As if earthquakes, tsunamis and floods aren't enough, now car companies need to deal with a worldwide shortage of PA-12, a special nylon used by almost all auto companies. According to Businessweek, PA-12 (polyamide resin) is a form of nylon that is used for plastic pipes, tubes and hoses to carry vapors, fuels and other liquids. It also used in plastics used in car seats. An explosion at the end of March at a chemical plant in Germany knocked one of the few companies that manufacture this resin out of production. Not only does this company (Evonik) manufacture this chemical, it also manufactures almost 70% of CDT (cyclododecatriene) which is used by other companies to make PA-12. Ouch.

 

What makes this worse is that car companies following the tenants of just-in-time have very little inventory, especially of component parts.Just-in-time practices consider inventory to be one of the wastes that should be relentlessly targeted and eliminated. This has resulted in billions of dollars of savings due to reduced inventory levels and more streamlined operations. However, that inventory reduction means that there is no buffer to carry companies when a significant supply disruption occurs.

 

The explosion at the plant in Germany, the earthquake and resulting tsunami in Japan, and the floods in Thailand are causing automakers to rethink their approach to just-in-time. The world has changed since just-in-time was developed by Toyota in the 1970s. Factors like increasing globalization, reliance on specialized parts (where one factory makes a large percentage of the world's supply) have increased the risk associated with the zero inventory principle.

 

Having lived through several Lean implementations, I used to be a strong believer in zero inventories. But I've come to realize that while inventory reduction is still a goal to be striven for; the RIGHT amount of inventory is going to be some quantity greater than zero. I'm not going to go into mathematical theories about how much. I'd probably get most of it wrong anyway. What I will say is that you need to look at your component part sourcing and pick the right amount of inventory for those components;

  • Do you have parts that are sourced through a single supplier? When doing this assessment, don't just look at the supplier. If you can, look at the supplier's supplier. With the flood in Thailand, not only was the drive assembly impacted, but several component part manufacturers were co-located with the assemblers. When the flood hit the assembly plant, the component plant got hit to. Assembly plants not affected by the flood were still impacted because they couldn't get parts.
  • If you have multiple sources, are those sources in the same geographic area? If an event like the Japan earthquake were to happen, it is likely that both suppliers would be taken down.
  • If your source is on the other side of the world, what would happen if there was a major interruption to shipping? A large storm, a significant event at a busy port could delay the shipment of goods by weeks.

 

If you answer yes to any of these questions, then maybe you should consider holding more inventory on these components. Even if you have multiple sources, you may need to hold enough inventory to cover the lead time needed to get these other sources ramped up to cover the full demand. This might be a good exercise for the Chaos monkey. (Pick a part and simulate what would happen if you couldn't get this part for a week...or a month...or 3 months). Another related exercise would be to simulate the effect of disabling all suppliers in a given region for 2 months. What would be the impact on your supply chain? How would you recover?

 

I certainly don't recommend drifting back to the bad old days of building inventory for the sake of building inventory. I also still think that unnecessary inventory is waste. However, there is the right quantity of inventory for each part and those that can figure it out will be better able to survive a significant supply chain event.

 

Are you planning on changing your inventory strategies as a result of recent events? If so, comment back and let us know.



Originally posted by Westerveld John at http://blog.kinaxis.com/2012/04/is-just-in-time-out-of-time/

My wife and I were discussing some of the recent blog posts on the 21 st Century Supply Chain, and although she agreed with Andy's blog, "Supply Chain Isn't Sexy," she completely disagreed with the Top Ten Reasons Why Supply Chains Are Better than Sex. As a result, I came up with the...

 

Top 10 Reasons Why My Spouse Is Better Than My Supply Chain:

 

10. If a supply chain is having a problem, it won't call another supply chainto help solve it.

 

9. Your supply chain doesn't know where you put the remote.

 

8. Supply chains don't pretend to be happy.

 

7. No matter how good your supply chain is, it will never have breakfast and a paper ready for you on Sunday morning.

 

6. Supply chain software is still more expensive than diamonds.

 

5. A forecast is usually wrong, my wife is usually right.

 

4. My supply chain doesn't know what kind of beer I drink.

 

3. When I'm late, my supply chain doesn't forgive me.

 

2. My supply chain doesn't rub my shoulders when my hockey team loses a Stanley Cup playoff game.

 

1. My supply chain won't call my mom when I'm sick.

 

Do you have any reasons to add to the list? Share them in the comments! And be sure to check out some more supply chain comedy on the "Just for Laughs" section of the Supply Chain Expert Community!



