One of the pleasures of working at Profit Point is having the occasion to reflect on and write a blog about a subject that is of interest to me. Taking time to reflect on what is important, especially now around Thanksgiving and the holiday season has rewards of its own, but especially with regards to the business we are in, helping people make their supply chains better, brings rewards unique to our profession. I am pleased and thankful to be a part of it.
At the grand scale, improving supply chains improves the very heart of most businesses. It reduces waste, reduces cost, increases efficiency and profit, and reduces the detrimental impact of commerce on our world, including reducing our carbon footprint and land fill waste as well as promoting the most efficient use of our natural resources and raw materials. Profit Point routinely has an enormous impact on the business of our customers, and I personally am pleased and thankful to be a part of it.
On a more human level, the people at our customers who interact with Profit Point personnel on our projects, come away with a profound sense that they can make a difference in their company; the impact of our network studies or scheduling work or other projects demonstrates the ability of a better business process to be rolled out and actually change the business for the better. Once involved in a successful project, many of these people move up in their organizations to lead other successful business change projects. Nothing succeeds like success! I am pleased and thankful to be a part of it.
Reflecting on our part in the business world as small actors on a large stage, it is rewarding to be able to know that we have made some difference.
Wishing you the same peace of mind this holiday season, Jim Piermarini, CEO Profit Point Inc.
November 25th, 2013 9:12 am Category: Supply Chain Optimization, by: Editor
We found a great article by Adrian Gonzalez entitled 5 Reasons Why Excel is Champ of Supply Chain Apps. Over the past 15 years, we’ve seen so many companies relying on Excel to make early stabs at supply chain optimization. And, since we recognize that you supply chain “disruptors” will do just about anything to change the status quo to move the needle on continuous improvement, we applaud you.
In fact, Excel – coupled with it’s relatively powerful optimization engine, Solver, from our partner Frontline – is a great starting place for identifying supply chain optimization opportunities. It’s extremely accessible, virtually free and easy to collaborate, since everyone has it. So long as your not looking for near-real time planning and decision support, the optimization features are quite useful.
Of course,when you’re ready to take it the next level, there are some very good reasons to move beyond Excel. First and foremost, connecting your supply chain optimization software to your ERP data warehouse allows you to get a much more granular level of detail. And, a direct connection means that you’re not wasting hours – or sometimes days – extracting and shaping the data into a consumable form. It’s just there and ready to go!
Below is Adrian’s top 5 list as well as some of the limitations that she identified. There’s also a link to the complete article, which is well worth reading.
“I believe there are five main reasons why Excel remains the reigning champ of supply chain applications:
- It’s is easy to learn and use.
- You can quickly and easily configure it to your specific needs and preferences.
- It’s highly portable: you can use it almost everywhere, and share it easily with others.
- It’s ubiquitous: Almost everybody has it and knows how to use it.
- It’s inexpensive.
Of course, Excel has some significant drawbacks that limit its usefulness and value as a supply chain application, such as…
- You’re working with static data
- A macro is not the same as an optimization engine
- It’s not integrated with execution tools
- You often end up with multiple versions of the truth”
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.
August 6th, 2013 6:32 pm Category: Optimization, by: Alan Kosansky
I enjoyed reading Phil Factor‘s editorial in SQL Server Central, entitled Flying high on the Big Data hot-air. While the piece brings an interesting perspective to the developing ‘Big Data’ discussion and I think there is merit to the opinion, I believe the author missed a few key points:
- From a technology stand point the author is correct, but from a business stand point, there is in fact a revolution going on….much like supply chain in the early 90s.
- While many of the early successes are on small data sets, they are happening because we have big ones.
- I read yesterday that Google search is having great success with new predictive search technology….this is where you don’t actively search for anything, but something like this might happen….your alarm goes off 30 minutes earlier than you set it, your device tells you there is an accident on your route to your 9AM meeting and offers an alternate route for you and where you may want to stop for your cup of coffee on this new route so you can get to your meeting on time. You did nothing before you went to bed, but while you were sleeping, this new Google search trolled through your calendar, and other info it “knew” about you, trolled through public traffic data, etc….
