Have you ever really thought about how much data and information is really required to run your supply chain? That’s not simply collecting and analysing today’s information, but also including storing data from the past in an immediately accessible way? How important do you think being able to store and access this data and turn it into information and insights might be as we go forward?
Imagine trying to run your supply chain the ‘old fashioned way’ with pen, paper and filing cabinets full of material, or for that matter, on CD’s or even spreadsheets, tenuously linked, built differently and inconsistently and unaudited.
You can try but it’s a very difficult exercise to ponder this, because it’s no longer in our consciousness. Who can even imagine not being connected via the internet? The idea of working that way is simply overwhelming! Further, it just wouldn’t work!
We’d be a laughing stock and we’d quickly be out of business.
Similarly though, whilst we have all moved on from paper, pens and filing cabinets of resources, and recognise that we do need some sort of software to assist us in our supply chain work have you really thought lately about what it’s costing you to not be using ‘more advanced’ well- proven technology to help you and your team run your supply chains?
We are all hearing lots about new technology. Every day there is something on the news about Blockchain, Robotics, and Artificial intelligence. I have even written an article about the 25 ways that advanced technology has already disrupted our supply chains of today (click here) before we even discuss what the supply chain of tomorrow might look like.
Note: I use the words ‘advanced technology solutions’ loosely because most of what is being implemented in our supply chains today has been around for the last 20 years and is hardly advanced. What is advanced are technologies such as block chains and distributed ledgers, robotics with 6 degree joints, when the human arm has only 5 and artificial intelligence, which began as simple pattern recognition software, and was developed simply to do the heavy lifting for us humans. At this stage, I am referring to technologies that have been around for many years, but are advanced when compared to manual processes and excel spreadsheets. Further, though, even when we are considering introducing truly advanced technology solutions the steps that we go through will be the same.
So, with this in mind, is it time now to start seriously thinking about how you are going to take your supply chain to the next level, whatever that might be?
Foundation Step #1. Be open to taking your supply chain forward.
Why is this important? Put simply, if you are not moving forward you are standing still and if you are standing still and your competitors are moving forward, guess what, you are actually moving backwards, becoming more and more uncompetitive every week, day, hour and second until you are taking action to move forward. You are slowly becoming so uncompetitive that the trek back up the mountain will soon become impossible.
So, if you are using predominantly spreadsheets as your forecasting, route planning, route allocation and dynamic sourcing might it be time to ‘dip your toe in the water’ regarding what alternative options might be available and how much additional value can be driven from their ability to drive a superior result? Have you ever wondered how many dollars in revenue you are leaving on the table simply because of not using proven technology? How can it hurt to find out and develop a fact based opinion?
Is your supply chain highly labour intensive? Are you using low skilled labour? What can you do to ensure that you leverage the many ways available to install pattern recognition software which has been around for years, to simply do the heavy lifting for you?
If you are currently using disparate, non-compatible systems in various parts of your supply chain, how could you better leverage the internet of things to drive greater connectivity across the supply chain?
Further to this one is your equipment not being managed efficiently and effectively because you don’t have telematics or connectivity in place.
If you are using multiple platforms, how could you deliver one platform on which to deliver improved performance across the end to end supply chain, how do you determine which platform to select and why is this particularly important now?
How are you collecting and leveraging your supply chain data and information? Do you think someone might pay for this data if it could be cleaned up, depersonalised and packaged appropriately? Could there be a gold mine here that you are yet to uncover? Has your competitor already worked this out?
And depending on where you are now, why not investigate a Supply Chain Management tool to manage your entire supply chain?
Further though, might you consider having some software or even an app built or modified specially for you? Do you have an idea, you know that idea that keeps bubbling to the top of your mind and you decide no before you’ve really even thought it through?
So, I hope you can see that wherever you are, there is always a next step and it’s really important that you continue to move forward by simply taking that step.
Independently of where you are now, there are some foundational steps that you will need to follow.
So, let’s start at the very beginning and work from there:
Oh, and whilst we are on this subject, remember, you don’t have to do everything yourself, managed services and outsourced providers can assist. Often they already have the systems set up and it’s just a matter of plugging in! Also we will always be measuring ROI for our supply chain so our capital investment allocation and usage is measured and monitored.
Foundation Step #2. On-site or SaaS?
On-site is investing in the technology for actually having the SCM tools on-site. That includes servers, desktops (or laptops) and a host of other related hardware. So, historically, IT equipment has been bought and held on-site. Remember the old box that was limited in it’s capacity that used to sit under the desk or in the computer cupboard
SaaS stands for at least three different “as-a-service” offerings. The original use of the acronym was to refer to Software as a Service. The term has since been used in reference to Storage as a Service and Security as a Service. Saas is more typically the way of the future. It allows us to access capacity, in the cloud which is seemingly never ending and add-on’s like Artificial intelligence and more which have not even been invented.
