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2013

I interviewed Ramesh Krishnamurthy who discussed IT Planning Systems: Go Global or Local?

 


1. Please provide a brief background of yourself.

 

Ramesh is the Founder of Indus Momentus Business Solutions, a Service Integration company in the area of Decision Support Tools in the Sales and Operations Planning domain. IMBS is focused on technology enablement of Sales and Operations Planning process. IMBS along with its partners, have more than 70 installations across industries mostly focused in India.

Ramesh, on a personal capacity, also engages in Strategy/Operation Consulting Projects as a Freelance Consultant. He has over the past couple of years completed projects with Monitor Group’s Inclusive Markets project in the area of Low Cost Housing in the urban areas of India.

 

Ramesh has an engineering degree from NIT, Suratkal and MBA from IIM Ahmedabad. Post his MBA, Ramesh worked with KPMG as Management Consultant in London and Mumbai. He was mainly involved in Telecom and Manufacturing projects in KPMG. After a 5.5 year stint in KPMG, Ramesh decided to pursue a career option that offered him challenges outside his comfort zone, and joined as the COO of Dimexon with the responsibility of setting up the diamond jewellery operations in Hong Kong and China as per the business plan conceived by him whilst in KPMG.

 

Apart from work, Ramesh is passionate about music and plays the drums and is part of a rock band. Ramesh is also deeply involved in running the India chapter of Junior Achievement, an education focused NGO that tries to bridge the gap between the academic world and the work world.

 

2. When is a broad Think Global Act Local philosophy appropriate?

 

When MNCs expand into newer markets, the key question facing them is which parts of the organization and its products/services should follow global norms and which should leverage/cater to local culture and needs. The key considerations for providing global focus to specific areas are the need for Global Shared Vision and Objectives, Global Homogeneity and Global Conformity and Control. Some areas that are standardized worldwide include Company Identity, Brand, Vision, Mission and Purpose, Industry Focus, Global Processes and Systems, Work Culture, Policies and Standards. On the other hand, aspects that need to take into account local tastes and preferences, local realities as well as local capabilities tend to receive local focus. These include products and services. For Instance McDonald’s basic SKU is a burger the world over, but a customized version is offered in each country – the  McItaly burger in Italy, Maharaja Mac in India and the McLobster in Canada to name a few. Similarly, the Supply Chain also receives local focus as local production and procurement realities are different for each country and affect supply chain strategies. Though the organization may follow global standards for procurement, manufacturing and logistics, the actual supply chain will be adapted to the local environment.

 

When we take the Think Global Act Local philosophy further and apply it to Enterprise Systems and Applications, we see that Hardware and Core System Software are suited to global standards and management as the requirements are not geography dependant and most leading vendors are based out of US or Europe, with local talent being relatively less. However, in case of Enterprise Applications, which are wider in scope and scale, the Think Global Act Local philosophy becomes very pertinent. Applications such as ERP, which form the core enterprise backbone do need a high level of conformity and control and hence, are better standardized globally. However applications that facilitate Planning, Advanced Reporting and Operational Tracking (excluding financial transactions) do not require the same degree of control and can be sourced locally.  These include applications such as Business Intelligence tools, S&OP tools for functions such as Supply Chain Allocation Planning and Procurement, Planning, Vehicle Routing and Planning, Bar Code systems etc for which local capabilities may also be well developed.  An added factor is that the local branches of MNCs may find the cost and complexity of global enterprise applications prohibitive relative to the scale of local operations. In such cases, utilizing local talent and capabilities is the way to go.

 

3. Can you talk about companies in India and their use of Excel solutions for planning?

 

Many companies in India use Excel for planning. In many cases this is largely due to the fact that Excel is a popular tool that is easy to use for simpler plans and has the advantage of not requiring any additional financial investment.  Additionally, many local subsidiaries of MNCs also use Excel as that their global organization may have forbidden the use of local applications in order to foster global homogeneity but the local organization may not be big enough to justify the cost of expensive licenses for global IT applications.

 

Excel when used for planning is adequate when planning is localized to a single department or one or two data sources. However, when you need to synchronize plans across several departments and pull data from multiple sources, Excel rapidly becomes difficult to use as a significant amount of manual effort will need to be spent on reconciliation. Inabilities to scale and handle complexity are just two issues amongst many, when it comes to Excel based planning. Excel does not have inbuilt document versioning or auditing and spreadsheets are prone to manual errors such as incorrect formulae, data getting accidentally erased or changed, incorrect data entry, reference errors etc.

 

Excel when used for transactional data entry also has several challenges including the inability to check for data accuracy and data integrity, lack of authorization, lack of an audit trail and the tendency to become bulky very soon.

 

Despite all these issues, local MNCs which don’t have the wherewithal to buy expensive Global licenses end up managing a lot of Planning and Transactions in Excel. In many cases, there exist local applications and capabilities that offer far better alternatives to Excel, but local MNCs, driven by Global Application Sourcing policies, are unable to implement local solutions.

 

4. What are your recommendations?

 

Organizations can realize significant benefits by applying the Think Global Act Local philosophy to their Enterprise Application Strategy. Though Act Local is an established practice for most MNCs when it comes to customizing products / services and delivery, it can be taken one step further. Functions and activities that come under the purview of Global focus typically do so when there is a need to have organization wide Conformity and Control. In case of IT systems, apart from ERP, which is an important enabler of Conformity and Control, all other applications only enhance operational effectiveness and hence do not directly impact global conformity. Most CIOs of Global MNCs have not made a distinction between ERP and other applications from a Control/Conformity vs. Local Capabilities standpoint. As a result, all applications tend to be globally sourced. This becomes sub-optimal especially in local markets where there are significant local capabilities in providing applications better suited to local realities and conditions. Hence, organizations can realize greater benefits by locally sourcing all applications other than those that provide global conformity and control.

 

About Ramesh Krishnamurthy


 

ramesh.jpg

Ramesh Krishnamurthy


 

Director at Indus Momentus

Business Solutions

LinkedIn Profile


I interviewed Maryanne Steidinger who discussed The Cloud And Manufacturing.

 

 

 

Hi, my name is Maryanne Steidinger. I’m the director of software marketing for Invensys. I’ve been in the automation industry for almost twenty-five years now. I’ve been with Invensys for about five years, and I’m responsible for their advanced application products. This includes the brand names of Avantis, SimSci, as well as Wonderware. If you're familiar with Wonderware, you know that we supply a variety of software products that help companies with increasing their productivity, their visualization of their manufacturing processes and the overall tuning of their manufacturing operations.

 

I’m going to talk today about the cloud in manufacturing. Let’s start out with:


Why should you care about what the cloud is?

 

In the simplest terms, what a cloud does is it provides you with worry-free access to applications. There are three different permutations of the cloud: there’s a private cloud; there’s a hybrid cloud; and there’s a public cloud. You may be familiar with the public cloud if you use any type of online banking or customer-relationship management application or even Amazon in ordering some of their products.

