Supply Chain Management Blog : Visibility

Closing the Loop, Optimizing the Supply Chain

christianverstraete — Fri, 20 Nov 2009 18:50:00 GMT

I'd like to start a series of blog entries titled "Close the Loop" and addressing how, through a better use of supply chain information, companies can improve their operations, creating a more agile ecosystem while reducing risk. In this...(read more)

The Cost of Cloud

christianverstraete — Fri, 13 Nov 2009 10:33:00 GMT

Does the cost of cloud computing limits the usability of a community cloud to support a supply chain? This is really the question I'd like to address today. Last April, McKinsey and last September, IDC have done an exercise of costing the difference...(read more)

Trade-offs between Supply and Demand

christianverstraete — Thu, 18 Jun 2009 12:45:00 GMT

A lot is written about S&OP, Sales & Operations Planning , and I will not resume it here, but S&OP only goes as far. Fundamentally what COE's are confronted with is balancing supply and demand to maximize revenues while delighting customers...(read more)

Should Manufacturing Companies move to the Cloud?

christianverstraete — Thu, 28 May 2009 07:13:00 GMT

As already stated in earlier entries, the Cloud started with Web 2.0 and the Social Networking phenomena. Since, it has taken a life of its own, and is attracting many SMB's (Small and Medium Businesses) allowing them to fully rely on a cloud provider...(read more)

The Dead of the (traditional) Supply Chain

christianverstraete — Tue, 07 Apr 2009 07:50:00 GMT

Early March, Industry Week published an article, titled " The Dead of the Supply Chain ", arguing that the supply chain as it has traditionally been defined is no longer feasible. Gone are the days when supply chains were linear, static, in...(read more)

Can companies learn from space & submarine collisions?

christianverstraete — Wed, 25 Feb 2009 09:55:00 GMT

A couple weeks ago I got my attention drawn to two different events that happened at one week's interval. The first was about the collision of two satellites in space. Indeed, an obsolete Russian military satellite crashed into one of Iridium's...(read more)

Developing Supply Chain Sustainability

christianverstraete — Tue, 20 Jan 2009 13:58:00 GMT

In a previous post , I discussed uncertainty and illustrated it by highlighting the volatility on the Dow Jones . I was reminded of this when I ran into a document PriceWaterhouseCoopers , the accounting firm, released last December. It was titled "...(read more)

Let's predict 2009 - 10 proposals for Manufacturing

christianverstraete — Sat, 20 Dec 2008 10:53:00 GMT

As 2008 winds down, many people are attempting to predict what will happen in 2009. One common element is that the year will be difficult from an economical perspective. Whether the crisis will last 6, 9 or 12 months is open for debate, but there is a...(read more)

The downturn, source of new opportunities

christianverstraete — Sat, 15 Nov 2008 15:41:00 GMT

I am not forgetting my promise to continue discussing HP's Supply Chain Initiatives, and I am actually working on the next post, but as I had the opportunity to speak at two conferences this week, I want to share with you some of my observations.

Thursday, I spoke at JDA Connect 2008, JDA Software's yearly European conference. The topic given to me was about making the Supply Chain more responsive. Obviously with the current volatility in the financial and commodity markets, how to adapt in the downturn was central to my talk. Actually it was central to many of the presentations.

Friday I spoke at IBF's Supply Chain Forecasting & Planning conference, addressing more thoroughly what is required to approach a downturn.

In both cases, I started with a diagram showing the evolution of the volatility of the Dow Jones industrial Average over the last couple months. The central question is how to improve the supply chain responsiveness at an acceptable cost level. The economical evolution being difficult to predict at this point in time, production quantities need to grow or shrink quickly, while safety buffers should be kept to a minimum due to their intrinsic cost. Four elements are required to achieve this:

