Frequently when we work with clients to implement decision support tools for supply chain scheduling and planning, they often have some unique constraint that is essential to model and may be unique to their environment. Some recent examples we have encountered include the following:
- When producing a batch in a make to order environment, the plant always produces some extra amount called the purge quantity which is stuck in the piping from the reactor to the packout line. After purging the line, this material is recycled into the next batch.
- A warehouse can have capacity constraints on both the
- Throughput based on the number and type of doors and
- Storage based on material characteristics such as hazardous material classifications.
- When working with a dairy industry client, the bill of materials changes throughout the year based on the component ratios of the milk produced by the cows which drives the product split.
These types of situations are a regular occurrence and require modeling tools that allow for the flexibility to deal with them. We will implement decision support tools either with a development suite such as Aspen Tech’s Supply Chain ManagementTM or develop an application that connects to an optimization engine such as FICO’s XpressTM. These tools provide a base starting point but then allow for adding modeling constraints that are required to include to get to a solution that the client can actually implement.
In addition, having this flexibility allows the work processes and tools that enable the work processes to evolve over time as the business needs change.
This flexibility though has to be balanced with some level of standardization. Therefore we will often build a new application by using a previous application as a starting point. For a production scheduling tool, there are many things that are common between different implementations including how to represent the schedule via an interactive Gantt chart, common basic reports, standard interfaces to external systems, etc. In a production planning tool, typically there are plants, warehouses and transshipment points to be modelled via a network representation; costs and capacities at each of these nodes in the network that need to be modelled; and an objective function that is either to minimize cost or maximize profit. All of these would be common elements between different planning model implementations.
- Flexibility allows for
- Modelling essential constraints that may be unique to a particular client’s environment but are required to get to a feasible solution that the client can actually implement.
- Changing the tool over time as the business needs change.
- Standardization allows for
- Faster / cheaper implementation.
- Faster / cheaper support.
- Ease of training when moving to a different role but using similar tools.
Having a hybrid of flexibility with standardization is the best of both worlds!
For years we’ve been hearing about Big Data. Now the call is to make the data visible and actionable. Easier said than done. Remember when we wanted our music, phone and camera on one device instead of having to carry multiple devices? Data Visualization is that desirable right now and it is challenging to do well. Here’s why:
Challenge #1: Properly defining the question that you want the data to answer
In the world of supply chain the leaders typically want all of the data summed up into Good News or Bad News. For example, at the end of a monthly S&OP meeting one of the key questions that gets asked is Can Sales continue to promote product A? For Operations to give a Yes or No answer, a timeframe has to be defined. Once the timeframe is agreed, then Operations can answer the question by building a heat map for every product or family of product (if that makes the data more manageable). The heat map then can be given to Sales at the end of the monthly S&OP.
Challenge #2: Cleaning up dirty data
This is where most organizations get stuck. Cleaning up the data is tedious work but it has to be done or the metric is useless. Take heart, sometimes identifying and fixing the issues with the data is meaningful on its own. Also, think about what decisions that dirty data is influencing on a daily basis or the time that it takes to explain variances every month.
Challenge #3: Developing graphics that tell the story at a glance with the push of a button
You have to work with your audience to determine what graphics work for them. I find that it’s best to create something and then get feedback. This step can be a bit of trial and error but once you have the design locked in, then you need a skilled developer to automate the report out. The end users really appreciate if they can easily run the reports and generate the charts and graphs on-demand with the push of button. If it is complicated or requires many manual key strokes to generate the charts and graphs then that report out will not be sustainable.
Challenge #4: Making the data actionable
Congratulations on making it to this step. You have put so much effort into getting here and now all you have to do is summarize thousands or even millions of data points across multiple parameters in a way that helps the receivers of the results to take action. If you can monetize the results by showing costs or savings that will give direction to the receivers of the output to either keep doing what they’ve been doing or give them incentive to make a change. Or, if you can summarize the data into categories that is meaningful to the audience then they will know where to focus their time and energy to make improvements.
Here is an example of a chart that answers the question: How good is my schedule? This chart in addition to five other supporting charts can be generated on-demand in 30 seconds.
At Profit Point, we work with our clients to overcome the challenges with Data Visualization and develop Meaningful Supply Chain Metrics. Contact us at www.profitpt.com or at 610-645-5557 and we will be happy to assist you.
We just finished the fall soccer season in my home. I was thinking about watching my children play soccer when they were younger after a conversation with one of our consultants. He had just come back from visiting a prospective client where he was doing an assessment of their supply chain work processes and systems. Speaking frankly, this prospective client really did not have well defined work processes and certainly didn’t have systems implemented to enable good work processes. Mostly they seemed to run from one fire to the next and tried to do their best in tamping out the flames enough to be able to move onto the next crisis. Our consultant came back feeling dizzy from observing how they operated.
