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
March 6th, 2014 9:32 am Category: Operations Research, Optimization, Optimization Software, Profit Network, Profit Vehicle Planner, Profit Vehicle Router, Supply Chain Improvement, Supply Chain Optimization, Supply Chain Planning, by: Jim Piermarini
In the recent weeks, I have been thinking about testing our applications, like our popular Profit Network, or Profit Vehicle Planner. When we test, we run data sets that are designed to stress the system in different ways, to ensure that all the important paths through the code are working properly. When we test, our applications get better and better. There are many good reasons to test, most importantly, is to know that an improvement in one part of the code does not break a feature in a different part of the code.
I have been thinking about how we could test our code a bit more, and the means by which we could do that. I have been reading about automated testing, and its benefits. They are many, but the upshot is that if the testing is automated, you will likely test more often, and that is a good thing. To automate application testing requires the ability to churn out runs with nobody watching. And to do that, the application needs to be able to be kicked off and run in a way that there are no buttons or dialog boxes that must be manually clicked to continue. There can be no settings that must be manually set, or information reviewed to decide what to do next. In addition, the application must then save the results somewhere, either in the instance of the application, or to a log file, or to a database of some sort. Then finally, to really be testing, the results must be compared to the expected results to determine the pass/fail state of the test. This requires having a set of expected results for every test data set.
In looking at this process above, I see numerous similarities to the process used to run a sensitivity analysis, in that many runs are typically run, (so automation is a natural help) and the results need to be recorded. Sensitivity Analysis is a typical process for user of our Profit Network tool, and out Profit Planner and Profit Scheduler tool. An additional step in sensitivity analysis however, is that you may desire to change the input data in a systematic way (say Demand + 5%, and Demand -5%), and to the extent that it is indeed systematic, this too could be folded into the automation. The results analysis is different too, in that here you would like to look across the final sets of results at the differences, while in testing you just compare one set of test results to its expected results. I can foresee difficulty in automating the data changes, since each type of data may need to be changed in a very specific way. Never-the-less, even if the data changes are manual, they could be prepared ahead of the run, and the runs themselves could be grouped in a batch run to generate the results needed for a sensitivity analysis.
Constructing a harness that lashes up to an application where you can define the number of runs to be made, the setting for that run, the different data sets to be used, and the output location for results to be analyzed, would be useful not only for testing, but for the type of sensitivity analysis we do a lot of here at Profit Point.
I am going to encourage our developers to investigate this type of a system harness to be able to talk to and control our applications to be able to run them automatically, and have their results automatically stored in a data store for either test or sensitivity analysis.
Jim Piermarini | CEO Profit Point Inc.
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.
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.
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?
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.
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.
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.
“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
We recently attended a discovery meeting that was focused on how to conduct a strategic optimization planning study of an existing distribution network. The company wanted to know what changes needed to be made to lower the distribution costs. Several members of the management team were present and there were many questions regarding the ideal business process, study approach and modeling tools to be used to insure a successful project.
What was interesting to me was the overwhelming focus on the modeling tool. Questions about who would be on the project, the timeline, the types of scenarios, data gathering and validation were secondary. It may be important to have the right tool to model your infrastructure, but the real focus should be on the experience and modeling capabilities of the users of the tool.
These are the Critical Success Factors
- Full participation in data gathering and results review by the project team and management.
- Clear definition of the key questions to be addressed and the related scenarios required by the Project Sponsor early in the project timeline.
- Availability of leadership resources within the company throughout the project to review assumptions and to ensure integrity and quality of the input.
- On time delivery of a complete set of all required data by Project Team members.
- Acceptance and agreement on the variable, fixed and capital cost assumptions of existing and potential new facilities.
- Availability, communication, and collaboration of the Project Team members, support staff, and consultant for all working sessions, conference calls, and follow-up between meetings.
It’s important that the optimization modeling tool can incorporate the variables and constraints associated with your supply chain, but the real focus should not be on the tool, but rather on the experience of the users of the tool and their ability to deliver the results of a project. If I were to set out on a network optimization planning project to model my entire supply chain, then my primary focus would be on developing an experienced team of individuals that had the skills to minimize the above risks.