When things happen in supply chain, knowing sooner and acting faster can mean the difference between a major catastrophe and a minor hiccup in your supply chain performance. It can mean the difference between late orders and angry customers and the ability to win additional market share. It can mean the difference between getting fired and getting a promotion. Imagine this scenario; you are a supply chain executive for a major U.S.-based electronics manufacturer. It’s a Sunday morning in May 2008. You’ve woken up and are reading the Sunday news. Suddenly you read something that makes you spill your coffee. There has been a major earthquake in Chengdu, China… where several of your key items are manufactured. This is bad…. very bad, but you know you have the tools to respond. By end of day Monday, you have identified the key items that are manufactured in that region, identified the customers and revenue impacted by the loss of those items, identified alternative sources, and were able to shift to new suppliers and reschedule orders. All with minimal impact to your customers. Is this kind of performance too good to believe? Can you imagine your supply chain planning team being able to pull this off? Supply chain performance like this is not out of your grasp. It takes two things:
- Knowing sooner
- Acting Faster
Knowing sooner means knowing both that an event has happened and the impact of that event. In the story described above, the event was announced in the news – you don’t need anything special to see that. However, what wasn’t immediately apparent was the impact of that event. What customer orders are impacted, what revenue is impacted, how does this impact your manufacturing plans. In many cases, supply chain issues aren’t going to be found in the news. Most often they will be smaller, more localized issues that none the less can significantly impact your business. So, sometimes, knowing sooner means you can sense the event before it materially impacts your supply chain. The sooner you sense the event, the more time you have to react. Let’s say, for example, that a supplier has delayed the delivery of some components. Basic planning functionality allows you to report on late supplier delivery. However, knowing sooner means not just that the parts will be late, but instead the impact of this delay. What orders are impacted? If I can’t resolve the issue, what customers do I need to notify. Looking at just the notifications and not the impact means that you can soon be buried by the noise. Not every delay needs a response, only those that will impact your ability to deliver. The final piece to knowing sooner is to prioritize. In my experience, planners are dealing with hundreds sometimes thousands of exceptions – things that need to be addressed. The problem is figuring out which of these are more important than others. Prioritized action lists based on impact to your customers or whatever key metrics drive your business can ensure that planners are working on what matters. Act Faster Acting faster means once you are aware of an issue and you know that issue needs your attention, that you have the tools to formulate an effective response very quickly. The problem with traditional ERP systems is that they don’t allow fast response to any situation. They simply weren’t designed with that need in mind. To react quickly, you need a handful of basic capabilities:
- You need fast analytics that allow you to try and discard multiple resolution options in seconds.
- You need resources that allow you to quickly make good decisions based on solid data.
- You need visibility that allows you to see beyond the factory’s four walls, but instead to the broader supply chain, including other sites, warehouses and if data is supplied, supplier and customer locations.
- You need scenarios that allow you to try and compare multiple resolution options.
- You need to collaborate with coworkers through sharing data and contextual information so they can instantly see and understand the issue you are trying to solve.
Acting faster doesn’t mean act randomly. Anyone can knee-jerk react to a situation. With traditional ERP systems that is often the only option and in many cases this causes more problems than it solves. If you have a system that provides the capabilities described above, you can respond with confidence knowing you have the right data and the right tools to analyze the problem to come up with the right answer.
What is your approach when you need to respond? Do you have different ideas about what is needed? Comment back and let us know!
I can not agree with you more. Canned reporting from ERP systems are just that canned. I utilize a control tower matrix that gathers data from finance, marketing, and production. I have weighted this simply matrix to align with KPIs and forecasting. Additionally, visual references help me to quickly identify the health of my supply chain.
With all that in place I still need to keep my head on a swivel, and rely on my team and their instincts. No matter how complex a virtual model is it is only a tool. Without a talented dedicated team of procurement and sourcing individuals I could not keep up or react fast enough.
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