One supply chain thought-leader recently said, “the closest supply chain managers can get to the magic bullet is supply chain visibility.BUFFER as Tank Metaphor.jpg

 

It is true: supply chain visibility is fundamental to maximizing return on investment (ROI) in the supply chain, of course. And, the goal of supply chain visibility should be, first and foremost, FLOW—allowing trading partners near real-time access to relevant data so that relevant materials are supplied at the proper time.

 

Creating a digital supply chain should never be an exercise in technological prowess or the acquisition of fancy new software without first giving way to the proper thoughtware to make it effective.

 

Also, Carol Ptak, writing at Beet Fusion, cogently reminds us: “For information to be shared, it must benefit both the sharing party and the using party. This requires different thoughtware about what that win-win could and should be.” We will never get the data flowing between supply chain trading partners if there is more burden than benefit.

 

What data needs to be shared to be most effective?

One proposed solution to supply chain data sharing is end-to-end visibility of all orders. However, our feeling is that this will only lead to further information overload.

 

Sadly, far too many supply chain partners are already swimming in their own data, and struggling to sort out from it what is relevant for action. New big data projects may have actually exacerbated the problem, rather than adding anything that provides clarity of action and priorities.

 

To now also add gigabytes of data from external sources will probably not contribute to greater clarity. In fact, it will likely make it more difficult for supply chain participants to separate relevant from irrelevant information. It is only the flow of relevant information that contributes effectively to the flow of relevant materials in the supply chain.

 

Consider this example: suppose two supply chain partners do business on 3,000 SKUs and, on those SKUs, the buying partner typically has ten (10) customer orders per day. End-to-end visibility (just between these two trading partners) would mean 30,000 lines of data would need to be exchanged between the firms.

 

However, it is very possible that only a small number—perhaps fewer than 100 SKUs—actually require the attention of supplying partner on any given day. Supplying the raw customer order data would provide no information to help the supplying partner prioritize their actions.

 

Beyond that, multiply that volume of data by the number of trading partners that might be involved on the inbound and outbound sides of a typical supply chain, and the result may be the need to process, classify and prioritize millions of rows of data daily in order to determine what actions need to be taken to keep relevant materials flowing in the supply chain.

 

Simpler is Better and More Effective

We propose visibility into the BUFFER STATUS of each SKU-locations (SKULs) traded between partners. A buffer status board might looking similar to the accompanying figure (simplified to exclude locations data).DDMRP BufferStatusBoard.png

 

Priorities are already clearly visible. Priorities are a combination of two (2) factors: the COLOR indicated and the BUFFER STATUS (percent). As for color, it is (naturally) RED before YELLOW, and YELLOW before GREEN. As for BUFFER STATUS, the smaller the number, the higher the priority.

 

If these data are supplied from a demand-driven MRP (DDMRP) or demand-driven S&OP (DDS&OP) model, then the buffer status is actually a reflection of the virtual buffer status (not on-hand or “available” quantities). This means that the following factors have already been included in calculating the color and percent factors presented:

  1. Quantity on-hand
  2. Quantity (if any) for orders due today or past-due
  3. Order spikes within the order-spike horizon
  4. Quantities already on a replenishment order (open PO, for example)

 

The replenishment quantity (ReplQty) coming from a DDMRP or DDS&OP model would also already have taken into consideration the factors listed above, and they would be accurate up to the moment they were last refreshed in any data exchange between supply chain trading partners.

 

These few rows of data (as in the supplied figure) may be the summation of hundreds, or even thousands, of individual transactions within the trading partners operating environment. Nevertheless, everything the supplying partner needs to know about priorities for action can be found on one line per SKUL.

 

The trading partners only need to agree upon the execution parameters—such as who initiates replenishment orders and under what circumstances, for example.

 

If—and hopefully it is so—the supplying partner is also executing in a DDMRP or DDS&OP environment, then it is easy to incorporate these values into purchase or production commitments and determine their own buffer status for finished goods, intermediate components, or raw materials as may be required.

 

Don’t Let Complexity Stand in the Way of Flow

 

The simplicity of this approach dramatically reduces the amount of data that must be shared, transmitted, received and processed by the trading partners in a digital supply chain. So, let’s just K.I.S.S — Keep It Simple, Stupid!

 

 

What do you think? Please leave your comments here, or feel free to contact us directly, if you prefer. Thank you.

 

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