SUPPLY CHAIN MANAGEMENT

ERP for Green Supply Chain Management in Manufacturing

2010-08-18T00:58:00.001-07:00

Manufacturers are under increasing pressure to document their impact on the environment. This pressure is coming—for North American manufacturers—primarily from the private sector. Major manufacturers are asking their upstream supply chain partners to document its environmental impact as part of green supply chain initiatives. Green supply chain programs may be initiated in order to help manufacturers position themselves to its own customers or investors, or to facilitate environmental compliance.

This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.

In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.

Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):

Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.

The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):

• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.

Regulation is advancing. While myriad regulations impact North American manufacturers, touching on discharge to the air, water, and landfills, perhaps the area of environmental regulation that is advancing most quickly is in the area of Restriction of Hazardous Substances (RoHS). In the European Union (EU), RoHS already governs the allowability of certain hazardous substances in a variety of products.

RoHS generally restricts the use of hazardous substances in electrical and electronic equipment, while associated regulation, Waste Electrical and Electronic Equipment (WEEE) regulates the disposal of these products. RoHS and WEEE focus on "certain heavy metals," specifically lead, mercury, cadmium, and hexavalent chromium. In Europe, these regulations also cover the flame retardants polybrominated biphenyl (PBB) and polybrominated diphenyl ethers (PBDE), while states like California do not, as of yet, deal with these substances in their RoHS regulations. California does, however, already have separate regulations that make it illegal to manufacture, process, or distribute products containing more than one-tenth of 1 percent of these substances by mass, which once again has green supply chain implications.

California’s RoHS regulation currently applies to a very narrow set of products, including computer monitors, televisions or other products that involve cathode ray or liquid crystal display (LCD) screens, but bills have been advanced through the state legislature that would expand that state’s RoHS initiative to mirror that of the EU in scope.

This means you will need to roll up in each of your assemblies the materials that are in each product with great detail. Some companies are also already manufacturing distinct product lines for Europe that, for instance, use mechanical electrical connectors instead of solder joints or welds. Manufacturers will need excellent functionality for tracking of the raw materials going into component parts sourced through a supply chain and for decision support in the area of product design.

You may need to provide documentation for your customers’ green supply chain. This is actually a more daunting task than is reporting for regulatory compliance because a manufacturer can expect individual requirements from each of its customer with a green supply chain program. Each of these customers cares about certain things that they track for their supply chain and their green emphasis. So, because most manufacturers have more than one customer, there is the need for a great deal of flexibility in an environmental footprint solution. Each customer with a green supply chain program is likely to have unique requirements for tracking different hazardous materials and environmental impacts depending on what it is that they are purchasing from you and what industry they are in. The six heavy metals included in RoHS, like lead and cadmium, may be typical and broadly of interest. But beyond that there will be other needs based on what customers want. Therefore, manufacturers need flexibility to track environmental impact by product, and also need the ability to customize the queries and reports so they can display what that customer cares about.

The takeaway here is that you will need the flexibility and the ability to track and report on a variety of rapidly changing metrics rather than one standardized set of environmental metrics.

The most advanced ERP tools may allow you to break down your environmental impact by discrete part, so you can document the environmental impact of each item you sell customers.

Whether you are manufacturing something yourself, or purchasing it from a supplier, the single most important thing to keep in mind when planning to measure and manage your environmental footprint is that it has equal impact on the total environmental footprint of the product you sell. In some cases, your supplier may be liable for reclamation costs for components of subassemblies they sell you, but unless this is covered specifically in a contract, you should count on being solely responsible for what you sell when it comes to environmental impact. This means that you need excellent integration between your supply chain solution and your ERP system.

You will want to document what your suppliers are consuming for the products you are buying from them. For example, let’s say you are buying a printed circuit board from a supply chain partner; you will still want to know by weight how much lead it has in it before you can sell that product in the EU. Plastic components will need to comply with regulations on the amount of PBDE, and so on. The degree of post consumer waste incorporated in materials, subassemblies, and products can also be something that must be documented and managed.

Apart from constituent parts and materials and their impact, there is also the environmental impact of logistics and transportation to consider. There will be an increasing need to factor in the environmental impact of different transportation methods and the distance of supply chain partners from your own location, along with the ability to roll that data up into the environmental impact for each individual product.

There are real implications not only for external vendors and suppliers but for multi-site companies because you are not just tracking the amount of potentially hazardous materials in your product but the impact of getting them, and their component parts, from one place to the next. For companies with multiple sites or business units located any distance apart, this can be a major factor for your internal supply chain. Enterprise applications that combine environmental footprint management with multi-site capabilities will be essential for companies with more than one site as they quantify their impact on the environment.

The environmental impact of transport logistics between your own sites and between your site and your customers and vendors also has implications for product design. Can products, subassemblies, or parts nest in shipping, or otherwise fit into a truck more effectively?

Product design is only one area where environmental footprint management in ERP is important for decision support. But perhaps a more critical area for environmental decision support in ERP software is risk management. An enterprise application ought to be able to help you evaluate the risks from an environmental standpoint when it comes to getting involved with a particular supplier—or even the risk of working with an internal supplier like a different location or subsidiary.

In implementing a green supply chain or participating in the green supply chain of a customer organization, it will also be important to document and track the history of your environmental impact program. The ability to look back on where you were in the past will allow you to respond intelligently to changing legislation and other mandates that impact life cycle and end of life cycle products in the field. In the case or durable and complex assets like capital manufacturing equipment and aircraft, changing environmental rules could have implications for ongoing support, maintenance and sustainment, and for spare parts and life cycle extensions of these assets.

The Role of ERP
It quickly becomes clear that the depth and breadth of information required to track an environmental footprint is substantial. While manufacturers might look at third-party products that purport to offer some degree of environmental management functionality, it probably makes more sense for them to look at whether their central ERP package carries enough information about each of the components that they buy or manufature to help them towards their initial environmental reporting or decision support goals. It is a simple matter of determining how your ERP package tracks what goes into each product and how it tracks what comes out of the product when it is disposed of, so you can ensure that it is disposed of in a manner appropriate for the environment.