Whilst there is no right or wrong on this, some companies still opt for a mix of on-premise software and SaaS. This is often justified for reasons such as keeping sensitive supply chain information secure (and on-premise) while still allowing for the convenient use of cloud-based technology.
That said, though, however, the likes of just having a bunch of spreadsheets and folders in Google’s cloud isn’t the ideal SCM software setup either. Truly authentic management tools (on-site or SaaS) have more sophisticated features that tackle different areas of your supply chain network. That brings us to Foundation Step #2.
Foundation Step #3. Where might advanced technology add (more) value to my business?
What you are really doing in this step is working out where is your existing process destroying value?
The difference between using purpose built software and simply having a bunch of files, or spreadsheets is that a file manager can only have so many core features that efficiently and effectively replicate the following.
- Forecasting – A feature that crunches data based on customer demand, market forces and allows for lean, just-in-time production. Demand forecasting is a field of predictive analytics which tries to understand and predict customer demand to optimize supply decisions. This is also crucial for reducing the costs of carried inventory and inefficient sourcing.
- Logistics – Have you ever noticed that Amazon and other delivery companies show the status of a shipment? That is done through the use of a logistics tracking tool that is a staple now in SCM software. Here is where you will find the data on delivery performance, data on your transports (on land, sea and air) as well as enabling ways to optimize it all to meet customer and end use consumer needs.
- Order management – This feature provides visibility of not only the orders your customers make but also the orders being made between different parties such as from supplies to manufacturers. If the supply chain is one large machine, SCM software allows you to better understand how each of its cogs and gyros connect with each other.
- Quality Assessment– The risk of damaged goods in any part of the supply chain is always ever present. Using too many manual methods will create a lot of delays (which is bad in cases where a customer is already frustrated by receiving a flawed product). A quality assessment feature allows you to streamline the processes of identifying bad batches and allows for smoother returns. There is a lot happening in this space with block chain which provides the traceability for contaminated goods and allows the rapid identification of the source of these items and replacement with a non-contaminated product. (See Walmart block chain trials individually and with 10 of their largest suppliers.)
- Perfect Order –Wouldn’t it be wonderful to know exactly when an order has been stuffed up and what happened and even better to be able to advise the customer ahead of time, no matter where in the supply chain this customer resides separately to the ‘last mile’. This would entail transparency and visibility from order to fulfillment.
- And the list goes on!
So wherever your supply chain currently is there are the standard features you must look for in your SCM software. Anything less than this and you are risking a huge blind spot along with your business success.
Foundation Step #4 – Prioritising the projects
So, how might you work out your priority areas for focus? Ideally, you will calculate the opportunity for value to be added and then work out how much each new technology application can deliver. Prioritise each initiative based on relative ease of realisation and value added.
Here are some questions for you to consider:
- What is your supply chain underperformance (too much inventory, poor and uncompetitive service levels, on time delivery, high delivered cost ) and what do you think drives it?
- Have you done your industry benchmarking, your KPI”s are in place, your systemisation and your network redesign? If so, you will have a pretty good idea of what needs to be improved going forward and you will also know for sure that it’s not due to unnecessary complexity in network design or poorly and ill-defined systemisation of basic supply chain processes.
- What is your organisations predilection wrt to inventory? Do you have too much inventory and is this driven by poor forecasting or is it simply a need to never run out of stock which in some businesses will never go away, no matter how much we focus on it! (Healthcare, pharmaceuticals, emergency stocks associated with life and death such as medically related products.)
- What industry are you in and how far away from the end user consumer are you? If you are in a hi performing supply chains such as FMCG, pharmaceuticals and Healthcare you will probably have been dealing with the need for lower delivered cost, lower cash, higher ROI, and improved customer service levels for years. Other industries, not so much.
- How close are you to industries that have been disrupted? If you are close and have not been disrupted yet, you need to start thinking about what disruption looks like for you? So, you need to start asking yourself how you will deliver lower delivered cost, lower cash, higher ROI and improved customer service levels.
If you have answered the above easily, you probably already know where you need to focus. If the answers to the above are not easy, you can take some other actions as follows:
- Ask your financial or supply chain analyst to do a quick, rough and ready assessment of the opportunities that exist for improvement in your supply chain as it stands today. Ask them to take the outputs of your supply chain performance (customer service levels, delivered cost, cash tied up in supply chain (could you buy an island if it was released?) and ROI, and try to work out what is driving those results and how you could do better.
- The areas you want to see included in the output from the analyst include but are not limited to: Sales/marketing integration, S&OP(or OE for retailers), demand forecasting, supply management, matching demand and supply, scenario planning, product life cycle management, development, phase in and phase out, data quality, management and analysis, improved connectivity, visibility and transparency, one person in charge, improved cross functional operations and more.
