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Optimization for the New Reality- Using Cost Drivers to Dynamically Re-Shape Your Supply Chain

Author: Dave Rhodes, Director- Manufacturing and Strategy

Crafting a global supply chain has always been challenging; putting a puzzle together even as the pieces change.  The stakes are high, the rewards substantial, and the risks can threaten the very existence of your company.  Two factors have conspired (no political pun intended) to make this task exponentially more difficult:

  • The scope of change
  • The pace of change

Bemoaning the shift in the economic and political climate is a bit like complaining about the wind blowing.  You can shout yourself hoarse, or you can adjust your sails.   This starts with creating the ability to rapidly account for changing cost and profit drivers, balance tradeoffs, compare multiple options, and develop optimal, fact-based, justifiable action plans.

Whether you are looking to expand your internal planning capabilities or just need assistance developing a strategy to make your way through rapidly evolving cost dynamics, MEBC Strategic Consulting can work with you to chart a clear track through these shifting winds.

If you currently run the JDA planning suite, you may already own the functionality to introduce optimized supply chain planning.   MEBC can help you fully exploit your current license to achieve your goals without incremental capital expenditures on software.  If you have been using legacy Manugistics or i2 software to support your planning processes, it’s time to explore the expanded breadth of the combined platform.  The consolidation of these market leaders has produced an unparalleled set of capabilities. MEBC, and our JDA reseller partner, Plantensive, can evaluate your current licensing and opportunities in the new landscape, then work with you to train your people to leverage this expanded capability.

As a supply chain leader, you ponder the implications of new tariffs, evolving labor cost structures, omni-channel shipping and fulfillment options, and emerging manufacturing technologies and the cumulative effects on your supply chain.  In your search for solutions you know that there is no appetite for additional capital expenditure on software and the churn of another implementation.  Maybe you just need some help exploring options, crunching the numbers, and developing your optimized strategy without purchasing more software.  The team at MEBC comes from the world of business and can conduct this evaluation as a service based on the data you provide.  We understand the weight of the decisions you are facing, and will work with you to apply the full scope of JDA’s capabilities to craft a supply chain strategy that will carry you through the upcoming storm.

MEBC will be publishing a series of articles, white papers and infographics that explore the swirling winds of change in the global manufacturing, strategic supply chain planning, and functionality within the JDA suite that helps sort through your options. Join us as we dive deeper into these topics over the course of the next few months!

Is ‘Omni-Channel’ Just the Latest Pet Rock?

I attended JDA’s 2015 FOCUS Conference recently and was pondering Rethinking the latest rhetoric of “What’s Next?” and the one term that keeps recurring to me is Omni-Channel Fulfillment (OCF). As I watched various demonstrations by customers executing the purchase transaction in a multitude of ways, I was also thinking about my current wrestling cheap mlb jerseys match implementing the JDA planning solution at a global manufacturing company. Our challenges are not new- Master Data, and Cross Region Process Rationalization versus some truly unique, regional requirements. Thinking more about this, additional questions came to mind like how does OCF play here? Does the rise of omni-channel mean the end of planning?

Through the course of the next few weeks I’d like to talk through some of the considerations that bubbled to the surface:

  • As we explore OCF, what is the scope and time span of the challenge?
  • The stunning master and transactional data implications: cross referencing, transactional timeliness, and synchronization across time zones and systems.
  • The deliberate, diligent thinking that is required to define the rules of dynamic, optimized order fulfillment.

I really want to challenge some of my foundational, personal supply chain planning beliefs by asking myself some tougher questions like “Is what I’m hearing just a new catch-phrase? Is it a revolution, or the signal that it’s time to a change a few of the bricks in this foundation?”

It seems that some of the chatter with the advent of OCF implies that we don’t need to plan and that all you have to do is place an order and watch the magic happen. Then, the yoga goods are whisked to the customer via and drone, who lovingly cheap mlb jerseys deposits the package at the customer’s feet by tracking them with the ULTIMATE GPS in their phone.

