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2017
by Alexa Cheater

Supply change managementWorking in supply chain means getting comfortable with change – changes in supply, changes in demand, changes in capacity, etc. The list is virtually endless. But supply change management isn’t just about dealing with unanticipated supply chain risks and adjustments.

 

Sometimes, it means changing your business processes and company culture to stay afloat in a complex, digitized world. Sometimes, it means pushing outside your comfort zone and trying something new. Sometimes, it means updating outdated supply chain management systems and bringing in better technology.

 

In any of those cases, especially that last one, achieving such a feat may seem daunting. But there is good news. There are things you can do to ensure you set yourself, your company and your team on a path to supply change management success.

 

Vision: Create a compelling vision of the future, a roadmap outlining what successfully implementing the change means, and what your team should expect as a result. Develop a clear plan with scope, and support it with a firm business case. Follow it.

 

Leadership: Recruit a respected leader to take overall responsibility for the change management efforts. Make it very clear this person isn’t responsible for detailed execution. Instead, this individual provides the vision, helps with decision support and resolves problems if needed. Support them.

 

Team: Engage a team of motivated and respected individuals who represent the stakeholders and who will work with authority to implement change. Empower them.

 

Stakeholders: Analyze the impact to the stakeholders from tool, process and organization perspectives. Engage them.

 

Communicate: Structure communications to fit the needs of the stakeholders, including defined forums to discuss and validate ideas. Communications should be inclusive, promote alignment and offer opportunity for sign offs and veto authority. Use them.

 

Incorporating all of these will help ensure your change management efforts are successful. It’s vital that all parties understand their specific roles and responsibilities. But you also have to make sure they have the necessary authority to carry out those duties.

 

That is what allows people to take ownership of the defined changes and work to implement them. That is what empowers them and motivates them. That is what drives them to be champions of change in the future. And that means the good habits they learned in the process will carry you through the next time you need to implement any kind of change within your organization efficiently and effectively.

 

Want to learn more about effective change management practices in your supply chain? Read our eBook, Five signs your supply chain needs to change and how to implement the change successfully.

 

The post 5 steps to supply change management success appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Alexa Cheater at http://blog.kinaxis.com/2017/03/5-steps-supply-change-management-success/

by Bill DuBois

Supply chain isolationWords get thrown around like rice at a wedding these days to describe what makes a world class supply chain planning system: “End to end visibility”, “collaborative planning”, and “what if simulation” are only a few of the many terms you hear when discussing the keys to supply chain success. Don’t get me wrong, these are all valuable attributes, but are often addressed in isolation and problems are usually tackled one functional silo at a time.

 

Kinaxis CEO John Sicard talked about the traditional, siloed view of supply chain during his interview with SupplyChainBrain’s Russell Goodwin. The title of the interview, Revolutionizing Your Supply Chain Planning, immediately made me wonder, “Are you yanking my chain?” The word “revolutionizing” was one I hadn’t heard in any supply chain narrative before, and with a word that strong, doubt is a natural reaction. When you hear “revolution,” you think the American Revolution, the Spanish Civil War, Batman vs. Superman. Ok, maybe not that last one, but epic supply chain battles definitely aren’t top of mind. However, Sicard got me thinking of a revolution like a rotation, a turnaround, a 180 – a way of doing things differently.

 

Goodwin does a great job of extracting the definition of the supply chain planning system revolution from Sicard. In this case, yanking my (supply) chain is actually a good thing. Let me explain. Mr. Sicard started by looking back with a brief supply chain technology history lesson: “Processes are disconnected because supply chain planning has grown up in a siloed manner,” he said.

 

Because of these functional barriers, “it’s futile to follow that model and think you can optimize the supply chain one link at a time.” Since functional processes are disconnected, it takes a significant amount of time for the impact of a change to get from one end to the other of the supply chain. In most organizations today, the supply chain is managed by looking at the individual links in the chain. That makes it difficult for individuals managing one supply chain planning process to know what the others are doing or what impact their decisions have on others.

 

Disconnected link

 

The revolution in supply chain planning systems begins to happen when these links are connected. Sicard’s chain analogy paints a powerful visual. “Like a chain, when you pull it you see the impact it has in the other direction.” When supply chain processes are “simultaneously linked”, you immediately see the impact of any change. Planning becomes concurrent and cycle times are cut from days and weeks to hours and minutes. If you yank on one end of the chain, impact is instantly felt at the other end.

 

Supply chain planning system

 

Sicard painted another vision of the revolution. Think about how your brain can interconnect multiple processes. “For example, you can understand language and math simultaneously. If you are asked a math question, you can respond in English. You can’t disconnect the two and the thoughts just happen.” In supply chain, if you make a change in capacity, you will immediately start to think about the impact on supply and demand.

