For the supply chain manager today, there are no dearth of online resources and expertise to guide them. From advisories by corporate biggies like Gartner or ARC, to research from leading supply chain academic programs, industry veterans and thought leaders, and company sponsored “how to” guides.
We combed through advice written by several of the leading supply chain thinkers we follow at Solvoyo and came up with 5 key technology recommendations that, according to the experts, will help prepare today’s supply chain leaders for this new age of the digital supply chain:
1) Re-focus on Supply Planning – Champions: Gartner, APICS, Lora Cecere, Tompkins, Dan Gilmore
Supply chain teams today have become too focused on the demand side of the demand-supply equation. In general, demand forecasting and planning technology for finished goods tends to be less industry specific and benefits from well-known statistical methods, even in the use of external factors such as weather and unstructured data from the internet. Supply planning in contrast is inherently more complex in having to deal with unique supplier constraints, alternate lead-times, inbound transportation issues, and differing supplier performance across companies.
For businesses looking to build supply planning capabilities, technology is the critical ingredient. Lora Cecere, a leading supply chain thinker and technology advocate, advises companies to move away from ERP expansionist planning tools like SAP/Oracle and to embrace a best-of breed supply planning technology that can deliver the level of realism in decision-making and close the gap between planning and execution. As Lora explains, “While consultants will often rationalize the difference away stating that an 80% fit is good enough, the wise business leader knows that supply chain planning is not a game of horseshoes. Model fit and speed are essential to plan.”2 Yet effective supply planning is essential to optimizing operations and escaping the current boundaries in gross margins, inventory turns, and service level improvements. In fact Dan Gilmore, editor at Supply Chain Insight ranked P&G’s supply replenishment planning process as the 2nd most important supply chain innovation ever, just finishing behind Toyota’s revolutionary production system.1
2) Build network design capabilities – Champions: Dr. John Gattorna, Supply Chain Insights, Lora Cecere, Chainalytics, James Cooke (Nucleus Research)
Supply Chain Insights, an independent supply chain focused research organization founded by Lora Cecere, has amassed together what is probably the world’s largest database tracking and ranking the supply chain performance of companies across the world in its Supply Chain Index. As Lora states conclusively, “Companies I recognize as doing network design well are rising faster in the index.”3 Today’s dynamic and volatile global supply chains demand that companies have access to sophisticated network design analytics tool to help them plan their responses to the changing demand and supply.
I am a big fan of the use of network design technologies. The work on the Supply Chain Index shows me that the companies that I consider to be the most mature in the use of these technologies—General Mills, Intel, Cisco, and Seagate—are outperforming their peers. Is it coincidence? I don’t think so. I think that it matters.
In fact, a survey conducted by Supply Chain Insights found that more than half of the companies today do not use network design to optimize the total cost to serve, trade off transportation against inventory, or design product flow-paths.3Companies that use network design only to answer static questions such as the footprint of the supply chain are missing out on significant opportunities to elevate their supply chain game.
Network design technologies have gotten better since the days of Infor’s CAPS Logistics, Oracle’s SNO, and JDA’s Network Design tools. As veteran supply chain and logistics guru Dr. John Gattorna explains, “We would recommend only two specialist modelling forms to work with in this space, i.e., Llamasoft, Ann Arbor, USA with its Guru model; and Solvoyo, Boston, USA, with its planLM model. None of the larger software houses yet has the viable options in this [dynamic alignment: ability to minimize total cost within the context of a focused and differentiated customer buying behaviors] modelling space.”4 In addition James Cooke, principal analyst at Nucleus Research notes, “These tools allow a company to streamline its supply chain network to ensure minimal stock holdings in the correct locations that, in turn, ensure the lowest transportation costs for shipping and receiving between nodes. Companies that keep their supply chain streamlined will continue to see bottom line savings from lower costs for freight and reduced inventory holdings while being able to meet higher service levels.”5
3) Concurrent Planning – Champions: Lora Cecere, Adrian Gonzalez, ARC Advisory
Traditional supply chain planning software solutions have two fundamental drawbacks: they are compartmentalized and developed with old technology. Best of breed planning tools silo their offerings into different components of the supply chain – demand planning, inventory optimization, production planning, transportation; and deploy them independently, each of which have its own data models, and put in a rather expensive effort to integrate the data at the backend. The isolated treatment of an in-fact interconnected supply chain means that most business today lack the ability to truly optimize their end to end supply chain, therefore leaving money on the table.
The Solvoyo [concurrent] technologies allow users to evaluate the form and function of inventory in network design and connect it to fulfillment and transportation planning. For an old gal in supply chain planning, I love seeing a new definition of supply chain planning.