There is going to be another big step in how our devices work for us over the next 10 years, and it is already beginning, partially enabled by “Big Data”. Don’t underestimate it because some of the leading analytics have been around for a long time. The ways they are being applied are going to change things significantly.
When we help our clients improve their supply chains the first step in the process is usually to identify what problem they need to solve, or what questions they are trying to answer. Examples of such questions might be
- What will be the impact of several possible capital investments in our distribution system?
- A major customer is considering changes in their manufacturing – how should we respond?
- How can we improve the assignment of available production / inventory to customer orders?
After pinning down the objectives, the focus will then shift to the design of a planning model, or a software system, that will help them to address the identified needs. We find that a key design tenet for the model, or the scope of the supply chain to be covered, is to include enough detail to be able to answer the questions at hand, but no more.
A typical supply chain will stretch from procurement of raw materials to manufacturing to distribution to customers (and possibly beyond, on either or both ends.) Part of capturing the supply chain behavior will be to define the transformation of materials along the chain. This can be done by defining a bill of materials, or BOM, which defines the quantities of input ingredients that are required at a point in the supply chain to make an output material of interest. For instance, if you are a baker then your BOM is your recipe – e.g. the amounts of flour, buttermilk, leavening and various other ingredients required to make the batch of biscuits.
Deciding on the detail of the materials going into the BOM, and getting the right quantities for the BOM, is a key step in properly modeling the supply chain. If you are working at an operational supply chain level, the BOM will need to be detailed enough to actually make the product, but many times in a planning situation, it is reasonable to omit some of the detail, and only capture the main flows of product through the system. You will need to make these decisions based on your project objective.
For instance, if you are modeling a beverage company’s supply chain, water may be a key ingredient in the production process. If the question you are trying to answer for the beverage company is whether traditional warehouses vs. crossdocks is a better distribution solution for a part of the territory, then you may decide that the sources and cost of water for the production facilities will not have a big impact on the answer, so you can omit the water consumption from the analysis. On the other hand, if the objective of the analysis is to evaluate the impact of alternative future production locations on the company’s overall environmental impact and commitment to sustainable practices, then water for production (and waste water, and other intermediate or byproduct materials) would likely need to be included in the production BOMs.
Making good choices in defining your BOM is one of the important steps in getting a supply chain model to help you answer your questions effectively. Our extensive supply chain experience allows us to bring a large knowledge base to the assignment when we are helping our clients design in enough detail, but no more.
Profit Point, a leading supply chain optimization firm, adds total delivered cost and margin at the customer location-product level of detail to its supply chain network design software.
Profit Point, the leading supply chain optimization consultancy, today announced the release of an update to Profit Network™, a supply chain network design software that is used by supply chain managers all over the world to gain visibility in to the trade-offs they will face when designing or optimizing a global supply chain. In addition to several other new enhancements, Profit Network now allows users to analyze and report on the total delivered cost and the resulting gross profit margin for all products delivered to each customer location.
“With the ever-increasing availability of granular data across the supply chain, many of our clients have expressed a strong interest in analyzing and reporting on the total delivered cost of a single product or set of customer products,” said Alan Kosanksy, Profit Point’s President. “Previously, it was quite a challenge to understand how costs accumulate over time from raw material procurement through manufacturing, inventory, transportation and customer delivery. Now our customers are able to see the true total cost for each unit of product delivered to each customer. This will be a powerful tool in helping them evaluate their product and customer portfolios.”
In addition to total delivered cost, now Profit Network also enables more control over source-destination matching, as well as inventory levels by establishing minimum and maximum number of days of inventory demand.
“Profit Network software has been helping Fortune 500 companies around the world build more robust and profitable supply chains for more than 10 years,” said Jim Piermarini, Profit Point’s CEO and CTO. “Over that time, the dramatic increase in data availability across the supply chain has provided us tremendous opportunities to solve unique and critical problems in a variety of supply chain networks.”
In addition to Profit Network, Profit Point’s line of supply chain software also includes Distribution and Vehicle Planning, Sales and Operations Planning (S&OP), Production Planning, Scheduling and Order Fulfillment software.