 

What cloud computing really does is it allows you access to applications without having to have a physical server within the four walls of your plant. For manufacturers, this would mean having applications such as reporting or historian or business-process management and not having to host the application yourself.

 

If you’ve been in the industry for a while, you may recall ASPs, or application service providers, back in the early 2000s. These were companies that set up hosting for organizations for applications that were either too complex or needed to be scaled globally and provided easy access to companies via a browser. If you think of the cloud in those terms, that’s exactly what it does. It provides you a browser-based access to your applications, and it provides it in one of three ways: either a peer cloud, which means that you and others like you may be sharing the same application, but it stores your particular information in your instance of that cloud-based application.

 

If you look at a private cloud, think of that as a hosted service within your four walls, but it allows all of the same benefits of a cloud, which is you don’t have to manage the application, you don’t have to worry about upgrades, you don’t have to worry about customization. Basically, all you do is use it, but it provides you that security of having the application within your four walls, so you don’t have to worry about risks or breaches.

 

A hybrid is a mixture of both. You may use some private-based services, so the application could be hosted within your four walls, but there could be some parts of that application, such as a platform with some of the infrastructure that you access through a public cloud.

 

Why do companies care about this, and why should you, as a manufacturer, care about it?

 

Well, let’s look at the kinds of applications you may now have within your plan. You may have a human machine interface, which is a visualization tool that looks at your process, grabs real-time data, and then provides you alarm and event management.

 

You may have a data historian. This is basically a database that’s optimized for time- and date-stamped data. This is grabbing lots and lots of information in real-time and storing it for further analysis. You may have a manufacturing execution system. This is a software product that allows you to track from raw materials through finished goods, and it allows you to do what they call track, trace, and genealogy or, as the product was built, how it was built, where it was built, and where it’s going.

 

Then you may also have something called Workflow, a business process management. This is basically business logic-driven processes. It can look at people, it can look equipment, it can look at material, and it basically provides you an infrastructure for promoting the way in which you access materials or information. Also, it promotes the process; so, the underlying process, it provides that foundation.

 

With these products, some of them may need to be internal, but you can use a private cloud to really host that. Some of them need to be shared amongst maybe plants or even lines or sites, and so those could use, perhaps, a hybrid or even a public cloud. But the point is that with more complex applications, you may not want to take your IT resources and devote them to these applications. You may want to use companies that have the experience in order to do both the implementation, as well as the maintenance and upkeep and also customization. That’s really where the cloud comes in to play.

 

The other thing of looking at a cloud is from a financial perspective. Many of these cloud-based services are called software as a service. Basically, what that means is it’s either a named user or it could be concurrent users, but you pay for it on a user basis. It could be fifty dollars a month, it could be a hundred dollars a month, and you may buy contracts for a year at a time.

 

The contrast that with buying an entire application and having to pay for all of the infrastructure, the hardware, the customization, and the cost of the application itself. For simpler applications, you can see where, financially, it just makes sense to buy it as a software as a service, and that’s why customer-relationship management, or CRM applications, became so popular, because it was a simple application, it had widespread uniformity across a variety of industries, and it was designated and really facilitated that kind of individual recordkeeping that you would need to manage your customers and manage the sales process.

 

When you look at the cloud for manufacturing, there are certain applications that just lend themselves to a cloud. Business Process Management or Workflow is one of them. Why? Because it’s individually based. You use named people in order to participate in that Workflow. So, using a similar application and doing very light customization, you can use the same application everybody else is but just really customize it for your own instance. Workflow becomes a very good and very simply software as a service or cloud-based service.

 

The other one that you might consider is a reporting application. For example, Wonderware has something that’s called a historian, and there are many companies out there, including Aspen Technology and OSI Pi, GE and Rockwell and Siemens, all of these companies have data historians. They all basically do the same thing: grab real-time data, structure it in order to do analysis and in order to do reporting. You may want to keep the real-time database on your plant floor, so you may not want that on the cloud, but there’s no reason that you can’t look at the reporting later—in other words, an instance of that real-time layer—and use that in the cloud. The cloud will provide access, the cloud will provide those reporting mechanisms, but, again, you won’t have to maintain it, so it becomes both an infrastructure, as well as a support decision.

 

Those are some of the things to look at for the cloud. There are many cloud providers, such as Microsoft and Amazon and Google. Microsoft, for the most part, has been well-positioned to be used within the manufacturing industry. For example, Invensys uses Microsoft’s cloud-based Azure services in order to provide that infrastructure.

 

So, in a nutshell, that’s what the cloud is, that’s what it does, and we hope that you consider the cloud for manufacturing because, again, from a cost and a performance perspective, for some application, it just makes sense. Thank you.

 

About Maryanne Steidinger


 

maryanne.jpg

Maryanne Steidinger


 

Director Commercialization,

Operations and Information Portfolio

Invensys

LinkedIn Profile


I interviewed Farhan Mirza who discussed Global Sourcing and Supplier Footprint Optimization.

 

 

 

 

Hello, everybody, this is Farhan Mirza. I’m working as the vice president and global head of global purchasing, supply chain management at Win Wind, a wind turbine manufacturer based out of Helsinki, Finland, for the past three years.

 

Prior to that I’ve been working with Clipper WindPower, which was also a wind turbine manufacturer based out of Santa Barbara, California. I worked there 3 years as Global Director of Supplier Development, Value Improvement and Warranty. And prior to that my background has been purely automotive, where I worked for General Motors and various assignments within manufacturing, supply quality, reliability, engineering, and global purchasing, and launch management.

 

From an education perspective, I have studied engineering; my bachelor’s was in Mechanical engineering from Osmania University in India. Master’s has been mechanical engineering with a major in industrial engineering and manufacturing from Wayne State University in Detroit, Michigan.

 

Today we will be discussing from my background of about seventeen years within the industry of manufacturing and supply chain, as I specialize in these two arenas and how I see the role of just pure purchasing, or sourcing has come about to being truly a cradle-to-grave approach where we see global purchasing and supply chain management as the new mantra. So, it’s truly, as I just said it, a holistic view will be a cradle-to-grave approach.

 

Within supply chain management, one of the key things which came in probably about in the mid-2000s, so we can say seven to eight years back—close to even ten years back—when the automotive industry, feeling the pressures of trying to reduce cost and be more creative with the supply chain, they came out with supply chain footprint optimization. So, we called it supply footprint optimization, SFO, and, of course, within various industries, that’s been accomplished now.

 

But the question to answer is: What is supply footprint optimization, SFO, and how is the supply chain optimized?

 

Primarily we go in and take a manufacturing location. It initially started with saying, “We’ll go low-cost,” and, generally, the trend was to go to the regions of either South America or go toward Asia if you are talking about an entity or a manufacturing facility based in the United States.

 

But fast-forward ten years. We are seeing the opposite, where, from East, things are moving back to the West, and from South, things are moving to the North. It does not really hold true that you only go in one direction. So, even more important, the word supply footprint optimization is how you take an original equipment manufacturer or a key manufacturing environment or an industry or a location and move it to where the best landed cost globally will be achieved without compromising quality, delivery, and customer service. And obviously technology and IP issues are not compromised either.