Originally posted by DuBois Bill at http://blog.kinaxis.com/2012/04/top-10-reasons-why-my-spouse-is-better-than-my-supply-chain/

https://blog.kinaxis.com/wp-content/uploads/2012/03/Kinaxis-SCM30-logo-small-square.png Welcome to the third blog post in the SCM30 series.

 

Though supply chain management concepts have been in practice since the turn of the last century, it is widely agreed that the term was created by Keith Oliver in 1982 – 30 years ago. This post in our series focuses precisely on that – the term’supply chain management’.

 

There is a postingin the Supply Chain Expert Community discussion forum that asks the question: If you could re-name SCM today, would you? If so, what would it be? While others have weighed in with some interesting thoughts, here are mine…

 

If I could change SCM, I would call it SCE ... Supply Chain Excellence (or Effectiveness — either work for me)

 

First off, I am not a long standing SCM expert. Thought we should get that on the table. However, I do have a long history of working with analytics-based enterprise software to help companies make better business decisions, to better achieve corporate strategy. With this background, the word "management" carries a connotation that screams "drive out costs at all costs."

 

To make sure I am not losing it, I went to my friends at Dictionary.com and found: the act or manner of managing; handling, direction, or control. The word "control" jumped out at me, so I following the rabbit to find: to exercise restraint or direction over; dominate; command. If I am being balanced and fair, there are other definitions of management that are not so dictatorial, but the connotation still holds for me.

 

In short, I don't think SCM because management implies execution alone and not strategy. Execution is certainly a big part of the equation, but I would like to think that supply chains, and the software that enables them, can be so much more.

 

With that out of the way, if we look at the three real traditional strategies a company can have (leaving out "system lock-in" as a viable option for most businesses). First, we have lowest cost provider. Second, product or service innovator. Third, customer intimacy.

 

In this first case, it is mostly about managing out costs or optimizing the supply chain, but in the latter two cases, clearly the supply chain has to be thought of as an essential component of the corporate strategy. It is hard to think about creating innovative products if you think of your supply chain as a low-cost assembly line. It is even harder to think about delighting your customer without considering product customization, order flexibility, and so many more factors from order to delivery that are key to the supply chain.

 

I am not going as far as saying we should be calling it SCS (Supply Chain Strategy) because it is equal parts strategy AND execution. There might be a better word than Excellence or Effectiveness, but I hope the point is clear and why the M in SCM doesn't work for me.

 

Would love to hear your thoughts on this topic – either here on the blog or join the discussion on the community.



Originally posted by Munroe Kirk at http://blog.kinaxis.com/2012/04/scm30-if-i-could-change-scm-i-would-call-it/

Today, Kinaxis is hosting an event in Dearborn for automotive supply chain and operations executives. This forum will provide a practitioner’s point of view of the process and technology aspects of managing global supply capacity across the multi-tiered supply chain. Yep, it’s a hot topic right now.

 

Global capacity planning and constraint management have become critical business competencies and the implications of not doing them well can be harsh. In today's world of constrained supply, automotive manufacturing executives need to make tough decisions about how scarce supply will be utilized. If they are not able to understand the tradeoffs involved in various supply allocation scenarios, the resulting decisions will be less than optimal at best, and significantly detrimental to the business at worst. Hence, there is anincreased focus on how to getglobal capacitymanagementright.

 

Fittingly, Kinaxis has produced a whitepaper on this topic. The paper proposes: https://blog.kinaxis.com/wp-content/uploads/2012/04/184x150_integrated_appro_global_cap_v1.jpg

  • an integrated approach to global capacity management that incorporates capacity planning, capacity monitoring, and constraint management to address both global and regional requirements
  • key characteristics of a global suppy chain planning, monitoring, and response platform that will enable this to be done effectively

 

For some good insights and recomendations, download it today.



Originally posted by Smith Lori at http://blog.kinaxis.com/2012/04/global-capacity-management-a-make-or-break-competency-for-automotive-manufacturers/

An interesting set of articles came out over the past few weeks that look at the future direction of ERP and supply chain management.While these two solutions spaces are not the same, there is an overlap—in terms of functionality and also because the big ERP vendors such as SAP and Oracle have both developed supply chain management (SCM) solutions and have bought or partnered with other solution vendors in the SCM space.

 

Let's look at the view from the ERP perspective first. In an article in the Future-Tech section of Toolbox.com titled " Where will ERP be in 2 years?", the author positions ERP in the following manner:

 

“ERP is used to track important data — usually related in some way to an organization's financial performance —across the enterprise.”

