What did our customers have to say? Kinexions 2010 - presentation overviews

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Kinexions 2010 is now complete – and what a success it was.  The general presentations in particular were very valuable and well received. Without a doubt the central theme to the customer presentations at Kinexions was how companies are using RapidResponse to manage increasing demand volatility, largely driven by product proliferation and market expansion. These in turn lead to supply chain complexity, not only on the demand side, but also on the supply side because of outsourcing. Karl Braitberg of Cisco gave a very compelling presentation titled “The New Reality - Managing Planning Complexity to Support Business Growth” in which he stated that “complexity is a choice”.  However Karl also differentiated between “structural” and “environmental” drivers, where “structural” drivers are those under the control of an organization and therefore a matter of choice that should be an outcome of the company’s strategy.  The “environmental” drivers on the other hand impact all companies, and are not possible to predict or manage. However, my opinion is that the magnitude of the impact of “environmental” drivers is largely governed by the “structural” decisions made by a company.  For example, the companies that responded most quickly to the downturn in late 2008 were those that had the most effective demand management capabilities and lean supply chains, the first to detect the demand drop-off early and the second to reduce inventories quickly to avoid excess and obsolete. Cisco’s results over the past 2 years indicate very clearly that Cisco is one of those companies that has adopted processes and systems in order to detect and respond to change very rapidly. As evidence of measures that indicate the increased industry-wide volatility, Karl included demand variability (increasing) and forecast accuracy (increasingly difficult) or supply reliability (decreasing) and suppliers lead times (increasing) - this is the new industry reality.  Karl offered the advice to “Recognize the New Reality, and begin managing it” through simplification, new metrics, segmentation, and collaboration.  Of these actions I would like to focus on collaboration, an often used but little understood term, which Karl defines as:

  • Creating a tight coupling across the extended value chain (all nodes)
  • Being mutually effective
  • Balancing S&OP, CPFR, S/D across multiple tiers
  • Although often missed, considering technology and process as essentials

Karl states that collaboration

  • Increases the level of trust across the chain
  • Improves the speed of information flow and decision making
  • Allows for new levels of creativity needed to solve dynamic and complex problems

Next up was Rick Begg of Research in Motion (RIM), the makers of the Blackberry, who provided some very compelling historical evidence of how RIM’s growth has driven complexity both in terms of the increase in volume and products:

  • FY01-08: 25M units shipped
  • FY09: 27m units shipped, 6 new products introduced
  • FY10: 36m units shipped, 6 new products introduced

This growth has led to a supply chain characterized by the following metrics

  • 8 Billion components purchased/quarter
  • 11 qualified manufacturing sites in 3 continents
  • Over 9,900 Order lines in quarter, (1128 SKU’s)
  • 500+ partners in 170 countries
  • 1000+ ECNs released per quarter
  • 500+ new PRDs released per quarter

Wow, that is some change.  To manage this complexity RIM has deployed processes and systems principally to increase the accuracy of their commits to customer orders while reducing order fulfillment lead time and stock-outs. While from a different industry and not a household name, Mark Utter from semiconductor manufacturer Qualcomm displayed charts that clearly continued on the theme of increasing volume, increasing complexity, ongoing demand volatility, and a growing customer base. Mark illustrated the increasing complexity of the semiconductor supply chain in which order lead times are 0 to 6 weeks, while supply lead times are from 12 to 16 weeks necessitating broad adoption of postponement strategies.  Because of the time it takes to bring new manufacturing capacity on-line, Qualcomm plans as far out as 5 years, working very closely with their outsourced semiconductor foundries. To manage this complexity Qualcomm deployed RapidResponse a number of years ago because plans can be generated faster with more flexibility, and the results can be understood easily, mostly through RapidResponse’s unmatched scenario planning capabilities, having earlier deployed a ‘black-box’ optimization engine. Qualcomm has achieved high customer service levels as measured by delivery to commit date (reliability) and delivery to request (flexibility), while reducing forward days-on-hand inventory by over 30% during the last 6 quarters. In keeping with the theme of increased complexity driving increased volatility, Rayne Waller and Elisabeth Kaszas of Amgen, one of the largest biopharmaceutical companies, described how external drivers such as healthcare reform, the impact of ‘biosimilars’, mergers and acquisitions, and increased scrutiny of regulatory compliance coupled with some internal initiatives are driving complexity throughout their network including international expansion, market segmentation, risk mitigation, network optimization, contract filling, and alliances. Managing this complexity requires a coordinated end-to-end response.   Amgen found that only RapidResponse has the capability to represent demand sensitivity, supply assumptions, product transitions, and time-phased parameters for processes, goods receipt times, and exception dating.  All of which greatly increased Amgen’s ability to perform risk-based supply planning, inventory management, network capacity utilization, and waste management. While the first two speakers, Cisco and RIM, are brand owners who largely outsource all their production, next up was Devin Taylor and Ron Stappert of Jabil, one of the biggest electronics contract manufacturers. Founded in 1966, Jabil has experienced extremely fast growth to reach revenues in excess of $13B while selling into a very diverse customer base consisting of 9 industry segments from automotive, to medical, to mobility.  Both the increase in revenue and the industry segments served leads to tremendous supply chain complexity.  Jabil has a very large deployment of RapidResponse with more than 4000 named users and over 200 concurrent users. Clearly, with such a big user community, many were interested to understand how Jabil has achieved such wide user adoption. Some of this is due to core capabilities of RapidResponse, particularly that users are able to get what data they want in the manner they want and when they want.  Jabil has added to this by configuring their own workbooks to ensure that the user experience matches the process.  At the same time Jabil has placed a lot of emphasis on training and the identification of subject matter experts in each site. One of the benefits achieved through the use of RapidResponse is that an order commit process that used to take over 3 very long days with a low level of precision is now completed in less than a day with a much greater level of confidence. In keeping with the diversified industries supported by RapidResponse, next up was Sergio Gallardo and Lisa Block of Raytheon Missile Systems, a $5B subsidiary of Raytheon.  The business drivers that drove them to RapidResponse we increased demand volatility, aggressive order delivery expectations, manual simulation and analysis that was taking weeks, and increasing work stoppages from line shortages in order to minimize non-cancelable/non-returnable inventory levels, easily identify parts at risk of late delivery, and avoid missing contractual deliveries.  Their reasons for selecting RapidResponse over the functionality provided by the incumbent ERP vendor were RapidResponse’s simulation capabilities, easy to use line-of-balance reporting (which is a key requirement in the aerospace and defense industry), and that the look-and-feel is based upon Excel.  The amazing things is that on one program alone a saving of over $4.5M in residual inventory and carrying costs was identified in weeks of going live.  This is across one program! In summary, we heard from a very diverse set of companies from OEM’s that outsource nearly all manufacturing with gross margins in excess of 50%, to contract manufacturers with gross margin less than 10%, to pharmaceutical companies with gross margin in excess of 80%, to a missile manufacturers with gross margin around 30%.  All these companies use RapidResponse with a single data model, and single set of analytics, and a single UI to model a multitude of different business processes across both demand and supply, at both aggregate levels and at detailed levels.  Above all these companies use RapidResponse to manage the complexity, uncertainty, and supply chain risks that results from operating a global company serving many markets and market segments.  All first tried to solve these business issues with their incumbent ERP before turning to RapidResponse.

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