When my kids were younger and playing soccer, their style of play could be characterized as “kick and run”. They really either didn’t understand the concept of trying to possess the ball or couldn’t execute this strategy. If you have the ball, you have the opportunity to score. If your opponent does not have the ball, they can’t score. It’s a simple as that. After watching my kids play on Saturday mornings with this “kick and run” style, I would really enjoy going to see a local college team play. They have won numerous national championships and play at a very high level. They understand and are able to execute this “possess the ball” style of play. It was always helpful to see how the game should be played and get my perspective straightened out.
Perhaps the “possessing the ball” analog in the operation of a supply chain is “possessing the key information.” In soccer, you have to get the ball to your attackers at the right time and in the right place in order to score. Likewise, in the supply chain, you have to get the right information to the right people at the right time to beat the competition. If you are feeling dizzy from fighting fire after fire (playing “kick and run”) in your supply chain operations and don’t seem to be making any progress on making things better and more stable, it would be our privilege to help assess where you are at and work together to move your organization toward operating in championship form.
October 17th, 2014 1:30 pm Category: Global Supply Chain, by: Karen Bird
August of 2013 I took a course at Stanford Graduate School of Business focused on Supply Chain Strategies and Leadership. Here are my takeaways of the Very Important Principles and People (VIPs) of Supply Chain Strategies and Leadership. We learned about The Triple A Supply Chain (Agility, Adaptability and Alignment), Vertical Integration, Postponement, Big Data, Value Chain Ethics and Sustainable Supply Chains. Each of these topics deserve a blog of their own. The bottom line is there is no cookie cutter strategy that fits every business. It is a combination of people and ideas and a willingness to innovate based on what’s happening in your business at the time. However, understanding these concepts and studying companies that have successfully leveraged them as well as those that failed gives us an idea of what may or may not work for a business or industry.
My class was made up of 40 students from 17 different countries and the industries represented were fashion, technology, chemicals, pharmaceuticals, transportation, logging and wine to name a few. We were given 20 case studies to read prior to the class starting and questions to answer for each case study. On the first day of class, we were assigned study groups of five people that reflected the diversity of the class. I learned as much from this part of the class as I learned from the professors and we had fun in the process.
The professors were all outstanding because they have theoretical as well as practical experience. A few examples were Professors Hau Lee, Bill Barnett and Michael Marks. Professor Lee was the Director of the program and taught us about The Triple A Supply Chain as well as many of the other Supply Chain Strategies. See how Professor Lee kept us engaged and why we call him Professor Bullwhip: http://youtu.be/b0dExw3es40. Professor Barnett focused on Leadership and is a prolific blogger. Here is one of his blogs on Leading by Design: http://www.barnetttalks.com/2014/07/leading-by-design.html. Finally Michael Marks, a founding Partner in Riverwood Capital and the former CEO of Flextronics, took us through some Supply Chain Ethics case studies as well as case studies on companies that demonstrate Innovation.
It was one of the greatest educational experiences that I have had. I am still thinking about it more than a year later. In my blogs over the next few months I will share:
- The Top 3 Strategies that the Top Supply Chain Companies are Using
- A More In-depth Discussion of the Very Important Principles of Supply Chain Strategies
Profit Point is helping several large chemical manufacturers upgrade their many Aspen SCM scheduling models with a goal to achieving long term support-ability in the new Aspen architecture of ver 8.5. An Aspen SCM (MIMI) Upgrade is no small undertaking, but we have been helping people manage, support, and enhance their scheduling models for over 20 years.
I have seen many Mimi scheduling models over the last 20 years, in many different businesses, and it is still amazing to me how well these scheduling models work. Their superior applicability is primarily due to creativeness of the their original modelers and their efforts to incorporate all the important aspects of the plants which they schedule, and most that I have seen have remained relevant and useful all these years. Their longevity is due is no small part to the flexibility of the scheduling environment which is Aspen SCM (AKA Mimi). This allows for many minor changes to the tool as equipment characteristics change or are upgraded, or as the business needs change, or indeed as the scheduler changes. This new version retains that flexibility which has made Aspen SCM scheduling models still relevant today.
In previous version changes, Aspen SCM has always been backward compatible; meaning that with nominal effort a newer Aspen SCM version would open an older version’s scheduling model. This was true up to ver 8.x released earlier this year. With this version, the older scheduling models, especially those that were developed in house, will not be able to function properly without a more substantial effort. Version 8.x brings a new XML based architecture and with it a new look and feel, more compatible with today’s applications. In addition, it has some useful new features that can make scheduling easier. Link here https://www.aspentech.com/products/aspen-plant-scheduler/ Aspen SCM remains, in my opinion, the best tool for the job of scheduling plants of all types and sizes. This new version is no break from that long history of being the best, indeed it has just been made even better.