 

This comes into play where all of this has to be accomplished when you move a location where you manufacture. Within that, you have to move the complete supply base, which goes with it. Now, how you go about doing that is you take probably the best of the best and the worst of the worst and make a hybrid.

 

So, take 20 percent of the best, twenty percent of the most difficult suppliers, and within the middle arena, where you would have about 60 percent, take maybe a handful of those. The low-hanging fruit is what you try to accomplish. You discuss with the suppliers up front and say, “Who within your chain is going to be the most difficult if, say, we move from United States to, say, India or we move from Mexico to a location within the U.S.?”

 

Then you decide on moving the business with a manufacturing location or a simple assembly location to the low-cost area or to the area where the local markets are going to be benefiting from having a supply chain which will be located locally, give employment locally, procure locally, and be able to source its own supplies locally. So, this is what it really means.

 

Originally, the original manufacturer moves. Within that movement, you would encourage the immediate supply chain to also move, and depending on the strength and the ability and the willingness of the supply chain, all of this has to be worked out, sitting face-to-face

 

And then when you move to that location of interest, not only the local economy will benefit, not only the liking for the product will be more because you're going to support locally, but also attention to addressing issues with a quicker turnaround. Working capital management will be so much easier to manage because you don’t have to keep on getting goods from other locations where you originally had the supply chain. And any issues to address the turnaround time is much quicker, and any warehousing and logistics costs are eliminated. And at the end of the day, you are able to go in a region which is more sustained to the long-term longevity and the growth of that unit.

 

Slowly but surely, you are going to pull back the support which you had, and that region within the new environment will grow and their supplier list will also grow with it. This in itself is supply footprint optimization which takes place when an original equipment manufacturer moves, and then within that movement, it encourages the supply chain also to move.

 

The next question would be: How does this affect global sourcing?

 

Obviously, all that’s coming into play in today’s world, we are absolutely an environment where whether you just produce locally in a small town, a small village, or a small sect of population, or you are looking at for fulfilling the needs of a true global cross-section of society.

 

You can never say that I am in a niche market. Yes, the word niche market and certain things exist, but, truly, things are becoming very globally. Recently, there was an article where the CEO of Ferrari—on average, Ferrari would be somewhere in the three hundred-thousand-dollar range—has reduced the production because the car is becoming a bit too common, although they only produce just about seven thousand units annually. You’ve got to understand, even a niche product is getting, in the eyes of the CEO, a bit too common, and they are trying to reduce, by a few hundred or a thousand vehicles, the annual production.

 

When you talk for any organization to really survive, the DNA has to be comprising of a global outlook. McKenzie did a recent study which was about, I think, six to eight months back, that the most thriving of organizations are the ones which have got on their leadership team and within the working environment, but it’s probably focused on the leadership team, a cross-section of diversity.


Diversity truly breeds success and global thinking breeds the success and the advantage over our competition who does not have it.

 

This all coming into play into global sourcing would really mean that you tend to go and truly say what, as I had initially pointed earlier in the discussion, quality cost, delivery service, and technology all have to be top-notch and they have to come as a package. Then the best landed cost globally should be accomplished to be able to thrive as an organization and bring the shareholder value.

 

If you go to a region where you feel the manufacturing is going to be best-suited, you take the entire supply chain and, as we discussed a few minutes back, what the benefits are of this supply chain coming together and then in the middle- to long-term, the growth coming and sustaining within the local region itself growing, that’s going to be a big takeaway for the society, for the supply chain, as well as the initiative of global sourcing, where you just don’t source to benefit, add a tick mark or get an “Atta boy” for one quarter, two quarters, three quarters and then get bonuses or the company’s stock goes up. It is long-term, it is sustainable, and then the anomalies of scale come into play there. Any market going up or down, the other region where you're globally sourced is going to balance it out, whether you talk about foreign exchange, you talk about material cost, or you talk about disruptions due to national calamities or acts of God.

 

And then another question would be: Where would I have seen or where would people who believe and can that business with global sourcing in mind seen successful implementation of this?

 

Again, I go back to my automotive examples. Wiring harnesses and electronics like your dashboard controls within an automotive environment, a lot of that is happening in Mexico. You look at, taking the example of Korea, for example, taking just something out (to highlight SFO activity in the country)

 

Take other examples of flanges for towers in the wind business. A lot of that is happening (in Korea). What used to be very much local business within steel mills in Europe and U.S., that’s moving out. Then you take the example of castings and machining. Initially, machining for heavy casting—sixteen, twenty tons in weight—talking about mainframes and hubs and wind turbines used to generally happen only the local regions where you produce. Talking about North America or Europe. Now the logistics have improved, machining abilities have improved where China is doing a lot of the machining and shipping machine castings.

 

Another example I could take would be bearings. Germany was the niche market for bearings. There were only three to four players. You talk about the Timkins, the SKFs, the ****, or the INA Group, but nowadays you have got a lot of Asian manufacturers in bearings coming out and giving a true tough competition to an industry which was so much secluded and niche within the central European region, primarily Germany, to be precise.

 

But this is what’s global sourcing; this is what’s globalization of companies, commodities, and products in general. These are some of the examples, I would say, in a nutshell. I could go on with a lot of examples. Maybe we could have some follow-up sessions depending on how the feedback is on this, and we could go individually, a little bit more detailed on what and how the discussion should be before moving a supply chain with the intention of a footprint optimization. Then we could have some other sessions where we could talk truly about initiatives of global sourcing and how to go about it.

 

There’s tons of discussion within this forum, but I can bring in my own perspective of aerospace, automotive, and the wind turbine business and see how all this I have seen happen, I have seen myself do it, and what I have seen as my lessons learned.

 

Then we can also, in subsequent sessions, talk about further taking a case-by-case example of implementation of global sourcing and where we have seen the benefits. We can take a couple to three examples and then have a session on that. Thank you very much for giving a patient hear on this. I look forward to further comments from the group. Thank you.


 

About Farhan Mirza

 


 

farhan.jpg


Farhan Mirza

 

Vice President and Global Head

of Global Purchasing, Supply Chain

Management at Win Wind

LinkedIn Profile


I interviewed Chuck Franzetta who discussed Supply Chain Management Should Be More Focused On Sales.

 

 

 

 

Hi, my name is Chuck Franzetta. I am the CEO of Franzetta and Associates, Inc. We are a supply chain management consulting firm. We also help our clients with regard to identification of the appropriate technology for application to their supply chains. We have been requested by many of our clients to help identify and to recruit top talent at the executive level and in some support functions.


My specific background, I’m a graduate of the Pennsylvania State University, which, I’m proud to say, is the highest-rated supply chain management school in the world, followed by MIT and Georgia Tech, so, fairly distinguished company. My working background was primarily with my first ten years with a company called Flying Tigers, which, at that time, over that ten-year period, we became the largest cargo-carrying airline in the world, with a number two, three, and five ton miles that equaled us. I was the general manager of the Ohio Valley division, which was, from a percentage-growth standpoint and my last three to four years there, was the fastest growth unit in the company. That company has since been sold to FedEx and merged into that operation years ago.