About Profit Point
Profit Point Inc. was founded in 1995 and is now the leading supply chain software and consulting company. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including Dow Chemical, Coca-Cola, Lifetech, Logitech and Toyota.
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.”
Profit Point announced that it has successfully completed a distribution network optimization project with the hydrogen peroxide business team at Arkema Inc. Arkema is a global chemical company and France’s leading chemicals producer. Profit Point is a leading supply chain optimization company, delivering solutions to global manufacturers to optimize their supply chain networks, distribution plans and S&OP processes using a combination of targeted software and consulting services.
In the very competitive hydrogen peroxide market, Arkema’s objective is to continuously improve product availability and customer service across North America, while simultaneously managing costs throughout the supply chain. Profit Point examined Arkema’s distribution options from manufacturing to the end customer to develop supply chain options to provide the right level of customer service at the best total delivered cost.
“The team at Profit Point developed an understanding of our business and they analyzed complicated data and made it easy to understand,” noted Ed Gertz, Arkema’s Director of Supply Chain for hydrogen peroxide. “They made it easier for us to see how different distribution infrastructure options impacted our cost and our service, which gave us the confidence we needed to make significant changes in our terminal network.”
The solution combined Profit Point’s supply chain design software, Profit NetworkTM, and the consulting team’s supply chain optimization expertise. By leveraging existing enterprise data, Arkema was able to develop an actionable infrastructure plan that meets the business’ strategic objectives.
“This is a classic example of the type of benefits large manufacturers can see when they bring together the right stakeholders and the right process, ” added Ted Schaefer, Director of Logistics and Supply Chain Services at Profit Point. “It reminds me a lot of what my Italian grandmother used to say about cooking, ‘If you choose the best ingredients, you will like the result.”
About Profit Point
Profit Point Inc. was founded in 1995 and is now a global leader in supply chain optimization. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point 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.
A global chemical company and France’s leading chemicals producer, Arkema is building the future of the chemical industry every day. Deploying a responsible, innovation-based approach, we produce state-of-the-art specialty chemicals that provide customers with practical solutions to such challenges as climate change, access to drinking water, the future of energy, fossil fuel preservation and the need for lighter materials. With operations in more than 40 countries, some 14,000 employees and 10 research centers, Arkema generates annual revenue of $8.3 billion, and holds leadership positions in all its markets with a portfolio of internationally recognized brands.
Building applications, especially custom ones, carries with it the burden of answering the question: Does this do what the customer wants?
With complicated systems with many interacting features and business rules, answering this question can be daunting. In fact, evaluating the answer can be daunting too, from the perspective of the customer. Having the sales guy check some boxes in a questionnaire, or watching a demo just doesn’t leave you with the assurance that the application with handle all the business requirements, from either perspective, the vendors or the customer. Everyone I have spoken to who has sold complex software, or who has participated in the purchasing process of software has expressed the same doubt. They are just not sure that the tool will be a good fit. As we all know, that doubt does not always prevent the purchase of the software, as each organization has its own level of risk tolerance, and trust in the vendor’s brand or reputation. Often these other considerations can outweigh the amorphous doubt that some folks might feel. How can one quantify that doubt? Frankly, it’s a quandary.
This thought got us at Profit Point thinking… Wouldn’t it be great if there was another way to evaluate the goodness of fit or an application, or the appropriateness of the parameter settings, to match the business needs of an organization. Would it be great if there was a way to eliminate (or greatly reduce) the doubt, and replace it with facts. Either a business rule is obeyed or it is not. Either a decision is made according to the requirements, or it is not. Let’s eliminate the doubt, we thought, and the world would be a better place. (well a little bit anyway).
There are many processes for testing an application as it is being developed, with writing test scripts, and evaluating the results. All these are based on testing little pieces of code, to ensure that each function or sub routine does what it should do in each case of input data. These processes work fine in our opinion, but only when the sub of function is able to be considered independently form the others. When the system has functions that interact heavily, then this approach doesn’t reduce the doubt that the functions may conflict or compete in a way that the whole system suffers. How then to evaluate the whole system? Could we treat the entire application as one black box, and evaluate the important business cases, and evaluate the results? This is exactly what we have done, with the effect of reducing the doubt to zero about the suitability of the application for a business.