Understanding what is happening in the Supply Chain is a prerequisite. Knowing the available inventories of components, ingredients and finished products, the production capacities available, alternative sources of supply, etc. allows understanding the upwards potential of the Supply Chain, while understanding variability (highest and lowest limit) at all nodes provide precious information on the flexibility, adaptability and responsiveness.
To achieve this visibility, all key partners in the Supply Chain need to share essential data. This requires a collaborative attitude, which can only be achieved if all parties understand the benefits they will gain from sharing that information. The role of procurement is essential here. In many companies it is the traditional and adversarial approach taken by procurement that limits the sharing of vital information.
The current downturn is quick and deep. It will affect many companies in the marketplace. Could some of your partners be affected? Rothstein Associates highlight in their Business Survival blog, a message from Marsh warning that the economic slowdown will increase companies' supply chain exposures. They advise companies to assess their supply chains and identify ways to mitigate risk. Combining visibility (to understand what happens) with risk mitigation and response planning (using methodologies such as scenario planning), helps companies assess their exposure an plan how to reduce it.
We already spoke about the need for increased flexibility and responsiveness. This does not only require an understanding of what happens in the Supply Chain in real time, which is what visibility gives you, but also the identification of how the Supply Chain interacts. Through the analysis of the behavior of the system over longer periods of time (using the data collected over multiple months), one can identify the key parameters of the eco-system and establish a model. Using simulation tools, it is then possible to submit the supply chain to a number of scenarios and identify how exposure can be reduced on the one hand, and where flexibility can be increased on the other.

By including the above elements in the supply chain, its responsiveness can truly be improved. And this provides opportunities. Indeed, by being able to respond faster to customer demand that market shares can be increased. And this can even be done in a downturn.

In my presentations I used an analogy. Let me share it with you here. Two people are walking in the savannah and one of them spots a tiger in the distance. He warns the other, but to his astonishment, sees him kneeling down to put his running shoes on. He tells him, "You know these shoes will not allow you to run faster than the tiger". The other one answer: "I do not need to run faster than the tiger, I only need to run faster than you."

Well similarly, your eco-system does not need to run faster than the tiger, it needs to run faster than its competition. Several conference attendees actually came back to me telling me they really liked this mindset and some even pointed out their management was thinking in the same way. Hope they are not your competitors.

If you liked this post and can spare five minutes, please answer the following survey on "The Supply Chain in the Downturn". I will use the results for a future blog post. Many thanks in advance.

Building Flexibility in the Supply Chain

christianverstraete — Mon, 27 Oct 2008 09:35:00 GMT

The other night I was looking at CNN. As many of you probably know, in these financially troubled days, they visualize the evolution of the Dow Jones Industrial Average. During my one hour watch, I saw the DJIA at +198 and at -456, and about every other position in the middle. This is around a 7.5% swing in one hour. Similarly, this summer the barrel of oil was at 147 US$, today it's in the area of 65. How are we able to manage our supply chains in such volatile times? That's really the question for Supply Chain executives.

The Supply Chain Council has integrated the concept of flexibility in its SCOR© model. They use two concepts, the concept of adaptability, covering the amount of change that can be implemented, and of flexibility, the time it requires to get this change going. To measure this, they calculate the time it takes to respond to a 20% increase or decrease in customer demand. The 20% is arbitrary, but allows comparisons between companies and supply chains.

Building such flexibility across the eco-system requires an in-depth understanding of the dynamics of the value chain. Such understanding can only be gained through the collection of key information, not only within the company, but also across the whole chain. Flexibility cannot be developed cost effectively in isolation. Obviously one could increase the responsiveness of the supply chain by establishing large inventory buffers; however in the current circumstances this is not really applicable due to the short shelf life of many products and the cost/lack of capital to finance those buffers.

Building more collaborative relationships with partners and including them in the effort of building the flexibility in the Supply Chain is probably a better way of approaching things. It is a difficult one, however, as most of our companies have traditionally developed a rather adversarial approach with their suppliers. The procurement department being measured on savings only, has pushed the suppliers to reduce costs and only that. Building this collaborative relationship however requires an approach where both partners find benefits, a win-win approach as it is often called. Actually increasing flexibility and responsiveness in the supply chain is beneficial to all parties. Often companies forget that when a problem occurs, the most important is to respond faster than its competition. Issues, particularly when they are industry wide, bring with them opportunities, and it is not the first time companies have taken advantage of that. For example, FedEx handling of the Katrina hurricane situation and the speed of its response has helped them grow their business in North America. As described in an Information Week article, real-time visibility of its operations and careful planning has allowed FedEx to react quickly. The fundamental question is whether your company is ready to move next time?

With the current variability in the marketplace, are there opportunities to grow the business by improving the responsiveness of the organization to the variability? Can we take advantage of the large swings in the market? Do we have the tools to understand its impact not only on our business, but on the business of our whole supply chain?

Global Supply Chains and a Downturn

christianverstraete — Wed, 03 Sep 2008 08:40:00 GMT

Last week I was in Kuala Lumpur and Singapore and had the opportunity to present to several CIO's on the subject of how to manage a global Supply Chain through a downturn. I know, a number of you may start argue whether we are in a downturn or not, but that was not the objective of my talk. I started out by highlighting three objectives that most companies have today, reducing costs, increase revenues (which in a downturn means taking market share away from the competition) and mitigating risk.