A next level of sophistication is an ERP product with environmental footprint tracking tool already embedded in the package. This delivers a level of futureproofing and simplicity that will become more and more demand in the market as manufacturers continue to document their impact on the environment.

According to a survey conducted for IFS North America, the vast majority of respondents said they wanted ERP vendors to offer embedded environmental footprint management capabilities, eliminating the cost and hassle of integrations.

SOURCE:
http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/

Squeeze Play in the Supply Chain Management Market

2010-08-18T00:57:00.003-07:00

To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) and transportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence (BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.

In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management (PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuable supply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.

This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.

The Downward Push of ERP Vendors

ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.

Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.

Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAP corporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.

Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.

This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.

Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.

The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.

The SCM Push Upward

Supply chain vendors of the past only provided a single product that addressed one aspect or function within the supply chain. However, certain business requirements have become the norm, such as vendor collaboration, changes in workflow, event management, performance management, PLM, labor requirements, key performance indicator (KPI) analysis, real-time inventory, manufacturing execution systems, WMS, transportation requirements, advanced planning and scheduling, and partner-supplier collaboration. SCM vendors feeling the tightening of the market have started to address their shortcomings, and are including more ERP-like modules to expand their solutions.

SCM software traditionally employs a strategy of covering everything within the four walls of the warehouse. The addition of ERP modules aims at tying into the entire supply chain and its collaborative aspects. Trading partners (and now logistic companies) are coming together with manufacturers to unite services, products, and customer experience. Demand management and SRM are intricate parts of SCE, and tier one vendors like HighJump, RedPrairie, and Manhattan Associates have now included very detailed iterations of this module.

Since detailed information is required, most tier one WMS vendors, and even the smaller vendors (ASI, Radio Beacon, RF Pathways, and Scancode) within the SCM space, have also added and developed new functionality to compete with this shift in business model.

For example, HighJump has evolved to fit this shift in business strategy and technology. Its initial offering was a best-of-breed WMS. HighJump’s WMS competes with Manhattan and RedPrairie, and all three vendors now offer a full suite of SCE products (see figure 2).

SOURCE:
http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/

How Supply Chain Management Helps Today's Engineer-to-order Companies

2010-08-18T00:57:00.001-07:00

How Supply Chain Management Helps Today's Engineer-to-order Companies
David Bourque

In today's dynamic manufacturing industry, companies are feeling the squeeze of fierce competition, as goods are being produced more cheaply in developing countries. Because of this, global sourcing for parts is a huge factor in cost reduction.

In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.

How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.

This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.

The Role of SCM in ETO Firms

The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.

ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.

Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.

How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?

How SCM Software Components Relate to the ETO Manufacturing Environment

The main modules of SCM software include the following:

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Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
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Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
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International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
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Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
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Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
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Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
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Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.

SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.

Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:

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Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
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The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
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The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
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Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.

SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/

PeopleSoft Supply Chain Is Music To Mid Market Ears

2010-08-18T00:56:00.002-07:00

PeopleSoft recently announced that O-Cedar Brands has licensed PeopleSoft Accelerated Supply Chain Management (SCM). This mid market solution offers a full suite of Supply Chain Management applications, a rapid implementation methodology and flexible deployment options that give users a predictable implementation timeframe. Accelerated SCM automates core e-business functionality, including general ledger, payables, receivables, billing, purchasing, order management, inventory, production management, bills and routings, cost management, and production planning.

O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.

Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."

The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.

Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."

Market Impact

PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.

The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.

Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.

User Recommendations

Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.

PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.

SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/

SAP Highlights Supply Chain Management Tools

2010-08-18T00:56:00.001-07:00

At last week's eBusiness Conference & Expo, SAP AG updated attendees on its supply chain management application, Advanced Planner and Optimizer (APO). The solution is designed to enable companies to perform collaborative optimization across their supply networks to facilitate customer service and order fulfillment. Available supply chain management modules include collaborative planning, forecasting and replenishment (CPFR), Internet-enabled vendor-managed inventory, ATP and shipment tendering. SAP has extended its pilot customer base to more than 350 installations in multiple industries worldwide.

Market Impact

SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."

User Recommendations

Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.

SOURCE:
http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/

Supply Chain Management Is Evolving toward Interdependent Supply Networks

2010-08-18T00:55:00.001-07:00

The advent of the Web as a major means of conducting business transactions and business-to-business communications, coupled with evolving web-based supply chain management (SCM) technology, has resulted in a transition period from "linear" supply chain models to "networked" supply chain models. This is where interdependent supply networks (ISN) come into play. Enterprises are moving toward real time operations by sharing information and interlacing processes with trading partners. Despite the millions of dollars enterprises have spent in recent years to optimize and connect the supply chain, further innovations and investments are expected. Enterprises are under continued pressure to work more closely with trading partners in order to stay even with, or gain advantage over, their competitors. The technologies to enable dynamic process changes and real time interactions between extended supply chain partners are emerging and being deployed at an accelerated pace. However, this transition is expected to take a considerable time.

Various software industry studies indicate that over the next five to seven years, inter-enterprise business relationships, information structures, and processes will evolve dramatically. Enterprises will blend internal production and supply chain processes with those of their external trading partners. Supply chain "champions" and "channel masters" like Walmart will drive partners toward a common set of business processes. We are also witnessing the rising adoption of radio frequency identification (RFID) as a supply chain tool and technology in virtually every industry. Over time, participating organizations will focus more on fulfilling the requirements of the customer more efficiently, rather than putting a more limited focus on what the direct "intermediate" customer requires. Linear interactions will give way to interactions that occur in parallel. Slowly, businesses are evolving toward the concept of the lean supply chain, working together toward a common set of customer-driven goals, and acting as an ISN.