 

If the supply chain planning processes are wired like the brain is, then you should be able to ask a supply chain question and immediately get the answer. If I take this new customer demand, what existing demands will be at risk? What supplies are causing the demands to be late? Is it a capacity issue? Is there another source of supply? What will be the hit on margin if I expedite? Instant answers to these types of questions will obviously drive the right responses to change. Supply chains today have the ability to do simulations, but in the revolutionized supply chain, anyone can simulate anything in seconds.

 

Sicard notes the ability to simulate in seconds is a computer science challenge. And not many have solved the problem. If everyone has their own sandbox to conduct simulations, think about the data challenges associated with that. Now you need multiple versions for any number of people to test and compare any number of scenarios. Legacy systems have precluded us to guess, and has driven Excel to the top of the list for most widely used supply chain tools. The revolutionized supply chain has solved the big data and versioning problems. Users can look at the past, present and future while collaborating across functional organizations with the ease of having a conversation.

 

An encouraging final comment from Sicard is that the supply chain revolution has started, but it is a journey. Companies that have already started this journey are achieving impressive results, and capturing lessons learned along the way. Unlike the typical revolution, there are no causalities, except your Excel spreadsheets. Let us know if you’ve started the journey and check out the interview here.

 

The post Supply chain planning system revolution: Are you yanking my chain? appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Bill DuBois at http://blog.kinaxis.com/2017/03/supply-chain-planning-system-revolution-yanking-chain/

by Melissa Clow

This blog is part of a video interview series. Check out the video below as well as links to other supply chain practitioner and Kinaxis executive interviews.

 

Company processes are disconnected because their supply chain planning has grown up in a siloed manner, says John Sicard, president and CEO of Kinaxis. Consequently, it’s futile to follow that model and think you can optimize the supply chain one link at a time.

 

Sicard explains how Kinaxis is revolutionizing supply chain planning because it is interconnecting all of the links simultaneously. He analogizes to the human brain what the Kinaxis RapidResponse tool can do. “You have the ability to understand language and math simultaneously. It’s two different parts of your brain, yet you can’t bifurcate those. If I ask you a math question in English, you immediately respond, with no idea how those parts of the brain connected.”

 

“In our world, if you make a change in capacity, you instantaneously feel the impact that has on demand. Therein lies the key — it’s what we call concurrent planning.”

 

 

Revolutionizing Your Supply Chain Planning

 

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At the moment, Kinaxis focuses on six verticals: high-tech, industrial, aerospace and defense, life sciences, automotive and consumer packaged goods. Each one has unique problems and supply chain needs. But each faces one thing in common: how to quickly and accurately create necessary what-if scenarios?

 

With the right tool, Sicard says, “You can simulate anything, at any time, with unparalleled speed.” He says the quote is actually from a Kinaxis customer, and it pertains to the benefits of using RapidResponse.

 

Drilling down into that statement, Sicard notes that supply chain data is historical, and the amount of data can be enormous. Actively running a simulation, what Sicard calls “carving out a sandbox,” is a computer science problem. It means finding the appropriate data contained in staggering amounts of information, and the exercise is complicated when other players want to run simulations at the same time.

 

“You can see the complex supply chain challenge in that,” he says. “Everybody saying ‘I need a sandbox’ at the same time. In the legacy world, it precludes you from doing anything. So you say, ‘I will guess because I can’t run a simulation when I want to.’”

 

Kinaxis RapidResponse can establish the desired data environment in 0.003 of a second, he says. “That means anyone on your staff can create a sandbox at a moment’s notice and run a what-if scenario. That’s part of the revolution, because it’s putting people back in the equation. You put the power in their hands without having to call IT and ask for permission.”

 

Given that business is awash in data, accessing only the right information is paramount. The tool allows simulations with a highly specific focus. “If I’m the demand manager, for example, my simulation is not about inventory but demand. So when I’m creating my sandbox, demand is the only thing I’m dealing with. It’s the same for someone working only with inventory.

 

“You have an environment to play with in the blink of an eye, learn, and then throw it away or share with others.”

 

Check out the other video interviews in this series:

 

The post [Video]  Kinaxis – Revolutionizing supply chain planning appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Melissa Clow at http://blog.kinaxis.com/2017/03/video-kinaxis-revolutionizing-supply-chain-planning/

by Alexa Cheater

Supply chain inventory managementFrom designing, sourcing and manufacturing, to distribution and consumption, your supply chain is at the heart of your customer satisfaction levels. It has become a competitive weapon that could help you win the consumerism war. But the sheer complexity of supply chain networks, and the impact design decisions have on operational performance, makes supply chain inventory management aligning inventory investments with on-time customer delivery and margins a major challenge.