I left there and joined Newsweek magazine, where we, at the time the deregulation happened in the U.S. transportation industry; we were able to take advantage and innovate quite a bit there. The basic innovations that we introduced there carried over.


Because I had been a proponent of deregulation, I testified on behalf of my company Flying Tigers in federal and various state regulatory groups in advocation of deregulation. When it occurred we were prime to do things that other people weren’t aware that could be accomplished. As a result, we were asked to get involved in doing consulting for a variety of companies. I’ve pretty much been involved in it ever since.


With our company, we have a number of very distinguished former chief executives of several of the more dominant third-party logistics companies and various other technology and manufacturing entities.


I’ve been asked to explain why I believe that supply chain management should be more focused on sales, and it’s a simple factor that’s involved in it. I use examples with regard to our consultancy. The fact of life is that you can draw a simple graph that will show revenues and cost, and that line between the base and cost is finite. If, as in many cases, folks concentrating on supply chain management tend to look at cost reduction or cost containment, you can only affect your company’s profitability at a maximum of that difference between the cost line and the baseline, which, of course, the closer you get to bringing that cost down to the baseline, the more profitable you get, and it probably will be more profitable for a very brief period of time, where you're losing business or you're suddenly spiking cost back up again.


However, the revenue line can, theoretically, go to infinity. Now, that’s not a practicality, but there is no very clear limit as to how high the revenue levels can go. If you concentrate on containing cost while focusing on how you can use your supply chain to enhance your ability to sell more of your product and sell it profitably, you can have a significantly greater impact on profitable growth of an organization. I am a proponent of the old philosophy that says “Grow or die.”


An example that I use is a classic of a client that we had several years back who wanted us to come in and help them identify how to reduce some cost. What we did when we came in there was we were insistent that, yeah, we would look at those particular areas where they were looking for the cost containment, but we would also want to talk to their sales and marketing people to find out what their objectives were and what their hindrances were.


What we identified was: The company, in the pursuit of efficient operation, was producing a product and selling primarily a product that they were averaging somewhere around a U.S. dollar a pound. Depending on how the market was moving in any particular point in time, they would make from a fraction of a penny to a couple pennies per pound or they would lose a fraction of a penny to a couple pennies per pound. They had other product that was highly desirable, high-quality, that had a much higher margin on it that they could sell for $3.50 to $4 a pound, but they weren’t concentrating on doing that because of various cost factors that were involved.


We identified the situation where they could realistically increase the cost that they were incurring in that particular area. They discovered that when they implemented that, that philosophy, that they were selling more of the high-priced product that had significantly higher margins, and by tying their entire supply chain into that, they were able to begin buying the component products that went into that more expensive product at higher volume and were able to reduce the overall cost, thus making them even more attractive in the marketplace. They were able to reduce their price and, at the same time, increase their margin.


There are ample examples in just about any company. Almost anyone can come into any firm and look into the supply chain and identify how to save money. The important factor is determining how do you contain those costs and enhance your ability to sell more of the product, be it in reduction of your price or the availability of the product or some combination of all the different factors that are tied in to supply chain management.


What is cost containment? Cost containment is the potential for reducing cost but the ability to enhance your ability to do more business without adversely affecting the price that you're paying in order to get it done. It’s a pretty simple concept in that the question comes down to how do companies do this? How do they take advantage of their supply chain and manage it in order to focus more on sales and increasing sales? Pretty simple factor.


They need to talk to one another. The procurement people need to be talking to the salespeople; not just for projections, but trying to identify how can we help you be more effective in the marketplace. Similarly with the logistics organizations and the manufacturing groups. Talking to one another with a core focus on sales. What is the market looking for, and how can we help enhance our ability to meet the demands in the marketplace by containing the overall cost of producing our product and having the right products in the right environment for people to buy more of them? It’s really not that complex.


Now, I’ve probably oversimplified it a bit, but it just comes down to simple communication within an organization. In the example that I gave previously, no one from the logistics and purchasing organizations had ever gone to sales and said, “How can we help you be more successful?” and backing down from there.


The primary objective for any company is to sell its product and to sell more of its product and to make a profit on that product. If you take that criteria as your starting point and back down through the organization, you are very often in a position to reduce cost even more than you might have in your individual silos, while at the same time, helping to identify a manner in which the company can product its product in a fashion that makes it more attractive. That’s what business is all about: Sell the product. I hope this helps.



About Chuck Franzetta

 


 

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Chuck Franzetta

 

CEO at Franzetta & Associates, Inc.

 

LinkedIn Profile


I interviewed Ulrik Topp who discussed Seamless and Transparent Internet Logistics.

 

 

 

Can you start by providing a brief background of yourself?

 

My name is Ulrik Topp, and I’ve been, I guess, in the logistics industry since I was born. Initially, I did my grounds in the shipping industry and freight forwarding very much with a trade between Asia-Pacific and Europe. I got very interested in the whole door to door concept and the simplicity of that to the customers. I got engaged in the integrators, started over at TNT in Denmark, my home country, and then went up also and started them up in Norway, one of our neighboring countries. Since then I joined DHL; I spent twenty-one years in DHL, in different divisions within the company. I’ve always, in that context, been very interested in the simplicity and the ease of use for customers; hence, of course the emerging Internet. That, of course, also intrigued me in terms of how to make sure that consumers are getting a fair deal and have transparency and that transportation is not a headache, but your staff facilitates it to get the goods they are ordering.

 

Can you talk about what is Internet logistics?

 

The Internet logistics, I guess it’s starting from the very basic: that you, as a consumer, decides not to go down to the shop, but that it’s more convenient for you to look at the goods you want to buy on the Internet. Classically, that started up, of course, with the different shops within your country that were offering goods on the Internet; e-bay came about and so on and so forth. But more and more, people in Europe might want to shop in the U.S. or in China. The Internet logistics, for me, is very much the facilitation and the background to help that consumer get what he is ordering on the Internet home safe to him and with no surprises. The classical surprise is of course, that Internet providers are not making it clear that there might be some Custom and duties to pay, or the transit time that people are expecting—“I’m going to a wedding next weekend,” and the goods will be delivered the following week. That’s kind of what I define in Internet logistics. It’s very much facilitating this so the consumer gets the goods how he wants it.

 

And where have you seen some good examples of Internet logistics in operation?

 

This is the difficult bit because what also is happening is, of course, that Internet logistics is very much making the need for what we logistically need to see so the consumer delivery of the much higher need. Many companies and carriers do not really like to deliver to a consumer because maybe the consumer’s not at home, so it’s difficult to deliver to that consumer and so on and so forth. It’s very much in small pockets. There’s no doubt that physical borders are making it more difficult, but in the U.S. there are models for both UPS and FedEx, which is very successful, but seeing a cross-border successful Internet logistics solution is far, far between.

 

And how would a carrier carry out Internet logistics successfully?