SCM needs to become more about information exchange among the entire supply chain, and to expand beyond limited point-to-point integration with a select few partners. As manufacturing operations embrace and adopt "lean manufacturing" concepts and tools within their production operations, they are also refining the meaning of, and means for, SCM. A lean supply chain entails examination of any step, process, or movement of product in which value is gained or lost. The impact on suppliers and customers can be significant, and for this reason practices using lean techniques need to be deployed.

Supply Chains Moving beyond Optimization to Synchronization

Many enterprise resource planning (ERP) and SCM deployments have contributed little in the way of meaningful system and process integration or trading partner collaboration. Manual processes, "un-rationalized" data, and stand alone systems that churn out best-guess forecasts remain the rule, rather than the exception. Yet supply chain optimization will be a strategic factor for company competition and survival in 2005 and beyond. Enterprises "roll up their sleeves" in order to undertake the hard work of dealing with the most basic aspects of SCM process alignment and connectivity with trading partners.

Progressive enterprises are looking to move beyond optimization of internal production operations to the synchronization of networked supply chain business processes as part of their vision to increase the integrated value chain. The sophistication of multi-enterprise SCM processes will force such businesses to look outside of their four walls to ensure value is profitably delivered to customers.

The dynamic nature of customer-driven demand, along with the adaptive nature of SCM networks, will make the process of synchronization more complex. As customer requirements become more demanding, supply chains will be forced to move from linear to dynamic configurations of supply chain networks. In a non-linear model, core competencies and capital asset utilization and efficiencies come into focus. This will concentrate attention on how enterprises work and integrate with partners to extend visibility through multiple tiers of the supply chain.

As the mandate for capital asset efficiency and collaboration capabilities is enabled by Internet technologies, enterprises will look for supply chain projects to go beyond the optimization of internal production processes and focus on the synchronization of activities among trading partners. Despite huge advances on the internal side—reduced costs and shortened lead-times through lean supply chain initiatives and other efforts—the fact is that manufacturers are dependent on suppliers, distributors, transportation providers, consolidators, outsourcers, and other partners to help make and deliver products to customers. While parts and products travel "up" the supply chain, supply and demand information moves in both directions and is critical for responding rapidly to demand. Enterprises are beginning to realize that using workflow and business processes to automate the communication of critical information throughout their operations allows systems to respond to pre-defined conditions and stimuli.

Service Oriented Architecture (SOA)—the Future for ISN

In its simplest form, service oriented architectures (SOA) are defined as self-contained modular applications of business process logic or services that can be mixed and matched; are platform independent; and can be dynamically located, invoked, and called into use by whoever needs them from anywhere within a platform infrastructure. SOAs make developing, structuring, and using an enterprise system much more efficient and flexible. It is this type of flexibility that is required in an interdependent supply network.

The independent nature of the objects and services also makes the system and the users invisible to the service. The user could be an in-house employee working through a browser or desktop screen, another application on the same computer, another computer within the network, a trading partner accessing a service through the Internet, or a trading partner's application accessing data or service. Workflows and business processes can invoke services from anywhere, and are no longer confined to, or limited by, an individual internal system. SCM in an SOA provides the environment to extend workflow and business processes beyond the company's internal systems, thus facilitating interdependent supply network activity.

SAP Addresses SOA to the Forefront

During SAP's recent Teched conference, the emphasis was on how SOA and SAP's Enterprise Service Architecture (ESA) will accelerate process changes among trading partners and provide an opportunity for more flexible business process reengineering. The SAP installed base is huge, with some of the most progressive enterprises in business today as members. SAP clients who aggressively strive for SOA are most likely to reach the status of ISN interoperability. Yet applying SOA remains a vision or at least a long journey for most enterprises. Issues of process proliferation, guidelines, costs, and performance are not totally understood, and the difficulties associated with them cannot be underestimated. Early adopters, such as Intel, will be revealing case studies in the SOA evolution and ISN transformation.

Summary

SOA provides the environment to extend the workflow idea beyond a company's internal systems, thus enabling ISN activities. Preparation for ISN starts with demand management. The ability to respond to demand is enhanced when trading partners are connected and information sharing is automatic, consistent, and allow for rapid-response. The transfer of data and event stimuli must be delivered in a standardized fashion and with flexible, actionable responses. Removing information barriers and tying supply chain partners closer together for rapid response are key to improving supply chain performance. ISN capabilities are achievable in the not so distant future, but will be dependent in large part on SOA frameworks.

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-is-evolving-toward-interdependent-supply-networks-18253/

Does Supply Chain Management Software Make Sense in Wholesale Distribution?

2010-08-18T00:54:00.002-07:00

Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.

This is Part One of a three-part note. This part defines the Challenge faced by wholesale distributors. Part Two discusses the Critical Objectives in meeting this challenge. Part Three covers meeting the objectives with Supply Chain Management Software.

Distribution Evolves

In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.

Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.

Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.

Software Matures

Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.

Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.

Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.

Industry Structure

While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.

OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.

The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.

However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.

All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.

Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.

Structural Challenges

The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.

The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.

This concludes Part One of a three-part note. Part Two will discuss the critical objectives in meeting the challenges covered in Part One. Part Three will cover meeting the objectives with Supply Chain Management Software.

About the Author

MARK WELLS has worked for the past 20 years on many aspects supply chain management from within industry, as a supply chain consultant, and as part of a software development organization. For two years, he worked for a steel service center as an internal consultant. He holds an MBA from Drexel University where he has also taught operations management and operations research. He currently works for the applications development division of Oracle Corporation, focusing on supply chain planning.

SOURCE:
http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/

The Essential Supply Chain

2010-08-18T00:54:00.001-07:00

Where SCM was once viewed as a way to obtain a competitive advantage, companies are now beginning to perceive it as a logical and necessary extension of ERP. It is also represents the best method of entry into the realm of business-to-business collaboration, which is simply an extension of the supply chain to include upstream and downstream trading partners (i.e., suppliers and customers).