 

The equivalent of 7% of America’s GDP is tied up in inventory, and accounts receivable and payable. That’s $1.1 trillion in cash according to a 2013 US Working Capital Survey. It’s no wonder that number is so high with a lot of companies still struggling with inventory optimization, trying desperately to find that sweet spot between supply volume and customer demand.

 

Implementing inventory optimization

The challenges of inventory optimization can be immense. The focus with Inventory optimization is often on analytics, but that’s just the beginning. You’ll need to overcome distributed data and inventory, navigate a complex network of locations and bills of materials (BOMs), and manage the configuration of thousands of parts. And if you’re still using dated technologies that don’t support robust and adaptive collaboration, you may even need to make critical decisions without the context of knowing their impact on corporate-wide metrics and objectives. It’s certainly no walk in the park.

 

The first step in navigating these obstacles is integrating inventory management into the rest of your supply chain planning processes, and the technology solution(s) powering them. Why? Because inventory management will be the backbone of your inventory optimization processes, and has strong interdependencies with sales and operations planning (S&OP), master production schedule (MPS) and supply action management (SAM).

 

This integration allows for the second step – cross-functional collaboration. Break down those departmental barriers and silos and work with other supply chain managers to find an ideal solution to inventory issues. The changes you make as an inventory manager have a ripple effect on other supply chain functions. It’s important everyone collaborates and agrees on any necessary trade-offs to prevent further conflict down the line.

 

Integration and collaboration also provide much needed visibility across the end-to-end supply chain. That means you’ll be able to see all aspects of supply and demand, including things like the balance of inventory management levers.

 

Single vs. multi-echelon inventory optimization

There are several different schools of thought on inventory optimization best practices. Two of the most common are single-echelon inventory optimization (SEIO) and multi-echelon inventory optimization (MEIO). Which one you choose depends entirely on the nature of your business. If you’re building highly customized, one-off products, like ships, SEIO will likely suit your needs best. If you deal with large volumes of similar stock across multiple distribution nodes, like those in the consumer electronic space, MEIO is almost a must.

 

SEIO balances inventory one part at a time, determining the necessary safety stock to overcome constraints like lead time variability and demand volatility. Location problems typically focus on either incoming material flow, or outgoing material flow – not both. It’s a sequential approach with forecast demand determining the required inventory for each level separately.

 

MEIO takes a more holistic approach, looking at the entire value chain and determining the correct inventory levels across the network based on demand variability at various nodes and the performance at higher echelons. The focus is on minimizing inventory costs while maintaining a target service level. Location problems deal with both inbound and outbound material flow simultaneously. You need to factor in constraints related to both.

 

For example, if a retailer receives a product from a distribution center, the distribution center represents one echelon of the supply chain, and the retailer another. The amount of stock the retailer needs is a function of the service it receives from the distribution center. The better the upstream service, the smaller the safety stock level needs to be at the retailer. The goal is to continually update and optimize inventory levels across all echelons.

 

Benefits of optimizing inventory

Optimizing inventory isn’t easy, but it can help you free up working capital in times of growth, and reduce costs and ensure liquidity in times of economic downturn. It’s also the key to meeting those all important customer satisfaction levels. It provides a systematic and statistical way to effectively cover supply chain risks. It provides the ability to make informed tradeoffs between service targets and inventory levels to maximize corporate performance.

 

Ultimately, it leads to improved inventory turns, reduced inventory holding costs and higher customer service satisfaction levels.

 

How have you optimized inventory in your supply chain? Let us know in the comments area below.

 

The post Supply chain inventory optimization – Beyond the analytics appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Alexa Cheater at http://blog.kinaxis.com/2017/03/supply-chain-inventory-optimization-beyond-analytics/

by Iman Niroomand

Supply and demand productionSupply chain performance depends on the matching of product features with supply chain features. When a new product hits the market, the existing supply chain that is optimal for a given set of product lines will not stay optimal. Thus, a new product introduction will require a supply chain logistic network redesign.

 

A new product introduction leads to a potential risk of reduced service performance due to ‘discontinuity’. In supply chain, a discontinuity is the introduction of a change in the product range of a firm, such as a new product or a new product line. This reduction could be measured against difficulties in reaching service level targets and master production schedule accuracy. The master production schedule suffers from very intense and short term production schedule variations and purchased materials unavailability.

 

So when a new product is introduced, how can supply chains re-align supply and demand?

 

There is a two-step methodology to mitigate the negative effects on performance and improve the alignment between supply and demand production. Step one is to find the risky products. Marketing managers with product developers need to jointly analyze the identification of unexpected demand growth scenarios and main risk areas in terms of volumes and demand peaks in order to find the risky products. In this way, supply chains can identify a list of products that can present managerial problems.