I spend of lot of time thinking cheap nfl jerseys about time.  In a previous History post I talked about Demand Latency Potential (DLP), which is the duration a customer will wait before choosing another product or vendor, or foregoing the purchase altogether.  In these OCF discussions we are talking about a transaction where the DLP is a few hours or a couple of days.  Our Commitment Horizons in the value stream are far longer than these DLPs.

After thinking through some of these initial questions, I came back to exploring some of my supply chain planning ideas about the future of planning.  The nature of the purchase transaction is changing and Omni-Channel is the ‘sticky’ term that we cheap mlb jerseys use to describe it.  OCF doesn’t replace planning; it requires innovative planning like we haven’t seen before.  Deliberate evaluation of our value streams and strategically crafted supply chain and inventory strategies give us the necessary flexibility to dynamically and profitably fulfill orders. We now have more tools and options for creating this potential – in defining where Season and in what form we hold inventory and the mechanisms for converting and transferring product to customers.

Time, expressed as inventory, is not linear.  Inventory is time.  Money is inventory.  Money is time.  How will you invest your money to collapse time and create the potential you need to meet demand effortlessly and optimally across all channels?

What can Conducting a DDVN Assessment do for you and How do you Take the First Step?

Gartner’s Demand Driven Value Network (DDVN) Maturity Model has become a touchstone for companies seeking to improve their supply chain performance. At MEBC, we collaborate directly with Gartner and fully embrace this model as a blueprint for assessment and a framework for charting a path forward. As Gartner released the improved Five-Stage Model, they acknowledged that companies struggle with the ‘fundamental, cultural shift’ required to transition from an internal, functional-focus to a more holistic, external, demand-driven focus.

A broad, multi-channel DDVN assessment helps to establish current state, but the next step can be the most difficult. While we acknowledge that the future state for every organization does not lie with every dimension in Stage 5, what IS our intended future state and how do we track our path along the way? Change must occur at many levels to transform your organization, and the breadth of the challenge can be overwhelming. How do we take our first step on this journey?

As the organization evaluates and determines how best to serve target markets, the underlying challenge is measuring progress. At MEBC we find that focusing on the Metrics Dimension enables an organization to align activities and crystallize the ideas Time formed during the assessment. Misalignment in the metrics strategy can cause an wholesale nfl jerseys isolated, high visibility service failure to create the impression of broader problems, while an endemic weakness may not be apparent in the granularity of the data at specific nodes in the network. ‘Correct’ metrics will depend on the supply chain strategy and the future state organizational model.

A fully realized Performance Measurement System is the underpinning of continuous improvement not only along this Metrics dimension. It enables an organization wholesale mlb jerseys to:

  • Monitor:  Track performance for reporting
  • Control / Diagnose:  Highlight when the supply chain operations require modification or attention
  • Direct:  Use of metrics to focus activities and as a foundation for personnel evaluation

The steps for implementing an effective Performance Measurement System are easy to list, yet deceptively difficult to carry out.

  • Metrics Definition
    • Select appropriate metrics to monitor supply chain performance
    • Establish clear goals
  • Data Cycles Management
  • Performance Tracking and Root Cause Analysis
    • Define process and organizational cheap jerseys responsibility to track performance and identify points for further analysis
    • Define root cause analysis / corrective action process and mechanisms

Conducting a DDVN assessment and defining a supply chain future state is a valuable, essential business exercise. zu The journey to that future state takes focused, Rethinking tenacious effort throughout the organization. Talk to MEBC about taking your Mission first step.

Down and Distance: Rethinking the Sports Analogy

We have talked with several companies over the past couple Team-The of years about how to best use the Gartner, Demand Driven Value Network (DDVN) Maturity Model.  Where should you start?  As with many questions that we face, the answer was consistently, ‘It depends.’

The image that came to mind as we continued to ponder this was the and coach on the sidelines of a football game with the play card.  As each Nfl situation develops, the coach checks the card to evaluate the appropriate play.  So let’s play out our ‘down and distance’ scenario before we rethink the analogy and get beyond the easy ‘it depends’ answer to our question of where to start.

So coach, what’s your play:

Here is where we rethink the Заработок analogy.  It worked because we understood football rules and strategy.  When Wireless you looked at the ‘Down & Distance’ column, you could discern then nature of the situation. You knew that the team only has 4 downs to cheap jerseys make 10 yards to get a new set of downs.  You made decisions about the correct play based on your perception and understanding of the situation.

