I love hearing from blog readers. This morning, I woke to receive this email in my inbox:
Good morning Lora,
I have read with pleasure the insightful report related to SC 2020 (race for Supply Chain – April 2013).
If it is possible, I would like to use some of the info for a presentation I will deliver in a couple of weeks to the General Management.
I have a question related to 2020.
The “Why” and the “What” seems to be very clear, and I can easily find some directions and value that we need to be aware of.
I think the chart is a very good summary, but can you elaborate on the HOW? I understand the “how” may be industry specific, if not even region-specific. However, there must be some common process/approach that I can adapt in order to give an idea and visibility about what’s involved for us to “stay relevant / stay in the race”.
Would you know where I can get such insights ?
Thanks for the email. It is always great to hear from a reader. Here are the steps that I would suggest your company focuses on to address the HOW.
I have built this plan with the realization that your company can only “DIGEST” so much change at once. Please let me know if you have any questions.
- Focus Outside-in, End-to-end. Define and map end-to-end supply chain processes. Start from the channel back. Gain a clear understanding that the supply chain is an end-to-end process, not a function with limited span of control within the greater organization.
- Train and align the team. Educate the group to understand the difference between sales-driven and marketing-driven processes and market-driven processes. Focus on market drivers, and the use of channel data, and less on sales and marketing forecasting. For more on these differences, reference the book that I co-authored, Bricks Matter.
- Design the supply chain for agility and flexibility. Determine the number of supply chains that you have, based on rhythms and cycles, and design the supply chains with appropriate push/pull decoupling points. Use technologies like IBM (Logictools), JDA (i2 Strategist), Llamasoft, and Logility (Optiant) to design inventory buffers and determine the right form and function of inventory. If you cannot afford the technologies or feel that you do not have the talent or executive support to do this work, hire a consultant that is experienced in the use of the technologies. I recommend the use of small, focused groups like Chainalytics or Spinnaker.
- Build strong horizontal processes. Turn your supply chain on its ear and move the focus from vertical excellence to cross-functional horizontal processes. Start with Sales and Operations Planning and then move to include the focus on Revenue Management, Supplier Development and Corporate Social Responsibility. Build the end-to-end supply chain based on a well-defined supply chain strategy with a clear definition for each of these horizontal processes.
- Stabilize your investments in ERP. Make sure that you have a stable platform for Enterprise Resource Planning (ERP) and realize that the Race for Supply Chain 2020 will not be run solely on the back of ERP. It is not sufficient. New adaptors are necessary to build the end-to-end value network to connect companies into value networks to deliver on value-based outcomes. The definitions of CRM and SRM are not up to the task and companies will need to invest in inter-enterprise systems of record.
- Invest in new forms of cloud-based self-service analytics. The average company has 150 applications. There will never be one throat to choke. As a result, cloud-based analytics need to be selected to work in a heterogeneous systems environments. They need to be designed to enable reporting and discovery by line-of-business leaders. Currently less than 23% have sufficient modeling to determine profitability, and less than 11% can adequately model “what-if” scenarios. My clients are currently having success with investments in Kinaxis, Qlikview, Spotfire and Tableau.
- Plan based on what you sell. Focus less on sales and marketing forecasting and build your demand plan on attribute-based models based on channel data outside-in. The modeling is focused on “what you sell through the channel.” This is in stark contrast to the item/location models (SKU) that are based on orders and shipments. This will often mean the reimplementation of demand planning. Attribute modeling is a more advanced form of demand management that is only found in more advanced technologies like Logility, Oracle (Demantra), and SAS. (Channel data is the data that you currently receive from retailers and syndicated data providers. Harmonize this channel data with distributor data and build the new models that use this data to sense demand shifts in the market).
- Establish a True North. Eliminate bias and error in demand planning through Forecast-Value Added Analysis. For more on this reference the book by Mike Gilliland, The Business Forecasting Deal.
- Add math. Replace rules-based forecast consumption with better math through solutions like Terra Technology or ToolsGroup.
- Model profitability. Move the focus of the S&OP process from a process of matching demand and supply volumes to orchestrating demand and maximizing profitability. Consider solutions like Signal Demand and Steelwedge. Move supply chain planning from a focus on determining what volume you should make by item at a location, to orchestrating demand and supply based on attribute-based models that recognize constraints and enable visualization of decisions based on changes in mix, and commodity pricing. For more on demand and supply orchestration check out my blog Bait and Switch.
- Collaborative logistics. Analyze opportunities to pool outbound freight with other manufacturers. Work collaboratively with third-party logistics companies to maximize small, frequent shipments.
- Plan for the Internet of Things. Focus on the design and implementation of digital manufacturing using mobility in combination with sensor, and machine inputs from the plant floor. As an SAP client, investigate the work that is happening within the SAP Manufacturing group in Mobility and MII to begin small-scale pilots to better manage the plant floor. Build new processes based on real-time data using mobility and the Internet of Things. Start small and build over time.
- Start work on new forms of analytics and big data. Map all forms of unstructured data and brainstorm how unstructured and structured data can be used together to sense and improve the supply chain response. Form a small cross-functional team and focus on one or two pilot projects. Start with problems that are relevant to the business and focus on small, iterative projects. Use new forms of analytics from companies like Aster Data (Teradata), Enterra Solutions, IBM and SAS. Where possible, use private-hosted cloud-based analytics to minimize the capital investment. A couple of projects that have helped my other clients are:
- Listening Posts. Start by working on listening posts (the sharing of social data across functions to understand sentiment) or the use of rating-and-review data as causal factors into demand planning.
- Social Emoticons. The use of specialized emoticons on Facebook to better understand customer preferences for package size, assortment or trade promotions.
- Mining of Quality Data. Use text mining to better understand the issues with quality data and patterns from production records.
- Use of Contract Data. Most contracts that are negotiated with suppliers are not actively used in the management of the supply chain. Tie channel contracts to order management terms and conditions to minimize costs and improve customer service reliability.
Patrick, I hope that this helps. I know that you are in Asia and are looking for local help. I will work with some of these vendors to find distributors and system integrators that they recommend.
See you There?
I would love to see you and your team at my upcoming Supply Chain Insights Global Summit where we will be discussing these topics in great detail. The event is in Scottsdale, AZ on September 11th and 12th, 2013 at the Phoenician. I hope to see you there!