 

The successful component really starts with a transparency with the consumer when he’s ordering, and that transparency very much starts with, mainly, the consumer where those taxes or duties are potentially to be paid and thereby having calculation engines there looking at the merchandise that the consumer have bought—let’s say that’s a T-shirt, and see where there’s any taxes or duties. There are minimum values. Sometimes you are below that minimum value, so there’s no taxes and duties that apply. That’s transparency; that’s really, in my mind, the starting point, you're making that clear to the consumer. And then a little bit like with domestic deliveries, you are always giving the customers a choice, a choice between maybe a mail option because it’s not urgent, I just want it to get to me, or an express option because I need it tomorrow. So, giving those options throughout is what makes that a good Internet logistics offer to the consumer. One of the key difficulties for many carriers is actually managing a cost-efficient way of providing the duties in a glance and making sure that that’s actually all so executed in a rapid way when you're importing it into the country.

 

What about consumer buying behavior? Are there any trends or things taking place that will affect how Internet logistics will be done?

 

Yeah, there’s no doubt that the demand is increasing. It’s probably increasing a little bit artificially. We all know that there’s the hype around the iPhones coming out and they launched them first in the U.S., so everyone else in the world is using their most imaginative way and finding people that are offering in the Internet-logistics type solution to get the iPhone, for instance, to Germany so you’re the first one to get it. The other trend is, of course, also the price differences, the pricing umbrellas that many of the global brands are protecting in terms that they can charge maybe for an iPhone more in Europe than in the U.S. As long as those barriers are still around, then Internet logistics is increasing and probably in the main areas growing and it’s in double digits.

 

Thank you for sharing your views on the Web or Internet logistics. Do you have any final recommendations?

 

Yeah, I think the final recommendation is very much for carriers and providers really to take the consumer needs as serious and understand that they need to develop an offering and really invest in that this is something that’s here to stay and not going away. They need to invest in this to serve the future customers.

 

 

About Ulrik Topp

 

 

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Ulrik Topp

 

Founder and CEO of CBS

LinkedIn Profile


I interviewed Subhash Chowdary who discussed Supply Chain Visibility & Security.

 

 

1.Please provide a brief background of yourself

 

I am the founder and CEO of Aankhen Inc. We are a supply chain visibility and security solutions company. We have deployed global platforms for financial and physical supply chain visibility and security across industries.

 

2.What is the relationship between supply chain visibility and security?

 

Supply chain visibility is a general catch all term for access to data in all its forms (text, audio, video, images) providing information about all activities in a supply chain ranging from financial activities to movement of physical goods. Supply chain security is more focused on the physical integrity and prevention of theft of goods. In supply chains ‘stuff happens’ all the time somewhere in the chain. When ‘stuff happens’ in the supply chain, visibility is critical for the person responsible to take decisive action.

 

3.Why is it important?

 

Lack of visibility results in higher costs for everyone. Visibility is a point of view. Everyone has one. It can change with time. Visibility has a different meaning and context depending on the individual, the individual’s role (Supplier, Buyer, 3PL, Customs, Banker,…) in the supply chain and the point in time. It can change with time and have a different meaning for the same individual with different interpretations. A simple event such as ‘shipped’ may have different interpretations. For a shipper it may mean it is packed and ready to be picked up by a Carrier. For a buyer it may mean it has left the factory. Reality may be different. These interpretations lead to several supply chain inefficiencies in terms of buffer stock and lead times resulting in higher costs for everyone. With visibility, everyone sees the same information about where the shipment is physically on a map if they want to, or at a machine-to-machine level the geophysical location of the shipment is communicated between systems. The systems can also tell you when the shipment is estimated to arrive with certainty and providing better customer service.

 

4. How is it done?

 

Next generation of visibility is based on automated data capture using technology, communicating machine-to-machine (M2M) and processing the data in near real time to provide the intelligence and predictive analytics to see into the future of what will happen or will not happen depending on your point of view.

 

5.Who needs to do it?

 

Same day delivery is the next level of performance standard being established. Every supply chain involving movement of physical goods will do this at some point in time to remain in business. It is no longer a just-in-time supply chain fulfilling an order, but an on-demand supply chain that can deliver as soon you order. Be careful about clicking ‘Like’ on the web, the product you ‘liked’ may just show up at your door step!

 

  About Subhash Chowdary


 

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Subhash Chowdary



CEO at Aankhen Inc.

LinkedIn Profile


I interviewed Edith Simchi-Levi who discussed The Role of Analytics in Supply Chain and Operations Strategy.

 

 

 

1. Please provide a brief background of yourself

 

Hi, thanks for inviting me to do this interview. I have a computer science education and software development background, which, in the last twenty years, has been primarily devoted to supply chain management applications.

 

This came about through collaboration with my husband, Professor David Simchi-Levi from MIT, who is a well-known supply chain expert. Our collaborations have been both on the business side as well as through some very well-received books, such as Designing and Managing the Supply Chain, which is a textbook.

 

In our first company, Logictools, we developed software for network design inventory optimization and a few other applications. The company was sold to ILOG in 2007 and is now part of IBM’s business analytics solutions. It is very gratifying to know that our software has been used by over three hundred fifty companies and also by over fifty percent of the AMR, now Gartner, top fifty supply chain performers.

 

This was a very interesting experience because we could see how companies were using decision-support systems, as they were called at the time, for the first time to solve supply chain problems. Building the models provided a common platform for them to agree on various costs, and the ability to see some unexpected results from the models created a deeper understanding for them of the drivers of costs and tradeoffs in the supply chain.

 

Currently, I am the VP of Operations of our second venture, which is called OPS Rules Partners. This is a supply chain operations strategy consulting company. We’re collaborating with experienced consulting Professionals and Analytic Experts to provide a data-driven and analytic approach to operations strategy that can lead to long-term transformation.

 

Many of the ideas we’re promoting are based on David’s recent book Operations Rules, which also explains the name of the company. The book highlights the scientific rules of how supply chains work, as well as provides a new approach to crucial operations topics, such as complexity, risk and flexibility.

 

2. What are analytics and why are they important?

 

In the last few years we’ve seen an increased interest in analytics in many areas of business, Part of the interest is driven by increased availability of data from various sources. Some of it is from enterprise resource planning systems; some of it is the so-called big data that’s emanating from the Internet and social media, e-commerce, and in the supply chain context from sensors and RFID tags.

 

I think the other reason there’s interest is obviously the capabilities in the analytics themselves have improved quite a lot in the sense that you can solve bigger problems and much faster. So, how do we define analytics, especially the context of supply chain? I would say it’s various mathematical techniques that are used to solve problems, and these problems are, for instance, network design, which can use optimization techniques. If you're doing warehouse design, you would use simulation. If you're doing forecasting, it involves a lot of statistical methods. Here we see that there’s a deep need to match not only knowledge of mathematical techniques but also knowledge of the domain. This is why there are a lot of opportunities but also it’s not a very simple thing to do.