 

The second step is matching product features with supply chain features. Product developers and supply chain managers must work together to develop an action plan to either concurrently change the product structure or change the supply chain itself to match the requested demand with the supply for the risky products.

 

Some possible actions that help align a product feature with the supply chain are:

 

  1. Modification of bill of material for risky products.
  2. Setting of specific strategic safety stocks on critical components.
  3. Manufacturing flow simplifications.
  4. Alternative sources for parts.

By implementing the above actions, supply chain managers can use the Tracking Ratio (TKR) metric during the introduction phase to measure the rate between the variety manufactured and customer orders. The TKR is calculated as follow:

 

TKRi =MCi/DCi [1]

 

Where i is working week, MC is count of different manufactured items in week i, and DC is count of different demanded items in week i.

 

Once the customer’s orders are aligned with manufactured parts, the supply chain and new product can align, and the firm can expect to reach its performance target during the early stage of new product lifecycle.

 

______________________________________________________________________________

 

[1] International Journal of Engineering, Science and Technology, Vol.2, No.9, 2010.

 

The post Supply and demand production challenges with new products appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Iman Niroomand at http://blog.kinaxis.com/2017/03/supply-demand-production-challenges-new-products/

by Melissa Clow

This blog is part of a video interview series. Check out the video below as well as links to other supply chain practitioner and Kinaxis executive interviews.

 

Speed and accuracy are everything to a company, says Jenny Balderrama, production planner at Keysight Technologies. All too often, however, speed is associated with orders arriving rather the ability to meet them. And accurate forecasting? Forget that.

The degree of a company’s responsiveness is incredibly important, she says, but a constant order flow can stress any company’s ability to keep up, especially last-minute drop-in orders. “Demand always changes, and it would be lovely if we could get a forecast to stay put, but it never does.”

 

Moreover, “big deals” often depend on meeting customers’ demands for fast deliveries and quick turnaround time. That mandates a company like Keysight, which makes electronic test and measurement equipment, to have impeccable communication, especially if it has multiple factories.

 

That disconnect was solved when Keysight Technologies employed Kinaxis RapidResponse.

 

“One of the things we appreciate about RapidResponse is that it sits on top of our database. We are able to use the power of the ERP, but the functionality of RapidResponse allows us to get at that data and arrange it in a meaningful and useful way. It allows us to make instant decisions instead of having to swim though the muck of data in our MRP.”

 

Keysight Technologies: Improving production planning efficiency

 

Spreadsheets are a limitation of material requirement planning systems, says Balderrama, who credits the Kinaxis tool with allowing Keysight to instantly manage the data without the spreadsheet hassle.

 

However, she says the biggest benefit the tool has provided is in the job release area. The cumbersome process required multiple entries into the MRP system, data filtration, quantity assignment and component tracking. The process took each planner the better part of two days a week, Balderrama says. Using the internal job release tool through RapidResponse has reduced that to less than one hour per planner.

 

“What could you do with two extra days in your work week?” she asks. “That’s a huge improvement.”

 

Check out the other video interviews in this series:

 

The post [Video] Keysight Technologies: Improving production planning efficiency appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Melissa Clow at http://blog.kinaxis.com/2017/03/video-keysight-technologies-improving-production-planning-efficiency/

by Alexa Cheater

Scenario simulation Scenario simulation is nothing new in supply chain. Practitioners have long heralded it as a sign of a mature sales and operations planning (S&OP) process. And it is. Having the ability to model and simulate the impacts of a change in your supply chain — whether it’s a sudden increase in demand, the loss of a key supplier or an unexpected capacity constraint — is a critical success factor. Asking ‘what-if?’ is commonplace.

 

But while a supply chain planning (SCP) revolution is beginning to take hold thanks to Industry 4.0 and SCP 4.0, some companies are still using scenarios the same old way. In a world as fast paced as ours, is it really still acceptable to wait on results and not leverage scenario simulation software?

 

Speed equals success

The creation of what-if scenarios should happen in the blink of an eye. Anyone on your team should be able to simulate anything at any time with unparalleled speed. It’s what lets you make better supply chain decisions, faster. Imagine having to wait hours or even days to understand the full impact of a change. Think of all the ramifications each extra minute could potentially have on your bottom line.

 

A recent paper by SCM World, Concurrency: Embracing the Death of S&OP, outlines how what-if simulation is a foundational capability of concurrency, which is ushering in a new era of supply chain planning where you can simultaneously and continuously plan, monitor and respond in a single environment across all business functions.

 

Author Matt Davies says the next generation of scenario planning will “… increase the frequency of scenario analysis, connect the humans involved in and impacted by the scenario, and create a broader organizational ability to ask the right questions of the data.”

 

Collaboration is critical

As Davies notes, there needs to be human involvement in simulations and what-if analysis. And I’m not just talking about the one individual who created and ran the simulation. When it comes to responding efficiently to supply chain changes, it requires seeing the complete picture and knowing the impacts across the entire value network.