 

The important term is "track," implying governance and control of financial information. Although ERP does more than this, the comment draws attention to transactional level activity—taking a sales order, processing payment, issuing a purchase order, etc.—and governance of financial transactions as the primary focus of ERP.

 

Michael Krigsman, CEO of Asuret, commented in the article that: https://blog.kinaxis.com/wp-content/uploads/2012/04/SCM-graphic-for-Trevors-ERP-Cloud-blog.jpg

 

"Simplified ERP implementations are going to become an essential factor because the market is becoming less tolerant of these big, expensive, monolithic implementations of traditional ERP."

 

 

I'm waiting with bated breath, because where governance and control are concerned, I cannot see the CIO or regulatory bodies reducing their need for risk avoidance.

 

Where things begin to get more interesting is when Krigsman comments that:

 

"Cloud-based ERP services will also evolve in the future to become more integrated both with other clouds and with installed ERP systems. Krigsman expects to see more vendors that offer pieces of ERP, which will necessarily lead to cloud-to-cloud integrations. This will allow customers to weave together their own highly tailored system from different vendors that best suits their organization and business processes. This type of interoperability between cloud services will also eliminate the need for companies to install middleware and execute complicated programming to make third-party modules work with an existing ERP system."

 

In other words, the days of monolithic "we do everything" ERP systems may be coming to an end with innovation in delivery and interoperability, and each supplied by cloud services, typically outside of the ERP vendors.

 

Separating Transactions from Decision Support

 

Where this has a direct impact on supply chain management is in Krigman's comment that:

 

"...predictive analytics, such as recommendation engines, will also be important to the future of ERP, enabled by faster analytics."

 

 

http://www.gartner.com/id=1430728#f-N67047The very heart of any SCM organization, and its associated solutions, is the prediction of future operational and financial performance by linking demand anticipation (forecast) and satisfaction (actual orders) to the supply of materials to satisfy the orders. This, in turn, requires the anticipation and provisioning of resources to convert raw materials into finished goods through complex and multi-tier, multi-continent manufacturing processes using bills-of-material (BOM), bills-of-distribution, and routings. Naturally, there is also the conversion of independent demand (sales orders and forecast) into dependent demands, which drive the purchase of raw materials through purchase orders and other procurement mechanisms using the BOMs, routings, and associated lead times and sourcing rules.

 

In other words, SCM has been doing "predictive analytics" for years.

 

What has changed over the past 2-3 years is the increased importance of what Gartner calls "demand translation." This is the realization that a plan is never 100% correct, and therefore early detection of the difference between actual demand and anticipated demand through constant monitoring, and profitable response, are of equal importance to the creation of the original plan.

 

https://blog.kinaxis.com/wp-content/uploads/2012/04/Gartner-Demand-Translation.png

 

It is the enhancement of these analytics that will bring benefit to an organization. Without a doubt, there is some benefit to be gained from analyzing what has happened, but it is the prediction of what will happen, along with the identification of risks and opportunities, that will enable a company to increase market share during growth periods and maintain market share during downturns.

 

Decisions Are Multi-Dimensional

 

In an article titled " Deciphering supply chain management software" in SearchManufacturingERP.com, Beth Stackpole explores the idea that:

 

"SCM software has evolved to provide rich functionality in the areas of planning, analytics, and real-time visibility. At the same time, new cloud-based deployment models and consolidation among SCM vendors have transformed what was once an arcane and often disconnected set of applications and processes into a tightly integrated, more cohesive suite of tools."

 

Clearly this is related to the comments made by Michael Krigsman to which I refer early in this blog. But what I find fascinating is that while Krigsman is predicting the dis-integration of ERP systems, Stackpole is predicting quite the opposite for SCM solutions. But I disagree with the idea that a "suite" is ever tightly integrated. At the heart of Krigman's comments is the fact that little has been gained by tightly integrated ERP suites. Perhaps more correctly, his position is that a lot can be gained by uncoupling the decision support and predictive aspects of operations from the transactional aspects typical of an ERP system.
http://www.mathworks.com/products/matlab/demos.html?file=/products/demos/shipping/matlab/nddemo.htmlWhat is missing from both discussions is that decision-making is not one-dimensional. What I mean by that is that nearly every system — whether ERP or SCM — with which I have worked has produced a SINGLE plan, https://blog.kinaxis.com/wp-content/uploads/2012/04/Multi-Dimensional-Arrays-300x225.png whereas making decisions is all about "what-if"; testing alternative hypotheses about market conditions (and thus, understanding the range of a plan). What I like about Stackpole's vision is the value that can be obtained by being able to perform this necessary "what-if" analysis across functions. But the legacy idea that simply integrating disparate functional solutions with very different data models, analytics, and user experiences is going to solve the inherent issues in current SCM suites is not correct.

