Supply Chain Technology

Unplugged, Uncensored and Unabashed

by Lora Cecere on May 30, 2012 · 0 comments

The title says it all.  The book is done.  Yes, I am busy writing reports.  This morning, we published our second report from Supply Chain Insights .  Check it out at SlideShare.  Two more reports are planned for this week and one is in the queue for next.  It is great to be able to write reports in front of the firewall based on quantitative data.

I love it! Real data from real supply chain leaders that I know and respect. It is fun to be unplugged from a large research firm, uncensored by technology vendors and unabashed in my approach.  I am now free to write openly for the supply chain leader based on the trends that I see. Did I tell you that I am having fun yet?

The Report Findings

In short, in the report, we share that while supply problems abound (dirty data, product proliferation and rising commodity prices), 2012 is the year of demand. Supply chain leaders have spoken.  Companies are trying to redefine demand management and are actively investing in demand sensing.  In this journey, they will tangle with the emerging definitions of big data, new forms of demand data and the continued evolution of Demand Signal Repositories (DSR).  The good news is that many software vendors are ready with new solutions that can help. They are in early launch phases, and are currently under NDA.  So, more on that later, when the Shaman can speak publicly.

Quite frankly, I was surprised to see that there was not more emphasis on supply by supply chain leaders in the data.  When I asked why in follow-up interviews, I heard a lot of frustration.  Companies do not want to do more of the same. Their success in improving supply has been a slog.  Companies have a multiplicity of systems, there is a low satisfaction level of supply chain systems among supply chain leaders in all areas except logistics and warehousing.

In my opinion, one of the greatest issues was the lack of clarity on “What is Supply Chain Excellence”  during the implementation cycle.  I feel that we are curently digesting a myriad of systems that were implemented during Y2K and then thrown to the wind as part of mergers and acquisitions.  And, let’s face it, most of these implementations were not stellar to begin with.

Most supply chain leaders are frustrated, some are angry and many are resolute to do better next time.  I think that we go forward by going forward.  Three decades of supply chain management are behind us, we are at the dawn of a new era. Growth has flattened, costs are rising, and supply chain talent is becoming scarce.  The big IT budget to implement big projects is not today’s reality. <Remember those days? WHOAH! The stories from those days may be my next book.>

Learning from the Past

I think that we have to learn from the past, and not repeat past mistakes.  As the large consulting projects for Enterprise Resource Planning (ERP) wind down, more and more consultants are hanging out a shingle to help companies define supply chain leadership.  I am worried.  I see too many people and too few of them with a good understanding of the basics.  Here are three recommendations that I have for my friends in supply chain management after writing the report:

Process is the Wrong Place to Start.  Start with Supply Chain Strategy.  When people speak to me about starting with process and best practices, I smile. I think that we have few BEST practices.  Instead, I feel that we have EMERGING practices. Please avoid those consultants that start with slick powerpoints advocating BEST PRACTICES.

The processes that are the most mature today are in the areas of transactional processing:  order-to-cash and procure-to-pay.  Yes, we know how to pay an invoice and write to a code of accounts.  And, hopefully, you have made progress on building a reliable supply chain. One that can take and process orders reliably. If so, it is ok to give yourself a pat on the back in this area. It was hard work.  Hopefully, you are done with your ERP implementation now and can move on and use the data. If not, stay focused on the basics.

As you move forward, you will find that the  least mature areas are those that are growing in importance.  This includes demand and supply sensing, risk management, revenue management, Sales and Operations Planning (S&OP), demand orchestration, and supplier development. These are horizontal processes.  Companies have focused on the definition of strong vertical processes (make, source and deliver) without a clear road map of how to make trade-offs horizontally.   What supply chain leaders have failed to define is an actionable supply chain strategy that helps companies make decisions cross-functionally. While the functions have become stronger, most organizations lack clarity on how to make trade-offs. Functional excellence can be a deterrent to supply chain excellence.

