October 23rd, 2013 9:00 am Category: White Papers, by: Editor
Today, smart manufacturers view the supply chain as a critical element for gaining competitive advantage. Leading companies have long since gloablized their manufacturing and distribution operations. They rely heavily on enterprise resource planning (ERP) platforms to track and record virtually every transaction that occurs in the supply chain – from raw materials sourcing to point-of-sale sell-through.Without doubt, the efficiencies that have accrued through ERP are significant. When one accounts for reduced inventory, carrying costs, labor costs, improvements to sales and customer service, and efficiencies in financial management, the tangible cost savings to enterprises have been estimated to range between 10 and 25% or more. 1 2 Global and multinational concerns have reorgnized themselves – through ERP standardization – to create a competitive advantage over regional manufacturers.
While this ERP standardization has created an advantage for larger concerns, leading supply chain managers are discovering new ways to improve beyond ERP’s limitations. In essence, these supply chain ‘disruptors’ are seeking new ways to separate themselves from the pack. The functional areas and tools used by these disruptors varies widely – from long-term global supply chain network design to near-term sales and operations planing (S&OP) and order fulfillment; and from realtively simple solver-based spreadsheets to powerful optimization software deeply integrated in to the ERP data warehouse.
At Profit Point, we believe that continued pursuit of supply chain improvement is great. We believe that it is good for business, for consumers and for the efficient use (and reuse) of resources around the globe. In this survey, we set out to explore the methods, tools and processes that supply chain professionals utilize to improve upon their historical gains and to gain competitive advantage in the future. You can request a copy of the report here.
We welcome your feedback. Please feel free to contact us or leave a comment below.
Supply Chain Survey 2013:
Gaining Competitive Advantage
If you’re reading our blog, you are probably someone who is deeply interested in supply chain improvement. So we’d like to invite you to participate in this brief survey. And in return, we will send you exclusive, early access to the results of the survey along with our analysis .
Your insights and experiences are very important to us. And we are hosting the survey on a trusted, 3rd-party site so your responses will remain completely confidential. The survey is relatively short and should take only 3-4 minutes to complete. Please take a few moments to complete the Supply Chain Competitive Advantage Survey.
Start the Supply Chain Survey:
Gone are the days that supply chain was merely an expense. These days, savvy decision makers are gaining advantages over the competition by leveraging the data and tools available to them. In this survey, we will be exploring the methods, tools and processes that supply chain professionals utilize to gain competitive advantage via their supply chain.
The global economy hangs in a tenuous balance. U.S. growth has been slow, but steady, while the global economy has been mixed. The survey data suggests that logistics planners are most concerned with meeting service levels, driven by capacity concerns, rising costs and the need to increase productivity.
- A slow and uncertain economic recovery has begun to put pressure on transportation/distribution planners to plan for multiple scenarios.
- Rising fuel and driver costs remain a key long-term concern.
- Capacity is a significant concern. While trucking capacity has tightened, rail capacity is available.
- Planners are equally concerned with meeting service levels, perhaps, caused by rising costs and capacity constraints.
To read the complete report, including our conclusions, click the link below:
A husband, two kids and a golden retriever later… I am back to implementations in Supply Chain planning and scheduling. To my surprise, the same challenges I encountered 10 years ago remain in force today: data, defining business processes, data, implementing software, data, training people, data, supporting the change to a new system and data.
Data collection remains one of the cornerstones of success of a supply chain planning or scheduling implementation. Though scores of data may exist in a company’s business, harnessing it to feed into a planning or scheduling model can be extremely complex and time consuming. Interestingly, the data collection process often drives an elucidation of manufacturing practices and process flows, and clients learn what they do and don’t know about their business. This may seem backwards and risky in terms of getting things out of order. In a perfect world, a thorough understanding of manufacturing and business processes would pave the way towards building an Advanced Planning and/or Scheduling System. In reality, they often happen in tandem and are evolutionary in nature.
Deciding how data will be housed, derived and propagated early on in an implementation will pay off in the long run. Establishing a systematic, automated way to update and propagate data is equally important as the decision of what software system to use. It is worth the investment to take the time to put this automation in place as a greater and greater number of products are added to a system the data will remain manageable and scalable.
From PC to Cloud, emails to tweets, networking happy hours to LinkedIn, it is nice to know some things stay the same.
October 28th, 2010 3:32 pm Category: Publications, by: Editor
This month’s issue of Supply Chain Solutions magazine features an article by Dr. Alan Kosansky and Dr. Joe Litko entitled Leverage Value.
“Executive-level business decisions include a broad range of interconnected variables leading to an extensive array of options. In the supply chain arena, this often plays out as a tradoff between operating costs, working capital, asset utilization and customer service levels.”
