December 2nd, 2013 11:09 am Category: Global Supply Chain, Green Optimization, Network Design, Optimization, Profit Network, Scheduling, Supply Chain Improvement, Supply Chain Optimization, by: Jim Piermarini
One of the pleasures of working at Profit Point is having the occasion to reflect on and write a blog about a subject that is of interest to me. Taking time to reflect on what is important, especially now around Thanksgiving and the holiday season has rewards of its own, but especially with regards to the business we are in, helping people make their supply chains better, brings rewards unique to our profession. I am pleased and thankful to be a part of it.
At the grand scale, improving supply chains improves the very heart of most businesses. It reduces waste, reduces cost, increases efficiency and profit, and reduces the detrimental impact of commerce on our world, including reducing our carbon footprint and land fill waste as well as promoting the most efficient use of our natural resources and raw materials. Profit Point routinely has an enormous impact on the business of our customers, and I personally am pleased and thankful to be a part of it.
On a more human level, the people at our customers who interact with Profit Point personnel on our projects, come away with a profound sense that they can make a difference in their company; the impact of our network studies or scheduling work or other projects demonstrates the ability of a better business process to be rolled out and actually change the business for the better. Once involved in a successful project, many of these people move up in their organizations to lead other successful business change projects. Nothing succeeds like success! I am pleased and thankful to be a part of it.
Reflecting on our part in the business world as small actors on a large stage, it is rewarding to be able to know that we have made some difference.
Wishing you the same peace of mind this holiday season, Jim Piermarini, CEO Profit Point Inc.
The primary goal of Big Data Analytics is to help companies make better business decisions by enabling analysts or other users to analyze huge volumes of transaction data as well as other data sources that may be left untapped by conventional business intelligence programs.
Ask yourself, does your company:
- Use advanced analytical techniques (e.g., simulation, optimization, regression) to improve decision making
- Routinely use data visualization techniques such as dashboards to assist users or decision-makers in understanding complex information?
- Combine and integrate information from many data sources for use in decision-making?
- Use systems that automatically make operational changes, based on performance criteria, business rules in response to signals from sensors?
- Use systems to give you the ability to decompose information to help root cause analysis and continuous improvement?
If your answers are yes then your company is on the road to implementing Big Data Analytics. If your answer is no, then read on to learn more.
We see companies develop and employ enterprise applications that use advanced analytical techniques to explore Big Data and generate optimal supply chain plans to improve decision making. These applications allow management to visualize their supply chain before and after optimization, helping to identify areas of risk and recommending and allowing management changes to these plans in an almost real-time environment.
The most advanced applications use sophisticated mathematical algorithms, typically mixed integer programming optimization models, to analyze their Big Data and generate optimal schedules and supply chain network designs. In addition, these tools allow the user to modify those plans in real time to align with their tactical or strategic goals.
For example, in S&OP optimization some of these advanced technologies implement color-coded information, which allows users to identify shortages or constraints with their production operations by SKU. The user then has the ability to point and click to drill down for further data analysis and quickly make the needed changes to modify the plan. The key to this type of a system is to provide actionable insights into their global supply chain, and allow worldwide operations the ability to make changes or corrections to their production process at any time 24/7. This process of examining Big Data using advanced technologies provides global supply chain plan visibility and an improved decision-making process. Contact us to explore a professional approach to take advantage of Big Data Analytics.
When we help our clients improve their supply chains the first step in the process is usually to identify what problem they need to solve, or what questions they are trying to answer. Examples of such questions might be
- What will be the impact of several possible capital investments in our distribution system?
- A major customer is considering changes in their manufacturing – how should we respond?
- How can we improve the assignment of available production / inventory to customer orders?
After pinning down the objectives, the focus will then shift to the design of a planning model, or a software system, that will help them to address the identified needs. We find that a key design tenet for the model, or the scope of the supply chain to be covered, is to include enough detail to be able to answer the questions at hand, but no more.
A typical supply chain will stretch from procurement of raw materials to manufacturing to distribution to customers (and possibly beyond, on either or both ends.) Part of capturing the supply chain behavior will be to define the transformation of materials along the chain. This can be done by defining a bill of materials, or BOM, which defines the quantities of input ingredients that are required at a point in the supply chain to make an output material of interest. For instance, if you are a baker then your BOM is your recipe – e.g. the amounts of flour, buttermilk, leavening and various other ingredients required to make the batch of biscuits.
Deciding on the detail of the materials going into the BOM, and getting the right quantities for the BOM, is a key step in properly modeling the supply chain. If you are working at an operational supply chain level, the BOM will need to be detailed enough to actually make the product, but many times in a planning situation, it is reasonable to omit some of the detail, and only capture the main flows of product through the system. You will need to make these decisions based on your project objective.
For instance, if you are modeling a beverage company’s supply chain, water may be a key ingredient in the production process. If the question you are trying to answer for the beverage company is whether traditional warehouses vs. crossdocks is a better distribution solution for a part of the territory, then you may decide that the sources and cost of water for the production facilities will not have a big impact on the answer, so you can omit the water consumption from the analysis. On the other hand, if the objective of the analysis is to evaluate the impact of alternative future production locations on the company’s overall environmental impact and commitment to sustainable practices, then water for production (and waste water, and other intermediate or byproduct materials) would likely need to be included in the production BOMs.
Making good choices in defining your BOM is one of the important steps in getting a supply chain model to help you answer your questions effectively. Our extensive supply chain experience allows us to bring a large knowledge base to the assignment when we are helping our clients design in enough detail, but no more.