 

Balancing demand and supply of anything is everything, and this cannot be achieved quickly and effectively with a suite of integrated—whether tightly or not—functional solutions. Key capabilities that are missing include the ability to:

  • Determine immediately the impact of a decision made by one function on the operational and financial performance of another function
  • Identify and alert the people affected by the impact
  • Bring people together, across functions, even organizations, to collaborate on scenarios to resolve an issue
  • Do this in a matter of minutes, not hours and days

 

Bringing it Together

 

I agree with Krigsman that the days of monolithic ERP systems are numbered, even as the ERP vendors attempt "edge innovation," and with Stackpole that SCM solutions need to be tightly coupled. The SCM processes can still be loosely coupled, but there must be the ability to bring different functions together to develop plans that balance competing operational and financial metrics through exploration of multiple scenarios. But we're not going to get there with systems that are tightly integrated, rather than tightly coupled.

 

As always—I welcome comment—especially dissenting comment, because we all learn from it.



Originally posted by Miles Trevor at http://blog.kinaxis.com/2012/04/innovation-in-the-cloud-beyond-erp/

We’re pushing the boundaries a little today in the interest of some Friday fun (we hope that you read it with the same approach to levity with which it was written). Our resident funnyman Bill DuBois is back with another one of his buzz-worthy top-10 lists:

 

I read Andy Zeitz's Supply Chain Isn't Sexy blog, and although it was an interesting post, I didn't fully agree with it. Here is why...

 

Top 10 Reasons Why Supply Chains Are Better Than Sex:

 

10. Supply chains don't care if you’re 60 or 20.

 

9. Supply chains don’t keep your neighbors awake. (Unless your neighbor is a supply planner...)

 

8. Your boss wants to hear about your supply chain performance.

 

7. You can ask a stranger for supply chain software without getting your face slapped.

 

6. The word “commitment” doesn’t scare off supply chain.

 

5. You can tell everyone how good your supply chain is.

 

4. You don't have to cuddle after your product is delivered.

 

3. Asking people what's wrong with your supply chain is not as embarrassing.

 

2. Nobody cares if you dump your old supply chain software for a newer solution.

 

1. With supply chains, faster is better.

 

Check out some more supply chain comedy on the “Just for Laughs” section of the Supply Chain Expert Community!



Originally posted by DuBois Bill at http://blog.kinaxis.com/2012/04/top-10-reasons-why-supply-chains-are-better-than-sex/

https://blog.kinaxis.com/wp-content/uploads/2012/04/Made-in-China-300x171.jpg In October 2011, Simon Rabinovitch of the Financial Times published an article entitled "China labour cost soars as wages surge by 22%." This figure is an average across the breadth of the country, with Shenzen and Beijing named as the costliest locations to do business. This trend has been covered extensively by the media in recent months, including Supply Chain Digest last month.

 

Rabinovitch's article is interesting, and he listed a number of factors influencing this trend. Chinese inflation and local municipal policy on raising the minimum wage are the primary factors. Rabinovitch also talked of this being a direct policy of the Chinese government, driving municipal action, to move activity in the region further up the value chain. We now see contract manufacturers offering managed services, Celestica being a prime example. It is simply a case of margin. CMs build to low margin and high volume. Margin jumps significantly when they move into professional services.

 

It is incumbent upon the supply chain to ask if this is a positive move or a negative move.

 

In previous blogs, I have written about the move toward the Asia-Pacific labor market in the mid to late 90s, primarily driven by low-cost manufacturing, low corporate rates, power services, and inexpensive labor. So, the question is, how does this impact change of cost in the region, impact global companies and their manufacturing base, and ultimately, the cost for the consumer?

 

This is where the discussion becomes interesting. Do we move out of the Asia sphere, or is this actually a where supply chain needs to be positioned—close to an emerging market? Why would you disregard a market of this size and continue to view this portion of the globe as an export-driven manufacturing base to support western consumerism? We need to be cautious about a knee-jerk reaction here and move bases out of China to lower cost bases in the APJ region or elsewhere. This reaction may well turn out to be a case of kicking the can down the road, as this wage trend is playing out across all of APJ.

 

So instead of looking at the negative, the supply chain should look at this as a potential growth and consumer market as well as a manufacturing base.

 

So initially, the base margin is being squeezed. The upshot of this trend, however, is that a large technology-hungry population has expendable income for "luxury goods."