With several of our clients we have worked out what seems to be a great process of testing a complex software solution for suitability to the business requirement. In this case, the detailed level function testing methods were not open to us, since the solution relied on a Linear Programming technique.
This process is really just an amplification of the standard testing process.
- Define the test case, with the expected results
- Construct the test data
- Build or configure the application
- Run the Test using the Test Data and Evaluate the results – Pass or Fail
This is the standard process for testing small functions, where the expected results are clear and easy to imagine. However, in some systems where there many interacting rules and conflicting priorities, it may not be simple to know what the expected results should be without the help of the tool’s structure to evaluate them. Such is the case with many of our application, with layer upon layer of business rules and competing priorities… The very reason for using an LP based approach makes testing more complex.
In the revised process, we have, for each new business requirement:
- Construct the test case with the test data
- Build or configure the application
- Set the expected results using the results of the first pass build
- Re-factor the code and test until all test are passing
In my next blog I will show you the simple excel based tools we use to facilitate the test evaluation.
In practice, the process works well, new versions of the application go into production without any surprises, and with full confidence of the application management team that all the business requirements are 100% met.
No doubt – no doubt a better process.
By Jim Piermarini
Here’s an audio interview with Dr. Alan Kosansky on the “Future of Supply Chain Management”.
Interviewer: What’s the future of supply chain management? Many companies have implemented ERP software solutions, but if you’re relying on well-traveled, standardized software to manage your supply chain, you could actually be eroding your competitive edge. Joining us now to explain why is Dr. Alan Kosansky, co-founder and President of Profit Point. Alan, welcome!
Now, Alan—ERP Software has definitely become commonplace as a solution in supply chain management—it’s certainly convenient, but is the software on its own enough?
Kosansky: ERP software plays a critical role in the enterprise. From its inception it has provided the backbone for accounting and financial functions. As it has extended into supply chain functions, it allows us to quantitatively manage the supply chain. All these systems have enabled significant efficiencies for companies over the past 20 years. And they have become commoditized. Leading companies are both leveraging what these ERP have to offer AND ALSO defining complementary supply chain processes that offer competitive advantage. For those supply chain processes for which being as good as the marketplace is enough, out of the box ERP and APS solutions are great. However, for those supply chain processes where your company believes they can create and maintain competitive advantage, using the solutions that the marketplace is using is not enough.
Interviewer: At Profit Point you believe that the future of supply chain management is in optimization based decision making – what is optimization based decision making?
Kosansky: Supply Chain profitability is based on the price you sell your goods minus the total delivered cost of making and getting those products to your customers. While this may seem like simple arithmetic, it is actually very difficult for companies to accurately predict profitability and then make supply chain planning decisions that maximize their profitability. Firstly, Computing the total delivered cost is difficult. Secondly, even those companies that are have a centralized way to view all this data typically have difficulty making the tradeoffs implicit in their supply chain costs: Inventory or customer service? Manufacturing, warehousing or transportation costs? Optimization based decision making allows supply chain planners to both see all the relevant data and make the tradeoffs that lead to maximum profitability.
Interviewer: … and how can optimization based decision making help ‘unlock’ a company’s competitive edge?
Kosansky: Companies that identify supply chain processes where they have developed some sort of competitive advantage need to embody those processes in enabling technology that support this better decision-making. Most often, this includes some form of optimization decision technology that quickly evaluates alternative scenarios and identifies those decisions that lead to maximum profitability. By combining the big data that is available today, with leading edge decision making technologies, leading companies are beating their competitors in every aspect of their operations, including the supply chain.
Interviewer: Well Alan this is great news – thanks for coming on and telling us about it! That was Dr. Alan Kosansky, President of Profit Point. For more information go to ProfitPT.com… that’s ProfitPT.com.
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.
At the risk of sounding like a supply chain nerd, here at Profit Point, I get a similar sense of exhilaration in enabling our clients to increase the velocity in their supply chains by implementing decision support tools that enable faster and better decisions.
