Whenever I work on any supply chain process improvement engagement, I intuitively classify them as either “Routine Problem” or a “Non- Routine Problem”. A routine problem is something which has a straightforward simple solution. Other simple way to look at routine problem is where you can apply an algorithm to solve the problem – If your supply side costs are high – A cost based optimization engine used effectively will help. However “Non-Routine Problems” are more abstract, problems where even supply chain veterans do not have a simple explanation. (Another rather easier way of identifying a non-routine problem is when your boss explains you the problem and then – There is a long silence from both sides).
With the increasing complexity owing to global nature of today’s supply chains, more and more supply chain problems are falling in the latter category. Couple this with increasing number of events which can cause volatility in your demand and supply markets. Solving a “Non-Routine” problem requires a strategy unique to the problem. One of the common strategy is to think of the problem in terms of “Waste”. A supply chain is not efficient may be because potentially there is a lot of waste that has been created due to various imbalances, events, customer demands, supply fluctuations etc. That is where data analytics can play a huge role in not only quickly identifying this waste but also anticipating the future waste.
These days I am working on a “Non- Routine” problem – “Improve the production capacity utilization so as to cover up the fixed plant costs and sell the additional delta production (due to improved utilization) for a discount (so as not to increase inventory costs)- And generate extra revenue in the entire process”. I classify this as a non-routine problem because a single algorithm will not be able to solve this problem. Capacity decisions impact all areas of operations management as well as other functional areas of the organization. Also it is important to understand that the focus is on improving utilization (=Actual Output/Design Capacity) and not on improving efficiency – (=Actual Output/Effective Capacity)
A major step in this regard is to improve processes to increase throughput (Increase actual output, with same design capacity). This can be achieved only by a much focused short term planning on increasing capacity usage, by proper scheduling of jobs and personnel, and appropriate allocation of machinery. Apart from this, a simple dashboard which can give useful insights into current capacity utilization can be very useful. Understanding the level of waste that exists in the system and the target one can achieve, if some waste is removed can go a long way in designing the optimum solution. Thus marrying the traditional lean concepts with today’s analytics.
The key here is to identify the right metrics to be used in drawing any conclusions. It is important that chosen metrics should provide information on all different areas which can impact the given scenario (The good old management mantra of Mutually Exclusive and Collectively Exhaustive, applies here too) E.g. all different types of waste in the process such as, wastes due to quality (rework), time (idle time of machines, efficiency of machines etc.) to give a clear picture. Metrics like First Time Through would provide indications on quality, whereas metrics like Equipment Efficiency provide approaches into capacity expansion. Also a close watch need to be kept on demand forecast accuracy and the process for discounting the additional production.
- First Time Through =(Total units processed – Number of units rejected/reworked)/ Total units processed
- Equipment Efficiency = Machine availability * Performance
- Machine Availability = (Total machine time available – downtime)/total time
- Performance efficiency = Actual run rate/ideal run rate
To conclude, an effective capacity planning process to maximize effective capacity by identification of various parameters will be required. Advanced analytics-driven “control towers” can aid the same by capturing the operational data and monitoring real-time critical events to provide visibility into capacity usage.
Communication is unquestionably the key to drive better management and our machines tracks the same rule. Businesses around the globe are producing a gigantic amount of structured and unstructured data that actually holds a plethora of unleashed business opportunities and capabilities. With the involvement of ERP, CRM, HCM technologies, etc. it has become far easy for organizations to monitor their assets and data. While employing multiple planning and management systems in business is yielding expected ROI, it becomes cumbersome to manage and get the best output when these machines work as a unit.
In this post, we will discuss the issues an organization, when it has multiple Planning and Management applications working independently. Moreover, we will also find out how integration can help businesses to achieve maximum output with minimum manual intervention.
5 Reasons to integrate your business processes
- Security- For every organization, security of confidential data is undoubtedly the primary concern. Exposing the confidential data to unauthorized personnel could be the worst nightmare for a business. When there are multiple applications using common pool of data, applying restrictions on users could be tedious and usually, an unachievable task.
- Low Visibility- Different teams handling different applications may result in poor visibility for the stakeholders. This opaqueness may further contribute to misalignment of policies as well as data loss.
- Error-Prone Process- Non-integrated or manual data insertion into the application brings in high possibilities of error. Furthermore, it requires continuous manual intervention and efforts hence reducing the profitability.
- Diversified Vision- Collaborating and analysing the results from independently running Business Management and Planning applications may again result in a pile of unorganized data statistics.
- Excess Cost- Monitoring and handling different applications require more workforce resulting in increasing cost of maintenance.
5 Absolute Benefits of Application Integration
- Bi-directional integration flow
- Real-time data synchronization
- Better planning, tracking and forecasting of requirements
- Improved productivity and customer service
- Fully-automated process with rich transformation capabilities supporting various data formats
Bristlecone provides ready-to-use packaged solutions or accelerators for business process integration with SAP ERP. The solution accelerators leverage Oracle Integration Adapter for SAP R/3 and Oracle Service Oriented Architecture (SOA) Suite platform for instant connectivity between SAP ERP and CRM systems like Salesforce.com etc.
As a consumer products good manufacturer, there is one fact that you cannot simply deny; all sale is local. You might create any kind of product, and be located in any part of the world, but your product is ultimately consumed by the people of a community, and upon them depends the performance of your products, and the profits of your company.
The information age that we live in provides us with incredible opportunities. Who could have predicted that the phones we keep in our pockets today will be more powerful than all the computers stored in a room from just a few decades ago? Or that these devices will be able to connect to the internet wherever they are? The kind of information that can be salvaged from customer interactions is immense and will help you paint a very clear picture of the kind of customers who buy your product.