This article looks at the challenges faced by executives in making these decisions and the value of modeling future scenarios to make better decisions. You can read the complete article here.
October 20th, 2010 11:37 am Category: Optimization, by: Ted Schaefer
A good friend of mine, who works for a large employer in her city, recently told me that her department’s budget, along with every other department budget that was classified as “Administration” in the ubiquitous SAP system, had to be cut by a large and specific percentage.
It didn’t matter that the “Administration” label was not uniformly applied across her organization and that some departments that were so labeled performed functions very similar to other departments that were not stuck with that label. It didn’t matter what services each department provided, or how efficiently they provided them, they just had to cut the budget and they had to hit the number. Incredibly, it didn’t matter that her group was one of the few “Administration” groups that actually generated revenue; in her case three times their total annual budget spend.
Unfortunately, hers is not the first story like this that I have heard.
There is no doubt that many corporations, organizations, governments and households have been hit hard by the recent economic downturn. Each of these groups has been forced to make some difficult decisions. So what do I have against across-the-board (ATB) budget cuts? Basically, I think it has to be the worst way to reduce costs in an organization, and here’s why.
Let’s take a look at something that is important and familiar to all of us; the family budget. Sadly, many families have been forced to drastically reduce spending as a result of a lay-off or furlough over the past two years. In those cases, an ATB cost-cutting strategy just doesn’t work. Try telling the bank that you’ve had to cut your monthly mortgage payments by 15%. I doubt that they will be impressed when you tell them that you’ve had to do the same with your property taxes, insurance premiums, electricity and water payments, as well. You might get lucky and be able to renegotiate your mortgage and you might get lucky if your state provides utilities assistance for people who have recently lost their jobs, but most tax assessors and insurance companies will not be particularly sympathetic.
But my guess is that you’d probably take a very different type of approach to cost-cutting in your household. You’d probably take a hard look at all of the money that you’re spending over a month or a quarter. You might first examine your spending to see if you could conserve on the amount you consume or if there were ways to get the same goods and services in a cheaper manner. If that didn’t reduce your spending enough, you’d probably divide the remaining spending into different categories. There are many different ways to categorize your expenses, but they’ll probably come down to something like, 1) Essential; 2) Non-essential, but painful to cut; 3) Non-essential and easier to cut. If you’re lucky, you will be able to cut enough of your spending by eliminating or reducing your expenses in the non-essential categories. If not, you might be forced to re-examine what really is “Essential.” For example, your mortgage payment is essential, as long as you plan to stay in your house, but if the situation calls for it, you can reduce your costs by moving into a smaller home or apartment. Not a fun choice, but it could be the right thing to do in certain situations.
Looking back on the family budget example, what did we do? First, we looked for opportunities to conserve and less expensive ways to purchase the same goods and services. Next, we prioritized our spending so we could make good decisions. To find less expensive ways to purchase the same goods and services and to prioritize the spending means that we needed to 1) understand what we were getting for the money we were spending and 2) understand what would happen when we stopped spending that money. After prioritizing our spending we made trade-offs by deciding what we could live without. Some of the trade-offs may have been no-brainers, but some may have been very difficult.
I would argue that this is the same process that should occur in any organization that needs to reduce its spending. It amazes me how a manager can walk into a large organization and mandate a large cut in the budget for each and every department (as they are defined in the accounting system, but that’s a different blog) without understanding where, how and why the money is spent. It would be laughable if the results weren’t so sad.
ATB budget cuts penalize your best managers. These are the managers that run a lean operation, who have taken the initiative to drive out all of the waste and improve productivity. They are already doing the job you’ve asked them to do with the fewest resources possible, but they are being treated in the same manner as the manager who is either not as effective, or who has become jaded by past ATB cuts, so that he/she keeps some “rainy day” resources in the budget for just such “emergencies.” (… and people wonder why their best managers seem to leave after these types of budget cuts, even when their positions are not eliminated.)
Let’s not forget the knock-on effect of penalizing your best managers. The best managers often assemble the best teams to do the work. If one or more members of a lean, highly productive, well-functioning team is forced out in an ATB cut, the rest of the team is forced to pick up the additional work of the departing team members. This extra work, on top of an already full workload, either forces the quality of the work to suffer, or reduces the total output of the team; that is, if the rest of the team elects to stay in an organization that doesn’t value efficiency.
ATB budget cuts often fail to achieve their savings targets or result in so much “slash and burn” damage to the organization that “add-backs” must occur after the blood-letting so the organization can survive. It continues to amaze me that these managers have the time to perform an initial ATB cut, followed by another one or by an “add back” program; but don’t have the time to do it right the first time.