Profit Point, a leading supply chain optimization firm, adds total delivered cost and margin at the customer location-product level of detail to its supply chain network design software.
Profit Point, the leading supply chain optimization consultancy, today announced the release of an update to Profit Network™, a supply chain network design software that is used by supply chain managers all over the world to gain visibility in to the trade-offs they will face when designing or optimizing a global supply chain. In addition to several other new enhancements, Profit Network now allows users to analyze and report on the total delivered cost and the resulting gross profit margin for all products delivered to each customer location.
“With the ever-increasing availability of granular data across the supply chain, many of our clients have expressed a strong interest in analyzing and reporting on the total delivered cost of a single product or set of customer products,” said Alan Kosanksy, Profit Point’s President. “Previously, it was quite a challenge to understand how costs accumulate over time from raw material procurement through manufacturing, inventory, transportation and customer delivery. Now our customers are able to see the true total cost for each unit of product delivered to each customer. This will be a powerful tool in helping them evaluate their product and customer portfolios.”
In addition to total delivered cost, now Profit Network also enables more control over source-destination matching, as well as inventory levels by establishing minimum and maximum number of days of inventory demand.
“Profit Network software has been helping Fortune 500 companies around the world build more robust and profitable supply chains for more than 10 years,” said Jim Piermarini, Profit Point’s CEO and CTO. “Over that time, the dramatic increase in data availability across the supply chain has provided us tremendous opportunities to solve unique and critical problems in a variety of supply chain networks.”
In addition to Profit Network, Profit Point’s line of supply chain software also includes Distribution and Vehicle Planning, Sales and Operations Planning (S&OP), Production Planning, Scheduling and Order Fulfillment software.
About Profit Point
Profit Point Inc. was founded in 1995 and is now the leading supply chain software and consulting company. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including Dow Chemical, Coca-Cola, Lifetech, Logitech and Toyota.
Building applications, especially custom ones, carries with it the burden of answering the question: Does this do what the customer wants?
With complicated systems with many interacting features and business rules, answering this question can be daunting. In fact, evaluating the answer can be daunting too, from the perspective of the customer. Having the sales guy check some boxes in a questionnaire, or watching a demo just doesn’t leave you with the assurance that the application with handle all the business requirements, from either perspective, the vendors or the customer. Everyone I have spoken to who has sold complex software, or who has participated in the purchasing process of software has expressed the same doubt. They are just not sure that the tool will be a good fit. As we all know, that doubt does not always prevent the purchase of the software, as each organization has its own level of risk tolerance, and trust in the vendor’s brand or reputation. Often these other considerations can outweigh the amorphous doubt that some folks might feel. How can one quantify that doubt? Frankly, it’s a quandary.
This thought got us at Profit Point thinking… Wouldn’t it be great if there was another way to evaluate the goodness of fit or an application, or the appropriateness of the parameter settings, to match the business needs of an organization. Would it be great if there was a way to eliminate (or greatly reduce) the doubt, and replace it with facts. Either a business rule is obeyed or it is not. Either a decision is made according to the requirements, or it is not. Let’s eliminate the doubt, we thought, and the world would be a better place. (well a little bit anyway).
There are many processes for testing an application as it is being developed, with writing test scripts, and evaluating the results. All these are based on testing little pieces of code, to ensure that each function or sub routine does what it should do in each case of input data. These processes work fine in our opinion, but only when the sub of function is able to be considered independently form the others. When the system has functions that interact heavily, then this approach doesn’t reduce the doubt that the functions may conflict or compete in a way that the whole system suffers. How then to evaluate the whole system? Could we treat the entire application as one black box, and evaluate the important business cases, and evaluate the results? This is exactly what we have done, with the effect of reducing the doubt to zero about the suitability of the application for a business.
With several of our clients we have worked out what seems to be a great process of testing a complex software solution for suitability to the business requirement. In this case, the detailed level function testing methods were not open to us, since the solution relied on a Linear Programming technique.
This process is really just an amplification of the standard testing process.
- Define the test case, with the expected results
- Construct the test data
- Build or configure the application
- Run the Test using the Test Data and Evaluate the results – Pass or Fail
This is the standard process for testing small functions, where the expected results are clear and easy to imagine. However, in some systems where there many interacting rules and conflicting priorities, it may not be simple to know what the expected results should be without the help of the tool’s structure to evaluate them. Such is the case with many of our application, with layer upon layer of business rules and competing priorities… The very reason for using an LP based approach makes testing more complex.
In the revised process, we have, for each new business requirement:
- Construct the test case with the test data
- Build or configure the application
- Set the expected results using the results of the first pass build
- Re-factor the code and test until all test are passing
In my next blog I will show you the simple excel based tools we use to facilitate the test evaluation.
In practice, the process works well, new versions of the application go into production without any surprises, and with full confidence of the application management team that all the business requirements are 100% met.
No doubt – no doubt a better process.
By Jim Piermarini
March 4th, 2013 4:19 pm Category: Global Supply Chain, Operations Research, Scheduling, Software Optimization, Supply Chain Agility, Supply Chain Improvement, Supply Chain Software, by: Danielle Cohen Jarvie
In a recent sailing trip to Croatia, we lost our sailboat. Sounds outrageous, but it really wasn’t difficult at all. It was early evening when we anchored in the harbor and took our dinghy to shore for dinner. A few hours later, seeing the wind pick up, we returned to the spot where we thought we had left the boat and it had vanished. It was dark, very dark. Looking for the boat on the dark ocean at night was like looking for a needle in a haystack. After hours of searching, we finally found the boat headed out to sea, we had not let out sufficient line for the anchor. The harbor was surrounded by rocky cliffs, and we had no idea what course the boat had taken, and if it had incurred any damage in its renegade voyage. We shook a mechanic out of bed to evaluate if any damage had been done. After it was all said and done, we were very lucky, the boat was fine.
