I interviewed Anand Chatterjee who discussed Supply Chain Review.
Can you first a provide brief background of yourself?
I have been primarily working in the domain of supply chain, consulting supply chain strategy and supply chain transformation projects across various organizations globally. I started working my career with PricewaterhouseCoopers, then moved on to GE, and then JDA, which used to be Manugistics logistics organization. And then, of course, right now I'm working with ITC Infotech.
But I worked with various organizations across the globe, across transformation projects, and one of the things that really interested me over the years has been the people aspect in supply chain transformation projects.
With advancement of technology, there has been a lot of very sophisticated software, too, developed in the market and the space and the supply chain space, whether it be execution or a planning and optimization piece. And that's been across the globe, whether it be developed economics or whether it be emerging countries.
Organizations do start supply chain transformation projects. A lot of these are enabled through technology, with a lot of interest, a lot of gusto.
Over the years, the interest slowly starts draining away because they find it really different to absorb the complexities of the software. They really struggle to utilize the functionalities that's available in the software. And that's been my interest, to help organizations to adopt them, to utilize the functionality in the fullest capacity.
Could you talk a little bit about how it's done?
The supply chain family, if you look into the area of supply chain, it's broadly classified, probably into two areas. One is the supply chain execution piece, and the other is supply chain planning and optimization piece.
The supply chain execution piece has been there for quite some time, probably in some way or other. If you leave out the technology piece, it's been there for as long as the history of organization would be. But with the advent of ERP applications, whether that be the Baan or the SAPs, or the Oracle applications, the supply chain execution has been supported by the software applications for quite some time.
But the supply chain planning and optimization piece became fashionable with organizations probably when i2 became popular in the mid-'90s or late '90s. Thereon, there has been quite a bit of players in the space. JDA is probably one of the better known organizations. SAP, of course has it's own suite of products. So does Oracle in the supply chain planning and optimization piece.
Probably, if you look at these applications, which is primarily supplies, planning, and optimization piece, they involve a lot of complex algorithms, sophisticated functionalities. And organizations, too, really look into using these applications to increase their revenue, to improve the bottom line through use cost.
But as the implementation goes through and as they try to use some of those applications, they really struggle to use the complete set of functionalities.
And over the years, there's been a lot of new organizations that have come into place. For example, Kinaxis and some others are online, some other startups. They have been really looking into how to make their software simpler for organizations to use. And that's really been transforming the space over the years.
There's a famous framework in the consulting world, which talks about the people, the process, and the technology. But what I generally try to do is, I start with the process part and take a really agnostic view of how we could improve the process and the supply chain area.
Then I look into the technology part, how the process we're looking into can be supported, whether technologies are available in the market, or whether it be custom built for the organization.
But on top of it, probably what is really the most important part is the people adoption of either the process or the technology. And that's how I go about...increase the adoption of these whole transformation projects in the organization.
Do you have any examples of success or success stories or good results?
Yeah. If you look at one of the organizations that I've been working on... Let's take an example of an organization which went about doing such supplies and transformation project. And this organization went to implementing a Demand Forecasting too, which then the Demand Forecasting figures are then used for distribution planning across a distributed network for the consultant supply chain for the organization.
And then, of course, it was again used for the supply planning, which could be in-house production planning. Or to could be outsource production. And then, of course, a part of it was also used for raw material procurement.
Given the complex structure of this organization, this organization went about implementing the solution, they really struggled in terms of what could be a very single view of the performance metrics that they had put in place to measure the success of this project.
So, if you're looking at some other very popular metrics that is generally used in this field of operations, supply chain's failure rate are on time and full.
If I think about various organizations – and I'm talking about big multi-national, big Fortune 500 organizations – I've seen that there's no single definition of some of those very simple metrics. And organizations do claim about using some of these metrics to their own benefit.
So, if you go and talk about market-facing sales organization, which is found responsible for insuring that the products are delivered to the consumers in time and in the full ordered for. They would say that they're on time in full metrics almost as high as probably 95%, or about that.
But when you delve deeper and look into the exact definition of how they define this metric, how they define those numbers, it really looks that they would have probably not taken a very scientific approach towards it. This particular department would have defined what could be the best way to represent their own interest.