 

Very rarely is it a case of running a simulation, deciding it’s the best course of action and then committing the change independently. Or if it is, you’re likely looking at some very angry colleagues. The reality is you’ll need to share your scenarios with those in other functional business areas to work out a compromise. You can’t rob Peter to pay Paul without at least letting Paul know he’s about to be shorted.

 

Another important message Davies gives about supply chain scenario simulation is how many organizations today are using separate systems for data manipulation, simulations and collaborative discussions. Bridging the informational and contextual gap between all these disparate systems compounds any existing speed problems resulting from a lack of computational power.

 

All of these activities should be happening in a single, unified system using one data set.

 

Questions should be unlimited

Recent technological advancements mean businesses are dealing with more data than ever before. Supply chains have to find innovative new ways of analyzing all of it quickly and efficiently. The path forward for what-if analysis and supply chain scenarios is the ability to simulate virtually anything – supply change, demand change, BOM change, business policy change, capacity change, pricing change and more. You can’t limit asking ‘what-if’. That question should be able to expand across data, working assumptions or business rules.

 

And you certainly can’t limit it based on computing power. Questions and scenarios are endless. Your supply chain system should allow thousands of simulations to be supported concurrently and holistically shared so you can make quick and informed decisions.

 

Technology has caught up. It is possible to model your entire data environment in seconds (regardless of size) to give you end-to-end visibility in your supply chain and mitigate risk. It is possible to test multiple scenarios and compare them to each other or to a baseline in a matter of minutes. It is possible to take action with a full and detailed understanding of the projected impact, not just an aggregated assumption. It is possible to make better decisions faster. You just have to rethink the way you ask ‘what-if’ and run scenario simulations.

 

Interested in learning more about the role scenario simulation plays in the future of S&OP? Download SCM World’s report Concurrency: Embracing the Death of S&OP.

 

The post It’s time to shake up supply chain scenario simulation appeared first on The 21st Century Supply Chain.

 

5 signs your supply chain needs to change

 

Originally posted by Alexa Cheater at http://blog.kinaxis.com/2017/03/time-shake-supply-chain-scenario-simulation/

by Melissa Clow

International Women's DayToday, Wednesday March 8th is international women’s day. To recognize this global celebration I decided to write on women in supply chain. Over the years we have discussed this topic at length on our blog. But to be honest, I haven’t heard much lately and I wonder what has changed. I used to see plenty of industry news articles, webcasts, conference sessions dedicated to the importance of diversity in supply chain, but today’s hot topics are IoT, machine learning, augmented reality and the like. Perhaps progress been made already and it’s no longer the pressing issue it once was? I’m not so sure.

 

In today’s current environment I believe that it is important to continue to keep women, and diversity, top of mind. Despite it being 2017, we know the gender split is not even in this field. We know the importance and focus of the supply chain function is intensifying in business so you would think that reexamining the current organizational make-up of today’s supply chain would be an important consideration. In the words of my former colleague Lori Smith, “Ironically, for an industry that is all about balancing supply and demand, there doesn’t appear to be much balance when it comes to its own human resources. It’s time for supply chain organizations to do a reality check and apply some basic planning and course correction initiatives within their own internal organizations.”

 

On a related note, SCM World recently published a report on Concurrent Planning. In this paper, Matt Davis discusses the importance of removing the functional barriers in supply chain management and addresses how current structural models should connect the data, processes and people. Davis describes the result being democratizing decision-making and how this democratized planning model could shift business processes and supporting organizational structures. With concurrent planning, it will challenge current organizational designs. It will increase the frequency of what-if scenario analysis, connect the humans involved in and impacted by the scenario, and create a broader organizational ability to ask the right questions of the data.

 

The skills of the future supply planner, and the leader, may have to adapt as well. It seems that by reexamining current operating models, we will see that decisions can no longer just be made hierarchically and without collaboration. The important attributes of a future supply chain worker/leader will be different. Could concurrent planning lead to a more diverse workforce? Or, generally speaking, are the qualities valued in future supply chain talent divided more along generational lines and not necessarily gender? Obviously these are tough questions and I’m not sure the answer. I would love to see a more inclusive world in supply chain, business in general and in everyday life. Perhaps progress is not always linear.

 

#BeBoldForChange is the International Women’s Day hashtag to call on the masses or call on yourself to help forge a better working world – a more inclusive, gender equal world.