I can’t help but liken this to a manufacturing supply chain, without a business process to chart the way, without software helping to navigate and support the process and without people in place trained to captain the process, the business, like an unanchored sailboat, drifts into sometimes dangerous territory. Yet, this scenario is not atypical for many companies.
How do you know if the anchor is set on your supply chain? Here are some attributes:
- A clear and documented business process that serves as the guide to how you operate under normal conditions as well as defines flows for unexpected changes and events. As conditions change, the process should be reevaluated and assessed in an ongoing fashion.
- Software that supports the business process and enables users to react quickly to unexpected events making your business adaptable and flexible. Software should be tailored to your business needs, one that is one size fits all does not necessarily work for all products and customers.
- Trained people who are living the business process and using the software giving your business a competitive edge. Additionally, attention to detail and data driving the software is crucial and can have a big impact on the business.
To learn more about Profit Point’s Global Supply Chain services, please contact us.
Lesson 2: You may not know the best and / or ultimate design for a tool until you try it out for some time in the real world.
In my last blog post, I talked about the waterproof boots I received as a gift and how I never knew what I was missing out on until I received and started using those boots. In this blog post, I’d like to continue my story.
My waterproof boots were working just great for me. Our dog, Blue, loved walking out in the wet fields behind our house and I didn’t mind that my boots were getting muddy since I could easily wash them off. Several months after using my boots, I made an unfortunate discovery. My right foot was getting wet! Turns out my boots had developed a crack in the tread. While my boots had several features I really liked and duct tape worked as a temporary repair, I decided I had to replace my boots.
I thought about getting a new pair of the same brand / model but was concerned that there was a design flaw and that these boots were not sturdy enough to walk with on a regular basis. I decided to switch to a boot with a much better and stronger designed tread as well as one with the other features I really liked.
If I had gone to the store before owning and using the first pair of boots, I don’t think I could have articulated exactly what features I needed / wanted in a boot. It was only after having an extended real world experience with the boots that I was able to much more clearly and confidently articulate what I wanted in a boot.
This is a common theme with our supply chain change projects. Often these projects are a discovery process for us and our clients because neither of us definitively know a priori all the functionality that will ultimately end up in the finished tool. That is why our typical approach is to begin with a pilot project that includes the minimum scope required to implement the basic functionality. This allows for this process of discovery to unfold and while starting to deliver on the stream of anticipated benefits sooner rather than later. This allows for the future releases of the tool to have a very tight scope on only those items that we are both confident can be delivered and will achieve the anticipated benefits.
Are you ready to get started on this journey?
Nearly 50 years ago, a 22 year-old musician from Minnesota released his third folk music album in as many years. The title track “The Times They Are a-Changin” warned the listener “you better start swimming or you’ll sink like a stone, for the times they are a-changin.” Critics were confounded because not only was a mere kid from Hibbing wagging a parental finger at an entire country, but nearly everyone knew he was right. Those who declined to change with the times were sure to be left behind. That kid, of course, was Bob Dylan.
The Old Road Is Rapidly Aging
This musical detour has a purpose: there is crucial wisdom in that song for small businesses and entrepreneurs. While five short years ago “going green” was an optional choice for workplaces, now even the biggest companies have committed to more sustainability in their operation. In fact, not going green can put your operation at a competitive disadvantage.
Who Went Green!?
Wal-Mart is leading the charge in business sustainability. A week ago, the corporate giant released a 126-page progress report on its efforts to be a more socially responsible and sustainable company, something they’ve done annually since 2008. These reports can be found here, if you’re interested. However, the company’s biggest step may be the inclusion of a “Sustainability Index Score” (SIS) on their products near the price tag. These scores rate the environmentally-friendly factor of product packing and production.
Make no mistake; Wal-Mart has not gone soft. While they enjoy their greener status, they’re most excited about how the changes have affected their bottom line. Consumers want to feel good about the products they buy, and want to feel like they’re making environmentally responsible purchases. Wal-Mart believes these SIS scores will give customers peace of mind when they shop in the retail chain.
Wal-Mart has also installed skylights in their stores and painted the roofs of their buildings with reflective white paint, which shaved a cool $1 million from their electricity bills last year.
In a few short years, the once villainous company has become a model for sustainability, and their commitment has made them more profitable.
Now Is The Time
Wal-Mart’s sudden obsession with sustainability is a microcosm of a larger trend showing that running a green business is no longer only a strategy for courting progressives: it is the new norm. Yet, it has always been admittedly easier to want to be sustainable than it is to be sustainable, especially since many business owners already have their hands full with the usual challenges of day-to-day operations in a less-than-stellar economy.
Nevertheless, things have changed from the way they were a few years ago. Many of the obstacles that were deal-breakers are no longer there, or at least they’re not so insurmountable. Since more businesses have committed to being environmentally conscious, collectively, they’ve learned how to be better at it. Here are some tricks other small business owners and entrepreneurs have picked up along the way that can help make your green transition go smoothly, save money, and make your business more attractive to potential customers:
- Commit – If you’re serious about becoming more sustainable, you have to commit. This applies especially to small businesses with multiple employees. Putting a recycling can next to the garbage is a good start, but you can go further. If you’re a small business leader, you must communicate to your employees “this is the way we do things here from now on.” Successful conversions require strong leadership.