 

If you were asking why this is important, obviously, this is an area of investment and competitive advantage for many companies, and it allows them not only to understand what their business is doing, but also come up with new solutions and ideas for where they are going. Obviously, analytics is a very, very important component of that, and doing that in a smart way is all to a huge advantage.

 

3. Who needs to take analytics into consideration in supply chain and operations strategy?

 

Before I answer the question, I’d just like to talk about what makes analytics in supply chain operations more important and practical now.

 

The first one is that complexity has increased for companies due to globalization and the Internet. Companies have more product, more locations, more channels, and more markets as a part of the mix. This creates a lot of new challenges that require new tools. David likes to say that “common sense consulting” is not enough anymore.

 

The second thing is that there is more data available, as I said before, from ERP systems and other sources. The third is that the computing speed has increased, as well as database technologies that speed up data access, so analytics are much more practical and deployable.

 

The other thing is that many new methods and techniques that are around but really haven’t been deployed widely, and they can be a huge asset to improve performance. We know that analytics have played an important role in supply chain operations for a long time, applications in demand forecasting, transportation routing, inventory optimization, and network design. This has been around for a while.

 

There are also areas of new opportunity that can benefit, such as supply chain segmentation, risk management, complexity reduction, manufacturing flexibility, all of which are very important to companies. What we see is that there’s a lot of interest from C-level managers in procurement, supply chain operations in using analytic tools to better understand their operations and provide some much-needed improvement.

 

The other thing that we see is that they really like these skills to be part of their organization, so they don’t have a lot of interest in just using spreadsheet solutions or people just coming and going; they really want this to be embedded in their long-term strategy.

 

4. How should analytics be approached?

 

Part 1

Analytics requires a deep understanding of both the domain—in our case we’re talking about supply chain management and operations—as well as the modeling and mathematical techniques that are required to create and solve models that will provide true, actionable insight into how to improve operations.

 

Many companies struggle with where to start investing resources in analytics, particularly in strategy, and they may also be concerned with the disconnect between the business requirements and the analytics process. Probably they would also prefer to have this capability in-house so that they can continue this process to support the operations strategy with analytics.

 

At OPS Rules we have developed a methodology based on the many years of experience that we’ve had building supply chain models. This involves first building a model of the current system, what’s called a baseline, and then validating by comparing the model with results, the details of the business. This is actually a pretty complicated process.

 

Once the results are acceptable, we analyze a complete set of improvements using simulation and optimization tools. The results of these models provide a way to analyze the tradeoffs in the system, as well as to provide new ideas for improvement. This is a very creative part of this process, and it allows you to come up with the ideas of what you want to model and the kinds of things you could possibly do in your supply chain or your system.

 

I think one of the interesting aspects of modeling is that it results of a specific scenario inconsistent with your intuition about the business. You need to understand where the discrepancy’s coming from, so sometimes the models are just something new and surprising that you probably wouldn’t have been able to come up with without the model, but sometimes the surprise indicates some sort of a problem with the data or the assumptions, and it would require reviewing any discrepancies to see, to really understand them and make sure that the model is reflecting reality correctly.

 

Part 2

 

This is the second part of the response to the question how to approach analytics. In the first part I talked about our methodology, so in this part I’d like to actually provide an example of a recent project that we did with PepsiCo Worldwide Flavours on end-to-end with optimization, which were give some concrete examples to some of the concepts I talked about before.

 

PWF recently went through a reorganization that led to a reassessment of inventory in the manufacturing plant. They have multi-tier network of three plants, four distribution centers in both the U.S. and Canadian markets; they have four hundred fifty finished goods and seventeen hundred eighty-one components and raw materials. This is not something that can be done easily, and this is kind of the complexity of real systems.

 

Management realized that this complexity of the supply chain it was not enoughto optimize using single echelon optimization methods. They chose to work with OPS Rules and deploy an end-to-end inventory optimization process; sometimes this called multi-echelon optimization. So, as we discussed before, the initial part of the process is to create a validated baseline model of PepsiCo’s network, and after that is completed, you can also create an optimized baseline. You take the baseline and optimize just that model with the assumptions in the baseline, and that provides another element to the process of understanding the supply chain.

 

The next step, as I mentioned before, the most creative part, where you plan the various scenarios that will uncover information about the drivers of inventory in the PepsiCo supply chain. Our first discovery through this process was that most of the excess inventory was in raw materialin the plant, so the next question is what to do about that. We devised several scenarios to see what was driving that raw-material inventory.

 

Some of the ideas included improving demand forecast(that always seems to come up); eliminating some packaging options to reduce complexity (that’s always probably a good idea); and then changing the frequency on the side of production batches and see if that can help with managing inventory; and, finally, assessing the impact of lead times (this is the supply lead times that can impact, obviously, the raw material). So, we examined what would happen if we changed all these parameters, but, in particular, we looked at the supply lead times and played along with reducing or increasing them. It actually turned out that there wasn’t a huge impact for that.

 

Then we looked at another factor that is sometimes connected but is pretty intuitive, and that is looking at the actual lead-time variability, so looking at not what the stated lead time, but wherever it really was probably too late or sometimes too early, which obviously makes planning difficult. We discovered that reducing lead-time variability even by a little had a very significant impact on total supply chain costs and reducing inventory.

 

The implication for this, for Pepsi was not what they expected; they were looking more at the demand forecast and packaging as the drivers. But what we found is that they really need to work with the suppliers to improve performance and better focus on on-time delivery. This wasn’t what they expected, but it was a very good insight and, obviously, a very successful project.

 

This is an example of the kind of ideas that come up using this methodology and a little bit of what it takes. Obviously, there’s a lot of data collection and work involved in doing this, but if you deploy this kind of process and then bring in some of this knowledge in-house to continue doing that, you can probably leverage this very successfully to create competitive and cost-effective supply chain. So, thanks, Dustin, for the interview.

 

About Edith Simchi-Levi


 

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Edith Simchi-Levi


VP Operations

OPS Rules

LinkedIn Profile


I interviewed JJ Coughlin who discussed Cargo Theft: Prevention and Raising Awareness.

 

 

1.) Please provide a quick description of yourself

 

My name is JJ Coughlin, currently Vice President of Law Enforcement Services for LoJack Supply Chain Integrity and Chairman of the Southwest Transportation Security Council. I retired from the Dallas, Texas Police Department in 1997 and went to work as the Southwest Region Manager of Security, including five states and Mexico, for a full service transportation and logistics company. I worked across the entire enterprise, which included a cargo airline, freight forwarding business, 3PL, two LTL companies and a full Truckload group. After ten years, I came over to LoJack Supply Chain Integrity, where I have worked for the last six years.

 

2.) What is Cargo Theft?

 

Cargo Theft has a lengthy statutory definition we could talk about but for the sake of brevity, let’s go with this:  “Cargo theft is the unauthorized taking of property from shipments or storage by acts of theft, robbery, burglary or fraud while they are in-transit from the manufacturer to the final end user”

 

3.) How can it be prevented and how can awareness be raised about this problem?