There are several reasons why ERP vendors have been augmenting their transaction processing systems with supply chain management applications. First, traditional ERP systems simply lack the advanced planning tools necessary for companies to respond to an increasingly competitive business environment. There are three fundamental limitations of ERP systems in this regard:

Execution Focus

ERP systems were developed primarily for transaction processing, data collection, and data reporting. Quite predictably, users who accessed the ERP databases hoping for the insight needed to make good decisions were overwhelmed by the sheer volume of content. The true benefit of large amounts of historical transaction data cannot be leveraged for business insight without sophisticated analysis tools and data reporting techniques required to make sense of the data. As a result, traditional solutions lacked the capability to support critical business decisions in real-time.

Certainly, ERP systems have advanced since their introduction in the early 1980s, however, most remain true to their original purpose and are not well suited to enable customers to make rapid, highly complex business decisions.

Poor Flexibility

Clients mulling over a prospective IT or business process reengineering project usually find themselves faced with a tradeoff between the way they want to conduct business and the method supported by the particular application. More a trap than a tradeoff, this situation can sometimes be avoided if business strategy is made the first area of reengineering.

However, in cases where an implementation is already underway, project teams are often required to compromise on functionality in order to complete the project on time or within budget. This occurs because many systems do not offer the flexibility and functionality required to accurately model the desired business processes. Large ERP vendors historically are the biggest offenders in this regard. Though the mySAP.com initiative of SAP seeks to overcome this limitation, R/3 is a prime example. These systems often hard-code assumptions regarding operating constraints such as available manufacturing capacity and production lead times. Plans created under these assumptions can hardly be expected to produce optimal results for a given client's particular complexities.

One-Dimensional Planning

ERP systems normally employ some flavor of MRP (Material Requirements Planning) or MRP-II (Manufacturing Resources Planning) for internal supply chain planning. The problem with these traditional planning methodologies is their sequential nature, which makes them unable to consider multiple constraints simultaneously. For example, a plan that begins with a demand forecast can be used to generate product requirements for the manufacturing facilities, which can then be checked against available material and capacity. However, plans created by sequential techniques are rarely optimal on the first attempt. It becomes necessary to refresh the system with updated constraint information and start the process anew. Because businesses change around the clock, sequential planning can never produce a truly optimal plan for a useful period of time.

Supply chain management addresses these limitations more effectively and at (usually) lower cost than ERP. Where ERP systems focused on transactions, SCM was geared towards analysis and planning. A planning tool, in its nature, is expected to be flexible. Also, because the SCM market is newer than ERP, smaller SCM vendors have had the benefit of hindsight and have targeted their applications at the gaps in ERP systems. In addition, the advanced techniques developed for supply chain applications allow consideration of simultaneous constraints that enables companies to have real-time visibility to their businesses.

Rise of Information Technology

The second reason why SCM is on the hearts, minds, and lips of corporate IT organizations has nothing to do with ERP, but relates to the phenomenal growth of information technology. As advances in computing power and data transmission continue, enterprises once thought to be too isolated or dissimilar are rapidly becoming tractable members of the supply chain community.

(The supply chain community encompasses the network of suppliers, manufacturers, distribution centers, and customers that share materials and information via technological means.) The Internet, Electronic Data Interchange (EDI) initiatives, and internetworking (LAN/WAN) technologies are just a few examples of technologies that are fulfilling the vision of SCM.

Market Consolidation

Finally, vendors have observed the complementary nature of SCM and ERP and are engaged in consolidation of their product suites. Perhaps more importantly, they have observed that prospective customers appreciate the ability to obtain applications offering full functional breadth from a single vendor.

Table 1 contains just a few of the major SCM-Enterprise Application vendor pairings that have occurred over the last few years. In addition to mergers, most ERP companies have entered into joint marketing arrangements with SCM vendors, embed their solutions, and/or provide standard interface certification programs. In like manner, SCM companies often partner with specialty supply chain execution software vendors in an effort to fill gaps within their functionality and industry verticals.

SOURCE:
http://www.technologyevaluation.com/research/articles/the-essential-supply-chain-16844/

How Supply Chain Projects Morph Into Black Holes

2010-08-18T00:53:00.002-07:00

A black hole is an object whose gravitational pull is so strong that nothing - not even light - can escape from it. Although predicted by Einstein's General Theory of Relativity, the existence of black holes in our galaxy and elsewhere has only recently been confirmed. A black hole forms when a massive star dies and collapses under its own mass.

For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.

Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.

Case 1:

Problem

Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.

Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.

Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.

Resolution

Under pressure to finish the implementation, the project team resolved the system shortcomings by writing a custom report in Microsoft VBA (Visual Basic for Applications) and Excel. This required four additional weeks at roughly $60,000 per week:

* Three additional weeks of interviews with planners to understand the metrics and development work by a VBA programmer

* Followed by one additional week of testing by the frustrated and increasingly skeptical planners.

In spite of the efforts, the completed solution was an unsatisfactory compromise between mitigating budget overrun and delivering the required reporting capabilities.

Underlying problems

* Failure to appreciate the importance of existing reports and metrics to planner workflow

* Inadequate communication between planners and the project team in the early stages of the project

* Failure to adequately screen candidate software packages for advanced reporting capabilities

Best practices that might have prevented the problems

* First off, the project team needs to prepare a list of detailed requirements by involving end users and then conduct a careful evaluation of several packages to find the one that best fulfills them.

* End users, those who will be working with the new system on a daily basis, should be included in the project implementation phase early on. Managers need to give these key users time off from their normal duties to contribute their expertise to the project. This commitment requires the support of top management.

* Rapid prototyping provides a basic system to users who then have a tactile understanding of what the new system will look like and how it will behave.

Case 2:

Requirements

* Implementation of a demand/supply matching system for two separate PC assembly plants, one owned by the company and the other, a contract facility.

* The system was needed to support new channel programs designed to facilitate replenishment of reseller inventory by allowing resellers to share requirements via EDI (electronic data interchange). This was an ambitious departure from existing procedures that relied on telephone communication between resellers and demand planners.