With plants around the world, our customers trust Profit Point to upgrade their effective scheduling models to the latest version of Aspen SCM (Mimi) so they can enjoy many more years of effective scheduling at their plants.
We love doing this work. Call us if you are facing the same upgrade challenge, we may be able to help get you going.
This month, Supply Chain Management Review is featuring a 3-part series by Dr. Alan Kosansky and Michael Taus of Profit Point entitled Managing for Catastrophes: Building a Resilient Supply Chain. In this article we discuss the five key elements to building a resilient supply chain and the steps you can take today to improve your preparedness for the next catastrophic disruption.
Once a futuristic ideal, the post-industrial, globally-interconnected economy has arrived. With it have come countless benefits, including unprecedentedly high international trade, lean supply chains that deliver low cost consumer goods and an improved standard of living in many developing countries. Along with these advances, this interdependent global economy has amplified collective exposure to catastrophic events. At the epicenter of the global economy is a series of interconnected supply chains whose core function is to continue to supply the world’s population with essential goods, whether or not a catastrophe strikes.
In the last several years, a number of man-made and natural events have lead to significant disruption within supply chains. Hurricane Sandy closed shipping lanes in the northeastern U.S., triggering the worst fuel shortages since the 1970s and incurring associated costs exceeding $70 billion. The 2011 earthquake and tsunami that struck the coast of Japan, home to the world’s 3rd largest economy representing almost nine percent of global GDP caused nearly $300 billion in damages. The catastrophic impact included significant impairment of country-wide infrastructure and had a ripple effect on global supply chains that were dependent on Japanese manufacturing and transportation lanes. Due to interconnected supply chains across a global economy, persistent disruption has become the new norm.
Are you ready to build a resilient supply chain?
Call us at (866) 347-1130 or contact us here.
Additive manufacturing or 3D printing is a process of making three-dimensional solid objects from a digital model. It is achieved by laying down successive layers of material, as opposed to the traditional machining techniques of removing material by drilling and cutting. 3D printing is usually performed by a materials printer using digital technology.
Taking a digital image of a toy and printing out a near-perfect replica of it seems sci-fi and surreal, but rapid technological advances in 3D printing being developed make this and even more possible. Printing metal parts with increased strength makes machines even more viable and cost-effective in manufacturing. Additionally, an entire part can be 3D printed in a single machine, eliminating multiple touch points in traditional manufacturing and reducing failures. The newest futuristic trend in 3D printing is to go huge: using robotics to deposit building materials in an orchestrated and precise way to build large structures made up tons of interconnecting parts.
3D printing is a reality. A recent Forbes magazine article, “What Can 3D Printing Do? Here are 6 Creative Examples” lists several ways in which 3D printing have been used:
- In 2012, doctors from University of Michigan developed a tracheal splint made from a polymer and created directly from a CT scan of a baby’s trachea/bronchus using image-based computer model with laser-based 2D printing to product the splint.
- Both General Motors and Ford Motor Company have used 3D printing to make prototypes of vehicle parts used in testing and design.
- Nasa has used 3D printing recently to make a rocket engine injector and use it for major hot fire testing.
- Defense Distributed, a high tech gunsmith group, created the world’s first 3D printed gun called the “Liberator”.
- Prosthetics including a 3D printed bionic ear created by Princeton University scientists have been developed.
Although 3D printing has been around since the 1980’s, a differentiating trend has emerged this year that could make 2014 pivotal: 3D printing machines are now being used to manufacture a large variety of consumer products not just heavy machinery and structural components such as aircraft parts. The printers are expensive and the 3D pictures required to print are difficult for most – a mainstream breakthrough in 3D printing could be seen in the near future as printers become cheaper and easier to use.
What could the Supply Chain of tomorrow look like if and when 3D printing takes off? It has the potential to transform certain parts of manufacturing and supply chains over the long term. Traditional supply chains are often characterized by mass production of products driven by forecasts and pushed to customers through a warehouse distribution network, with long lead times, high transportation costs and large carbon footprints. A 3D supply chain would be distinguished by having customized production, be “pulled” by customer demand, locally printed and distributed, have short lead times, low transportation costs as well as low carbon footprint. It will create a demand for smaller factories that would take offshore manufacturing and bring it close to the consumer. Goods will be cheaper to reproduce domestically versus manufactured offshore and shipped from low-wage countries. Because new technologies currently being developed result in a significant proportion of manufacturing becoming automated large and costly work forces would be reduced. In addition to distribution cost reduction, storage would also be a reduced as products could be made quickly in response to demand as opposed to meeting service levels via inventory and safety stocks.