These decision support tools enable faster and better decisions in at least the following 3 ways:
1. Faster visibility to the data – By having a software tool that holds all the data needed to make a particular decision with automated interfaces to source systems, our users don’t have to spend countless hours combing through multiple spreadsheets and other software systems to get the data they need. We bring all the data needed together in one place for the user to be able to make effective decisions.
2. Faster understanding of the data – Supply chain decision support tools have huge amounts of data coming in and going out of them. Making sense of it all can be challenging. Typically what we do is build tools that allow the user to sort through all this data by:
a. Having graphical user interfaces that make it easier to understand what is going on. After all a picture is worth a thousand numbers any day of the week.
b. Show only the exceptions or problems that need to be resolved to help the user focus on what needs to be changed.
3. Faster processing of the data – Oftentimes we will automate tasks that are menial and time consuming or if the task is very complex it may be appropriate to employ an optimization or heuristic solution approach to speed getting to a feasible or better solution. We like to call these “Power Assist” tools that greatly ease the burden on the user while still giving them ultimate control over the decisions that are made.
Do you feel the need for more speed in your supply chain? Give us a call so we can discuss how we can help to get you moving faster.
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.
Sales and operations planning (S&OP) is an integrated business management process that enables a company to continually balance and manage the supply chain supply and demand to achieve its strategic and tactical business objectives. More and more business leaders are relying on S&OP to align and improve decision making across the disparate parts of their organization. And, many companies are still adopting and improving the techniques and tools that they use to improve S&OP.
So this year, we conducted an S&OP Survey of key decision makers to learn more about their challenges, concerns and expectation for 2012. Business leaders from a variety of companies and industries were polled. Here’s what we learned:
- Many companies lack the metrics needed to capture the benefits from S&OP
- Scenario and sensitivity analysis is the tool of choice for S&OP planners who understand that sales forecasts are imperfect
- More companies are beginning to collaborate with suppliers and customers to improve S&OP
- For many companies, point-of-sale (POS) data may be the key to effective sales and operations planning
To read the complete report, including our conclusions, click the link below:
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.
The following is a guest blog post from Sam Polakoff, President, TBB Global Logistics.
Now sit down and think about it for a moment. Exactly when did your company establish its current distribution network? In all likelihood, the answer is three or more years. Is your business the same as it was three years ago? Probably not. What factors commonly drive change necessitating a shift in supply chain strategy? There are many including, but not limited to, the addition of key customers, product introductions, changing sources of supply, competitive threats, mergers, acquisitions, natural disasters and shifting demographics. So how do you rationalize using yesterday’s supply chain for today’s business needs? At best, you are getting by with higher costs and lower margins. You may feel as if you are losing the battle to stay competitive in a difficult economy.
To compete effectively in a dynamic business environment, continuous evaluation of the marketplace is a critical success factor. Once knowledge is in-hand, your supply chain must be built in an agile manner allowing for efficient shifts to accommodate expected and unexpected change.
I recently spoke to the owner of a U.S. manufacturing company that dates back to the early 20th century. He was explaining how he was in the final stages of divesting the company of all its hard assets. They had long ago moved manufacturing offshore. They had evolved into a substantial importer managing a series of company-owned distribution centers. Today, all of the distribution is outsourced and the old company headquarters building is up for sale. The shift to a virtual company is near complete. The executives are now free to work on product innovation and the related sales and marketing. They still compete effectively but with higher margins and more agility. This old line company has adapted and overcome, multiple times, aligning and realigning supply chain process with strategic business objectives and changing marketplace conditions. The results are higher profits, supply chain flexibility and happier customers.
Establishing and using key performance indicators will serve as confirmation of effective supply chain process or as a red flag requiring attention. Aligning supply chain with strategic business objectives and keeping your finger on the pulse of the customer will propel you forward on the road to prosperity.
More than a decade has passed since businesses started using Enterprise Resource Planning (ERP) for managing data and transactions throughout the supply chain. Traditionally, ERP systems have provided transparency and insight into transaction-level data in the supply chain that support important business planning activities. Now, a new generation of applications is being developed to help fill the gaps between general business planning and business-specific, tactical and strategic decisions. These ERP-connected applications offer supply chain executives previously unavailable analysis and insights into the decisions that directly impact customer service, profitability and competitive advantage.