Problem

The project schedule was based solely on the start of the new channel programs without regard to resource constraints. In addition, the supply chain software vendor gave optimistic release dates for the software to be used, which were taken as firm by client management.

Even working 65-70 hours per week, the undersized project team of 15 people had no hope of conducting a thorough design and test implementation. To make matters worse, less than three weeks were allotted for receiving the new server, installing the software on it, and configuring it to run the software in a live setting. The vendor consistently failed to meet its expected release dates due to other projects and clients. Resellers could not keep up with required milestones for the implementation of EDI capabilities.

Nearly three months into the project, almost at the proposed conversion date, the project team and management conceded defeat.

Resolution

The project timeline was redrawn by factoring in the number of skilled resources available, realistic software release dates, and firm delivery dates for the hardware server. Also, the new plan included the development of interfaces to allow resellers to input inventory and demand data independent of EDI. The system went live six months after the original conversion date. Estimated budget overrun: $2.5 million.

Underlying problems

* Implementation was squeezed into an overly aggressive three-month project schedule to support the inauguration of three new reseller channel programs.

* Failure to realize the barriers to be overcome in implementing new business processes, i.e., obtaining commitments from resellers to share inventory data with demand planners

Best practices that might have prevented the problems

* Timelines should always be constructed using a bottom-up approach, where project milestones are determined by the availability of people, software, and hardware.

* No supply chain management solution will work unless the business processes it is designed to support are agreed upon by the parties involved. Obtaining this agreement should be an ongoing process that starts before the technical aspects of the project begin and continues through the implementation phase by allowing all organizational entities, both internal and external, to understand the new changes.

Case 3:

Background and Requirements

* Large, multinational semiconductor manufacturer

* Supply chain planning software implementation at the headquarter planning division responsible for creating production requirements for seven wafer fabs and assembly/test facilities and allocating supply to customer orders

* The new system was to support four main activities:

1. facilitate development of consensus forecasts
2. allocate different categories of supply to forecasts and orders based on business rules
3. generate finite capacity plans and schedules to be passed to manufacturing sites
4. promise orders to customers based on supply allocated from inventory as well as planned and actual production

* Systems to support all four activities were implemented in parallel using a "Big Bang" approach

Problem

During the user test, in which headquarter planners were allowed to play around with the system tested version of the software and make suggestions, the project team was inundated with requests for additional functionality. The project team dictated each of these to the software vendor who was responsible for making customizations to the core software. Not only was the vendor unable to make all the requested modifications in time, it viewed the changes as well beyond the originally agreed upon scope. Deadlines slipped and the development environment became chaotic with all the requested changes, which caused more delays.

Resolution

Client top management finally intervened and put a freeze on modifications to the software. It also split the project into four phases based on each headquarter planning activity to allow the project team to focus on fewer requirements at one time. The last phase of the project was completed nearly one year after the originally scheduled "Big Bang" conversion date. Estimated budget overrun: $4 million.

Underlying problems

* The client failed to appreciate the size of the undertaking and tried implementing the four areas in parallel to save money.

* The client was unwilling to table new functionality requests for a later release, causing severe scope creep. Best practices that might have prevented the problems

* Where project scope spans multiple business functions, a phased implementation approach can be used to reduce the complexity of the project. Lessons learned in the early phases can often be applied to succeeding phases.

* Project scope should be decided at the outset and adhered to throughout the implementation. New requirements that arise during the implementation should be prioritized and only the "must-have" changes should be made. The rest should be saved for future releases.

Summary

From a broad perspective, many problems result because the complexity of supply chain management projects is underestimated by corporate management.

Often supply chain packages are installed on top of ERP or legacy systems requiring an array of interfaces to be developed. Linking different applications requires a profound level of understanding about the data that is passed back and forth between them.

Apart from technical complexities, managers fail to appreciate the bottom line impact that supply chain management tools can have on their businesses. Even with the expanding compass brought to supply chain by B2B collaboration, this perception will be slow to change.

Finally, it is important to remember that, even with good preparation, experienced resources, and an enthusiastic project team, all supply chain management projects are guaranteed to bring unanticipated problems and dead ends. Successful projects are not those that finish without a hitch, but those in which project managers adapt well to adversity and persevere in spite of the problems.

SOURCE:
http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/

Identifying the ROI of a Software Application for Supply Chain Management Part 4: Just Give Us the Bottom Line

2010-08-18T00:53:00.001-07:00

The competitive environment for every industry grows increasingly intense. Fast, reasonably accurate information about the impact of a software investment decision grows more critical. Many decision-makers look for an exact forecast of return on investment (ROI) from the purchase of a supply chain management application. At least four very real challenges make such perfect information elusive. Commonly, executives meet these challenges with responses that are not carefully considered. The challenges and the corresponding reactionary refrains are as follows:

1. Limited time exists to perform analysis - "We need to know now!"

2. Business analysis skills are lacking - "We are looking for the vendor to tell us!"

3. The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."

4. It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…

* the prediction will always be wrong

* the prediction will always change for as long as the analysis continues

* someone is going to be held accountable for the prediction

- "Just give us the bottom line!"

After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.

The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.

About This Note: This is a four part note, each part addressing one of the four challenges.

Part One covered "We need to know now!"

Part Two covered "We are looking for the vendor to tell us!"

Part Three discusses the challenge of performing the data analysis.

Part 4. "Just give us the bottom line!"

This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.

In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.