- Self-Audit – Do an energy/waste audit of your business. Take a look at your business on a macro-level, and look for ways you can be more efficient. This could be as small-scale as better using the timer on your thermostat, or as large as finding distribution routes for deliveries with less stop signs and stop lights.
- Upgrade – Upgrade your building where you can. Many hot water heaters and toilets, for example, are decades old and are very inefficient. They use loads of water and run for a long time. Newer units can drastically reduce water bills. Newer air conditioning and heating units are also much more efficient than their predecessors. Note: do some research on government rebates. Sometimes there are some pretty awesome kickbacks for upgrading to more efficient technologies.
- Track Your Progress – Tracking your energy savings is wonderful for everyone at a business. It’s nice for you when you’re paying the bills at the end of the month, but it also gives your employees ownership of the company’s green growth. This gives them proof that their hard work has paid off and gives them motivation to keep it up in the future.
Continuing with the theme of ownership, encourage your employees to be innovative and creative, always looking for ways to be more sustainable. After all, someone had to think of Wal-Mart’s sustainability scores.
Yes; for the past decade the terms “green” and “sustainable” have been used ad nauseum, but it is unfortunate if this dilutes their importance. Sustainable businesses are not part of a fad that will soon disappear; they’re the new standard. Not only are they more ethical, but they’re also more profitable. Times have changed, indeed.
Hopefully, upon reading this, something you can change has already popped into your mind. What are some of the new ways you’ve come up with to go green? Have you already instituted changes in your small business that are providing a profitable return?
Author: Brent Hardy is Vice President of www.extraspace.com, responsible for all corporate construction & facilities management. He writes about corporate sustainable practices at blog.extraspace.com/category/sustainability.
Lesson 1: You may not know what you are missing out on until you get something new.
My wife bought me a pair of waterproof boots and gave them to me 2 Christmases ago. Admittedly, I was not the most gracious gift recipient. I uttered the customary thank you but at that moment I had no idea what I was going to use these boots for.
As it turns out these boots were a great gift! I often take our dog, Blue, out for a walk over lunch time in some fields behind our house. Prior to receiving these boots as a gift, when the fields were wet and muddy, I would end up walking Blue on the street in our neighborhood. Blue much preferred our jaunts in the fields and the waterproof boots enabled me to trudge through the mud without ruining my sneakers which is what was happening before if I ventured into the wet fields with them on.
My problem was that I was so into the groove of walking in the neighborhood when it was wet out that I really couldn’t conceive of another way. I thought that Blue and I would just have to grin and bear it when it was wet out and walk in the neighborhood. Receiving and then using these waterproof boots was kind of eye opening for me. I didn’t know what I was missing out on until I received the boots.
We find that the same thing can be true with our clients. They may just be doing things the way they have always been done and have a hard time believing that there is a better way. The way they have done things has worked so far so why bother to change when you can stay the same! While the old adage “If it ain’t broke, don’t fix it” may be applicable, how about changing so you can operate on a different plane.
Next week I’ll post Lesson 2.
Watch your thoughts, for they become words. Watch your words, for they become actions. Watch your actions, for they become habits. Watch your habits, for they become your character. And watch your character, for it becomes your destiny. What we think, we become. “My father always said that”. Margaret Thatcher
The year 2012 is behind us. If you are like me, you may not have accomplished all the goals that you had in mind at the beginning of the year. No worries, the year 2013 is before us.
Here are Seven Rights of Fulfillment taken from the CSCMP website, which I believe are relevant for our industry, but also can be adopted as a framework for your goals for this year:
1. The right product
2. To the right customer
3. At the right time
4. At the right place
5. In the right condition
6. In the right quantity
7. At the right cost
The ability to meet customer requirements is built upon the expectation that everything is done correctly in the supply chain. In the quest to provide quality service and satisfy customers, world-class companies along the supply chain are guided by these Seven Rights of Fulfillment.
Goal setting involves establishing specific, measurable, achievable, realistic and time-targeted goals. Take a moment right now and think of one goal that you want to accomplish in 2013. Done? You just primed your subconscious.
What kind of risks are you prepared for?
As a supply chain manager, you have profound control over the operations of your business. However, it is not without limits, and mother nature can quickly and capriciously halt even the smoothest operation. Or other man-made events can seemingly conspire to prevent goods from crossing borders, or navigating traffic, or being produced and delivered on time. How can you predict where and when your supply chain may fall prey to unforeseen black swan events?
Prediction is very difficult, especially about the future. (Niels Bohr, Danish physicist) But there are likely some future risks that your stockholders are thinking about that you might be expected to have prepare for. The post event second guessing phrase: “You should have known, or at least prepared for” has been heard in many corporate supply chain offices after recent supply chain breaking cataclysmic events: tsunami, hurricane, earthquake, you name it.
- What will happen to your supply chain if oil reaches $300 / barrel? What lanes will no longer be affordable, or even available?
- What will happen if sea level rises, causing ports to close, highways to flood, and rails lines to disappear?
- What will happen if the cost of a ton of CO2 is set to $50?
- What will happen if another conflict arises in the oil countries?
- What will happen if China’s economy shrinks substantially?
- What will happen if China’s economy really takes off?
- What will happen if China’s economy really slows down?
- What will happen if the US faces a serious drought in the mid-west?
What will happen if… you name it, it is lurking out there to have a potentially dramatic effect on your supply chain.
As a supply chain manager, your shareholders expect you to look at the effect on supply, transportation, manufacturing, and demand. The effect may be felt in scarcity, cost, availability, capacity, government controls, taxes, customer preference, and other factors.