Supply Chains Differences
Supply chains are as different as the companies and people that run them. Some companies view their supply chain operations as a “utility” that is expected to function without any investment in intellectual capital. These organizations are content to rely on industry best practices in their supply chain operations and follow the leaders (or the features that are added by ERP software providers) in supply chain improvement. Other organizations see their supply chain operations as a strategic opportunity to develop a competitive advantage and increase market share. They know that with some small departures from the norm and a modest investment in intellectual capital, supply chains can provide enhanced performance to the business. These companies understand that there are opportunities for creative and unique ideas in the supply chain to improve company performance and achieve business strategy objectives.
Today, many C-level executives see their ERP systems as key enablers to company productivity, and for the most part, they are correct. Since ERP systems perform many valuable functions, there is a natural assumption that they can handle whatever business strategy the company adopts. However, new business ideas by definition run the risk of stressing the ERP system features beyond their ability to cope. Usually these failures are discovered only during the implementation of a new business strategy. So what happens when the ERP system fails to support the new business strategy in certain critical details? Those working in the trenches know this scenario all too well. But, what can be done to implement strategic supply chain initiatives when ERP is not equipped to handle business-specific initiatives?
Making the ERP Work
There are three possible approaches for implementing supply chain planning activities that offer a company a competitive advantage:
1. Figure out how to get the ERP system to do it. This approach works well if the company’s needs align well with current industry practices supported by ERP systems. Otherwise, companies may find themselves going down a path that consumes significant resources for a poor fit in the end. Companies that adhere to this path typically do so in part because there is a strong C-level edict in favor of simple, clean upgrades for the ERP system. Faced with this, the IT organization has enormous power to shape the nature of the supply chain operation to fit within the established ERP norms, and thus can act as a barrier for business innovation and supply chain improvement.
2.Modify the ERP system to provide new functionality. This is an approach often promoted by IT organizations committed to supporting the fewest number of tools. While this is an important cost management objective, it is important to understand the full cost to implement and support the system over the long term. What can be accomplished is often limited by the lack of flexibility in large ERP systems and IT organizations. Since ERP systems are mission-critical systems, the support and maintenance of the core functions are of paramount importance. This task, placed on a limited IT staff, leads to large backlogs of enhancement work and long queue times. And while IT departments are well-equipped to manage their primary assets, few if any IT departments have the requisite domain knowledge to cross over into supply chain optimization. Given long wait times, organizations will often choose the simplest approximation of the business change that can be ushered to the top of the queue. This approach can result in a quick-fix style of strategy implementation, rather than a priority-based feature development, and may leave the most important aspects of the initiative lingering in the queue.
3. Add an integrated solution to the ERP system that replaces one or more functions that are needed to achieve the business strategy. This could be from an out-of-the-box third-party provider, or for full competitive advantage, a targeted or custom supply chain application that integrates with the company’s ERP data. This approach has the benefit of including priority-based features that the current ERP system lacks, and the additional benefit of avoiding the ERP enhancement queue. The downside, however, is that it suffers from the stigma of being yet another application and not the ERP system itself. This usually presents a hurdle that requires a careful analysis to understand the total cost relative to the strategic benefit. While not all business changes will overcome this roadblock, there are good reasons to look at this approach. These include:
- Ensuring a tight fit between the business strategy and the tool execution
- Minimizing the cost, overhead, and extra setup and maintenance in un-needed functions from a shrink-wrapped general purpose tool
- Providing the marketplace with a specialized and unique operation of the supply chain for competitive advantage.
Example from the Field
A leading consumer electronics company with about $2bn in annual sales implemented an integrated solution to its ERP system to manage its order fulfillment process for competitive advantage. The company had recently modified its corporate strategy to increase retail sales through its “big box” customers (Walmart, Best Buy, Staples, etc.). However, key service level agreements were not being met for these customers due to lower than expected order fulfillment measures. A simple inventory analysis recommended large increases in the stock required at the warehouse, with some method of segregating inventory for each big-box customer so it could not be taken by orders from other customers.