Where To Start

An investment in supply chain management software may accrue to your company benefits that manifest themselves through four strategic effects. They are top line revenue growth, reducing requirements for working capital, return on assets, and higher margins. The intermediate effects and the metrics (bulleted) that drive them are outlined below:

Top Line Revenue Growth

Product/service Innovation

* Reduced time from concept to production
* Less frequent engineering change orders after production release
* Increased rate of innovation

Customer Satisfaction

* Better on-time delivery (Less canceled orders; also few late penalties)
* Higher quality (fewer returns)

Reduced Requirements for Working Capital

* Finished goods inventory

* WIP inventory

* Raw materials inventory
* Inventory obsolescence

Higher Return on Fixed Assets (plant and equipment)

Higher Margins

* Lower shipping costs (to customers, premium and otherwise; internal distribution)

* Reduced late penalties

* Lower manufacturing costs (reduced setups, downtime and overtime, better resource allocation)

* Lower scrap

* Improved product mix

* Reduced inventory carrying cost

Improvements in the above metrics can be driven by the following capabilities in a supply chain management application:

* Collaborative Product Design

* Collaborative Planning and Forecasting

* Optimized Manufacturing Planning

* Inventory Planning and Optimization

* Synchronized Planning

* Powerful Detailed Scheduling

* Accurate Order Promising

* Optimized Transportation Routing

* Statistical Process Control

The Causal Metrics Matrix in Figure 3 summarizes how supply chain management software capabilities interact with opportunities for business improvement. It shows metrics across the top that lead to overall improvement in competitive position along the four dimensions previously outlined-top line revenue growth, more available working capital, higher return on assets, and a reduced overall cost structure. Down the left side are the capabilities of supply chain management software that drive improvement in the metrics across the top, and as a result, move the business toward the overall business objectives.

SOURCE:
http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/

Does Supply Chain Management Software Make Sense in Wholesale Distribution? Part 2: The Critical Objectives

2010-08-18T00:52:00.002-07:00

PeopleSoft Delivers Oxymoron In 'Supply Chain in a Box'

2010-08-18T00:52:00.001-07:00

At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.

According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.

Market Impact

PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.

The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.

Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.

User Recommendations

We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services.

SOURCE:
http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/

Supply Chain Management Audio Conference Transcript

2010-08-18T00:49:00.000-07:00

This is a transcript of an audio conference on Supply Chain Management conducted on May 24, 2000.

Introduction

Good morning everyone, my name is Steve McVey and I head-up the supply chain management research areas for TechnologyEvaluation.Com. This morning we're going to discuss a proven, best of breed methodology for evaluating and selecting a supply chain management solution. During the presentation, we will use TechnologyEvaluation.Com's patented online selection engine, WebTESS, to guide you through a live, real time evaluation and selection. We will then review the critical differentiating supply chain management criteria, as well as detailed comparisons between i2 Technologies, Manugistics, Aspen Technology, Logility, and Adexa.

Overview

I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:

According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.

1. They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.

2. They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.

3. And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.

So, what's the solution?

The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.

So let's review these criteria categories.

Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.

Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.

Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.

Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.

Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.

Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.

Trend Note

The Internet is reshaping the enterprise applications market by making possible unprecedented visibility and information sharing between enterprises. Nowhere is this transformation more evident than in the supply chain management software market. The fact is, prior to the Internet, much of what supply chain management promised was never realized beyond a conceptual level. Supply chains that seamlessly joined customers and suppliers were easy to draw on paper, but building the link without Internet technology was practically impossible. The trends that have emerged in recent years capitalize on the possibilities for collaboration, information sharing, and instantaneous communication that the Internet provides.

These trends are:

* Collaborative Planning / CPFR
* Internet Procurement
* Portals
* New Pricing Models

Collaborative Planning / CPFR

The first of these is Collaborative Planning and specifically, a subset of this called Continuous Planning, Forecasting and Replenishment or CPFR. CPFR is a set of processes for trading partners, manufacturers and retailers, to share forecast and replenishment information. It is a superb example of collaborative planning and embodies all of the attributes and purposes of collaboration. CPFR succeeds earlier initiatives such as Efficient Consumer Response, Quick Response, and Vendor Managed Inventory and benefits from strong support from standards organizations like VICS (Voluntary Interindustry Commerce Standards), primarily geared toward the retail industry and to a lesser extent, RosettaNet which focuses on developing many other business-to-business standards.

CPFR is emerging from its pilot phase with the help of proponents like retailers Kmart, Wal-Mart, and Sports Authority as well as consulting firms like Andersen Consulting. Several supply chain management and ERP vendors have recognized the potential for CPFR and are building standard protocols and features into their collaboration products to support it. A good example is Logility, which was an early champion of collaborative planning. Its Voyager XPS and XES products are the culmination of several years of CPFR-compliant architecture development.

According to a 1999 study by Consumer Goods Magazine, more than half of the 224 executives surveyed from consumer goods manufacturers representing apparel/accessories, food and beverage, packaged goods, and home furnishing/appliance companies said they expected to implement "Internet Order Handling" in the next three years. Forty-four percent said they would implement CPFR specifically. Although it demands a high level of organizational commitment to succeed, CPFR can bring bottom line benefits to companies that sign onto the challenge. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges supporting indirect material procurement wears off and users seek more structured methods to control relationships between customers and suppliers.

User Impact

For all its potential and the extensive blueprints developed by VICS and others, CPFR is relatively new to the vendor world. Apart from Logility and SAP, few supply enterprise application vendors offer products that directly support CPFR processes according to VICS standards. We expect CPFR to gain broader acceptance as the novelty of online trading exchanges wears off and users seek more structured methods to control relationships between customers and suppliers. Though CPFR can be applied in any industry segment, the retail consumer goods market has been the primary adopter to date. Retail users should find out more about CPFR if accurate forecasts are a priority with external and internal customers.

Internet Procurement

The second major trend impacting supply chain management is Internet procurement. Online communities where companies can buy and sell products have become very popular in the past year. Companies look to these communities to reduce administrative costs, improve turnaround, and to help control inventory and spending. In response, supply chain management vendors are developing tools and applications targeted at this segment of the Internet procurement market. Some industry observers have expressed concern over the impact that such exchanges have on profit margins by driving prices down and predict that "e-markets" will be used exclusively for "spot purchasing" of commodity-level goods and services.

E-markets fall into different categories depending on where the software resides, who controls or sponsors the market, and whether direct or indirect goods procurement is available. Though current exchanges predominantly involve only spot purchases, there is a move towards making e-markets responsible for the full trading lifecycle, which spans procurement, supply chain management, and customer relationship management.