 

Take China alone. Chinas population exceeds 1.3 billion. With an average workforce of 900 million, this is an astonishing large consumer market. If the working population has money to spend, then, the demand chain needs to rise to the occasion and deliver. As a profession, the demand chain is becoming just as much of a buzz word as the supply chain.

 

So looking at the whole picture, reducing baseline margin, and placing the money into consumer hands will drive the “demand chain,” and ultimately drive sale of goods. Volume will ultimately win out over margin.

 

Companies need to get "smarter" at managing their supply chains. Labor is only one cost factor in margin as discussed in previous blogs. Technology and people create a lean supply chain. Give people the tools required to react to the market, and the supply chain will find its own margin, and adjust accordingly. So the discussion becomes market size versus market margin.



Originally posted by Tyrrell Jenny at http://blog.kinaxis.com/2012/04/rising-labor-costs-in-china-and-their-impact-on-the-supply-chain/

I was scanning my reader feed when this headline leapt out at me: Radioactive Scrap Metal is New Threat to Global Supply Chains.This article references an incident at Bed, Bath and Beyond where a shipment of metal tissue box holders set off a radiation detector in California. While in this particular instance the product was not considered dangerous (it was taken off the shelves anyway), it still opens an interesting set of questions as more and more of our metal supply comes from metal recycling.

 

https://blog.kinaxis.com/wp-content/uploads/2012/04/Radioactive-300x288.jpg

 

According to a Bloomberg Article, " More than 120 shipments of contaminated goods including cutlery, buckles and work tools like hammers and screwdrivers were denied U.S. entry between 2003 and 2008 after customs and the Department of Homeland Security boosted radiation monitoring at borders."

 

It isn't too hard to see how this happens; equipment using radioactive materials (medical equipment, power stations, food processing and mining equipment, not to mention weapon manufacturing), just like any other product, have a limited lifespan. This equipment is being scrapped and is finding their way into smelters, being melted down and reused in new products. This process does not get rid of the radioactivity— it only spreads it to other materials.

 

Many steel companies now scan for radioactivity before processing scrap steel...and for good reason. Cleaning a smelter to remove radioactive material can cost millions of dollars and disrupt production for a week. The Steel Manufacturers Association (SMA) has a significant portion of their public environmental policy page dedicated to radioactive scrap which they call "A major environment problem." According the SMA, " Current U.S. Nuclear Regulatory Commission (NRC) regulations for generally licensed devices do not provide for tracking of individual owners. The lack of accountability makes it easy for licensees negligently to discard sealed sources in scrap and evade prosecution."

 

The issue of radioactive scrap metal is top of mind with the International Atomic Energy Commission (IAEA). They have published a pamphlet on the issue that describes the problem and steps that recycling companies need to follow to ensure that they are not recycling radioactive materials.

 

So, what does this mean for the supply chain? Companies need to be concerned about any trace of radiation above the background norm in their products. Not because this is necessarily dangerous, but because customers simply will not buy the product if they find out that it is even slightly radioactive. U.S. consumers especially are very nervous about radiation.

 

While it is likely that significantly radioactive supply "should" get caught at the border, there is still a risk that some radioactive supply could get through. That being said, how do you ensure that your supply chain remains free from radioactive material? Make sure (or have your component manufacturer check) that the supplier of the metals used in your products has a policy to not use radioactive scrap metal and further, scans incoming scrap metal for radiation. If your metal supplier does not have safeguards in place, consider using another supplier.

 

Is this a concern for your business? Have you taken steps to address this? If so, comment here and let us know.



Originally posted by Westerveld John at http://blog.kinaxis.com/2012/04/whats-that-strange-glow-is-it-my-supply-chain/

https://blog.kinaxis.com/wp-content/uploads/2012/04/Kid-in-candy-store-224x300.jpg Welcome to the second blog post in the SCM30 series. Throughout 2012, Kinaxis will be exploring the past 30 years—as well as thefuture—of supply chain management.

 

I have always suffered from "a kid in a candy store" syndrome, and when Lauren Bossers asked me to write about the three greatest advancement in Supply Chain Management over the past 30 years, I was "over the moon." But in truth, I turn quickly into "a deer in the headlights." Paralyzed more by choice than by fear in this case. But I guess I am really paralyzed by the fear of making the wrong choice given the wide range of choice. How does one choose just three from a long list, and aren't many of them interlinked? And If I choose this one rather than that one, what is Lora going to think of me? Also, it is just easier to identify the ones that have failed, because that is a fact. But to choose the three greatest advancements is to predict longevity too, not just past impact. And we all know how well we can forecast demand, don't we? So in the end, I decided to make this personal—to be less analytical—which is tough for me. So let me take a crack at defining the three greatest advancements of supply chain management, and all of you armchair experts out there are welcome to agree, disagree, or just comment. We still have a long way to go and any and all insights are welcomed.