In this case, one of the leading causes of low service for customers was that they ordered “just-in-time”. These JIT orders were not being given any priority over other customers’ orders with longer lead times. The company noted that these important customers may have provided accurate plan information, but that was not being used to assure them any better service. The analysis recommended that separate stocks of inventory be set up based on the big-box planning information, and that other customers not be allowed to take from those inventory locations. This would result in a large increase in overall stocks, but should achieve the desired increase in service levels.
One manager questioned this recommendation, wanting to know why the ERP system did not use the big-box planning information to appropriately manage the company’s service levels. She also questioned what could be done to avoid increasing her inventory risk and yet still achieve the business strategy. This is a question many managers face when their analysts say that to improve service you need to increase inventory levels. Often there are alternatives. This key manager’s insight set the path for her company to make a significant shift in their supply chain operations, with remarkable benefits. What follows will answer the question: Can I raise the service level of my key customers without increasing my inventory and capital risk? The short answer is, “yes”. Significant service benefits and risk reductions can be achieved, but only if you are willing to deviate from your ERP’s standard approach to implementing key supply chain initiatives.
The industry standard approach for assigning available inventory to open orders is to use a FIFO (first in, first out) approach. This approach prioritizes orders based on when the order was received and assigns on-hand inventory to those orders that were received and entered into the system first. While this approach has a degree of fairness to it, and is available in all ERP systems, it did not align well with the business objectives of this company. It actually penalized key customers who issued JIT purchase orders while giving ample planning information. These JIT orders would have to wait until all the older orders, from non-key customers, were allocated before they would be assigned any inventory.
The standard ERP process does not take into consideration the customer’s strategic importance or their planning information. Given this FIFO process, the internal recommendation makes sense: set up separate safety stocks for each big-box customer (based on their planning information), in separate inventory locations, and make a rule that directs big-box orders to their separate inventory.
But having separate safety stocks violates the principle that more customers need lower inventory together, than each does individually. Pooling the inventory helps to avoid unnecessary capital risk. The standard ERP FIFO inventory assignment process could be replaced with one that met customer needs more effectively.
The company embarked on a project to take into account several important factors when deciding how much inventory to assign to each order:
- The priority of the customer
- The amount of inventory actually in the sales channel of the customer, and
- The planning information that the customer shared with the company.
Customer priority is a key and strategic factor in deciding which customers receive product, when inventory availability is limited or delayed. This business need meant that strategic and high-volume customers should typically be serviced before others. However, this may not be the case if a strategic or high-volume customer happens to be sitting on a lot of inventory in their channel. In these cases, it may be preferable to share the wealth with smaller volume resellers to maximize the sell-through to retail customers. Moreover, these rules may apply differently for each SKU in a manufacturer’s product line.
The business rules to implement these sorts of complex trade-offs can get complicated. If one wants to retain a certain amount of flexibility in these rules, then the ERP system is a poor place to make these decisions. However, since most, if not all, of the data resides in the ERP system, these decisions must be tightly integrated with the data and transaction handling within the ERP system. So an application was constructed to manage the inventory assignment process in this way to more closely match the business strategy. The new application is run several times a day, extracting needed info from the ERP system, making the assignment of inventory to all open orders, and sending back the info to the ERP system.
Using this integrated solution, overall service levels for these key customers were sharply increased, prompting several supply chain awards from these big-box customers. As a result of the increase in service level, Walmart (a strategic customer) was so pleased they chose to increase their orders of all this company’s products by 100 percent. The overall inventory did not increase.
The new method demonstrated that pooled inventory was an effective approach to containing inventory levels. In subsequent versions of this application, the integration of point of sale data has allowed even more control over the inventory in the various channels to market. As a result, this company has declared this application a business-critical application. It overcame the hurdle, and the application can defend its spot on the chart of critical business applications alongside the ERP system.
Integrated Solution Success
Using an integrated solution to the ERP system was a win-win approach that allows the business the flexibility to manage order fulfillment for competitive advantage while maintaining the benefits of centralized data and the strong transactional handling capabilities delivered by ERP.
