4 Key Tools for Managing Shortened Customer Lead Times & Demand Volatility

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1 ebook 4 Key Tools for Managing Shortened Customer Lead Times & Demand Volatility 4 Key Tools for Managing Shortened Customer Lead Times & Demand Volatility S U P P L Y C H A I N

2 Content Introduction Tool 1 Implement a Supply Chain Management Console Tool 2 Enhance Your Automation Capabilities Tool 3 Manage by Exception with Powerful Workflow Tools Tool 4 Expand Supplier Integration Conclusion

3 Introduction Resiliency Manufacturing organizations have always recognized the necessity of managing both the demand and supply sides of the supply chain, which are often not in alignment. Yet the modern supply chain organization is expected to achieve a trifecta of agility (speed), accuracy (of all supply chain data), and resiliency (ability to respond quickly) in order to remain competitive. Moreover, several factors conspire to amplify the challenge posed by these requirements: 1 Globalization and the goals of low cost manufacturing have created a more complex supply chain with longer lead times and disparate systems. Demand volatility is on the rise due to the age of the empowered consumer, creating a new norm of brand selection and switching based on increased access to information and social media. The pace of business is rapidly accelerating in the networked economy, driving shortened customer lead times. Agility This ebook provides four key tools to help you manage the increasing pressures on manufacturing supply chains to decrease lead times in an era of volatile demand and complex supply networks. When properly executed, these tools create a comprehensive solution set for achieving fulfillment and quality excellence, customer satisfaction, and increased responsiveness. Accuracy

4 1. Implement a Supply Chain Management Console A single interface for processing all data related to supply chain management (SCM) provides visibility into all operations across the supply chain, and reduces the risk of errors due to redundant data or re-keying information. The more systems and individuals that perform the same processes, the higher the likelihood that multiple interpretations of the same data will decrease your forecasting and fulfillment accuracy. To illustrate how this works, let s look at two common scenarios: Scenario 1: Disparate, redundant data from multiple systems If a company uses a general ledger, warehouse management system (WMS), ERP software, and a third-party logistics (3PL) system, each of these use different data sources for procurement and fulfillment. In this scenario, they can have four different versions of the data, especially considering the external inputs from the 3PL company. Without a single console to view and collaborate on warehouse inventory or integrate customer lead times into the ordering and shipping process, it is increasingly difficult in a complex, global supply chain operation to accurately project demand and fulfill orders on time. Scenario 2: Data from a single, large system that is separated by function In many companies with large or older ERP systems, information for different functions, such as quality, engineering, procurement, and AP is housed in separate silos that require duplication of efforts. 2 Since these information silos do not talk to one another, it is difficult to determine the overall picture, much less generate cross-functional reports or analysis. In all cases, the central goal for optimal supply chain management becomes how to achieve a single version of the truth. 3 The best solution is to streamline your supply network into an integrated supply chain management (SCM) console, leveraging technology to auto-populate redundant data, collect and analyze demand information ( demand sensing ), and integrate previously unconnected processes such as warehousing, transportation, and procurement. Many solutions offer the extended capabilities of business intelligence (BI) and analytics. These capabilities are critical for managing the huge amounts of data from complex supply chains and creating real-time graphical reports to increase forecast accuracy.

5 2. Enhance Your Automation Capabilities The writing is on the wall for any supply chain organization that intends to stay relevant and competitive in the future: analysts predict that in the long-term, at least half of all standard processes will be automated, and half of those will include automated selfcorrection. 4 Yet many studies reflect a relatively low adoption of automation within key supply chain transactions. And nearly half are still utilizing phone, fax, and for information synchronization. Current technology provides improvement capabilities that allow companies to realize tremendous performance enhancements and reduction in waste. Manual processes create a notorious lag on productivity: time and effort are wasted on re-keying information, searching for data placed in multiple locations, duplicate or late payments, and a host of other inefficiencies. The data analysis from that point forward is both an art and a science that requires regular monitoring and adjustments, until your decision network and the reporting tools feeding it can swiftly respond to the variety of modern supply chain challenges. Despite all the hype around future technologies and trends such as Big Data, if your organization still performs critical processes manually, closing the gap between manual and automated processes is the next Big Thing that s already here. Regardless of the degree of automation you currently have in place, it is always crucial to look for ways to automate smarter for continual performance improvement and cost reduction. Read More on Automation here: The operational cost of a high error rate due to these manual processes can be seen in the bottom line as well as in decreased productivity and customer satisfaction. 5 Companies that have implemented automated processes with centralized databases reap tremendous savings in the time it takes to perform each task, in addition to minimizing errors. The key is to assess your company s performance in critical processes and determine the right combination of automation and human oversight that will translate into the most efficient solution for your business. In general, however, the more processes that can be automated, the more accuracy and efficiency you can achieve.