So, what is supply chain excellence?  In short, you need to define it.  It is the delivery of the business strategy at maximum supply chain potential.  So, if I were in your shoes, the first place that I would start is in the definition of Supply Chain Strategy as defined by figure 1 above.  I would not phone a big consulting company. Instead, I would start outside-in: from the markets back.  I would work to actively define meaningful customer and supplier relationships:

-What is happening in key relationships on both the demand and supply-side of your business that needs alignment? 

-How do you use the redefinition of these relationships to sense market changes?

No, I am not speaking of last week’s changes, or last month’s market shifts. Instead, I am speaking about the use of daily data used daily with near real-time latency powered by new forms of analytics that allow you to sense and learn.

The ends of the supply chain are fragile.  The center definition of the supply chain is stronger.  To define the supply chain outside-in, the supply chain leader will need to win the support of the Chief Operating Officer to build and execute this strategy. Why? It requires the definition of the extended supply chain from the customer’s customer to the supplier’s supplier, and the redefinition of customer and supplier relationships.  Sales and procurement will be very resistant because the traditional roles of sales and procurement have been very transactional.  Be patient in this journey.

Then focus on the product platforms and the acceleration of new product launch processes.  How well are you bringing new products to market?  And, rationalizing product life cycles?  And, using supplier innovation networks to fuel design?  Build strong relationships with R&D to help infuse supply chain thinking into the stage-gate processes for new product launch, and work to bring more value into the value chain through actively defining these processes.

After answering these key questions, define the network design for each of your supply chains clearly defining the supply chain response.  I love what is happening with the new generation of network design tools.  Invest in them to understand the effective frontier for each supply chain and how to make the right trade-offs between cost, service, forecast accuracy and working capital.  Actively define the supply chain response and communicate it to your teams.  This will require work; and remember, that the most efficient supply chain is seldom the most effective.

Then focus on the building of talent.  Augment the good work in supply lean initiatives by investing in Forecast-Value Add (FVA) initiatives and “what-if” modeling.  Build a cross-functional understanding in your team through horizontal career paths and focus on horizontal process excellence in Sales and Operations Planning (S&OP), Supplier Development, Corporate Social Responsibility (CSR), and Revenue Management. Supply chain talent is becoming a constraint.  In the words of one manager from South Africa, “I looked at the situation.  Yes, the gaps in my team were large.  One option was to just terminate them all.  There was sufficient cause, but I had a problem. The issue was that the available candidates in the market were no better than what I had on my team.  As a result, I sucked it up and took responsibility to train the supply chain team.”

After doing this, then move to process. Define the process definition for your company.  You are then ready to define your three-year road map for process improvement.

A Project-based, Piecemeal Approach is too Limiting.  Many companies have deployed a functional strategy of many projects working on continuous improvement in isolation.  This just will not work anymore. In the words of one supply chain leader, “We have made a lot of supply chain investments, and all the project teams report outstanding progress, but the overall progress in supply chain excellence for my organization is stalled.  I am to blame.  We have outsourced the responsibility for crafting our supply chain vision to ill-prepared consultants and wrongly believed that we would deliver supply chain excellence through an extended ERP project.  Yes, we can now better see and record transactions, but we have not improved our ability to sense and adapt to market changes.  The ends of our supply chain are fragile. The fault lies with me and my lack of vision for the organization.  We will not make progress through this traditional piecemeal approach.”  In short, there is no substitute for leadership.  While supply chains can be outsourced, and talent can be obtained through new ways of deployment, supply chain leadership and vision are the largest barriers to progress. A piecemeal approach will not get you there.

Forge a three-year road map based on a well-defined supply chain strategy, and please do not hire the busloads of consultants to lead this effort.  In my opinion, there are just too few in the market that really understand supply chain excellence. If you are interested in my short list, please send me an email at lora.cecere@supplychaininsights.com.

It is a Multi-Year Journey.  In the research for my book, Bricks Matter, I interviewed 75 supply chain pioneers on the evolution of supply chain practices.  I loved listening to their stories.  One of the most memorable quotes was:

No real impact can be made in a supply
chain in less than three years.  It takes time.

Marty Kisliuk, Director of Global
Operations and Business Development,
FMC Corporation Agricultural Products Group

Marty, I could not agree more.  However, the supply chain leader has to build the guiding coalition to earn the organizations’ support over this journey.  I firmly believe that it is about the delivery of value.