Although it is a huge leap to go from printing a single object on a 3D printer to replacing an entire manufacturing enterprise and thus allowing any business or individual to become its own homegrown factory, Gartner Group calls it the “beginning of the Digital Industrial Revolution which threatens to reshape how we create physical goods”. If that “threat” becomes reality, then it promises to reshape how we consider and optimize our current Supply Chain.
I read an interesting article in the New York Times concerning a shift in the physical route of the supply chain running between China and Europe. Until recently, trains have played a very small part in the shipment of manufactured products from the Far East to Germany, Holland, France, etc. However, a number of recent developments have caused a number of large companies to begin to shift their supply chains away from maritime to rail-based modes.
Four major developments have spurred this increasing use of trains.
- Labor costs in Eastern China along the coasts have been rising. As a result, if they have not abandoned China all together, many manufacturers have shifted their production facilities to more inland locations to the West and thus marginally closer to Europe. However, adding an extra truck-leg to their supply chains has increased the cost, duration, and complexity of moving their goods to market.
- Taking full effect in January 2012, Kazakhstan, Russia, and Belarus created a customs union that eliminated time consuming and costly customs inspections at their mutual borders. This was little noticed by the rest of the world, but has shaved days off of the overall rail transit time across central Asia by removing delays due to bureaucratic paperwork.
- Kazakhstan is rapidly building new rail routes through its territory. This has the obvious effect of improving the time and reliability of rail transit across that nation. However, this has had the secondary effect of spurring competition from Russia as that country has begun to make infrastructure improvements to its Trans-Siberian railway.
- The Kazak rail authority has implemented processes and policies to give certain trains crossing their territory priority over other traffic. These are given a kind of express-status, whereby fresh operating personnel and locomotives are available at specific stops along the way. Also, guards board the train, sometimes riding on the tops of the rail cars, to ‘send a message’ and insure that goods are not stolen in transit.
Certainly there are many impediments that still exist, which tend to slow the movement of goods by this new Silk Road. The greatest one of course is the fact that the gauge of the rail lines in territories of the ex-Soviet Union are different than the standard used throughout the rest of the world. For this reason, when rail shipments reach the Chinese-Kazak or the Belarus-Polish border large cranes must shift containers between trains designed for the different rail widths.
One of the companies who have begun using this rail option in their Supply Chains is Hewlett-Packard. They report that from their manufacturers in Western China to Europe, the marine route (around India and through the Suez Canal) is 5 weeks whereas the rail-route requires 3 weeks. Although the sea route is about 25 percent cheaper than over-land, the cost of the additional transit time is substantial.
I think the take-away from all of this is to realize that Supply Chains are constantly evolving as a result of changing circumstances. Companies must always re-evaluate their networks and be ready to take advantage of changing conditions so as to optimize their processes and organization.
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.
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.
This month’s IndustryWeek features an article by Alan Kosansky and Ted Schaefer entitled Margin-based Supply Chain Optimization.
“To effectively implement margin-based supply chain optimization, it is important to have three key components in place: data, optimization technology and alignment with strategic business objectives.
Margin-based supply chain optimization is a new business process based on two key business priorities: 1) the desire to deliver more high profit products to customers, and 2) the ability to stop serving customers and products with low profit yield. This supply chain decision support process quantitatively shows companies which customers to serve and what products to produce in order to maximize profit and margin. For companies with complex supply chain operations, this is often easier said than done. Recent advances in the availability of data and optimization modeling, however, enable a growing number of companies to implement more efficient and effective supply chain systems.
A company’s portfolio of customers and products typically changes more quickly than the assets used to meet the customer demand. These situations include changes in the macro-economic environment that precipitate significant increases or decreases in customer demand, shifts in a company’s product portfolio, development of new markets, or changes in the cost to produce and/or deliver products or services. In each scenario, margin-based supply chain optimization is a key tool to help companies manage supply to achieve maximum profitability.
To effectively implement margin-based supply chain optimization, it is important to have three key components in place. They are: data, optimization technology and most importantly, alignment with strategic business objectives.”
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.
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?
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.
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?
DC Velocity featured an article entitled A Network Design is Never Done. The article, which included an interview with Profit Point’s Alan Kosansky, touches upon on the trend of large manufacturers to move from designing their supply chain networks once to continuously improving the design to meet customer demand and supplier mix, among other things.
You can read the complete article here.
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.