6 3. Manage by Exception with Powerful Workflow Tools An increasing number of companies are working with multiple ERP systems due to M&A and globalization. All ERPs may not have an integrated workflow engine, so an external solution that helps the systems seamlessly talk to one another is often deployed, generally as part of an SCM console as outlined earlier in this ebook. The increase in global trading networks (suppliers, customers, and carriers) is driving more complexity into supply chain operations. As a result, the need for collaboration systems that can automate processes and synchronize information in real time is more critical than ever before. Automated workflow provides notification for reviews and approvals, including the ability to route to alternate users. Powerful solutions can provide the ability to customize the workflow engine based on your specific processes, and can integrate mobile devices in addition to multiple ERP systems. Workflow processes in complex supply chains also present unique opportunities for management by exception (MBE), so that only disruptions in your workflow that require manual intervention or oversight will cause delays in processing. Your procurement and fulfillment operations will be more efficient when your supply network is less reliant on manual routing and approval, especially in a global network spanning multiple time zones. This efficiency results in reduced labor and transaction costs, as well as increased customer satisfaction due to on-time shipments and the ability to accurately sense and respond to demand. Another way to employ management by exception is by using the Pareto Principle, also known as the 80/20 rule or the law of the vital few, to optimize your demand forecasting and inventory replenishment processes. Simply stated, the Pareto Principle asserts that 20% of any population will account for 80% of the observed results. 6 You can use this principle one of two ways to guide your demand forecasting workflow: 1. Assuming that demand is most predictable for 80% of your products that produce the lowest amount of sales, and require inventory replenishment least often, automate the procurement workflows for those items and focus your attention on the 20% (or exception) that have the most volume, sales, and potential volatility in both supply and demand. 2. Approach the exceptional 20% from the reverse viewpoint and, since those items have a higher volume and more frequent ordering cycles, automate the fulfillment processes for those items. With either approach, the result is that resources are optimized for the more volatile processes with less predictable demand and inventory, and overall task processing time is sharply decreased due to automation. In general, the pathway to an effective, automated workflow process model is threefold: 1. Analyze current processes affecting your supply and demand network, such as purchase ordering, quality collaboration, forecasting, and replenishment of safety stock levels. Look for excess steps or routing/ approvals required. 2. Streamline the process, if necessary, so it is simplified yet effective. 3. Use an automated workflow engine to ensure the process is followed correctly every time, with no delays between steps. The primary goal is to optimize workflow, using the appropriate balance of automation and manual oversight so that the right people can complete all steps of a process without delays or errors.

7 4. Expand Supplier Integration The abilities of traditional ERP systems to track products within the four walls are no longer sufficient for today s supply chain, which relies heavily on outsourcing as well as multiple locations and partners with varying information systems. An array of supply chain automation solutions allow you to integrate supplier data, providing the desired visibility and automation with a simpler implementation and often, a more user-friendly interface. These portals can additionally provide visibility into supplier inventory with forecast collaboration, empowering your planners to make informed decisions without phone calls or lengthy exchanges. Three common categories of data integration are B2B/EDI, web portal (cloud), and SFTP. Leading supply chain collaboration solutions will support all of these as well as provide: A single login interface that consolidates data from multiple integration types and points. Validation of data and documents between the supplier and your ERP. Support for PTN/LPNs in addition to carrier tracking. Rules and workflows that can be configured to specific suppliers or groups of suppliers. Supplier integration provides the visibility into supplier data needed to accurately identify potential issues with fulfillment. Additionally, real-time integration with your suppliers provides enhanced collaboration capabilities that help you identify potential pain points early in the ordering process, providing greater flexibility to determine the best solution for order fulfillment. For example, if your single supply chain management console contains workflows that require a supplier to acknowledge every purchase order, each supplier must either commit to the quantity and lead time requested or let you know if an order cannot be fulfilled from that site. This gives you the ability to make a strategic, timely decision to use another supplier from your network, if needed, in order to meet your fulfillment requirements within the customer s lead time. Another solution that enhances the capabilities of all of the tools in this ebook is to source regionally in order to meet shortened customer lead times. 7 In simple terms, this means that an organization employs its supply network at the regional level to service that demand, and allocates demand planning, logistics, and customer service functions to each country in the network. Enhanced collaboration capabilities such as comments, notes, attachments, and real-time interactions such as chat.

8 Conclusion As technology rapidly advances and supply networks are increasingly global and complex, organizations clamor to streamline operations and maximize efficiency in order to keep pace. Add to this the proliferation of instantly available information, social media, and the empowered consumer, which results in a climate of volatile demand, and it is clear that to be successful in the networked economy, supply chain organizations must adopt a continuous improvement model to succeed. By taking advantage of technology that integrates disparate systems and global suppliers into a single console, automates processes, and provides real-time visibility and analytic capabilities, companies are better prepared to meet the challenges of an economy moving at breakneck speed. When you have the ability to view and analyze all aspects of your operations at once, automate the most predictable processes, and produce only one version of the truth, you can dedicate your efforts to responding to the unexpected. Now that s agility, accuracy, and resiliency. Endnotes 1 IDC. Worldwide Manufacturing Supply Chain 2013 Top 10 Predictions, December Plex Online. Ten Warning Signs Your ERP System is Killing Your Business. 3 Collaborative Consulting. Data Visibility and Supply Chain Intelligence: Creating an Optimal KPI Model, IDC. Worldwide Manufacturing Supply Chain 2013 Top 10 Predictions, December Kofax, Inc., The Top 10 Reasons to Automate Your AP Processes, Whiteside, Bill. Demand Solutions. Manage What Matters: The Pareto Principle, ABC Analysis and How to Manage by Exception. 7 IDC. Worldwide Manufacturing Supply Chain 2013 Top 10 Predictions, December 2012.

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