Do you have a model of your supply chain that would allow you to run the what-if scenario to see how your supply chain and your business would fare in the face of these black swan events?
Driving toward a robust and fault tolerant supply chain should be the goal of every supply chain manager. And a way to achieve that is to design it with disruption in mind. Understanding the role (and the cost) of dual sourcing critical components, diversified manufacturing and warehousing, risk mitigating transportation contracting, on-shoring/off-shoring some manufacturing, environmental impacts, and customer preferences, just to begin the list, can be an overwhelming task. Yet, there are tools and processes that can help with this, and if you want to be able to face the difficulties of the future with confidence, do not ignore them. The tools are about supply chain planning and modelling. The processes are about risk management, and robust supply chain design. Profit Point helps companies all over the world address these and other issues to make some of the of the best running supply chains anywhere.
The future is coming, are you ready for it?
Manufacture and delivery of a company’s products usually consume a wide array of materials, either directly or indirectly, ranging from rare commodities like titanium or zinc, to the most basic, such as water. Given the explosive growth of world population in recent history, and the resulting increases in consumption of food and other products, and the finite nature of raw materials, the sustainability of the supply chain over time is a growing planning concern for many companies. Water is often a key focus in their planning, whether it is the main ingredient in their product, as it is in the beverage industry, or a major component, as it is for power generation, paper production, mining and many other industries.
One way to measure the water impact of companies (or countries, or production of industrial or agricultural products, such as textiles, rice or beef) is through the calculation of a “water footprint”, which can help identify what water is used (both directly and indirectly), where it comes from, and the relative efficiency of its use. This concept is discussed in detail on the website www.waterfootprint.org which has a wide array of statistics, as well as an interactive water footprint calculator and the option to download extensive research materials. According to the website 92% of total water consumption in the world is associated with agricultural use. However, since agricultural products are raw materials in many corporate supply chains, and are shipped from one location to another around the world, nations and companies effectively consume water from around the world. The figure below shows major international water consumption flows, taking into account such factors as goods consuming water in production in one part of the world are shipped to a consumer in another area.
Source:Mekonnen and Hoekstra (2011)
Why should a company be concerned about their water consumption? There are several risks that all companies face, to varying degrees, as global water consumption increases, including
- Physical supply risk: will fresh water always be available in the required quantities for your operations?
- Corporate image risk: your corporate image will likely take a hit if you are called out as a “polluter” or “water waster”
- Governmental interference risk: governmental bodies are becoming increasingly interested in water consumption, and can impose regulations that can be difficult to deal with
- Profit risk: all of the above risks can translate to a deterioration of your bottom line.
But with risk comes opportunity – planning for your water consumption, and footprint, as part of your supply chain analysis, and acting in response, can keep you ahead of the curve!
July 30th, 2012 12:56 pm Category: Enterprise Resource Planning, Global Supply Chain, Network Design, Operations Research, Optimization, Profit Network, Profit Vehicle Planner, Profit Vehicle Router, Risk Management, Supply Chain Improvement, by: Jim Piermarini
There is nothing like a bit of vacation to help with perspective.
Recently, I read about the San Diego Big Boom fireworks fiasco — when an elaborate Fourth of July fireworks display was spectacularly ruined after all 7,000 fireworks went off at the same time. If you haven’t seen the video, here is a link.
And I was reading an article in the local newspaper on the recent news on the Higgs: Getting from Cape Cod to Higgs boson read it here:
And I was thinking about how hard it is to know something, really know it. The data collected at CERN when they smash those particle streams together must look a lot like the first video. A ton of activity, all in a short time, and a bunch of noise in that Big Data. Imagine having to look at the fireworks video and then determine the list of all the individual type of fireworks that went up… I guess that is similar to what the folks at CERN have to do to find the single firecracker that is the Higgs boson.
Sometimes we are faced with seemingly overwhelming tasks of finding that needle in the haystack.
In our business, we help companies look among potentially many millions of choices to find the best way of operating their supply chains. Yeah, I know it is not the Higgs boson. But it could be a way to recover from a devastating earthquake and tsunami that disrupted operations literally overnight. It could be the way to restore profitability to an ailing business in a contracting economy. It could be a way to reduce the greenhouse footprint by eliminating unneeded transportation, or decrease water consumption in dry areas. It could be a way to expand in the best way to use assets and capital in the long term. It could be to reduce waste by stocking what the customers want.
These ways of running the business, of running the supply chain, that make a real difference, are made possible by the vast amounts of data being collected by ERP systems all over the world, every day. Big Data like the ‘point-of’sale’ info on each unit that is sold from a retailer. Big Data like actual transportation costs to move a unit from LA to Boston, or from Shanghai to LA. Big Data like the price elasticity of a product, or the number of products that can be in a certain warehouse. These data and many many other data points are being collected every day and can be utilized to improve the operation of the business in nearly real time. In our experience, much of the potential of this vast collection of data is going to waste. The vastness of the Big Data can itself appear to be overwhelming. Too many fireworks at once.
Having the data is only part of the solution. Businesses are adopting systems to organize that data and make it available to their business users in data warehouses and other data cubes. Business users are learning to devour that data with great visualization tools like Tableau and pivot tables. They are looking for the trends or anomalies that will allow them to learn something about their operations. And some businesses adopting more specialized tools to leverage that data into an automated way of looking deeper into the data. Optimization tools like our Profit Network, Profit Planner, or Profit Scheduler can process vast quantities of data to find the best way of configuring or operating the supply chain.