 

Cargo Theft prevention is very doable if you understand the risks and build your transportation security program based on that knowledge. In other words, having awareness about the methods of operations of both organized and opportunistic cargo thieves, understanding what products they target, how they target them, when they are most likely to strike and where the known cargo theft hot spots are allows one to build a very efficient prevention program. Processes and protocols can overcome most of the obstacles and building a layered security program based on known risks make success easily reachable.  Raising awareness both in the industry and out and with law enforcement is a key. Sharing information about this crime through industry and public venues with continuing outreach to law enforcement is a good first step in raising awareness.

 

4.) Can you talk about using industry councils and law enforcement networking to build response networks?

 

Yes, if any crime has ever shouted out for federal law enforcement response, cargo theft is the poster child. In almost every case, when cargo theft occurs, within minutes the stolen property is in a different police jurisdiction and usually moving quickly across state lines. Unfortunately, due to mandates and thresholds, federal law enforcement response to cargo theft has been very limited. Because of this fact, the industry has had to build their own response networks using state and local law enforcement resources that are tasked with working commercial auto theft or other specialized investigation units. There are currently only seven Cargo Theft Task Force units across the US. The industry councils have developed email BOLO/Alert system to report cargo theft to the correct law enforcement personnel across the country and sponsor law enforcement trainings about the cargo crime. These training events enhance law enforcement and industry networking and has become a model of public/private cooperation with net positives for all participants.

 

Anyone in the business of moving freight or having freight moved should be involved in the information sharing, at least one of the regional transportation councils and the Supply Chain – Information Sharing and Analysis Center or other cargo theft intelligence portals so they can have a full awareness of the risks, have access to a great network of law enforcement and other resources so that they have a qualified force multiplier for their transportation security program and response plan.

 

About JJ Coughlin


 

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JJ Coughlin


 

 

Chairman at Southwest

Transportation Security Council

LinkedIn Profile

I interviewed Hugh Aitken who discussed Not “peanut buttering” Procedures and Attacking Complexity.

 

 

 

1. Please provide a brief background of yourself.

 

Hi, my name is Hugh Aitken. I’m the president of ASCC, a small supply chain consultancy based out of Reno, Nevada. I’ve been in the technology business on the supply chain side for over thirty years. I’ve worked for companies like Digital Equipment, Apollo Computers, Sun Microsystems, Oracle Corporation, Microsoft Licensing. My focus has mainly been in operations, supply chain optimization, logistics, warehousing, manufacturing both external and internal, engineering, Six Sigma, and order-backlog management.

 

2. What do you mean by “peanut buttering” procedures and attacking complexity?

 

On the peanut buttering side, it’s my opinion, the supply chain should have their own rhythm, heartbeat, pulsory—call it what you may—and they should be specifically focused on the products that you're bringing to market, the vendor geographical presence, and the customer geographical presence and, specifically, the end customers’ requirements overall.


By peanut buttering across all of these processes, you may get some short-term wins on cost, but I believe the long-term losses on lead times, quality, future sales, and a diminishing return on cost over the longer period of time. In my opinion, you therefore need to look at the total end-to-end picture, taking into account all of these factors and build a supply chain which best meets everyone’s needs for both the economy and the future.

 

3. Can you give examples?

 

Sure, I can give you a couple examples, the first one focusing on the peanut buttering comment. I had a customer who was complaining that our server lead times were not competitive enough, and they wanted me to cut them from fifteen days down to five. I took a look at what they were buying from us, and at the time they were asking for over one hundred sixty-seven different types of configurations, all demanding different task times and, in some cases, different parts and vendor support.


Without inventory at premium, we could not afford to hold such a mix to support a five-day lead time across all of these products. When I went to the profile to look closer I found out the following: Seventy percent of the configurations that they were asking we were shipping at single-digit volumes to their end customers. Of the balance of the thirty percent, half of them were in high volume and the other half in medium volume.


I went back and offered them the following: three-day lead times on the high volumes; seven-day lead times on the medium; and fifteen-day lead times on the single-digit. They agreed and they found that after only six months, the lures were disappearing from the demand profiles and migrating to the three- and seven-day lead times, and their customers were delighted not only with the lead times, but with the predictability of supply.


Here’s a perfect example of peanut buttering a fifteen-day lead time across all of these products, which, really, in reality, required three separate supply chains.


Another example of understand your customers’ needs and requirements and behavior was a Scandinavian customer who wanted our fifteen-day lead times on very complex servers reduced to five or ten. These servers were being built in Scotland and shipped to the factories in Scandinavia, which took two or three days total to deliver via trucking schedules, which we included in our overall lead time, which made things even harder.


We decided, as two companies, to set up a three-day supply chain workshop at their factory with a view to looking at the overall supply from our factory to theirs and attain the two to deliver from their factory to their end customer. We found the results to be quite staggering. We were hitting fifteen days on a ninety percent basis from our factory to theirs, but it took them another fifty-seven days to close process and deliver to the end customer, which was a total of seventy-two days’ overall lead time in a market demanding thirty or less.


What we found as we dove deeper into the overall process was that there was duplications around our manufacturing processes whereby identical tasks were being performed at both sites. Material was being added in the second stage which could easily be inserted during the first. Software was being added during the second stage, which could just as easily be downloaded via the Internet into our site during the earliest of stages.


Twenty percent of the volumes they had had minimal touch during the second stage, and we offered to do that work in our factory and direct-ship to their end customer straight from Scotland. And similar to the earlier example, twenty-two percent of their volumes were runoffs which we agreed to be fully configured in Scotland and again direct-shipped to the end customer.


The end results that we got was that the overall seventy-two days came down to thirty-seven in, say, the first three months, and then we got it to, the end results were that we got the overall seventy-two days down to thirty-seven in, say, the first three months. Then we got it to below thirty days after a six-month period. The end customers were delighted, as were sales and marketing; plus, the overall savings to their end customers were over seventeen million during the first year and his volumes were twenty-six million during the second year. So, once again, the solution to this problem was multiple supply chains as opposed to one single solution.

 

4. Can you talk about complexity?

 

Complexity is a huge subject in its own right, but I believe complexity is the biggest problem for a competitive supply chain. By complexity, I mean it can be the way you take orders, place orders from your customers or the way you take orders or place orders with your vendors. It can be the number of SKUs that you're asked to manage. I worked in a company had sixteen million SKUs, of which only 3.2 were live and the books were just swollen with the number of SKUs and supply chain requirements in support of them all. The number of product offerings that you received from the business groups in different configurations. The lack of collaboration between the business groups and operations itself can drive complexity.


The physical supply chain on its own can be highly complex because it’s my belief that you walk away from multiple touches to minimum touches to meet the most competitive edge to any supply chain. I think there’s a place for end sourcing and, equally, a place for outsourcing. I don’t think it needs to necessarily be either or, because one or the other can drive complexity. The number of vendors that you work with is a major driver on the complexity side. The number of, for instance, engineering-change orders that come out after a product release, after new product introduction can cause not only complexity but confusion in the supply base. I think that the first thing that you should look at in any supply chain is where you can drive simplification, whether that’s on the physical side or the administrative side or on the vendor side or the customer side. My biggest focus from any supply chain requirements that we have worked on in the past has been to truly understand what they customer is trying to achieve, because sometimes the customers don’t know what they don’t know, and you can help them drive complexity of their system just as easily as your own.