And if you go further upstream, and if you'll talk to the production guys and talk about those guy claiming they're having a very high on-time and full metrics, they would say, "No, that's a false representation of the facts." The actual figures probably might be in say 70s or 80s.
Now, if you go deeper... And those organization often struggle to understand why I get two different pictures from two different departments in the same organization.
The second... What the struggle is how do I bring about those two departments to work in a symbiotic way so that the whole organization benefits through the supply chain transformation projects as it goes along.
I believe the key to this is the way you define your metrics hierarchy. How do you go about defining the performance measurement across the organization? That's when the people aspect starts coming in.
So, in this particular case, we defined the supply, sales and operation planning process very scientifically. We kept out first the people dimension out of it. We look into the whole process and said this is how it should be looked into. This is how the performance measurement should be defined. This is how the process should start, at what day of the month. What are the technology aspects? When do you run the Demand Forecasting piece and the application then go on planning the distribution planning?
And so we define the whole supply chain process. And then we insure that supply chains, sales and operations planning process is probably one of the most difficult processes to establish in any organization, because there are too many departments which get involved in it, from sales, from marketing, procurement, production, finance, logistics and warehousing. Everybody has to get involved in it. And unless you take a very detailed process or wide view, you would find in really difficult to get it accepted by all the various departments.
And that brings up the very important aspect of people.
How do you insure that each of the departments feel that they have been given due importance to it? The way they are being measured is proper? And the other department may not take an undue advantage of this particular department.
So, you have to go about doing a proper approach of defining the whole piece of the performance measurement. From what the object of the organization is, how does it get implemented on into operation, operating performance metrics. And then gets into how does it get into the tactical aspect of measurement.
That's how we went about defining for this particular organization. At each node, we went about giving a proper set of visibility of the numbers to the various departments. We insured that the way the rows had been defined for various organizations, gave them the right set of information to take corrective actions. We insure that manual interventions are properly minimized because, the more the manual interventions, the more the ad hoc ways people try to respond to various situations and probably they also try to, I will say, manipulate some of the numbers, especially in terms of reporting.
Finally, of course, it did take a couple of months to stabilize because there was a whole lot of change to management aspects in one place.
But we slowly went about doing it. In some cases we had to use a simplified version of the planning tool. We made it slightly simple to start and then went about increasing the complexity over the months when we found that people were more open to accepting some of the supply chain applications within the organization.
Do you do any final recommendations?
One of the things that we went about, I would really recommend to keep things simple. Technology is probably progressing a lot faster than... I would say that things are very different from the people perspective as an execution perspective. As I say to organizations, especially it could be more applicable to emerging economies... Some organizations say, "I bought this expensive application. Why don't I run it daily?" What I recommend and tell to the organization is that you can probably run it daily or probably every hour, but you would really struggle to implement that recommendation.
So, for example, the planning tool says that you probably dispatch a certain amount of goods today to a particular destination, but things would have changed. The ground reality is different, especially in emerging economies, there would be a lot of uncertainty in terms of what kind of vehicles are available, what transportation, what kind of space might be available for storage and warehousing. There could be even political unrest in certain parts of the country, which probably affects their movement of goods.
And these uncertainties...what happens is you know the recommendation of planning tool is probably what you may not be able to execute. So, you would have to bring in a certain amount of people aspect to it. To bring in that, you have to really give the application a relatively simple to begin with.
Your planner should be able to comprehend the results that's thrown out of this application. They should be able to absorb this and understand the fullest implication of the results for your organizations and then make a decision in terms of how they can be, implement it given the ground realities, especially in these emerging economies, where there are probably a lot more uncertainties and variations in execution.
So, I would recommend to keep things simple. Just because you bought an expensive application does not mean that you have to use everything. Make sure you use whatever is actually needed for your organization. And then probably you're going to evolve the adoption of this technology as you move towards your goal.
Thanks, Anand, for sharing.
Thank you, Dustin. Thanks for your time.
About Anand Chatterjee
Associate Partner - Supply Chain Management