So, while it is not the Higgs boson that we help people find, businesses do rely on us to make sense of a big bang of data and hopefully see some fireworks along the way.
June 22nd, 2012 3:46 pm Category: Distribution, Enterprise Resource Planning, Global Supply Chain, Green Network, Green Optimization, Network Design, Optimization, Supply Chain Agility, Supply Chain Improvement, Supply Chain Planning, Transportation, Vehicle Routing, by: Editor
Supply Chain optimization is a topic of increasing interest today, whether the main intention is to maximize the efficiency of one’s global supply chain system or to pro-actively make it greener. There are many changes that can be made to improve the performance of a supply chain, ranging from where materials are purchased, the types of materials purchased, how those materials get to you, how your products are distributed, and many more. An additional question on the mind of some decision makers is: Can I minimize my environmental footprint and improve my profits at the same time?
Many changes you make to your supply chain could either intentionally – or unintentionally – make it greener, so effectively reducing the carbon footprint of the product or material at the point that it arrives at your receiving bay. Under the right circumstances, if the reduced carbon footprint results from a conscious decision you make and involves a change from ‘the way things were’, then there might be an opportunity to capture some financial value from that decision in the form of Greenhouse Gas (GHG) emission credits, even when these emission reductions occur at a facility other than yours (Scope 3 emissions under the Greenhouse Gas Protocol).
As an example, let’s consider the possible implications of changes in the transportation component of the footprint and decisions that might allow for the creation of additional value in the form of GHG emission credits. In simple terms, credits might be earned if overall fuel usage is reduced by making changes to the trucks or their operation, such as the type of lubricant, wheel width, idling elimination (where it is not mandated), minimizing empty trips, switching from trucks to rail or water transport, using only trucks with pre-defined retrofit packages, using only hybrid trucks for local transportation and insisting on ocean going vessels having certain fuel economy improvement strategies installed. These are just some of the ways fuel can be saved. If, as a result of your decisions or choices made, the total amount of fuel and emissions is reduced, then valuable emission credits could be earned. It is worth noting that capturing those credits is dependent on following mandated requirements and gaining approval for the project.)
If your corporate environmental strategy requires that you retain ownership of these reductions, then you keep the credits created and the value of those credits should be placed on the balance sheet as a Capital Asset. Alternatively, if you are able, the credits can be sold on the open market and the cash realized and placed on the balance sheet. Either way, shareholders will not only get the ‘feel good’ benefit of the environmental improvement, but also the financial benefit from improvement to the balance sheet. If preferred, the credits can be sold to directly offset the purchase price of the material involved, effectively reducing that price and so increasing the margin on the sales price of the end-product and again improving the bottom line. If capital investment is required as part of the supply chain optimization, the credit value can also be a way to shorten the payback period and improve the ROI, or to allow an optimization to occur
So, when you consider improving your environmental impact or optimizing your supply chain, consider the possibility that there might be additional value to unlock if you include both environmental and traditional business variables in your supply chain improvement efforts.
Written by: Peter Chant, President, The FReMCo Corporation Inc.
I was sitting on the plane the other day and chatting with the guy in the next seat when I asked him why he happened to be traveling. He was returning home from an SAP ERP software implementation training course. When I followed up and asked him how it was going, I got the predictable eye roll and sigh before he said, “It was going OK.” There are two things that were sad here. First, the implementation was only “going OK” and second, that I had heard this same type of response from so many different people implementing big ERP that I was expecting his response before he made it.
So, why is it so predictable that the implementations of big ERP systems struggle? I propose that one of the main reasons is that the implementation doesn’t focus enough on the operational decision-making that drives the company’s performance.
A high-level project history that I’ve heard from too many clients looks something like this:
- Blueprinting with wide participation from across the enterprise
- Implementation delays
- Data integrity is found to be an issue – more resources are focused here
- Transaction flow is found to be more complex than originally thought – more resources are focused here
- Project management notices the burn rate from both internal and external resources assigned to the project
- De-scoping of the project from the original blueprinting
- Reports are delayed
- Operational functionality is delayed
- Testing of transactional flows
- Go-live involves operational people at all levels frustrated because they can’t do their jobs
Unfortunately, the de-scoping phase seems to hit some of the key decision-makers in the supply chain, like plant schedulers, supply and demand planners, warehouse managers, dispatchers, buyers, etc. particularly hard, and it manifests in the chaos after go-live. These are the people that make the daily bread and butter decisions that drive the company’s performance, but they don’t have the information they need to make the decisions that they must make because of the de-scoping and the focus on transaction flow. (It’s ironic that the original sale of these big ERP systems are made at the executive level as a way to better monitor the enterprise’s performance and produce information that will enable better decision-making.)
What then, would be a better way to implement an ERP system? From my perspective, it’s all about decision-making. Thus, the entire implementation plan should be developed around the decisions that need to be made at each level in the enterprise. From blueprinting through the go-live testing plan, the question should be, “Does the user have the information in the form required and the tools (both from the new ERP system and external tools that will still work properly when the new ERP system goes live) to make the necessary decision in a timely manner?” Focusing on this question will drive user access, data accuracy, transaction flow, and all other elements of the configuration and implementation. Why? Because the ERP system is supposed to be an enabler and the only reasons to enter data into the system or to get data out is either to make a decision or as the result of a decision.
Perhaps with that sort of a focus there will be a time when I’ll hear an implementation team member rave about how much easier it will be for decision-makers throughout the enterprise once the new system goes live. I can only hope.
When working with our clients we try to understand the reasons why they decided to use an outside consultant. I surveyed several of our clients to understand their thinking on this topic and the content of this blog entry should largely be credited to them.
