Not having end-to-end supply chain visibilityOver 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
Imagine this scenario. You are a supply chain leader. It’s Friday afternoon and your thoughts are turning to the upcoming weekend with your family. The phone rings – it’s your VP of sales. A prospect that your company has been chasing for years has finally agreed to place an order. It’s a big one and they need it fast. Really fast. Inside cumulative lead-time fast. The question is can you do it. Can you commit to this order with confidence that you can deliver? Traditional ERP offers a couple possible options. 1) Load and pray. Accept the order and hope / pray that everything aligns and you actually can deliver on time… maybe even at a profit. The problem with this approach is that very often, you can’t deliver and you lose a customer and worse your reputation. 2) Fire drill (I knew a company that actually called it that). This is where you e-mail each node in the supply chain with the order requirements, have everyone do a feasibility analysis on accepting the order and then wait for the results. The results, however may take several days / weeks to come in. By that time the customer and their lucrative order have moved on. Why are there only these two options with traditional ERP systems? It comes down to the disconnected nature of these systems. Companies that have grown through acquisition typically have multiple ERP systems distributed throughout the enterprise. Even if systems are from the same vendor, they will often be at different versions and are not interconnected. So a scheduler at one plant has no visibility as to the inventory position, capacity or material supplies at another plant. The only recourse is to pick up the phone or pound out an email to find out…or guess. There is a third option, one where you can commit to a customer order with confidence. This new approach enables you to simulate the addition of the new order, see the impact across the entire supply chain, try out different options to resolve any shortages and most importantly know that you can commit to and actually deliver this order…and respond in hours not days or weeks. This option requires a new tool and a new way of thinking. This approach requires lightning fast simulation and, most importantly, visibility to all the nodes of your supply chain. Let’s look at these one by one;
- Simulation – To simulate the impact of a major supply chain change like a large order you need to have several things; 1) Analytics that model the results from each of the ERP systems involved in your supply chain. 2) An in-memory data model that bypasses the slow read/write cycles used by disk based systems resulting in lightning fast supply chain calculations and 3) the ability to instantly create scenarios – effectively a copy of the entire database within which you can try out multiple approaches to resolve supply chain issues 4) the ability to share and collaborate with other members of your team.
- Visibility– Imagine trying to drive a car where you have no visibility to the side, none behind nothing out front except through a little 4” by 5” window. Yes, you might be able to successfully navigate but the chances of you making a very expensive mistake is pretty high. The sad thing is that this is how many of us navigate the complex streets of supply chain. Traditional ERP often are siloes of information locking off other nodes because they are using different versions or worse, entirely different versions. In our drop in situation, you could have sufficient inventory at a different site but never know it because you can’t see it. But visibility goes beyond the raw data. Many traditional ERP systems limit visibility because they are designed to show one part, one order at a time. You cannot look at aggregated data without running specialized reports or extracting the data and loading it into a BI tool.Visibility also means understanding the impact of your decisions on key corporate metrics. Knowing that when you make a decision, that it makes sense not only from the context of your department, but also for the company as a whole.