Over the years, working for and with numerous manufacturing companies, I’ve seen many supply chain practices that cost companies money. Over the next several weeks, I’ll outline these issues and discuss some ideas around how to avoid these practices. You can find the previous posts here:
- Reason #1: Offshoring without getting the full picture
- Reason #2 Poorly executed or non-existent sales and operations planning
- Reason #3 Not having end-to-end supply chain visibility
- Reason #4 Making key decisions by modelling the supply chain in Excel
- Reason #5 Not having a supply chain risk management process
- Reason #6 Not effectively managing inventory
- Reason #7 Making decisions based on bad data (supply chain data accuracy)
Reason #8 Keeping supply chain information in silos (and preventing your users from making the best decisions)
Don’t ask… you don’t want to know. I can’t tell you how many times I’ve heard that phrase from different people in different contexts. Sometimes it’s true. I probably don’t want to know. Sometimes (like when I hear it from my son) I probably not only want to know, I NEED to know. Not because I want to pry (well… maybe a little) but mostly because I care and if I know I might be able to help. When companies deploy supply chain solutions, they often make the decision for users… “you don’t want to know”. They do this by preventing them from getting (or making it very difficult to get) any more information than they absolutely need to do their specific job. Sometimes this information limitation actually prevents them from doing their job adequately. Sometimes this is intentional and necessary;
- Some companies (especially publicly traded companies) restrict access to revenue / margin information to prevent unauthorized financial data from getting out.
- Some companies prevent access to data to prevent trade secrets (or in the case of US military manufacturers ITAR regulations prevent foreign nationals from accessing manufacturing data)
- One company I’ve talked to told me that they limit information to their planners because they wouldn’t know what to do with it… that it would just confuse them. But in my opinion, there are few things more complex than supply chain management. Planners are smart people and if educated (APICS training should be a prerequisite in my opinion), they likely will have no problem absorbing and using additional information.
- In other cases, information is limited because of interdepartmental rivalries, for example, “I don’t want demand planning to see my supply planning information. I’ll tell them what they are getting.”This is just plain wrong on multiple levels. If you hear this rational, then I’d look at your management levels and how people are being rewarded. In today’s competitive manufacturing environment, the only metrics that count are how a change impacts the company’s goals. Departmental goals should be secondary.
- One reason I’ve heard many times is that we don’t expose this data because one group “doesn’t care” about the information from the other group; “Demand planners don’t care about supply information; Planners don’t care about what orders are impacted by a change they are making”. Deep down we all care about the impact we are having on the company. I think sometimes “don’t care” is the result of “I can’t” or “it’s really difficult to”. Which brings us to the next section…
- Many companies suffer from limited visibility across sites. The primary reason is that companies often grow through mergers and acquisitions and sites will often have different ERP systems that are incapable of working together. Even if you use the same ERP system but sites are at different versions, (or even the same version but different instances) you can have limited or delayed access to information.
- Traditional ERP systems limit access to information by making it very difficult to get the information you need. ERP systems are transactional and are designed to view information one piece at a time. If you look at the old green screen interface that we used back in the 70s and 80s and then compare it to a modern screen from a traditional ERP vender, you’ll notice that while the “modern version” runs on windows, it still looks and behaves very much like that green screen terminal interface.
- Want to see summarized information in a cross-tab? This is typically very hard to do in a typical ERP interface and you usually would need to run a report.
- Want to see your results in a chart? Better export that to Excel.
- Want to do add some additional information to a screen? Sure! Submit a request. Several months and thousands of dollars later – here you go! This is one of the reason so many decisions get made using Excel (see “Your supply chain is costing you money - Reason #4”)
Let’s look at an example of how information can change a role. Let’s start with the customer service representative… the person on the phone taking orders. In many cases, the only information this person may have is a standard lead time for order promising (if they are lucky they’ll have standard lead time by part. In most cases it’s just a fixed lead time for everything. The problem is that the lead time is likely padded and over estimates how long it will take to fulfill the order. The reason that the customer service representative is forced to work with such limited data is that traditional systems cannot quickly and accurately provide this information. Imagine if you could provide the customer service person with a system that determined the “capable to promise” date. A date that given the current state of the supply chain, including component availability and capacity, accurately represented when the order could be fulfilled? Imagine, as well, a system that could even show what parts, supply orders and constraints are preventing the order from being completed on time. What if in addition to the late items, the CSR had information about who was responsible for the items or resources that were late. Do you think that would change the order promising function? Now, let’s look at things from the other side – the component planner/buyer. Let’s imagine that this planner was responsible for some parts that were going to be a few days late. They may be able to get them here on time if they expedite the shipment… at a higher cost. Should they do it? In traditional ERP systems, it is a laborious process to peg up multiple levels through the supply chain to figure out if there is any impact (the order may be simply replenishing safety stock or it could be gating a multimillion dollar sale). With an advanced planning tool, pegging is instantaneous and you can see exactly which orders are impacted and if enabled, the revenue and margin impacts as well. Put this information into the hands of your planners and suddenly they are making decisions based on the impact to the company, not just to their own internal metrics (like expediting costs). So what do you think? Would your supply chain be more efficient if users could get access to more information and that information were presented in a way that helps make better decisions? Would you want your planners to be able to see which orders a shortage is impacting? Would you want your customer service reps to be able to see why an order is late – right down to the component order that’s holding everything up? Do you have an additional reason why some information should be restricted? Comment back and let us know!