All that said, I do want to do a quick shout out to past 21st Century Supply Chain blog posts on women in supply chain:

 

  1. The Future Supply Chain Workforce: Can Supply Chain Organizations Balance Their own Demand and Supply? By Lori Smith
  2. The Gender Divide in Supply Chain – 3 Questions That May Show We Are Looking at the Wrong Issue by Trevor Miles
  3. Mentoring, sponsorship and quotas: What are their relative merits in bringing more women into supply chain management? Tune into this webcast recording with top female supply chain leaders: Lora Cecere, Supply Chain Insights, Verda Blythe, Grainger Center for Supply Chain Management, Wisconsin School of Business, Laura Dionne, TriQuint, Elisabeth Kaszas, Amgen Inc., Shellie Molina, First Solar
  4. Women in supply chain: four I admire by Kevin O’Marah. This blog was not published on the 21st Century Supply Chain, but I thought it was worth including. In his post he covers four well known role models in the field: Annette Clayton, President and CEO of Schneider Electric’s North American operations; Beth Ford – Beth is EVP and COO for Land O’Lakes; Maria Lindenberg – Maria is the Chief Procurement Officer for Chevron; Sandra MacQuillan – Sandra is the first ever Chief Supply Chain Officer at Kimberly-Clark Corporation
  5. Women of the Supply Chain: Responsibility, Collaboration and Bathroom Lines by Josh Greenbaum, Enterprise Applications Consulting, on his experience at the Kinaxis user conference, Kinexions

 

 

The post Women in supply chain: Where did this topic go? appeared first on The 21st Century Supply Chain.

 

blog-email-concurrency-embracing-the-death-of-sop-kinaxis

 

Originally posted by Melissa Clow at http://blog.kinaxis.com/2017/03/women-in-supply-chain-where-did-this-topic-go/

by Melissa Clow

Recently Matt Davis of Gartner (formerly SCM World) published Concurrency: Embracing the death of S&OP, SCOR and Other Supply Chain Paradigms as a result of three years of Future of Supply Chain research. In this new research paper, SCM World describes the death of S&OP as we know it.

 

Proving to be both a disruption and a massive opportunity, digitisation, value chain collaboration and a greater need for real-time decision-making are coming together as a disruptive catalyst to end a roughly five-year stagnation in supply chain planning. Innovative approaches to solving today’s supply chain challenges that embrace these new realities are showing that the future of planning is concurrency.

 

What is concurrency?

concurrency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Davis predicts three foundational capabilities of concurrency and the future of supply chain:

 

  1. Digital will act as a mechanism to unify strategic supply chain technology investments and provide the mechanism to gut, retrofit and fill the gaps in planning across the end-to-end value chain.
  1. Digitised business processes will displace non-value-added human work yet simultaneously make cross-functional collaboration more important than ever before.
  1. The underlying principles, objectives and value propositions of S&OP will remain supply chain priorities, but the sequential, time bound nature of the process will be replaced with democratised, dynamic decision-making.

Check out this fascinating report as Davis shares insights and approaches from leading organizations embracing concurrency; and lastly, presents a six-point action plan to help you establish concurrent planning in your supply chain.

 

Download this complimentary report.

 

The post Concurrency: Embracing the death of S&OP, SCOR and Other Supply Chain Paradigms. appeared first on The 21st Century Supply Chain.

 

blog-email-concurrency-embracing-the-death-of-sop-kinaxis

 

Originally posted by Melissa Clow at http://blog.kinaxis.com/2017/03/concurrency-embracing-death-sop-scor-supply-chain-paradigms/

by Trevor Miles

These were the words that popped out at me during an excellent presentation by Alex Brown of Xilinx during his keynote presentation. Recently my colleague covered an interview with Alex and it reminded me of his aptly titled presentation “Taming Complexity”.

 

As a practice Supply Chain Management is made up of a bunch of engineers who pride themselves in their mathematical skills, and Alex, with a PhD in Industrial Engineering from Stanford University, is a prime example. Nothing pleases us as much as solving complex problems using mathematics. We spend years learning about linear programming and the theory of optimization, so we want to put these skills into action.

 

What we don’t get taught at university, is that most “interesting” problems are too complex to be solved using mathematics. Recognize that word “complex”? It was in Alex’s title. What we are taught at university is the word “intractable”.

 

intractable

 

 

 

 

 

 

 

 

 

 

 

 

 

Most real world problems are intractable, which we don’t get taught at university. What amuses me about the definition is that it’s almost like the problem is being deliberately obdurate, another lovely big word, frustrating the human being.

 

obdurate-definition

 

 

 

 

 

 

 

 

 

 

 

The reality is that our mathematics isn’t strong enough to deal with the real world. The problems are simply too complex. So we are taught to break up the problem into a lot of smaller pieces, each one of which is tractable, meaning the resultant equations can be solved using “simple” mathematics. But in doing so we have lost the overarching context, and therefore we are not solving the real problem. We have simplified the original problem beyond recognizability. We forget the difference between teaching a method and applying that method to real world problems.

