survey is still open and the final results will be shared at our upcoming Supply Chain Insights Global Summit on September 10th-11th.

During the webinar, I look forward to dialogue with the panel on the research findings on these charts. I find it interesting, in the research, that supply chain talent is seen as an increasing point of pain and that the adoption of new ways of thinking is a barrier to closing the gap.  I want to know more about why the panel thinks this is the case.


A Case Study

I welcome their perspective on how to solve the problem. Let me explain through a story. Last week I was on a call with a client that was looking for a consulting partner to help redesign demand planning processes. This new contact had previously been a CFO at the same firm and was new to supply chain. Early in the conversation, the client admitted that they did not know much about supply chain. The organization had implemented a good demand planning technology, but badly, ten years ago. In this initial implementation, they made the mistake of automating their old processes with new technology; and due to other project commitments, the organization has not upgraded the technology and rectified the situation.

The conversation went like this, “I want to implement best-in-class demand processes. I don’t have time to look at the technology, and I want to hire someone with gray hair that has done it well at another company to come and help me.”

I scratched my head. My struggle was three-fold:

  1. The demand planners at this organization are quite good. I have worked with them for many years. It is my belief that they would give this CFO better advice than 9 out of 10 consultants that I would shortlist into this account. They have been looking for management support to fix a bad situation for a decade, but to no avail. Based on the conversation, I don’t believe they’ll have a voice in the outcome.
  2. The initial implementation was flawed because the company automated their past practices and did not understand what was possible through technology automation. It is happening again. At the time of the first implementation, they were using spreadsheets, and they implemented the new technology based on spreadsheet-like thinking, and never used the optimizers. Using this approach, when will the company ever be able to look at what the processes could be through the advancements in technology? The client expressed the new goal as a “redesign of the demand planning processes with no discussion of technology.” This well-intended CFO is making no attempt to understand what is possible through the software. My struggle is that I find it almost impossible to design demand planning processes without including a discussion of the technology’s capabilities. Why?  The technologies, and potential outcomes, are so different by system; and I find most executives that are not familiar with planning woefully lacking an understanding of what a good demand planning implementation could be. Demand planning cannot be done well on a spreadsheet.
  3. As we talked, it was clear to me that this prior CFO was more comfortable with a gray-hair approach. The request was for someone who is seasoned and had implemented demand planning processes before. My issue is that these processes are in a massive overhaul in the industry, and that someone who has implemented one or two times will only understand this more limited perspective, not what is possible. The CFO was unwilling to engage with the technology provider resources (whose resources are quite good) to understand what is possible, and they did not want to tap the resources of more seasoned consultants that had a broader perspective. It is my hope that the person she finally selects to help reads my research, and will bring these insights into the account:
  • Consensus Forecasting Sounds Good, But Has Been Problematic. Consensus forecasting processes implemented in the beginning of the last decade to include sales and marketing input sound good, but introduce bias into the forecast. The average bias can increase 5-9% through consensus forecasting if the organization does not adopt Forecast Value-Add techniques.
  • Demand Planning Needs to Report to a Neutral Party. When demand planning reports to a sales or marketing function, the forecasts tend to have higher error and bias. It needs to report to a central planning group or a center of excellence. The focus needs to be on the reduction of bias and error.
  • Use the Technology. I can count the number of successful demand planning implementations on my two hands. There are not a lot of great demand organizations: most have organized for supply. However, when the technologies are properly implemented, and the forecast is used in decision-making processes, it matters. I can see it in the results that I will present in Scottsdale. This is one case in supply chain thinking where I think the understanding of what the technologies can do is paramount to making improvement. However, executives do not trust software vendors; and based on the dynamics of the software vendors in the market, I understand why. This continues to be a dilemma.

So, let’s apply the lessons from this story to the talent discussion. The story demonstrates two gaps that I see often that tie to the talent discussion we will be having  next Tuesday.

The first gap is the senior leadership’s understanding of supply chain. When senior leadership is assigned to manage the supply chain without training or prior experience, there is a lack of understanding of what is possible. While financial processes are transactional in nature and can be managed in spreadsheets, the supply chain decision-making processes are forward-looking flows requiring technology and optimization. Staying current on industry practices matters to performance. A new leader has to quickly sort out who they can trust in their organization and build a guiding coalition.

The second gap is the management of talent. How do these demand planners get a voice to drive adoption of an automated process that could work?

