TOO MUCH SENSE, TOO LITTLE RESPONSE

There is a growing focus on solutions that "sense" what is going on in a business—alerting users to gains in demand signals, plant failures, supply outages, and similar occurrences. The vendor and analyst communities have labeled these tools with names such as Supply Chain Event Management and Business Activity Monitoring. Clearly, the ability to get real-time information on imminent events is crucial for companies seeking to become more responsive.

Randy Littleson serves as vice president at Kinaxis and has more than 17 years of management experience, having held executive-level positions at Interface Software, Spyglass, and Palindrome Corporation (a Seagate company). To discuss this topic further, join him online at blog.kinaxis.com.

The drawback is that sensing solutions don't help organizations to respond—and resolve—the problems that arise. And the traditional approach of feeding these events back into the planning cycle isn't fast enough. As a result, users are either inundated with sensory overload without an effective response capability (often leading them to disable the sensing tool, since it has become "noise") or their response happens too late to correct the situation.

Today's highly volatile, consumer-driven markets make sensing and responding to change more important than ever. And as companies increasingly outsource to gain cost efficiencies, they add complexity to the supply chain. For example, research by the Electronics Supply Chain Association (ESCA) shows that a 10 percent forecast error in the 1985 personal computer supply chain produced 21 percent in excess inventory. But in the current telephone handset supply chain, the same 10 percent forecast error produced 61 percent in excess inventory.

While sensing capabilities and tools are valuable, they must be complemented with an organizationwide ability to quickly and effectively respond to change. Key decision makers throughout the organization need instant access to the information required to understand last-minute changes and be armed with collaborative "what-if" capabilities that allow rapid and thorough evaluation of action alternatives. Moreover, users must be able to judge these action alternatives by their ability to meet corporate objectives for margin, inventory, on-time delivery, and similar key measures.

These capabilities are exactly what Response Management solutions provide. Response Management facilitates collaboration across the extended supply chain, continuously aligning OEMs and contract manufacturers—along with supply, demand, capacity, and product—so organizations can collectively sense and respond to changes that could create serious difficulties if left unaddressed. And by enabling a rapid response that supports organizational objectives, Response Management solutions ensure that each action taken is not only fast, but appropriate.