While there are a number of reasons for engaging an outside consultant, those reasons fall into three broad categories which are
1) Resource capability
2) Resource availability
3) Training / Partnership
In planning a project a key question to ask is “What skillsets are required to accomplish the work?” It may not be cost effective to maintain certain skillsets in-house if those skillsets
1) are not part of the core mission of your company and / or
2) are readily available at a reasonable cost on the outside.
Resource capability, though, can be thought of in broader terms than just expertise. An outside consultant can provide
1) a fresh perspective
3) knowledge of best-in-class practices
4) political cover
In these kinds of situations, engaging outside resources makes eminent sense.
Once you have settled on the skillsets required to accomplish the work, if those skillsets are not available in-house then obviously you’ll need to engage outside resources. But if they are available in-house you’ll need to determine if those in-house resources have enough capacity to accomplish the work within the required time frame.
If the resources needed are not available over the time frame required then an option is to make a permanent hire but there may not be enough time to do a proper search and after you hire someone presumably for the long term.
By engaging an outside consultant you can almost always get that resource working on your project sooner and will have that resource engaged for a limited time for a known cost up front (assuming fixed pricing).
Training / Partnership
Some of our customers want to have capable and available resources to do the work in house but do not currently. In those cases, an outside resource can help you build the capability in house via a partnership of training and / or mentoring. Here the clear end goal is to develop the long term in house resources to continue the work.
So whether it is to complement the capabilities of your organization supplement existing capacity or train and mentor new in house skills, consider how outside resources might help you meet your objectives.
November 21st, 2011 12:20 pm Category: Global Supply Chain, Network Design, Optimization, Risk Management, Scheduling, Supply Chain Agility, Supply Chain Improvement, Supply Chain Planning, Sustainability, by: Jim Piermarini
Change is hard.
In the businesses that I help, change comes for several reasons. It may be thrust upon the business from the outside, a change in the competitive landscape for instance, or a new regulation. It may come from some innovative source within the company, looking for cost savings to increase profitability of productivity, or a new process or product with increased productivity. Change can come from the top down, or from the bottom up. Change can come in a directed way, as part of a larger program, or organically as part of a larger cultural shift. Change can come that makes your work easier, or harder, and may even eliminate a portion (or all) of the job that you were doing. Change can come to increase the bottom line or the top line. But primarily change comes to continue the adaptation of the company to the business environment. Change is the response to the Darwinian selector for businesses. Adapt or decline. Change is necessary. It is clear to me from my experience that businesses need to change to stay relevant.
This may seem trite or trivial, but accepting that change is not only inevitable, but that it is good, is the shift in attitude that separates the best companies (and best employees) from the others.
So, you say, I see the need to change, it is not the change itself that is so difficult, but rather the way that it is inflicted upon us that makes it hard. So, why does it have to be so hard? Good question.
Effective managers know that change is necessary but hard. They are wary of making changes, and rightly so. Most change projects fail. People generally just don’t like it. Netflix is a great example. Recently, Netflix separated their streaming movie service from their DVD rental business. After what I am sure must have been careful planning, they announced the change, and formed Quikster, the DVD rental site, and the response from the customer base was awful. As you likely know, Netflix, faced with the terrible reception from their customer base and stockholders, reversed their decision to separate streaming from DVDs. What was likely planned as a very important change, failed dead. Dead, dead, dead. Change can be risky too.
If change is necessary, but hard and risky… how can you tame this unruly beast?
The secret of change is that it relies on three things: People, Process, and Technology. I name them in the order in which they are important.
People are the most important agents relative to change, since they are the one who decide on the success or failure of the change. People decided that the Netflix change was dead. People decide all the time about whether to adopt change. And people can be capricious and fickle. People are sensitive to the delivery of the change. They peer into the future to try to understand the affect it will have on them, and if they do not like what they see… It is the real people in the organization who have to live with the change, who have to make it work, and learn the new, and unlearn the old. It is likely the very same people who have proudly constructed the current situation that will have to let go of their ‘old’ way of doing things to adopt to the new. Barriers to change exist in many directions in the minds of people. I know this to be true… in making change happen, if you are not sensitive to the people who you are asking to change, and address their fears and concerns, the change will never be accepted. If you do not give them a clear sense of the future state and where they will be in it, and why it is a better place, they will resist the change and have a very high likely hood of stopping the change, either openly, or more likely passively and quietly, and you may never know why the fabulously planned for change project failed.
Process is the next aspect of a change project that matters. A better business process is what drives costs down. Avoiding duplication of efforts, and removing extra steps. Looking at alternatives in a ‘what-if’ manner, in order to make better decisions, these are what make businesses smarter, faster, better. A better business process is like getting a better recipe for the kitchen. Yet, no matter how good a recipe; it still relies on the chef to execute it and the ovens to perform properly. Every business is looking for better business processes, just as every Chef is looking for new recipes. But putting an expert soufflé recipe, where the soufflé riser higher, in the hands of an inexperienced Chef does not always yield a better soufflé. People really do matter more than the process.
Technology is the last aspect of the three that effect change. Better technology enables better processes. A better oven does not make a Chef better. The Chef gets better when they learn to use the new oven in better ways, when they change the way they make the soufflé, since the oven can do it. A better oven does not do it by itself. An oven is just an oven. In the same way, better technology is still just technology. It by itself changes nothing. New processes can be built that use it, and people can be encouraged to use it in the new process. Technology changes are the least difficult to implement, and it is likely due to this fact that they are often fixed upon as the simple answer to what are complex business problems requiring a comprehensive approach to changing the business via it people, process, and technology.