 

About Hugh Aitken


 

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Hugh Aitken


 

President at ASCC Inc

Aitken's Supply Chain Consultancy

LinkedIn Profile

I interviewed Srinivasan Prassana who discussed Discussion of Warehouse Management System Implementation at APICS Professional Development Dinner Meeting.

 

 

 

Hi, Dustin, thanks for the opportunity to share some of my thoughts around supply chain and a recent presentation that I put together for the APEX South Florida chapter.

Basically, I’m going to go through some of the answers that I have for the questions you posted, the first question being: What’s my background? I have about fourteen years of experience in the supply chain industry.


I started way back as a chemical engineer for a refinery in India, then, along the way, I moved on to work for a chemical industry in Dubai, United Arab Emirates, before I made my way to the United States. I came here to do my schooling. Since then, I’ve been fortunate to have gotten the opportunity to work in various distribution and manufacturing companies here in the U.S.


One of the things that sparked my interest, coming from an engineering background, I was well-versed with computer programming, and in the manufacturing-distribution environment, there was always a need for data, being that the U.S. had to compete with other countries for cheaper labor. So, there was a huge need for supply chain management systems and for someone with a broad understanding of how these systems integrated with each other and what are the financial levers that could be leveraged on so that they can have the opportunity to make things faster and cheaper in a more efficient manner.


Over the years I’ve implemented various management systems in various companies in the U.S., U.K., Canada, Poland, and in Germany. Also, I’ve been part of a CRM, customer relationship management, and ERP solutions for some companies in my consulting days.


Presently, I work for a company called Vitacost.com. We sell online vitamins and food products. We have about 40,000 SKUs; it’s based in Boca Raton, Florida, and that’s where I live.


What was the topic that I presented recently at the APEX Professional Development meeting about four weeks back, here in Florida?


I was briefly involved with sharing my experience and one of my consulting assignments that I implemented a warehouse management system for a fairly large food distributor and manufacturer here in the U.S. and Canada. They have about twenty-six distribution facilities, nineteen of them in the U.S. and five in Canada. Three of those were manufacturing and distribution facilities, so I had an opportunity to implement a WMS System and that’s the main thing I wanted to share, my background as to how this implementation went and what is a particular interest for the supply chain professionals.


When you go through a fairly large implementation along these lines, and I think that kind of coincides with the third question you had:


What did the supply chain professionals got out of your evening of sharing about creating a Center of Excellence for this client?


First of all, the Warehouse Management System had a specific objective what they wanted to achieve out of it.


One was lot traceablity, being in food distributor in the U.S. after the Buyer Terrorism Act of 2002 was passed, they had to have a good lot traceability to know exactly what kind of raw materials from which supplier went into the food product. And being the distributor side of it, which customers got these products. This company was involved in B2B, so they it was a business-to-business transaction.


Also, the company was very interested in FIFO rotation of inventory—First In, First Out—so that they never had a rotation problem, but with a system like this, they wanted to ensure that they could tap in to the potential of making sure that FIFO rotation was happening. Inventory accuracy, they wanted to ensure the inventory was accurate between their different, various systems, ERP being the financial inventory system and WMS, the warehouse-management system. No one likes to do physical cycle counts, so allowing, the WMS had to make sure that the cycle count was done year round with strategies like ABC cycle count or cycle count opportunistic cycle counts to make sure the inventory was fairly accurate putting into the systems.


They also wanted to look at optimizing labor usage. Being in North America, one of the challenges is that the labor is very expensive, and you have to compete with other countries—South American, the Asian market—so I think a lot of the investment was also geared toward how do we optimize the labor usage; not to reduce the body count per se, but it has to be more efficient so they could know what was the deal cost to manufacture the expense of finished goods coming out of their lines.


They also wanted to have increased responsiveness to customer needs and market dynamics, food, like anything else, is very cyclical and certain kind of foods sell well in the western part of the United States to the Eastern part of the United States, and certain food products sell well during Christmas, holiday season or certain sell well during the summer months, so they wanted to understand those customer dynamics. Also to have a collaboration, knowledge sharing with their various vendors so that they’re not buying too much or too less and making sure that they had enough inventory available to them.


The implementation was about 5.5 million dollars. the implementation took us about three years to get to all twenty-six locations. Some of the challenges right from get-go was various languages, North America being in the distribution side in the southern part of the United States and West Coast like Los Angeles, Phoenix, Dallas, Houston, Florida. We have a significant Hispanic workforce available here, a Spanish-speaking workforce, so the system had to be bilingual here in the U.S. at least, English and Spanish, so that people could understand clearly what the instruction the system was giving.


We did have a voice activated picking to ensure for the refined streamlined the picking processes; what they call as the hand sweep picking, to ensure that inventory was picked in the right format. Also, in Canada especially one of the provinces, a French province, the language had to be French and English, so that was quite a bit of interesting to figure out how to get this, how to get out training materials in three different languages and get the message out to the floor.


Also, when you have a fairly large implementation like this, you have to work with a bunch of different consulting companies and independent consultants, so that was a challenge to kind of work through those details. Also, this project was leveraged on having offshore resources, so that’s another challenge we ran into, how to figure out, follow the same approach basically. The offshore partner was based out of India, the IT partners, so there was about ten hours’ difference between the U.S. time zone and the Indian time zone. How to coordinate that, making sure that the work productivity is good, as well as the good quality of information was coming up.


After we went through the WMS installation, like anything else, there was a learning curve. After the system stabilized, the company found that lot traceability, the main objective of the project, improved significantly and constantly; it went very well. The FIFO rotation of inventory was pretty good. Inventory accuracy gained by thirty to forty percent. Labor usage was, additionally, they were able to get more out of the existing workers by about twenty percent. I think the amount of data that that was collected with this kind of system, one of the things this company was able to realize was totally how to streamline the KPIs based on the data they got out of the system; also look at the opportunities to use root-cause analysis and FIWI to share best practices across the various distribution centers.


After the presentation we went through this, sharing the information, it did stir up a lot of good, productive conversation between various partnerships in the dinner meeting. A lot of people shared about how their installations have gone or how some of the challenges they ran into. It stirred up some productive conversation. Overall, that’s a plus that I have found very good and engaging than the people who are presenting the meetings such as these kind of start sharing their details and how they’re facing various challenges.


It was, overall, very productive and a good evening; about twenty-five people turned up, and they had some great conversations on some of the challenges. A few people did appreciate the information I shared with them.


I hope I get to come back to your blog more often and share some of the work that I’m trying to do, also learn some of the stuff other people that you have been interviewing are reviewing about so we can share more information to create a very customer-oriented supply chain along the way. Thanks, Dustin.

 

About Srinivasan Prassana


 

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Srinivasan Prassana

 

 

Senior Project Manager

at Vitacost.com

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