This is how to answer the question, ‘Where do Australia we start?’

To succeed, we have to understand the situation.  How well are we serving wholesale NFL jerseys the customer?  Before we can determine the correct play, the appropriate initiative in which to invest, we need have the correct wholesale jerseys measurement system in place that efficiently and accurately illustrates the current situation.   If you have the wrong metrics in place or a data gathering process that does not allow Getting timely analysis, you may be making decisions for a situation that has already changed or that you have totally misread.

What are the correct metrics for your company?   Well, that depends…

To define the right set of metrics for your organization and your business goals, contact wholesale NBA jerseys MEBC.

Time and Inventory Strategy

I was in Poland recently looking out the hotel window at the town’s historic clock tower – still in operation after about 400 years – and started pondering how time shapes the modern supply chain.  Time is A the lens that focuses all supply chain planning decisions.  Distance is time.  Inventory is time.  And Time is money.  For any consumer facing organization, our ability to make decisions in a ‘timely manner’ is nothing less than a matter of corporate survival.

Our planners hold the customer satisfaction in their hands.   As they balance the dynamics of demand against the constraints and limitations of supply, we need to recognize that the feasible, financially viable options available to planners have been dictated by earlier choices.  The decisions that limit their current choices were made days, weeks, or even months earlier.  But a planner’s life is pretty straight forward, right?  They only have to answer one question:   What customer demand can we meet today?

If the answer was, ‘All of it’, the job really would cheap jerseys be easy.  Yes there would be questions about inventory, but we’ll talk about that later.  Very rarely is all demand being satisfied.  So more questions get asked:

  • If not today, then when?
  • When can we ship it?
  • When can we make it?
  • When can we receive it?

This ArcherESPN is where the planner’s job get complicated.  As we drill down into each of these questions, we realize that they are interconnected:

  • The demand we can meet today depends on what’s in stock.
  • If it’s not is stock, it depends on what has shipped within a transportation lead time.
  • What we can ship depends on what we produced a manufacturing lead time before that.
  • What we can manufacture depends on what we scheduled a planning cycle before that.
  • What we can schedule depends on the available components that were ordered a procurement lead time before that.

Let’s go back to the first question as the place to start working our way back through the decision points that drive supply chain strategy and inventory policy.  “What customer demand can we meet today?” Before we start crunching numbers to come up with an answer, consider a more fundamental question and one that drives continuous supply chain improvement:  How long is the customer willing to wait to take possession of the product?   The duration the customer is willing to wait versus the time (and cost) it takes for us to ‘get’ more is the primordial equation of supply chain management.  ‘Demand Latency Potential’ (DLP) is the duration a customer will wait between selecting to procure a particular, fully specified item, and taking possession of that item, before selecting an alternate item or foregoing the procurement altogether.

DLP can range from less than a second to years.  From the chewing gum impulse buy while standing in line at the grocery Order store, to waiting for the ‘Back to the Future’ hover-board.  We normally think about this in terms of manufacturing Getting strategy.  The higher the DLP – the longer the customer is willing to wait – the longer we have to create the product and the further ‘upstream’ we can hold inventory.  We don’t craft our supply chain strategies on an empty white board. Our customers have already decided on the boundaries within which we need to work.

The further upstream we can hold inventory, the shorter the ‘Commitment Horizon’.   Commitment Horizons are the wholesale mlb jerseys durations between committing funds to procure, convert, or transport and the customer taking possession and paying for the product.  We want the shortest Commitment Horizons possible to collapse the time between spending and collecting money.  Most customers will not wait the full value stream lead time for most m of industries and products with which we work. Take the time to understand, differentiate, and segment customers and products based on DLP.  Once we clearly understand DLP, we can compare it to the cumulative value stream lead time.

The difference, along with accounting for variability, is the amount of time and money you need to invest in inventory to bridge the gap.  Before each shipment point and point of conversion we can decide to hold inventory to close the DLP gap.  This is where factors relating to demand variability, risk pooling, and total cost analytics are leveraged in multi-echelon inventory optimization.