ATB cuts suggest that the value of the work performed under each of the budgets is equal to the value of the work performed in all other budgets. I have seen a lot of different organizations over my career and I don’t think I’ve ever observed this to be the case. Take my friend’s case: her group makes money, while others spend it. Is a cost cut that forces a reduction in revenue equal to a cost cut that has no impact on revenue? Probably not.
So, what’s the answer? Clearly, many organizations are forced to radically reduce costs just to survive. I think it goes back to our home budget example: 1) know what you’re spending; 2) understand what you get for it, 3) find ways to get the same or similar things for less money, and 4) make the hard choices about what you can do without.
In the end, my experience has been that managers who drive ATB cost reductions are incapable/unwilling to understand their business processes and organizations sufficiently; lack the imagination or skills to reengineer their business processes; or lack the courage to make the hard choices about what their organization will do and what it won’t do in the future.
To all those top level managers who have instituted ATB cuts, or for those who are planning to do so: Don’t do it! Think before you act, and save your company the added burden of bad management.
At Profit Point we are in the ‘Science of Better’, and we are always looking for new ways to do business, both for our clients, and for ourselves. When we started, we had the challenge of being a virtual company, that is, we have never had a corporate office space. Since 1995, each of us has always worked from home. While there are numerous benefits of this style of company architecture, including having a family that actually knows who you are, and keeping the company’s overhead to a minimum, it also has its drawbacks. Like forcing each person to make the deliberate decision about when to start work, and harder still, when to stop work each day. We knew when we started this company that we wanted to keep our overhead costs low, so a virtual office seemed like the natural choice.
More recently, we have been faced with another challenge, how to reduce the cost of the projects we do. Projects in the supply chain business require a certain amount of industry and company specific knowledge. Until recently, we had been building into our projects ample on-site time where the project team could gel and collaborate and build the trust that is needed for the free flow of ideas. But the world has changed, and we have changed with it. No longer are big travel budgets a normal part of the projects we see. So the challenge was: how to reduce the travel expense line item, without sacrificing the project speed or quality?
In the consulting business, there is sometimes no substitute for ‘face-time’. So travel to the customer site perforce happens. Over the course of the last 15 years, I have seen a marked drop in the amount of time that we need to travel, going from 60-70% a decade ago to less than 20% currently, and this has been brought about primarily by two factors: 1) Companies simply do not want to pay the travel expenses. Since 9/11, most major companies have been slashing their travel budgets, and expect their consultants to follow suit. One particular project comes to mind where I had seen travel expenses that were as much as the consulting bill each month. But in general, we see pressure to reduce the travel expenses that are generated by projects across the board. 2) ‘Remote Touch’ Technology has provided the means to travel less. There are some great remote desktop control tools that allow two or more people to have a telephone or VOIP conversation, and look at the same computer screen, to discuss and collaborate on ideas and tools. These web based telephony and remote control tools have eliminated the need for travel to a greater extent than you might think. Many of our projects today have only two face to face meetings, one to kick it off, and one to present the results or close it out. Some of our clients are handled successfully without any face time. I must say though, that in our experience, low face-time projects only work well within the culture and language: that is, when language and culture barriers exist in the project team, face-time is the best way to bridge these gaps, and mitigate the risk of project overruns and delays.
In business, technology comes into being as a means to enable better business processes. The processes that we use that are enabled by this remote touch technology includes an agile approach to solving business problems or developing software solutions. We use several readily available web based tools every day in our business, and boy have they allowed us to reduce the travel expenses. These include:
This is the best remote touch tool out there in our opinion. Until a robust free app comes along, this will remain the best value for the money. The best part of the app is the recent addition of the integrated VOIP, where you can use a head set (I would recommend the Logitech ClearChat PC Wireless Headset: http://www.logitech.com/en-us/webcam-communications/internet-headsets-phones/devices/4226) to join the integrated telecon line. This has the advantage of freeing up your phone, and being instantly connected to the telecon as soon as you start it. No more long telecon numbers with their passcodes! We use this many times every day, and it is the primary reason why we can travel less.
This is a simple to use and secure web based file storage and sharing application that fosters and supports collaboration with people both in your company and externally. We love this app, and my clients seem to as well. Just drop a file into this app, and share it securely with anyone with an email address. Use it when email attachments just will not do, due to size limitations, or just when the email hassle is too much.
This is a terrific project management tool that is designed for agile projects, and makes it simple to create and manage user stories for tool development. While inviting new members can be a hassle (since their email seems to get caught in many spam filters), once they are in, these folks have made a stellar user interface to manage the tasks in a project of nearly any size. Use it to track bugs too. We have done several projects using this tool. and we will be using it for many more. Great tool.