Summary

In short, this week, and the next three, I will be traveling. I am in Germany this week catching up with leaders at SAP; and next, I will be at the Consumer Goods Sales and Marketing event.  The following week, I will be checking in with IBM at DemandBetter in San Francisco and speaking at the APICS/IBF Best of the Best S&OP conference.  We are currently working to close the surveys on Big Data Supply Chains and Mobility in Retail.  Lots is happening in the market, and I am excited to share the insights. I hope to see you in my travels.

Revenue Management: Beyond Smoke and Mirrors

by Lora Cecere on March 18, 2011 · 0 comments

Improving revenue management –which includes the management of multi-party trade settlement (sometimes dubbed bifurcated trade management) — is an equal opportunity for all supply chains.  No matter whether you are in a consumer, high tech, life sciences, or chemical supply chain it is a major source of cost, waste and frustration.  Executives often will ask, “Why can’t we get this right?”  I laugh and empathize.  What seems so simple is very complex.    

The revenue management process varies by industry.  Each value network shapes demand a bit differently and the contract terms are VERY industry specific. For example, consumer products companies lean heavily on trade promotions, high tech supply chains focus on new product introductions, life sciences on rebates and value-based outcomes and the chemical industry on price.  Despite the differences there are commonalities:

  • Traditional CRM is not the answer.  The historic footprint of CRM is sales pipeline management, customer service and call center execution and business development.  This footprint lacks the data model for either decision support (Revenue Management Optimization (RMO)) or execution (Revenue Management Execution (RME).  This CRM data model is fundamentally flawed—focused on a pipeline data model for sales effectiveness versus a product/services data model that looks at the process workflows of bifurcated trade, the inter-relationships of the demand shaping levers (price, promotion, incentives, buzz from the social web, trade and brand marketing and new product launch) and the visibility of a clear baseline forecast. As a result, the industry is forced to nurture and evolve small, industry-specific providers to augment and redefine front-office functionality.
  • Complex Workflows with Substantial Opportunity.  For the corporate fiscal year ending in 2010, the size of the prize is large. The average consumer products company spent 22% of revenue on trade promotion management (source Symphony/IRI and AMR Research/Gartner) and for the average life sciences company, rebates represented 18% of revenues (source IMS). For either industry segment this can quickly add up to over a billion dollars annually.  Yet, no company that I have interviewed in either industry (over 150 companies) believes that their processes are under control.  Uniformly, companies see revenue management as an opportunity, but do not know how to seize the opportunity.  There is no easy answer.  To understand why, read on.
  • Industry-specific Workflows.  Each industry shapes demand differently, has different contracting processes with their downstream trading partners (buy-side), and uses substantially different language/terminology to describe what they do. (Can you imagine if you substituted the acronym BOGO (Buy one Get one Free) from Consumer Products (CPG) sales cycle for Averaged Managed Price (AMP) for life sciences sales cycle?) These processes are VERY industry specific.

This leads to a problem.  When buying a solution, where do companies turn?  Who can they trust?  There is no perfect solution.  Why? Traditional Customer Relationship Management (CRM) technologies are insufficient to solve the problem.  In sales cycles, the battle lines in sales cycles quickly form.  Information Technology departments want one throat to choke and believe that this type of functionality can be sourced from a CRM or ERP provider.  Lines of Business (LOB) leaders believe that they need industry-specific functionality from industry-specific suppliers.  They are both right, they are just not good at drawing the battle lines.    Companies need traditional CRM functionality for business development and contact management, but industry-specific functionality for predictive analytics, base-line forecasting and bi-furcated trade management.  The decision on Business Intelligence needs to be based on the total IT portfolio.