 

1: Defining the term

 

So I started this blog with a bunch of idioms that are a fair, but incomplete, reflection of me. And so it goes with the term supply chain management. We all need and use acronyms and idioms to encapsulate and convey ideas in in a concise form, but lose something by bounding it tightly in a term. And so it goes with supply chain management. When I first came across the term I was working in Germany, which I am embarrassed to say was only 20 years ago, not 30 years ago, which is when the term SCM was coined. But even at that time there was confusion about the term SCM because the Germans used, and continue to use the term "logistik," which is very different from the North American term "logistics," used to describe the transportation of materials between locations. In fact, a quick search of Wikipedia will show that "logistics" dates back to Roman times:

 

 

Logistics is considered to have originated in the military’s need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters.

 

http://www.woodinnovation.org/?p=903Searching for supply chain management in Wikipedia comes up with a host of similar yet different definitions, not that dissimilar to logistics. But the whole point of having a name or term to describe something is that now people can study it, debate it, enhance it. Without the term there is no cohesion and therefore little progress. Let's assume for now that we can locate the origins of SCM in 1982, 30 years ago. What is interesting is that from an academic perspective, there was little research was published until much later, with only five publications in 1997, 15 years after the term SCM was coined. https://blog.kinaxis.com/wp-content/uploads/2012/04/SCM-publications-by-year.jpg

 

Yet the term SCM itself has broad meaning. I have to admit that when I first heard the term, my attention was drawn to the supply aspect, which limits its applicability to materials management and inbound logistics. But clearly it wasn't only me that had a limited understanding of the term. Many still do think of supply chain management being limited to the inbound supply of materials.

 

This confusion of definition can be seen in many articles published by the analysts and is exemplified by AMR Research's (now part of Gartner) attempts to popularize the term value chain management and the concept of a demand-driven value network ( DDVN). But as I pointed out at the start of this blog, a term is very important shorthand for communicating ideas and concepts. And everyone at AMR Research, and now Gartner, needs to be congratulated for promoting the broader concept of value chain management. Even if the term is not gaining much traction, the central themes of demand translation and profitable response are essential in being able to conceptualize how a company's operations can best be orchestrated to meet their financial goals.

 

I'd also like to point everyone to a great piece by Lora Cecere on the maturation of supply chain management as a recognized profession and course of study. Lora's view is that the third generation of practitioners is now in university and will be hitting the streets soon. I look forward to their contribution. They will be the first that will have been born at a time when nearly every household in the Western world had a computer in it. They are the generation that will have learned to use the computer much as they would a telephone or TV. I expect big things from them.

 

2: Technology to support the process

 

As I mentioned above, I'm a slow starter, so I'm going to put myself in the second generation of supply chain professionals despite falling into the first generation by Lora's definition. At the time I came across the term supply chain management I was working for a management consulting company and doing a lot of what I now term supply chain re-engineering, while others call it supply chain design. To be honest, I don't think that at the time we had a term for what we did, but it was the aggregate level of analysis of a company's operations that tries to determine where best to locate facilities and to flow materials through the network based upon historical demand patterns and anticipated changes in the demand patterns. We never did anything as mundane as actually trying to operate the supply chain we had designed. J It was during one of these studies in 1995 that I came across i2 Technologies, which was still a relatively small company at the time, and had only just opened offices in Europe. At the time they had a single product called Factory Planner, which, in itself, is indicative of the level of maturity of the industry. I leapt at the opportunity to join i2 and had over 10 great years working for them at a time when technology was just emerging to support the emerging practice of supply chain management.

 

Of course once I joined i2 I came across the likes of Manugistics, Think Systems, Aspen Tech, Numetrics, and a host of others, which have now come and gone. All of these companies tried to add science to how companies were purchasing, manufacturing, and distributing product in order to satisfy customer demand. Of course, before this there had been a lot of work done by the likes of Jay Forrester and others, and there was quite a lot of academic study of things like operations research. But this was the first time technology had been developed specifically to satisfy the emerging practice of supply chain management. We needed to get beyond the abacuses and spreadsheets being used at the time.

 

Core to the concept behind the establishment of i2 Technologies was Sanjiv Sidhu's observation that even the smartest people can juggle no more than nine variables when making decisions. Instead he proposed a design for computer software based on artificial intelligence and advanced simulation techniques, most of which were rooted in Operations Research techniques and Eli Goldratt's Theory of Constraints.Of course, as I mention above, it wasn't only i2 that was developing products to satisfy the supply chain management needs. Once SAP and Oracle saw that there was a large market for supply chain management software, and that MRP alone would not satisfy the requirements, the developed the respective Advanced Planning and Optimization (APO) and eBusiness Suite (EBS).