If you like to look at data, like we like to look at data, then you will want to look at Tableau. You can think of it like a pivot table / chart on steroids. You open it, connect to you data, (whereever or what ever data you’ve got, it can connect to it), and then you start to explore your data like you’ve never been able to before. Like a pivot table, you can drag and drop fields, aggregate data along dimensions, and make sums, etc, but the really cool part of Tableau is the part where it suggests new ways of the looking at the data. Go ahead, make maps, heat charts, time phased graphs, whatever. Then you can assemble the graphs into a dashboard. Dashboards are the best. Want to see a ton of data distilled down into a very compact visually stunning view suitable for management? Get a copy of Tableau, and you can make that view in minutes.
Used appropriately, these tools, and others like them, have enabled us to travel less, and work faster and better. (and more!)
If you have other great apps like these that enable better business processes, I would love to hear about them.
I’m a picture guy. In our kind of work, we have to be able to take a lot of data and make sense out of the process or processes that generated it. I used to work with a fellow named, Bill, who has a PhD in Operations Research, and is probably one of the smartest people I’ve ever met in my life. Bill is a guy who can look at six or seven big tables of numbers and then say something like, “… and the answer is 7.563.” He was usually right. I don’t have that talent to create the linkages among lots of different types of information in my head to come up with a conclusion like that. That’s why I like pictures.
Recently, one of my colleagues and I were visiting a manufacturing plant to assess their production scheduling process. The client invited us to visit the plant because they knew they had a problem. As we followed the scheduler through his day, we began to understand the root causes of the problem. So how did I choose to communicate what we’d found to the client? You guessed it; I drew a picture.
When the plant manager first opened the file containing the flowchart of their existing process, she told me she only needed to see that it took me three letter-sized pages to document to the process to know that the process was much too complex and cumbersome to be fixed with a couple of “quick hits.” Why is it that she knew without studying the details that we needed a full redesign to fix this process?
I think many of us are just built that way. I know there is a lot of clinical and academic research that shows how we human beings use our sense of sight as a first preference for observing the world, and that there are specific parts of our brains that are able to detect visual patterns or the lack thereof. However, I don’t think we need to see the results of that research to know why the phrase, “a picture is worth a thousand words,” is such an enduring statement. It rings true with all of us.
That’s why I like a software product called Tableau. It is marketed as a visual analysis tool and I think it does its job quite well. Although I don’t claim to be an expert user, I have found it quite useful when I need to understand what’s going on in a large dataset. Let me illustrate using an example from a recent transportation analysis that we did for one of our clients.
Our client had grown by acquisition and managed its transportation in a very de-centralized manner. Each of the sites contracted individually with their own set of carriers, using their own set of criteria for selecting and then awarding business to the carriers. Profit Point was called in to help the client understand the cost-savings opportunities that would result from a more centralized approach to carrier contracting and management.
Our first priority was to find out what was going on at all of the different sites so we developed a database from the client’s freight payment records to do it. Now, picture this (pun intended). We now have over 63,000 individual shipment records to analyze and we needed to do it in a way that told a story that we could understand and that we could then communicate to the client. The first thing we did was look at the spend by plant and by carrier. The spend by plant was more of a prioritization issue, to understand which of the plants had the highest freight spend, but the spend by carrier became the first part of our story as you can see in the two pictures below.
This second chart was a very powerful image to help the client quickly see that the number of carriers being employed was out of control. You don’t even need to be able to read the name of the carrier on the Y-axis to know that there are too many carriers in this picture. Many of these carriers had only a single load all year long, but were still carried in the system.
We also wanted to show the client the significant different in pricing policies across their carrier base. The following slides show how we used some more of Tableau’s functionality to make our point.
By plotting cost vs. distance for all of the shipments, we were able to see the general correlation of cost with distance that we expected, but we also saw a number of outliers that we wanted to better understand.
We then highlighted a group of very high-cost shipments and kept only those points to see what we might find out.
Using a simple stacked bar chart, it was very apparent that carrier “C-g,” the red bar in the chart at left, was the main player in this group. Once “C-g” was identified, we were able to demonstrate that their cost was always greater than the average cost for shipments with distances greater than 200 miles and by as much as 50-66% for shipments with distances greater than 1000 miles.
Again, these pictures allowed us to find one of the smoking guns inside this mass of data. Suffice it to say that we found many other opportunities through similar visual analysis.
Because of these pictures, and others like them, it was an easy sell. Using a tool that makes it easy to use the built-in “intelligence of our eyeballs,” we were able to develop a convincing call to action for our client, who went out to the market with a targeted freight bid and reduced their transportation spend dramatically.
As technology continues to penetrate more and more aspects of business and our everyday lives, it makes more and more data available for us to turn into useful information. But it’s only useful information when we can put it into a form that we understand and can communicate it to others. That’s why I’m a picture guy.