As Martin Christopher from Cranfield pointed out a number of years ago, "Companies are no longer competing with companies, but supply chains with supply chains", it is important to look at the end-to-end supply chain to address those three objectives. Companies need four key elements to truly operate at a supply chain level; these are visibility, responsiveness, collaboration, and risk management. I'd like to address these points in a series of blogs I hope to post over the next couple weeks, but before that I'd like to emphasis the importance of operating as an integrated supply chain.

Let me take a practical example. The Japanese invented the concept of "lean", and worked a lot at making their factories and operations lean. But in their traditional, collaborative manner, they worked at the same time to help their suppliers and partners to also become lean. As a result of this, although each company was focused on its operations, the whole supply chain quickly became lean. This is one of the key reasons of the success of companies such as Toyota and others.

European and American companies have taken a different approach. Yes they have been working hard at making their factories and operations lean, but they often have done that by pushing the "waste" up and down the supply chain. Unfortunately, the end consumer has to pay for the waste, regardless of where that waste is along the supply chain. Unfortunately, because they neither have the close relationships with their suppliers, nor the visibility of what happens across the supply chain, they often do not spot the problem, while asking themselves why they cannot make a given product at the same price point as their Japanese counterparts.

I used this argument to open my presentation and was actually surprised how much agreement I got from the audience. To me this sounds obvious, but it seems many companies have not thought about it, nor have they looked at how they could address the issue and improve their competitiveness.

In the next post I will discuss the importance of a win-win collaboration for the success of the relationship.

Is RFID mainstream?

guillaumeoget — Thu, 21 Aug 2008 19:17:00 GMT

The topic of RFID has been approached a few times in this blog. RFID, being a technology, is supporting a number of usage scenarios and its maturity depends on the area we are looking at. Access control and retail and certainly not at the same place.

Still the middleware space has changed significantly over the last year, with the Oracle/BEA deal, steady progress from Microsoft and SAP, and the Checkpoint/OAT deal more recently. I found this article to be quite interesting about this and trying to look at the future of middleware…http://www.rfidupdate.com/news/07082008.html#editorsNoteWhile the functions provided by the middleware themselves are certainly going to stay in some form, it will be interesting to see if some of the larger players are able to use this as a differentiator versus a “need to have” type set of features.

Why isn't a 60 years old technology more mainstream?

To See or not to See

christianverstraete — Thu, 03 Jul 2008 07:21:00 GMT

At the end of May I had the privilege to participate in AMRResearch’s Supply Chain conference. During the plenary session several presenters spoke about how they were improving their supply chains, and to my great astonishment, all spoke about the need to improve visibility up and down the eco-system. Having been advocating this for a couple years now, I was really surprised to hear the same message from so many companies in different industries.

After having spent years and millions implementing their ERP system, it looks like the more advanced companies are shifting their focus to the operations not just of the company, but of its eco-system. Indeed, these days ERP is no longer a competitive advantage. I remember a conference a couple years ago where a CIO presented its ERP project starting by saying “there are 35 companies in our industry sector; we are the 32^nd to implement SAP”. Sure, that in its own right says it all.

A number of companies have shifted to lean and six sigma, using IT to understand and improve the operations within the enterprise. Unfortunately, many of those have done so by pushing inventory and tasks to suppliers and distribution channels. What they did not envisage was that the end customer has to pay for the inefficiencies in the supply chain, regardless where they are. So, improving one’s own operation without looking at the overall eco-system does not really add value as far as the end customer is concerned.

It is easy to walk through the factory and spot waste; it’s more difficult to do that through the supply chain. And here is where visibility comes in again. To understand the supply chain and where the inefficiencies are, gaining visibility of what happens is mandatory. This can be achieved by sharing information between partners. But that requires a willingness to collaborate, which often implies a different attitude towards suppliers and partners. This is a good subject for a separate entry, so we will come back to that.

When implementing a visibility platform, make sure to separate operational data, the details of what happens in “real-time” in the supply chain, from historical data, typically condensed, but maintained for a long period of time in a data warehouse. The operational data will provide you with insights of potential issues and allow you to react quickly, while the historical data will provide you with trends and allow you to understand how the eco-system works and what could be done to improve it.

Don’t hesitate to react to the above. It will open up the dialogue.