 

There are two major drawbacks, which we are still experiencing today, that resulted from this period. The first is that the software products were developed to satisfy specific supply chain management sub-processes, such as demand planning/forecasting, in isolation with no thought being given to how the different processes were interconnected. The second is that it was assumed that an optimization algorithm could arrive at a better answer than a human being, ignoring the fact that he model itself is an approximation and is based upon assumptions that usually have a fairly short half-life.

 

Nevertheless, we are considerably further along in the development of supply chain management as a profession than if these companies had not emerged to fill this gap.

 

3: Supply Chain Management in the C-Suite

 

I am a technologist—a geek at heart—which is why I studied for a long time and why I have worked mostly for software companies or management consultancies. But I recognize the tremendous importance and value of the people who actually have to put this stuff into practice. It is much easier to analyze than to do, so to all those "doers" out there, thank you. Until recently supply chain management, if such a department even existed, would report into all sorts of functions, often procurement or manufacturing, reflecting again the emphasis on the term supply. Or even into IT, reflecting the perception that supply chain management was mostly technology rather than process.

 

http://cscosummit.raptureworld.co.uk/A couple of years ago, Gartner began using the term "Chief Supply Chain Officer" to describe the emergence of the second https://blog.kinaxis.com/wp-content/uploads/2012/04/CSCO-summit.png generation of supply chain practitioners in the executive ranks of organization. In a blog originally dating from 2008 and titled " Chief Supply Chain Officers are still rising, but what is the job?", Kevin O'Marah comments that:

 

On one hand, supply chain looks ready to usurp all kinds of traditional functions from purchasing through shipping; but on the other, the very breadth of this span of control means that most real VPs of supply chain have hard line authority over only a portion of the process and must influence, via dotted lines, the traditional owners of manufacturing or forecasting.

 

The most obvious example of the emergence of this operations-savvy senior executive is Tim Cook as the CEO of Apple. His official bio, which I have copied below, emphasizes his deep supply chain experience. And what better exemplar can we get that a geeky function such as supply chain has produced the CEO of the hippest company in the world epitomized by the black mock turtleneck and other non-conformist characteristics of Steve Jobs.

 

Before being named CEO in August 2011, Tim was Apple’s Chief Operating Officer and was responsible for all of the company's worldwide sales and operations, including end-to-end management of Apple's supply chain, sales activities, and service and support in all markets and countries. He also headed Apple's Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships, ensuring flexibility in response to an increasingly demanding marketplace.

 

Prior to joining Apple, Tim was vice president of Corporate Materials for Compaq and was responsible for procuring and managing all of Compaq's product inventory. Previous to his work at Compaq, Tim was the chief operating officer of the Reseller Division at Intelligent Electronics.

 

Tim also spent 12 years with IBM, most recently as director of North American Fulfillment where he led manufacturing and distribution functions for IBM's Personal Computer Company in North and Latin America.

 

Tim earned an M.B.A. from Duke University, where he was a Fuqua Scholar, and a Bachelor of Science degree in Industrial Engineering from Auburn University.

 

As recently as two weeks ago I met with a high-tech/electronics company in Silicon Valley in which this was still the case. The supply chain management team is a central function, reporting into the CIO, that can advise but not act. It has little budget and needs to bring a number of budget owners together in order to reach a consensus on how to proceed. We all know how long that takes and how seldom a consensus can be reached. Each head wants to maximize their operational effectiveness of their functional in isolation.

 

I can only contrast that with another company I have been engaged with lately that has an SVP of Supply Chain that reports directly to the CEO and has direct operational responsibility over the business of getting product into the hands of the customer. Often the people who rise to these positions have a strong analytical background and have worked in many of the functions that make supply chain management. In other words, they understand the interconnectedness of the sub-processes and how optimizing one in isolation may well mean that the overall process is less effective. I believe the emergence of these people at more senior levels is a key reason for the resurgent interest in sales and operations planning (S&OP) over the past 3-5 years. They are laser focused on the cross-functional effectiveness of operations both from a financial and an operational perspective. While S&OP is the mechanism by which they are implementing cross-functional processes, many are interested in supply chain control towers as an enabling technology to support not only the S&OP process but also the translation of that plan into executional effectiveness, what Gartner and Lora Cecere call "demand translation."