At the end of the call, I short-listed some consultants  I thought could help, but I think that the dialogue represents the essence of the problem we will be talking about on Tuesday in the webinar; and on September 10th and 11th at the Supply Chain Global Summit in Scottsdale, AZ. In short, senior leaders and directors need to reskill. Supply chain processes and technologies are changing and can drive improved outcomes. It shouldn’t be about yesteryear’s processes and technologies with limited thinking. Instead, we need to unleash the power of the supply chain team to scale new heights. It starts with talent. For me, this is exciting; and, I believe that our mental models are at the crux of the talent issue. What do you think?

I hope to see you there!

Joining Forces for the Third Act

by Lora Cecere on July 24, 2014 · 0 comments

“I read your blog, and was struck by some of your comments on Forbes,” stated the email. “Could we arrange a call?”

“Sure,” I said, and the call was quickly arranged.

As I answered the phone, I heard the voice of an aggressive investor in supply chain technology software. He seemed very certain in an uncertain market. I scratched my head because I question how anyone can be this “sure.” Since more and more equity groups are reading this blog, and sending me questions, this post is for them.

I have been writing on what I term the “Third Act in Supply Chain Planning Software.” I believe that we have seen two prior evolution periods of supply chain planning software and we are entering into a third period. I am excited about this evolution and eager to share my opinion.

Here are the questions I am getting most often:

What does it take to be successful in the supply chain planning market? I look for three basic factors. Leadership by the CEO, understanding of the business problem at the product marketing/management level, and the ability to build software. Many companies are missing one or two; while sadly, some are missing all three.

So, you write that SAP will struggle and then recover, but Oracle will not do well in what you call the “third act” of supply chain planning software. Yes, I say. This is the beauty of being an independent analyst and having the ability to call as spade a spade. I find too few analysts are able to speak the truth. They are hamstrung by their organizations.

I think that SAP has great talent to write software, but their current focus is on the analytics technology market. They put supply chain into a traditional framework of CRM, SCM and SRM and the world has moved past this. I think that SAP lacks focus and a basic understanding of the business problem.

Most of the work on SAP APO is currently focused on sales-driven initiatives or maintenance work, and as a result the company has struggled to bring supply chain innovation to market. SAP SNC has been disappointing, as has their work on inventory optimization and demand sensing. I don’t think that they understand the basic concepts of being demand-driven enough to bring new solutions to market to solve the problem. We see in our benchmarking work that SAP APO takes three times longer to install and has a lower ROI than best-of-breed software.

Oracle is different. Their solution is based on acquisitions. They have not been successful in building a cohesive architecture. While there are pieces of the software like transportation planning or trade promotion planning that are promising, today it is piece parts.

They are in worse shape than SAP. With the turnover in the organization, they are missing all three of the elements that I look for in a successful supply chain company. I just don’t see the leadership, the understanding of the problem, or the technology skills to evolve the product. The rewrite of the Numetrix and Peoplesoft supply chain planning products has been disappointing for business users.

What about JDA? Using the same model, JDA has the ability to write software, but they come up short on the other two factors. There is a shift in leadership along with turnover of talent, and both are a barrier to success. Their current struggle is to bring together different views. Some folks within JDA want to solve the problem like it is an i2 problem, while others approach it from a Manugistics viewpoint, and others from a Red Prairie perspective. None of the three views today is visionary; and it is hard for them to get a clear vision of what to build and how to go to market in the manufacturing space. As a result, we see them on-again and off-again in the market. They need to jumpstart their thinking; and no, I am not optimistic about flowcasting. I think that it is problematic for many reasons.

Which companies do I think are interesting?  I like the movement into Software as a Service deployments. I also like B2B networks. So, my list of interesting vendors in this space includes: Kinaxis and Steelwedge for SaaS; GT Nexus, GHX, Elementum, Elemica, E2open for B2B networks; Logility and Terra Technology for demand and inventory management; Quintiq and Solvoyo for concurrent optimization; Llamasoft for network design; and Enterra Solutions and ToolsGroup for Cognitive learning. I also like what Infor is doing on visualization, S&OP and collaboration.

What do I tell SAP clients? I advise clients to take advantage of their current architectures. Stabilize the investments in ERP. If the company has SAP APO, I advise them to maximize the integration capabilities of the CIF interface and then augment the platform to compensate for the lack of depth in the SAP optimization engines.

I hope that this helps. For line-of-business supply chain leaders, we will be facilitating a session at the Supply Chain Insights Global Summit on September 10th-11th to enable supply chain leaders to talk to each other about this topic in a room with no vendors or consultants. It is an informal networking session to discuss alternative strategies to build technology architectures as we transition from the second to the third act. We hope to see you there! Reserve now, because the room block is up on August 8th at the Phoenician, and there are only 48 seats remaining in the audience.