- You want to understand what impact say a 5% improvement at SKU level in forecasting might add in reduced inventory and fewer stockouts, and improved on time delivery in full? You might be surprised at the answer to this very simple question.
- You can then go on to the other areas listed in step #2, asking similar questions about small improvements and the value they might deliver. You need to get an idea of improvement vs value offered.
- Suggest to your analyst that they might see if they can locate an old SCOA (Supply Chain Opportunity assessment). Most supply chains have one of these from years ago. Drag it out, repopulate with today’s nos and calculate the opportunity.
- This analysis, which I emphasise is rough and quick, should highlight the areas where for small outlay of time and money you can generate big outcomes. You might then like to engage your team, ask them to get into a room, include others on line, and work through the rough outcomes as validation with the team.
After all of this though, you have identified those areas that are a priority and probably have one or two that you could start asap.
Have the goal in mind of making the preferred suppliers do the hard work for your business. They will come with promises, so make them prove it to you using your data.
Foundation Step #5. Selecting the preferred supplier
This is the fun part really because the onus is on the potential preferred supplier to prove that doing it their way will deliver more value than your current methodology, so make them do the work.
Locate a list of suppliers that work in your industry. Always include some industry names and some broader names who bring additional expertise. You will do some secondary research to shorten this list to the few you want to meet, (and deep dive with.)
Set up meetings with each short listed supplier, ask all short listed suppliers to attend and agree up front the questions you will ask and the weighting of the answers. Ask all suppliers the same questions at the meetings and based on their responses you will select the preferred candidate.
There is plenty of information around about how to select a preferred supplier. The questions should include:
- Supplier capability
- Tool capability
- Reporting capability
- Other areas you will investigate will include: Compatibility, Documentation, Help Desk, System disaster recovery, Cyber security and privacy of information, protection for customers data, warranties, pricing, areas where additional costs are incurred, installation process, trial period, training etc.
Now, here’s where the fun really starts:
- Ask them to show their expertise in your industry, get them to give you a list of references but one specific reference site in the same or similar industry that you can speak with.
- As soon as you are happy that they are who they say they are and that they can deliver, provide them with some data (the last 12 months if possible) and make them prove what they can do, vs your historic information.
- Make them quantify the value added to your business and importantly, make them show you how the value added by their tool allows you to afford their tool!
- All of this information needs to be presented to you, with explicit assumptions, each one reviewed with your team, so that your team fully understand how value is going to be realised and even whether the value equation is realistic under your operating conditions.
Foundation Step #6. Implementation and continuous improvement
The final step is having the implemented solution working in your organisation. Make sure that in your negotiations you have a trial period so you can get out of the agreement should the system simply not work for you, or simply not be installed properly. Remember you don’t pay if the tool doesn’t work, and working means delivering the value the supplier has committed it will. You need to state this up front and ensure it’s recorded.
So, with this step, comes Continuous improvement, which is an ongoing effort to improve products, services or processes. Consider using the plan-do-check-act (PDCA) cycle, also known as Deming Cycle.
Final Note: Expect a custom solution to be the best solution.
Even with the information covered in Foundation steps #1 to #6, it is not likely that every company has the exact same software solution. For example, some companies opt for a mix of on-premise software and SaaS.
Some features, while staple, would demand more sophistication than other features depending on your specific business needs. For example, you might require more forecasting capacities because your product uses a lot of different raw materials (e.g. automobiles, electronics etc). Or, you could require more logistics because you are more heavily into e-commerce.
In any case, there will come a point where simply acquiring the software tools will just be the first step. Much like anything else in SCM, you must prepare it to adapt to your business’s own unique needs.
All of this can certainly make SCM software less of a convenient tool and more of a daunting project in the making. However, the way it will streamline and transform your business makes it well worth the effort. And at the rate that other businesses are adapting these technological solutions, such transformations might as well be mandatory and is rapidly becoming a requirement to ‘be in the game’. The only real risk is the hesitation to ‘dip one’s toe in the water’ and simply take the first step to begin the process.
We are now long past the age of using folder stacks and filing cabinets and certainly past the age of a competitive spreadsheet run supply chain which will soon also be relegated to history! Make sure you are moving forward purposefully and simply not waiting till it’s too late to find out that you are not competitive!
By the way… Ever heard about what happened to strong brand KFC? If you want to avert that kind of disaster for your business – God forbid – Click HERE. Don’t worry, it’s totally FREE.
Or, maybe you would like to better understand how you can more fully leverage today’s technology in your supply chain? Click HERE for a FREE ebook. You just might discover the missing piece to get your business back in the lead where it belongs!
And of course, if you would like more information or to discuss more ways how to drive greater innovation into your supply chains, please just book for a Complimentary Consultation with me.
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