But order fulfillment is not the only area where there is opportunity to supplement the strengths of ERP with flexible and powerful business optimization processes and tools. Other areas where leading companies have decided to enhance their ERP capabilities include optimization-based infrastructure planning, sales and operation planning, distribution route and territory planning, transportation bid optimization, transportation fleet planning, and production scheduling.
These are just some examples of where complex and/or strategic business rules can provide competitive advantage through improved supply chain performance. While ERP systems remain the backbone of all successful large business operations today, they are not the only path available to companies who desire to apply innovative approaches to their business and supporting supply chain activities. Global enterprises that seek a competitive advantage now have the opportunity to leverage their ERP investments by integrating optimization-based solutions to key business strategies.
“With every passing year, the amount and variety of information available to make business decisions continues its exponential growth. As a result, business leaders have an opportunity to exploit the possibilities inherent in this rich, but complex, stream of information. Alternatively, they can continue with the status quo, using only their good business sense and intuition and thereby risk being left in the dust by competitors. Top-tier companies have learned to harness the available data with powerful decision support tools to make fast, robust trade-offs across many competing priorities and business constraints.”
Read the complete article here: Face Complexity – Making Sound Business Decisions
June 16th, 2011 9:00 am Category: Enterprise Resource Planning, Global Supply Chain, Inventory Management, Press Releases, Supply Chain Improvement, Supply Chain Planning, Supply Chain Software, by: Editor
Profit Point, the leading supply chain optimization software and services company, today announced the release of its Profit S&OP software to complement it’s S&OP consulting services. Profit Point’s combined S&OP solution provides business decision makers with the process and tools to manage and optimize sales and operations planning across the supply chain.
The Profit S&OP software tool is fully-customizable to meet the needs of supply chains across all industries and is designed to improve tactical planning for the key decision makers across a company, including finance, sales, manufacturing, logisitics and supply chain. The software provides a centralized dashboard to gain insights and control over a company’s supply chain, including features to enhance collaborative forecasting and improve manufacturing, distribution, and inventory decisions.
“Global manufacturers struggle to accurately plan for global demand across their product lines in a timely manner,” noted Alan Kosansky, Profit Point’s President. “Our S&OP solution solves this problem with a combination of effective processes and a shared planning tool that provides one set of numbers for the key stakeholders across the entire supply chain.”
Using Profit Point’s S&OP solution, manufacturers can coordinate with their supply chain planners across the globe to build accurate, detailed manufacturing and distribution plans quickly and integrate with point-of-sale demand tracking systems. And, the software connects with existing ERP systems, such as SAP® and Oracle®, so analysis and decisions are up to date across the entire organization.
“Improved planning can help any large manufacturer reduce inventory excess and capital risk.” said Jim Piermarini, Profit Point’s CEO. “But the key to successful planning includes the right technology and the right process to align employees with the company’s strategic objectives.”
Profit S&OP has an integrated optimization engine that seamlessly drives the best scenarios to the forefront of a tactical planning sessions. Throughout the process, decision makers are able to visualize and test multiple future scenarios to achieve a collaborative, cross discipline decision making process. Key features in the software include the ability to automatically generate an optimal tactical plan down to the bill of materials (BOM) level, integration with existing ERP data warehouse, multi-period planning horizon, scenario analyzer to systematically assess multiple future scenarios, complex BOM exploration and the ability to visualize plans, timelines and bill of materials to correct bottlenecks and reduce excesses.
To learn more about Profit Point’s sales and operations planning software and services, call us at (866) 347-1130 or contact us here.
About Profit Point:
Profit Point Inc. was founded in 1995 and is now a global leader in supply chain optimization. The company’s team of supply chain consultants includes industry leaders in the fields infrastructure planning, green operations, supply chain planning, distribution, scheduling, transportation, warehouse improvement and business optimization. Profit Point’s has combined software and service solutions that have been successfully applied across a breadth of industries and by a diverse set of companies, including Dow Chemical, Coca-Cola, Toys “R” Us, Logitech and Toyota.