Per Lora Cecere, “The solution is solving inventory, transportation, and fulfillment in one model across strategic, tactical, operational, and executional horizons. Is this important? Yes, for three reasons… The depth of the solution, a more scalable solution, and the bringing of the decisions on demand helps companies that are struggling to get and retain talent. Inventory problems solved in isolation have had little adoption. Inventory needs to be part of a deeper, more connected solution.”6
By adopting concurrent planning, companies gain access to optimization opportunities previously invisible to individual silos. A great example of this is how a leading US home improvement and construction products retailer leveraged Solvoyo to concurrently plan their order policies for each vendor, inbound transportation, inter-facility logistics at cross-docks, and stocking policies at each store to identify $105M in annual savings shared among their transportation, inventory and DC ops groups. Concurrent planning is a leap-frog from functional planning approaches and the business results from cross-functional trade-offs are measurably superior.
4) Smarter & Faster Planning – Champions: Gartner, Talking Logistics, Adrian Gonzalez, Lora Cecere
Quoting Adrian Gonzalez – a leading industry analyst and founder of Adelante SCM, “The biggest challenge facing supply chain and logistics executives today is not managing change, because that’s always been the norm in supply chain management, but managing the rapid pace of change. . . [S]uccessful companies
of today and tomorrow need to make smarter decisions faster. The two key
Common issues cited by SCP users in relation to their planning technology:
Gartner9 |
words here are smarter and faster.”7 To make SCP smarter and faster, planning technologies need to be able to (i) remove a company’s primary dependence on Excel and maintain corporate memory in the planning system of record, (ii) produce plans actionable enough to be fed directly into an ERP for execution, and (iii) meet the scale challenges of too many SKUs and big data.
Using simplistic approaches of the traditional planning tools means that both plan inputs and output must travel through “Excel ghettos” before they become actionable. In fact, in repeated surveys planners cite aggregating and decomposing data in Excel as the single biggest obstacle to planner productivity. Advanced SCP technologies provide the planning tools and the computing power to help companies plan at a granular level, down to an SKU, location, and individual order level – forever banishing Excel from being the primary planning tool.
We’re now at the point where Closed-Loop Operational Management is possible — that is, where companies can tightly integrate planning and execution processes and create a feedback loop to drive continuous improvement.
As Adrian explains, “We’re now at the point where Closed-Loop Operational Management is possible — that is, where companies can tightly integrate planning and execution processes and create a feedback loop to drive continuous improvement.” Modern planning platforms can model supply chain constraints and generate plans that are—in certain cases- 100% actionable. Removing the gap between your planning processes and execution systems truly helps companies achieve smarter and faster planning.
5) Act – III, The Takeover from the CIO – Champions: Lora Cecere
The history of SCP according to Lora can be viewed as a three-act play. Act I – “centered on the ‘birth’ of supply chain planning software.” Act II promised integrated supply chain but in actuality were “large systems sold with big price tags and high expectations. . . [but] were inferior to the first generation.” In Act III, Lora explains, “Companies are waking up. The business requirements have changed. Growth has stalled, and demand and supply volatility is greater. The business pain is high. The complexity of managing a global supply chain has changed everything. Uncertainty is rampant. Due to the amount of investment in supply chain technology in the second act, the CIO is dragging his feet. . . The third act is very different. Supply chain matters more than ever, and the CIO plays less of a role. To succeed line of business leaders have to learn about new forms of technology and use their influence with management to drive supply chain innovation. The traditional definitions of architectures disappear.”8
The third act is all about supply chain leaders finding and embracing technology that uniquely serve their complex requirements, going well beyond the high-level analyst frameworks and the traditional dependence on ERP software + consultant model. This age is about finding new capabilities whether concurrent planning, end-to-end planning, unstructured data inputs, or decision making with advanced visualization support – that empower the supply chain organization to drive results and value across the whole enterprise. In the third act per Lora, “The use of the cloud, and the evolution of Software as a Service [SaaS] models become mainstream,” enabling supply chain leaders to be their own CIOs in this increasingly digital supply chain reality.
Epilogue
While my motivation to write this post is to focus light on some of this amazing intellect out there, I would be remiss if I don’t take this opportunity to articulate why Solvoyo is relevant in light of this discussion. Solvoyo’s supply chain planning platform can truly equip planning teams with each and every one of the five technology capabilities listed above. From a single cloud-based comprehensive supply chain planning platform, our clients can perform detailed supply planning, cross-functional concurrent planning, strategic network design, and planning automation, all the while enjoying the lowest total cost of ownership with our SaaS business model.
Notes:
1- The Top 10 Supply Chain Innovations of All-Time. By: Dan Gilmore. Dec 3, 2010 http://www.scdigest.com/assets/FirstThoughts/10-12-03.php
2- Three Reasons Why SAP Supply Chain Planning Is a Risk to Your Business.
Do No Harm…
Dynamic Supply Chains. By John Gattorna. 3rd Ed 2015, FT Publishing, pg 262
6- Applause!
A Case Study in Closed-Loop Operational Management. By Adrian Gonzalez. November 19, 2014 http://talkinglogistics.com/2014/11/19/case-study-closed-loop-operational-management/
8- The Third Act.
Magic Quadrant for Supply Chain Planning System of Record. Gartner. Jan 19, 2016