We are trying to minimize cost while at the same time maximizing feasible planning options.  Because of market imperatives, we employ postponement strategies, delaying customization by holding inventory cheap mlb jerseys at the component and sub-component level while waiting for a more accurate customer demand signal.   Investing in critical, hard to obtain and long lead time raw materials may be part of the strategy to shrink the time to fulfill – and react to changes – customer demand.

Following the DLP vs Strategy Curve in Figure 2 is like traveling back in time through the conversion points in the product structure illustrated in Figure 1.  Somewhere along the curve lies the right blend of manufacturing and inventory strategies that are appropriate from an order fulfillment and inventory investment standpoint, to support your business model.

Determining these strategies can quickly become overwhelming.  There are powerful Inventory optimization and Strategic Analysis software packages on the market to support this decision making process.  They don’t however, fully take the place of deliberate, clear thinking when crafting a comprehensive supply chain strategy.

So as planners sit down each morning to make the decisions that are driving customer satisfaction, understand hit that they really make many, interrelated decision over different horizons.  When you design your supply chain, take the time to decompose these decision.  Follow them back to the business drivers and create an integrated strategy that allows planners to take powerful actions.

Getting Inside Decision Cycles

“There is always a latent tension between what facilitates timely decision and what promotes thoroughness and accuracy in assessment.”

Many of the supply chain planning software implementations on which I’ve worked have felt like quests keep to cram more data into the solution to enable the planners to make ‘perfect’ decisions.   This idea that more data means better decisions – that somehow if we could just get a little more data, the software could calculate a near-perfect, optimized plan – can become distracting and lead implementations astray.

These conversations remind me of my experience in the US Marine Corps.  The art of war fighting came down to making imperfect decisions, with incomplete information, but executing them… well, let’s cheap jerseys just call it ‘vigorously’.  We talked about getting inside the enemy’s decision cycle.  That ability to interpret the environment, reassess, adjust, communicate, and press on more quickly than our foes was one of the keys to success on the modern battlefield.  The decisions did not need to be ‘perfect’, but they did need to be ‘good enough’ on a timely basis.

The military has talked about the O-O-D-A loop for decades.  could It is in fact, the foundational concept behind the Marine Corps model of maneuver warfare.  The ideas have filtered throughout the business community, but as they were passed on, some of that original messaging was lost.

This is not a single cheap nfl jerseys loop.  There’s a crank on the side of this wheel that needs a strategic focus to turn.  The companies that turn this faster gain strategic advantage, but what’s the differentiator?  This comes down to one box on diagram: Orient.

Orient.  Understanding, interpreting, and synthesizing information is what good companies do well. They are very efficient at orienting in the OODA loop by filtering out noise and distractions. Organizations focus their view of information and streamline decision making by defining effective metrics.

Misalignment in the metrics strategy can cause an isolated, high visibility service failure to create the impression of broader problems, while an endemic weakness may not be apparent in the granularity of the data at specific nodes in the network.   ‘Correct’ metrics will depend on the supply chain strategy and the future state organizational model.

A fully realized Performance Measurement System is the underpinning of effective tactical and strategic decision making. It enables an organization to

  • Monitor (Observe):  Track performance for reporting
  • Control / Diagnose (Orient / Decide):  Highlight when the supply chain operations require modification or attention
  • Direct (Act):  Use of metrics to focus activities and as a foundation for personnel evaluation

The steps for implementing an effective Performance Measurement System are easy to list, yet deceptively difficult to carry out.

  • Metrics Definition
    • Select appropriate metrics to monitor supply chain performance
    • Establish clear goals
  • Data Management
    • Define data required to support metrics and operational statistics
    • Determine mechanisms for storing data and displaying metrics
  • Performance Tracking and Root Cause Analysis
    • Define baseball process and organizational responsibility to track performance and identify points for further analysis
    • Define root cause analysis / corrective action process and mechanisms

Effective, efficient decision making.  Cranking that OODA faster wholesale mlb jerseys than your competition; fast enough to keep ahead of the market.  These are critical factors for success when conducting operations with the Marines or guiding your supply chain organization.

Talk to MEBC today about creating this foundation for your supply chain operations.

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