 

Alex addressed one aspect of this issue during his presentation when he discussed the Economic Order Quantity calculation, a classic of all Industrial Engineering and Operations Research courses. It is meant to show the use of optimization techniques to set the standard quantity of material to be ordered and is based upon balancing the cost of ordering against the cost of holding inventory. Order larger amounts infrequently and the cost of ordering goes down, but the cost of holding inventory goes up. Order small amounts frequently and the cost of ordering goes up, but the cost of holding inventory goes down. I love the diagram below, which I found on the internet. The icons are particularly helpful, in case the problem has not been simplified sufficiently.

 

Inventory Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: https://ais.web.cern.ch/ais/apps/lims/images/EXCEPT~1convert2.gif

 

Alex’ point is that if you collect all the information and use the equations to calculate the EOQ (there are even some website that do this for you) the result will show that you need to order 98.325752. As Alex said, in reality is doesn’t make much difference if you order 80 or 120. This is confusing precision with accuracy.

 

There are three problems with the equation which lead to Alex’ assertion that the answer lies in the 80-120 range, and that we cannot be more precise than that. The first is the simplicity of the equation, the second is the accuracy of the input data, and the third is variability or uncertainty. I will discuss these three problems collectively because, and this is the fourth problem, they are interlinked and cannot be separated out.

 

But let me pause before diving into a deeper discussion to state that using the EOQ equation to determine how much to order is far, far better than simply guessing how much to order. But let us recognize it for what it is: A simplistic answer to a complex problem.

 

Let us start by addressing the simplicity of the equation. What is ignored is that the company may be buying several items from the same supplier and therefore it is cheaper to have several items delivered together, because doing so reduces the transportation costs. Notice that the EOQ equation does not even consider the cost of transportation because it assumes it is a constant regardless of the quantity purchased. It also ignores the purchase price, assuming that there is no bulk purchase discount. I would argue that both are gross simplifications.

 

There is always variability in the demand signal and in the lead time for delivery, both of which lead to safety stock. While it is true that the EOQ equation captures the variable cost of purchasing more or less, having more safety stock because of variability will flatten the total cost curve meaning that the relative difference between different order quantities will have an even smaller effect. The diagram below shows the impact on the amount of safety stock where the % values represent the amount of safety stock as a percentage of the average stock over the ordering period. This % will depend on the variability of the demand and supply lead times. As we can see, the EOQ decreases as the relative amount of safety stock increases. Of course the exact shape of the curve will depend on the relative values of the variables used in the equation, but the overall principle will remain the same.

 

total-cost-order-quantity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Of course in this example we are only considering one item at one location. What if this is a multi-echelon distribution network? And what if the supplier could deliver from more than one location, perhaps at the same price, but with a different lead time?

 

We can see that the traditional EOQ equation is a gross simplification of the real world, but that it was approximately correct. In other words, do not confuse accuracy with precision. The simple EOQ equation produces a result that is more right than wrong, making it extremely useful. But if you think it provides a result that is more than 80% correct you are wrong.

 

I had a recent discussion with a customer that is thinking of using Kinaxis RapidResponse for demand planning, but was getting pushback from the demand planning team because we do not support the Lewandowski method. Let us put this into perspective. Independent studies show that best in class forecast accuracy in weekly buckets, by customer and item, at lead time is around 70%, while the typical forecast accuracy is no more than 60%. Of course these forecast accuracy measures go up as the time bucket and as we go up the product or customer hierarchies. The point being that it is the forecast accuracy at customer and site that actually matters because this is what determines production and distribution schedules.

 

Our customer, while being recognized by Gartner as one of the Top 25, is no different. Their forecast accuracy falls into the bands above, despite using Lewandowski. On the other hand using simpler, more easily configured and understood forecasting methods will have limited impact on their forecast accuracy. This can be proven.

 

So once again, do not confuse precision with accuracy.

 

What matters far more in terms of their ability to meet customer demand with a reasonable profit is an agile supply chain. Of course they can’t be hopelessly wrong in their forecast otherwise they will need a lot of inventory and would still have poor customer service, ultimately leading to lost profitability and revenue. But, far more important than the precise forecast for a period are questions about trends and mix changes. These have a much greater impact on the agility of the supply chain and its consequent ability to absorb demand variability.

 

Are you fighting core complexity at your organization? If so, comment below and let us know.

 

The post Don’t confuse precision with accuracy! appeared first on The 21st Century Supply Chain.

 

blog-email-concurrency-embracing-the-death-of-sop-kinaxis

 

Originally posted by Trevor Miles at http://blog.kinaxis.com/2017/03/dont-confuse-precision-with-accuracy/

by Melissa Clow

Madhav Durbha, KinaxisFrequent Kinaxis blogger Madhav Durbha was recently honored as a Supply & Demand Chain Executive ‘Pro to know’. We are thrilled that his contributions to the industry were recognized.