 

In Conclusion

 

There were so many items on my list, but I had to come up with three, and I chose the definition of the term supply chain management, followed by technology to support the sub-processes, and the emergence of people in the executive suite who understand the importance of the supply chain to the financial performance of the company. I am sure there are many other options out there and encourage you to either comment directly or email me with your suggestions.



Originally posted by Miles Trevor at http://blog.kinaxis.com/2012/04/scm30-what-are-the-3-greatest-advancements-in-supply-chain-management/

Those are the words I kept repeating in my head after seeing a presentation by Kevin Maynard, executive director of the Canadian Supply Chain Sector Council. But why not?

 

First of all, let's put this in context.

 

In a recent survey of high school students across Canada, students were asked to name a profession within the supply chain field. Only 14% of all students surveyed were able to name one, and of all the answers provided, only two professions were identified: dock worker and forklift driver.

 

https://blog.kinaxis.com/wp-content/uploads/2012/04/Geeky-is-the-new-Sexy.jpg

 

I was shocked! How could they not know about supply chain? How could they not realize that their tablets, smartphones, running shoes, and pretty much everything they owned, consumed, and threw away in their lives had to at some point work its way through a supply chain? Surely they must understand that it takes a whole lot more than a couple of forklifts and receiving personnel to make it happen.

 

Let's take it a step further. Take away even just a few links in a supply chain and see what happens... Imagine a world where there were no logistics practitioners or procurement specialists, retailers or assembly/manufacturing personnel. How would we get our products? How far would we have to go to get them? How much would it all cost? That assumes that we would even know what to do with all of the pieces once we got them. Think about it: Without a supply chain, all we would have is a bunch of design documents, recipes and a vague idea of where to get the stuff we needed to make it happen.

 

Admittedly, I had no aspirations of becoming a supply chain expert when I was in high school — I was going to be a rock star. I think today if you were to ask high school students what they want to be when they grow up, their answers wouldn't be all that different. Not too long ago I read that one of the hottest, most desirable professions among young adults was "video game developer." What is so different about designing the flow, players, alliances, and obstacles involved in a good video game from designing a complex and well executed supply chain?

 

Sure, maybe I didn't dream of this job when I was growing up, but I think that is because I didn't realize the potential and the scope of it all. Managing a well-executed supply chain is like conducting an orchestra. It's filled with nuances, personalities, unexpected events, and it's different every time! It is artistic and methodical. It is massive in size yet surprisingly detail-oriented. It is complex yet brilliantly simple. A good symphony conductor knows how to bring all of the pieces together and elicit the desired emotion of an audience in much the same way a good supply chain manager knows how to orchestrate all of the right pieces and players to meet company objectives.

 

The best conductors of a supply chain symphony are the ones who can read their audience (or customers) and respond to the energy they are getting from them. That is why a performance of any piece of music or supply chain execution is never the same way twice. The speed at which the conductor reacts to these changes in mood (or demand signals) affect the overall performance value. Symphony conductors have sheet music, a baton, and a cast of musicians to help achieve their goals and supply chain managers have similar tools to help them control the rate and delivery of their products or services. In both cases, their ability to anticipate, adjust to, and correct for any changes in the predetermined program determine the response from the audience.

 

In a world of globalization, mass customization, postponement, ATO, ETO, MTO, outsourcing, and consumerism (to name a few), doesn't that make supply chain about, well, pretty much everything? And everything IS sexy!

 

Yet, with all of this exciting information, the demand for supply chain professionals still heavily outweighs the supply. Perhaps it is due to the growth of supply chains themselves, or the lack of interest on the part of young professionals. Regardless, the need is there.

 

Excerpt from Canadian Supply chain Sector Council 2012 HR Study Update :

 

The supply chain sector is growing. Over the next five years, employers are expecting a growth in the number of employees from a low of 8.4% (Tactical: Transportation) to a high of 14.9% (Managerial: Marketing and Sales), with all other occupations and sub-functions falling in between. Based on the current sector total of 767,200 employees, an annual employee demand growth rate of 8.6% will result in approximately 65,979 new and vacant positions to be filled. In addition, respondents to the employer survey indicate current unmet employment demand of 3.5%, resulting in the need to fill approximately 26,852 current vacant positions within the sector. This is an enormous challenge.

 

So, my fellow supply chain geeks, hold your head up high. Ours is a truly noble profession and one that provides us with exciting and artistic challenges every day. Be proud of what you do, and tell others about the dynamic and rewarding work that is being done.



Originally posted by azeitz at http://blog.kinaxis.com/2012/04/supply-chain-isn%e2%80%99t-sexy/

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