  • Changing Processes.    These are not enterprise, but are inter-enterprise workflows, driven largely by the nature of the relationships in the extended value chain.  As a result, they need to be designed from the outside-in not the inside-out.   It is not easy.  The technologies lack an inter-enterprise system of record and standards.   Given the recent shifts in power and the increasing compliance/regulations of these industries, the industry processes are in flux and the need is greater with even more dollars on the table.
  • Opportunity Abounds in both Planning and Execution.  While revenue management should be a horizontal process focused on demand orchestration, the applications in the market are largely piecemeal serving organizational silos not end-to-end supply chain processes. There are no complete solutions. The choice is fraught with risk, but I have seen greater success when companies chose industry-specific best of breed providers than try to adapt the data model through custom development that is required with an ERP solution.  In short, while people want it there is no effective end-to-end solution for any industry for revenue management.

Split the Baby?

While it would be great if there was an industry roll-up strategy to consolidate the small vendors that abound in the area of revenue management to deliver an end-to end solution? The list of names is long:  Accenture/CAS Systems, Adesso, Biztech, DemandTec, MEI, Model N, ProMax, Oracle, Symphony/IRI, SAS, Synectics, Vendavo, Zilliant… 

 I fear that the end-to-end solution is a long way off.  Change is slow.  Until then, users will have to split the baby by layering industry-specific revenue management software over industry agnostic CRM. 

However, last week, there were a series of announcements that I feel are deserving of a mention. The industry is changing, albeit slowly. 

Model N with its Feet on the Ground and its Head in the Clouds.  Last week, as I sat in the packed audience at the Model N user conference, named Rainmaker, you could feel the energy.  As a company, ModelN is now nine years old with 350 employees and a global presence.  It primarily serves two industries:  life sciences and high tech.  The company has moved to an agile release schedule allowing them to move quickly against the changing requirements of life sciences and Hi Tech.  Last year, they successfully released five major and two minor releases.  The good news for me was the successful launch of their cloud service.   Buyer preference in revenue management is clearly moving to Software as a Service (SaaS), and Model N can now answer this challenge.  

Model N is clearly a company that is beyond Smoke and Mirrors.  They have a strong product heritage, and pride themselves in serving their customers.  I have wondered on many occasions how more successful Model N could be if they improved their sales and marketing.  They lack name recognition, and have not differentiated themselves in the market, although the solution is clearly differentiated and reliable.  When the smoke clears, I feel that Model N will stay be a player.

M-Factor Acquired by DemandTec.  On Thursday last week, DemandTec announced the acquisition of M-Factor.  The M-Factor solution was a unique, niche solution that was launched before its time.  The solution enabled the optimization of all marketing spend in consumer products –advertising with a multi-year lift and trade promotion spending with single period lift—to determine the right mix of demand shaping activities.  The visionary founder died tragically seven months ago, and although the company had raised venture funds in tough market conditions, like many small enterprise software companies, scaling growth is expensive and takes time compared to the consumer plays that Silicon Valley currently favors.  Despite the depth of the optimization solution—one of the strongest technologies in the market to determine baseline forecasting—and a good number of tier one customers— the purchase price was a good deal for DemandTec. 

While the DemandTec press releases on the acquisition are bullish, and the companies share a common heritage, the merging of these two SaaS offerings does not yield a complete solution for consumer products.  While a strong offering for trade promotion management in the sales account teams, the DemandTec solution still lacks the core functionality for headquarters trade promotion management.  However, it is a nice complement to an ERP solution like Oracle.  The press release was a bit too much of smoke and mirrors for this old analyst gal.

ProMax: A New Contender.  A new contender in consumer products trade promotions from down under –Australian heritage—entered the North American and European markets in 2010.  Last week, they announced selection by Kimberly Clark.  ProMax is attacking the CAS (reference blog article Accenture buys CAS, http://www.supplychainshaman.com/page/4/) user base.  With successful implementations at Biersdorf, Dial and Henkel, the team is inching forward touting a simpler, easier best of breed solution.  I will keep my eyes on their references to see if they deliver.  This is a case of where there is smoke there may be fire.  Too early to tell, but promising.

Three announcements in a confused market full of smoke a d mirrors.   While we are inching down the path, we are still a long way from a perfect end-to end process solution for revenue management.  Next week, I will be at SAP Insider and the Logility User Conference.  Look for updates from me from Orlando. Also look for my post on the Rise of Social Commerce and the many interactions that I am having with retailers on Monday.  Lots of progress in that space….