See your customers in High Definition
Visibility is important in a supply chain, and every organization vies for end to end visibility in order to maximize supply chain potential. But when it comes to better prediction algorithms in order to maintain proper stock across the supply chain, there is something added that needs to be done. The spending patterns of the buyers also need to be factored in, along with the stimuli that trigger buying. With most retails stores switching over to electronic invoice management systems, it has become easier to collect purchase data in a shorter period of time, and for a larger number of retails stores. Most modern invoice solutions automatically raise a re-stocking request when the stock for a product falls below a certain level.
Store level insight is a great way to create a superior supply chain for your products. The consumer market is always a difficult nut to crack, but with the insights that can be collected using the tools and technology available today; CPG companies are certainly a step closer to this goal. Implement better data collection and processing systems in place for your products, and you will be amazed to see how much better informed you become about your end users.
If you ask any supply chain consultant, what benefits an organization can expect if they were to implement point of sale systems, the first answer he/she would give you is better demand forecasts. And without a shadow of doubt, he/she is right. This is because point of sale data will give you a picture of ‘True Demand.’ In the past few years, we have seen point of sale systems becoming very common in modern trade outlets, retail stores, restaurants, multiplexes, etc. Though the data these systems collect is generally used for purposes of demand management, it is also extremely valuable for supply chain planning in the entire network.
In a traditional setup of supply chains, demand information is passed from retailer to manufacturer to supplier in the form of orders. However due to large number of intermediate partners, this order information gets distorted as we move upstream. This is generally known as ‘bullwhip effect.’ One of the easiest ways to avoid this distortion on actual customers’ demand is to share the POS data with the suppliers. This will not only help the suppliers in meeting the demand properly but also in improved production planning through better sell-through visibility, better on-shelf availability, more accurate determination of re-order points and reduction of noise from demand trends and seasonality. For example, any supplier would assume that if its customer faces high level of order variability, its fill rates are bound to go down. However if POS data reveals that fill rate is steady, it implies the customer is stocking very high levels of inventory. Thus without POS data, the supplier never gets to know the complete sell –through picture and the customer may continue to carry higher than necessary inventory. Thus POS data will enable suppliers to calculate certain key metrics like ‘Sell through percentage’, ‘Ratio of Stock to Sales’ and ‘Days of Supply’. These can be highly powerful in decision making. Apart from this, in various industries, the large number of distributors and retailers makes it difficult to improve demand planning beyond a certain point. Thus the incremental value of improving supply planning can be more than improving forecast accuracy. For example, companies with mature supply chains may not see much benefit from improving forecasting as compared to reducing lead times for their critical products.
Thus POS data can be leveraged not only to reflect true demand but also in making better supply side decisions. A proactive organization can make use of POS data to overcome problems related to supply chain shortages. Thus an improved visibility in supply chain enabled by POS data can also improve supply chain flexibility of the entire network.
There have been quite a few developments in the Radio Frequency and Identification (RFID) technology space which have increased the adoption of RFID technologies in supply chain. For instance:
- Reduction in technology / implementation costs
- Development of uniform standards for implementation
- Developments in middleware technologies like SAP AIE which integrate better with existing ERP systems
- Improved technology performance
The use of RFID technology is hence gradually moving from pallet or case level applications to the item level applications. However, companies are concerned with the Return on Investment (ROI) of RFID implementations and often opt for other investment opportunities.
As May Tajima puts it in ‘Strategic value of RFID in supply chain management’, some of the tangible benefits which are typically considered while estimating the ROI of RFID implementations in supply chain are:
- Process Automation through Wireless Technology:
- Reduced shrinkage and theft of products
- Better material handling leading to reduction in process times and reduced errors
- Automation in shipping, leading to fewer delays & shorter delivery lead times
- Reduced number of stock-outs through automated replenishment
- Closed loop tracking through unique object IDs
- Tracking of raw materials, WIP inventory, finished goods and assembly status during production, leading to reduced errors and better quality
- Lower safety stock inventory levels, as products move faster through the supply chain
- Ensuring continuity in production through supply availability
- Reduction in maintenance time and maintenance costs
- Improved efficiency and flexibility of space and asset utilisation
- Visibility in supply chain to track and trace:
- Increased data accuracy & improved inventory records leading to reduced out-of-stock situations, prevention of inventory obsolescence
- Improved demand forecast and production planning due to better information
However, there are a lot of benefits that a company derives from an RFID implementation, which are not tangible but give a strategic long term value to the entire supply chain. For instance:
- Faster exception management due to timely data, business intelligence, alert management
- Authentication and Counterfeit Protection through e-pedigree, which prevent erosion of sales volumes and enhance the product brand
- Organization culture change due to visibility, information sharing and automation of processes, leading to improved innovation capabilities
- Enhanced customer experience: Staff free from inventory related activities can focus on customer. RFID kiosks installed at retail outlets can be used to display product information
- Enhanced after-sales service: Faster response to recalls, improved warranty processing and returns handling enabled by track and trace capabilities
- Improved regulatory compliance (Pharmaceutical industry)
These aspects can best be realized if there is a strong willingness among the buyers and suppliers to collaborate through the use of RFID. Achieving such high level of collaboration across multiple stakeholders entails significant effort and trust between partners. There is hence, a considerable first mover advantage and organizations can learn the art of transforming organizational practices for optimum use of technology.
These investments should not be viewed as purely revenue increasing / cost reducing over a horizon of 2-3 years and hence should not be judged by ROI alone. The investment in RFID in fact facilitates a sustained competitive advantage over the long term and can perhaps be better judged by estimating the discounted Net Present Value (NPV) or Incremental Rate of Return (IRR) of both the tangible and intangible benefits.