Because so many vendors offer e-procurement capabilities, it is becoming increasingly important for them to distinguish their portals from competitors. We believe that supply chain management vendors are uniquely capable of doing this by providing value-added services that relate to procurement in fundamental ways. i2 Technologies is an excellent example of a supply chain management vendor that is successfully bringing its domain expertise in advanced planning and scheduling to provide the backend capabilities for procurement over the Internet.

User Impact

Users who want to cut their indirect material costs should not delay in selecting an appropriate vendor that offers online procurement, either a package vendor or Internet-based portal. For direct material purchases, where on-time deliveries are an imperative, users should partner with an SCP package vendor or a portal backed by supply chain planning that can bring the intelligent backend planning capabilities to fulfill online material purchases. A good choice to consider is i2, which has begun to offer advanced planning services such as logistics and transportation planning along with its growing cadre of vertical marketplace portals.

Portals

Less exciting than Internet marketplaces perhaps, but nonetheless important are portals. Vertical portals open a window of communication between supply chain planning vendors and communities of customers, partners, content providers, advertisers, and, in most cases, the general public. A good example of a basic portal (detached from hosted services and procurement) is Aspen Technology's ProcessCity.com, a collaborative web site for the process industries. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.

Portals are a natural result of competition, the need for better customer support, and the Internet. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.

Apart from advertising revenues and content sales, the future dollar impact of portals on supply chain management market growth is difficult to quantify. Portals will drive partnerships and even consolidations among supply chain management vendors and Internet enablers such as, in Aspen's case, Extricity and Syntra Technologies. If nothing else, portals also afford more backward vendors a low cost, low risk entry into the Internet marketplace.

User Impact

Users should view portals in the same way as vendors: as a place to share and receive information. Privacy issues exist, of course, and users should be careful to avoid sharing potentially sensitive information such as implementation success/failure stories unless the portal provider agrees to keep it confidential.

New Pricing Models

The fourth trend that is on the rise concerns new pricing models. Unfortunately for vendors, customer expectations tend to grow faster than their ability to furnish competent, easy-to-use products to satisfy the expectations. High client hopes usually fall to the ground sometime during implementation and leave a lasting and often bitter impression.

Since fewer than one in four projects deliver workable solutions that survive six years or more, clients are increasingly wary of committing huge sums of money before they have obtained measurable return on their investment. In response, the licensing of supply chain management software products is undergoing a fundamental shift from traditional up-front fees to incremental or success-based pricing. Success-based pricing is a popular alternative especially for small businesses and startups that lack the IT budgets of larger, established companies. It allows these companies to acquire software for a lower entry cost and pay more only as their business expands.

Vendors who embark on the transition to the new model are sure to experience growing pains, however. As traditional license revenues decline, recurring revenue generates comparable figures only after time. This can quickly lead to negative earnings and eventual success is by no means assured. Organizationally, vendors have to make fundamental changes to sales and support processes for transaction-based pricing.

User Impact

For users, success-based pricing models offer a "pay-as-you-grow" alternative to up-front license fees. Though often sold as cheap and convenient, these models can bring unexpected IT costs down the road. As with any long-term contract, prospective clients should carefully review the fine print to understand the implications that transactional revenues will have on future expenses. A transaction may appear cheap at, say $10 per, but detailed growth projections that factor in per-transaction increases, milestone increases, as well as other contract attributes are a must for companies to understand the magnitude of future payments.

Conclusion

In conclusion, with the Internet making access to supply chain planning tools both cheaper and easier, it is difficult to imagine why a manufacturing company would remain without them. Success-based pricing is probably the most compelling financial incentive for small to midsize companies to consider a supply chain software application acquisition. Actual charges vary widely depending on the type of application, but typically range from $5 to 15 per transaction (where transactions may be purchases, orders, shipments, truck lanes, etc.).

Large and small companies can benefit immediately from e-market portals. By signing on to an e-market, whether a public exchange or a private network hosted by the vendor or a large "anchor tenant" supplier, a corporation can effectively outsource its entire tactical procurement operation, at least for commodity items.

CPFR will be the collaborative paradigm of choice for direct goods procurement and non-commodities over the next five years as it allows large companies with several key suppliers and/or resellers to individualize their relationships while at the same time exploiting the speed and efficiency of the Internet. For the longer term, CPFR will provide the framework for end-to-end collaboration across the entire supply chain.

We believe these trends and others will play a large role in shaping the enterprise applications market over the next several years.

WEBTESS DEMO

Now, I think it's time we moved to the demonstration. Although everyone has been given instructions on getting to the WebTESS Supply Chain Management Selection Model on our site, I'll go through it again, briefly just in case some of you may have had difficulty.

First, go to our website, www.technologyevaluation.com. From the front page, select the tab marked "Vendor Selection Tool." Then, within the blue-bordered box titled "Current Category: All Categories", select the "GO" button beside "Supply Chain Management." This should spawn another browser window in which you should see the WebTESS application. You will want to maximize this window for best viewing. The great beauty of WebTESS is its ability to provide project teams with a statistically valid framework for comparing vendor options. In it, we have scored each vendor according to its ability to meet the criteria. WebTESS aggregates the scores upward through the hierarchy, while simultaneously taking into account the effect of local and global weights.

Now, I would like everyone to click on the Select Choices option on the menu bar at the top part of the browser window. I'll be referring to the top menu bar several times during the demonstration. It is located in the top frame of the WebTESS browser window to the right of the spinning globe logo. In the "Select Choices" window, you should see a list of vendors on the left hand portion of the window and a description on the right hand side.

Clicking on a vendor in the left-hand side panel brings up a detailed description of the vendor option in the right-hand side panel. By clicking the check boxes next to the vendor, you can include or exclude it from your selection.

We'll touch briefly on these vendors in order, starting with Aspen Technology.