 

Madhav’s experience and educational background show his passion and enthusiasm for supply chain and the role it plays in making the world a better place. He shares this passion with others through his speaking engagements and writings. Madhav brings deep knowledge across verticals and significant market intelligence to Kinaxis. He is also a strong asset and advocate to our customers as we enable their transformation by revolutionizing planning.

 

I asked Madhav to share some insight with our readers. Check out his responses.

 

What do you believe are the biggest supply chain challenges companies are faced with today and for years to come?

The key challenges facing today’s organizations are complexity and volatility. The root causes for these include growing channel complexity, SKU growth, demand variability due to more dynamic pricing and promotions, trading partner growth, increased outsourcing relations, geopolitical risks, and informed consumers. Not all of these factors apply to all industries but most industries are impacted by a subset of these.

 

In light of this growth in complexity and volatility, Demand Planning is becoming increasingly challenging. Being solely focused on increased forecast accuracy to align supply and inventories is no longer sufficient. Being able to quickly respond (in near real time) to unforeseen circumstances is become increasingly important.

 

However, current supply chain planning processes are very batch oriented in most companies. In my role, I educate these companies on the need for speed in planning and supply chain decision making. Kinaxis provides the technology to enable such near real time planning supported by scenarios to combat this rising complexity and volatility.

 

One of the examples of this is, when the Tsunami hit the Japan coast a few years ago, a high tech customer of ours was able quickly run scenarios and lock in alternate sources of supply and for their competition, that same process took several weeks and this resulted in them having to pay a premium to secure the supply, for whatever is left after the said company locked in the supply. There are many more such examples.

 

In my role I help companies, in dealing with uncertainties such as the one in the aforementioned example, by helping them craft an end state vision and a journey map to get there. While Tsunami may be an extreme event for many, on a day to day basis there are mini earthquakes and mini Tsunamis impacting every supply chain through surprise orders, missed deliveries, production outages and so on. In this day and age, information is power and time is money. So “know sooner and act faster” is the mantra that I evangelize.

 

What is the importance of connecting the supply chain function to a company’s broader strategy?

Supply chain as a function is becoming increasingly prominent in lot of companies. Tim Cook of Apple and Mary Barra of General Motors are two high profile examples of supply chain leaders becoming CEOs.

 

Chief Supply Chain Officer (CSCO) is a role that is getting a seat at the executive table. This rising prominence is because companies are coming to the realization that the scope of supply chain is quite vast and that significant amount of fixed and working capital is invested in the supply chain.

 

They also realize that majority of costs are related to supply chain functions such as production, distribution, warehousing, and order fulfillment amongst others. In terms of attaining and exceeding a company’s revenue and profit goals, a well-functioning supply chain is the greatest enabler.

 

In this sense supply chain’s alignment to a company’s broader strategy is rather a necessary condition for the strategy to be successful in my opinion. This can be best accomplished by the following:

 

  • Ensuring that the chief supply chain officer directly reports into the executive suite (preferably to the CEO).
  • Executive suite and the board asking explicitly how supply chain objectives and strategies align to the company’s broader strategy.
  • Within the supply chain organization, capabilities need to be built so that the business community gets answers to their supply chain questions/challenges in near real time. Business community need to benefit from the ability to run what-if scenarios, simulations with explicitly factored in profitability and revenue considerations.
  • A well designed S&OP process with explicit linkages to tactical planning processes and execution is a must have to ensure broader company strategies are driving the lower level planning processes and execution. Supply chain organization needs to champion the S&OP process as they sit in the middle of the sales, operations, and finance teams.
  • A supply chain center of excellence (COE) needs to be established to drive common practices and shared learnings across the company.
  • Appropriate technology investments justified by clearly stated ROI are necessary to differentiate by supply chain excellence. Such ROI numbers need to be measured and reported to the executive suite and the board. This is very important, as well executed supply chain technology investments are proven to yield double digit percentage benefits in various financial and operational metrics. Success breeds success.
  • Organizations should identify their core competencies and insource or outsource, as appropriate, specific supply chain functions.
  • Last but not the least, talent acquisition and retention is key for the success of any supply chain organization. With the rising prominence of machine learning and data science in general, skills need to be constantly evaluated and refreshed.

If you have any supply chain questions for Madhav, comment below. He would be happy to discuss.

The post Passion for supply chain management given industry recognition appeared first on The 21st Century Supply Chain.

 

blog-email-concurrency-embracing-the-death-of-sop-kinaxis

 

Originally posted by Melissa Clow at http://blog.kinaxis.com/2017/03/passion-supply-chain-management-given-industry-recognition/

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