Change is necessary, but hard and risky. Without change businesses will miss opportunities to adapt to the unforgiving business world, and decline. However, change can be tamed if the attitude towards it is changed to be considered a good thing, and is addressed with a focus on people, process and technology, in that order. Done right, you can implement the change that will increase the bottom line and avoid a collapse of your soufflé.
November 10th, 2011 6:46 pm Category: Enterprise Resource Planning, Global Supply Chain, Network Design, Operations Research, Optimization, SAP Integration, Software Optimization, Supply Chain Agility, Supply Chain Improvement, Supply Chain Planning, Sustainability, by: Richard Guy
The rise of zombies in pop culture has given credence to the idea that a zombie apocalypse could happen. In a CFO zombie scenario, CFO’s would take over entire companies, roaming the halls eating anything living that got in their way. They would target the brains of supply chain managers and operations people. The proliferation of this idea has led many business people to wonder “How do I avoid a CFO zombie apocalypse?”
Supply chain managers are seeking and developing new and improved ways to exploit the volumes of data available from their ERP systems. They are choosing advanced analytics technologies to understand and design efficient sustainable supply chains. These advanced analytics technologies rely on the use of optimization technology. I am using the mathematical concept of “optimization” as opposed to non-mathematical process of making something better.
Mathematical optimization technology is at the heart of more than a few supply chain software applications. These applications “optimize” some process or decision. Optimization-base programs, for example, those frequently found in strategic supply chain network planning, factory scheduling, sales and operations planning and transportation logistics use well-known mathematical techniques such as linear programming to scientifically determine the “best” result. That “best solution” is usually defined as minimizing or maximizing a single, specific variable, such as cost or profit. However, in many cases the best solution must account for a number of variables or constraints. Advanced analytics technologies can improve a company’s bottom line – and it can improve revenue, too! CFO’s like this.
Advanced analytics technologies provide easy-to-use, optimization-based decision support solutions to solve complex supply chain and production problems. And, these solutions can help companies quickly determine how to most effectively use limited resources and exploit opportunities.
So, from my perspective, there are seven practical reasons to embrace advanced analytics technologies:
- Your company saves money, increases profits.
- You get to use all your ERP system’s data.
- It’s straightforward and uncomplicated.
- You have the tools to discover great ideas and make better decisions.
- At the end of the day, you know the total cost of those decisions.
- You have a roadmap to make changes.
- You avoid the CFO zombie apocalypse
“With every passing year, the amount and variety of information available to make business decisions continues its exponential growth. As a result, business leaders have an opportunity to exploit the possibilities inherent in this rich, but complex, stream of information. Alternatively, they can continue with the status quo, using only their good business sense and intuition and thereby risk being left in the dust by competitors. Top-tier companies have learned to harness the available data with powerful decision support tools to make fast, robust trade-offs across many competing priorities and business constraints.”
Read the complete article here: Face Complexity – Making Sound Business Decisions
June 16th, 2011 9:00 am Category: Enterprise Resource Planning, Global Supply Chain, Inventory Management, Press Releases, Supply Chain Improvement, Supply Chain Planning, Supply Chain Software, by: Editor
Profit Point, the leading supply chain optimization software and services company, today announced the release of its Profit S&OP software to complement it’s S&OP consulting services. Profit Point’s combined S&OP solution provides business decision makers with the process and tools to manage and optimize sales and operations planning across the supply chain.
The Profit S&OP software tool is fully-customizable to meet the needs of supply chains across all industries and is designed to improve tactical planning for the key decision makers across a company, including finance, sales, manufacturing, logisitics and supply chain. The software provides a centralized dashboard to gain insights and control over a company’s supply chain, including features to enhance collaborative forecasting and improve manufacturing, distribution, and inventory decisions.
“Global manufacturers struggle to accurately plan for global demand across their product lines in a timely manner,” noted Alan Kosansky, Profit Point’s President. “Our S&OP solution solves this problem with a combination of effective processes and a shared planning tool that provides one set of numbers for the key stakeholders across the entire supply chain.”
Using Profit Point’s S&OP solution, manufacturers can coordinate with their supply chain planners across the globe to build accurate, detailed manufacturing and distribution plans quickly and integrate with point-of-sale demand tracking systems. And, the software connects with existing ERP systems, such as SAP® and Oracle®, so analysis and decisions are up to date across the entire organization.
“Improved planning can help any large manufacturer reduce inventory excess and capital risk.” said Jim Piermarini, Profit Point’s CEO. “But the key to successful planning includes the right technology and the right process to align employees with the company’s strategic objectives.”
Profit S&OP has an integrated optimization engine that seamlessly drives the best scenarios to the forefront of a tactical planning sessions. Throughout the process, decision makers are able to visualize and test multiple future scenarios to achieve a collaborative, cross discipline decision making process. Key features in the software include the ability to automatically generate an optimal tactical plan down to the bill of materials (BOM) level, integration with existing ERP data warehouse, multi-period planning horizon, scenario analyzer to systematically assess multiple future scenarios, complex BOM exploration and the ability to visualize plans, timelines and bill of materials to correct bottlenecks and reduce excesses.
To learn more about Profit Point’s sales and operations planning software and services, call us at (866) 347-1130 or contact us here.
About Profit Point:
Profit Point Inc. was founded in 1995 and is now a global leader in supply chain optimization. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point’s has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including Dow Chemical, Coca-Cola, Toys “R” Us, Logitech and Toyota.