Agility, Alignment and Adaptability:
Why ERP Supply Chain Suites Can't Deliver…and How Kinaxis RapidResponse Can
Investing in a patchwork approach for integrated demand and supply chain management is a gamble, at best, and the industry as a whole is questioning the merit of ERP supply chain suites. With a growing focus on sales and operations planning (S&OP) as a means to ensuring agility, alignment and adaptability, the limitations of ERP systems and their associated modules are becoming very apparent:
- ERP systems have a very "inside out" perspective of the world and struggle to incorporate data from external organizations as anything other than reference information.
- In today's dynamic market, you must be able to evaluate situations in seconds, not hours or days. When a single MRP run takes hours, there is little opportunity to investigate and evaluate alternatives, let alone quickly reach a decision.
- ERP suites provide multiple, separate modules, almost always with different data models. Therefore, they require different user interfaces and integration among the modules.
- Companies can arrive at a quick and "better" answer through team consensus than from the slow and "optimized" answers of their ERP's advanced planning tool.
The supply chain has transformed—so too must the technology approach to solving the emerging supply chain management and S&OP challenges.
- One service…not many modules.
- An integrated view of the entire, extended supply chain…not just your internal operations.
- Analysis in seconds…not days.
- Collaboration and human judgment…not black-box optimization.
- Supply chain response management…not just supply chain planning.
Let's examine it further…
An Outside vs. Inside View
In today's world characterized by globalization, outsourcing and off-shoring, your view of the market has to be "outside-in." In other words, to understand both shorter term demand fluctuations and longer term market trends, you must have information from your customers and other market indicators. In addition, because your ability to satisfy the market increasingly depends on manufacturing, distribution and trading partners, you cannot take confident action on demand shifts without their latest supply picture at your finger tips. Your supply chain's agility, alignment and adaptability depend on reaching consensus through timely, effective collaboration among trading partners.
ERP systems, given their history as accounting packages, have a very "inside-out" perspective of the world and struggle to incorporate data from external organizations as anything other than reference information.
Recording all business transactions is undoubtedly an important aspect of a company's operational capabilities. But as a means of predicting your ability to satisfy future demand in a cost-effective and efficient manner, this "inside-out" view is slow and cumbersome. It mandates a sequential process in which each trading partner along the supply chain separately and individually evaluates its ability to satisfy upstream demand with only partial downstream information. The information flow latency—and therefore decision latency—in this arrangement is enormous and can only be overcome with excess inventory and capacity as "just-in-case" measures.
In supply chains governed by an ERP system's "inside-out" view, it's not unusual for the information flow from consumer to component supplier to take longer than the product flow from component supplier to consumer.
When information flow is slow, companies struggle to get alignment across the supply chain. Agility and adaptability are nearly impossible to achieve.
The Need for Speed
Great progress has been made in the physical supply chain, with concepts such as cross-docking, direct shipments and drop-ship. But given ERP systems' "inside-out" perspective, very few—if any—of the equivalent concepts have been adopted in the information supply chain. This fact illuminates the need for rapid supply chain planning, performance monitoring and risk response. Demand volatility has never been higher. Expectations for order-to-delivery lead times have never been greater. Products have never come to market faster. In this dynamic market, having a detailed understanding of the inventory throughout the extended supply chain becomes a basic requirement to ensure a rapid, effective response to a new enquiry or order.
For example, in the case of an inventory shortfall, you don't have hours or days to evaluate your ability to satisfy the demand. You must make a decision in seconds, and the evaluation must include the extended supply chain of contract manufacturers and component suppliers. In the case of misalignment, rapid "what-if" capabilities enable the relevant parties to reach consensus by comparing the impact that alternative courses of action have on financial and operational performance.
When a single MRP run takes hours, there is little opportunity to investigate and evaluate alternatives, let alone reach consensus and alignment across the entire supply chain
Why a Single Data Model Matters
Even within your company's own operations, ERP suites provide separate modules, almost always with different data models. Therefore, they require different user interfaces and integration among the modules for demand and supply planning. Not only that, they often require different modules for S&OP and tactical and operational supply planning. Further modules are required to exchange information with your customers and suppliers, with an emphasis on transaction management rather than decision making (despite the fact that most supply chain decisions will impact future performance). And yet another module is required to create forward-looking financial reports for operations management.
Almost no "what-if" capabilities exist to enable the side-by-side comparison of different scenarios across both financial and operational metrics. Of course, much of this can be achieved—with massive assistance from Excel—if you have a week or more to wait for the results and a ton of people to go through the exercise.
Relying on batch processes to convert data between modules—each of which incorporates outdated assumptions about the market—is time consuming and prevents alignment across functions, let alone among trading partners.
Human Judgment Drives Consensus and Compromise
Today's supply chain requires a unique marriage of human judgment and machine processing power. When trading partners achieve consensus on a quick and "better" answer, it is immeasurably better than a slow and "optimized" answer that only considers your own company's operations. Moreover, the assumptions about the market that drive the "advanced" planning tool from your the ERP vendor were relevant 9-18 months ago when you started the implementation. How many of these assumptions have now changed? How long will it take to incorporate these changes in to your "advanced" planning tool? How do you run your supply chain while you wait for the changes to be made?
Machines are far better than humans at processing large amounts of data. But humans are far better than machines at dealing with uncertainty and compromise.
Kinaxis RapidResponse: a single planning and response management service that delivers on the promise of integrating information, capabilities and people
Fully leveraging an outside-in view, Kinaxis® RapidResponse® is a supply chain management and S&OP cloud service that has a single data model and single user interface for:
- Both demand and supply
- Both long-term and short-term planning
- Both operational and financial performance management
- Both risk identification and mitigation
- Both "what-if" creation and evaluation
The single data model used in RapidResponse makes it possible to detect what has changed, the future risk (if any) caused by this change and the person responsible for dealing with the future risk.
A customer can make a demand change, and everyone impacted by the change—within your company and within a trading partner's company—will have immediate visibility into its effect. This greatly facilitates consensus building and rapid decision making.
RapidResponse is uniquely architected to support the ideal marriage of human judgment and machine processing power. People are empowered to deal with what they do best: nuance, subtlety, uncertainty and consensus building. The RapidResponse engine quickly evaluates large quantities of data, which enables people to understand the consequences of their actions on both financial and operational metrics within the context of corporate goals and objectives. This empowers them to make rapid, effective decisions.
With Kinaxis RapidResponse, you can manage your entire supply chain…across sites, systems and partners…in one place…tackling the many challenges that threaten your operations performance on a daily basis.
Learn more about the advantages that the RapidResponse Service is bringing to 10's of thousands of users spanning the globe every single day.