Aspen Technology

Aspen Technology made its mark selling software applications for process simulation and control, though its supply chain management applications form a large percentage of its total revenues. Aspen appears as a strong supply chain management challenger for giving its supply chain applications a prominent position among its product offerings and its leadership in the process manufacturing industries.

Aspen Technology Strengths

* Aspen's supply chain management suite offers a high degree of functional flexibility: Aspen's MIMI application provides a feature-rich modeling language that enables users to address a large variety of industrial problems.

* Established customer base in the chemical process industries (CPI): Aspen's customers include 44 of the 50 largest chemical companies, 17 of the 20 largest petroleum refiners, and 16 of the 20 largest pharmaceutical companies.

* Experienced implementation and customer support personnel: Chesapeake has received high praise from consultants and clients for their staff of bright, experienced process engineers and modelers.

Aspen Technology Challenges

* Poor financial showing in FY1999: Aspen's FY1999 revenues of $219.6 million represent a 13% drop over the same period on year ago ($252.6 million). Net losses for the same period in 1999 were $26 million. Part of the drop can be attributed to the reduced IT spending by the petroleum and petrochemicals companies - key markets for Aspen - due to economic factors and obviously Y2K.

* Shortage of trained implementation resources: Implementing much of Aspen's eSupply Chain suite requires highly trained resources to do detailed modeling. Although some templates exist and more are being developed, MIMI, the core of eSupply Chain, is essentially a toolkit that typically involves extensive training of resources when experienced modelers cannot be found.

* Dealing effectively with multiple competitors due to Aspen's broad product offering: The Plantelligence suite is almost ungainly in its variety of applications, including everything from operator training programs to process simulators to supply chain planning. Judicious pruning of non-core applications is needed to better focus corporate resources. Some of this has taken place, but we feel that more is needed.

i2 Technologies

i2 was the dominant supply chain management vendor in 1999 and maintains a significant lead over its competitors in terms of market share. Though its total revenue growth has begun to slow in recent years, the 55% increase it recorded between 1998 and 1999 is still enviable by market standards.

i2 Technologies Strengths

* Strong financial position and commanding market presence: More than any other aspect, i2 is known for its rapid growth rate. In contrast to its competitors' claims, this growth remains unaffected by Y2K remediation spending and general economic downturn.

* Aggressive sales and marketing organization: i2's direct sales force headcount stood at around 700 at the end of 1999, more than twice that of its nearest competitor. At 34%, investment in sales and marketing as a percentage of revenues is the highest of their competitors.

* Innovative approach to marketing and alliances: i2 has successfully remade itself into an e-commerce software company with its Intelligent e-business suite of applications that include the online trading network, TradeMatrix (10/99), its vertical offshoots such as HightechMatrix and Fasturn.com, acquisition of Aspect Development, and partnerships with IBM, Ariba, and others. i2's ability to reinvent itself to capitalize on market trends is evidenced by its consistently high percentage of license revenues.

* Product flexibility: Rhythm provides the capability to satisfy a wide variety of functional requirements and business rules through its custom modeling language, OIL (Object Integration Language). Also, i2 offers a series of vertical industry templates, which allow customers to jump-start their modeling effort.

i2 Technologies Challenges

* Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.

* Business consultants know application, not industry: Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers but jurisdiction problems can arise during implementations.

* Reporting capabilities inadequate for many core applications: It is frequently necessary to integrate with a third party reporting tool that provides the flexibility to fulfill customer requirements. The additional and sometimes unplanned for development can be costly and delay project timelines.

* Product Technology: i2 must win the race between transaction volume size and static memory size allowed by existing platforms - a consequence of Rhythm's memory-resident nature. Results of i2's proprietary heuristics and algorithms can be compromised when extensive modeling flexibility is utilized.

Logility

Logility has made significant progress since it was spun off from American Software in 1997. The company grew by a respectable average annual rate of 38% from 1994 to 1998, but slid 22% in fiscal 1999 due to Y2K market malaise, weakness in the global economy, and increased competition from ERP vendors.

Logility Strengths

* Comprehensive supply chain planning product offering: Logility's Voyager supply chain management solutions cover a wide area within supply chain management. Its distribution planning is especially strong in consumer packaged goods.

* Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. It also offers many standard interfaces with major ERP and legacy systems to enable faster implementations. Logility's pre-packaged functionality can also give it an edge over other candidates when demonstrating for prospective clients.

* Headstart in collaborative planning: Logility has a headstart over other supply chain management vendors in terms of collaborative planning. Its Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS and Resource Chain Voyager, a precursor to the current applications was installed at client sites as early as 1996.

Logility Challenges

* Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g., configurable product, mid market focus, CPFR), Logility will need to make considerable investments in product development, marketing, and alliances to make its ASP model successful.

* Dependence on American Software: By our estimates, American Software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.

* Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a shift in marketing strategy.

Manugistics

1999 proved to be a very challenging year for Manugistics. Its license revenues dropped by 47% and services revenues dipped slightly below 1998 levels. Manugistics lost market position as it focused on internal reorganization, making wholesale changes to its executive management team, streamlining its operations, and reassessing its corporate strategy.

Manugistics Strengths

* An experienced management team with new ideas and the ability to execute on them. We have to give credit to Greg Owens and his team for generating a great deal of excitement around Manugistics recently and we are seeing this translate to new license deals.

* Manugistics also offers very mature functionality, especially for transportation management and optimization, perhaps the only suite vendor to offer comprehensive and flexible VMI and replenishment modules.

* Manugistics also benefits from probably the largest supply chain customer base of its competitors including i2 and SAP (for supply chain). This gives it a great advantage, if properly utilized, in generating new license and web hosting revenues.

Manugistics Challenges

* Among its challenges, Manugistics' inability to effectively incorporate acquired sales forces into its existing organization contributed to a 30% decline in license revenues in calendar 1999 over the previous year. Also, its fourth quarter 1998 loss was $71.2 million, including $33.1 million for restructuring. These financial difficulties lead to a complete revamping of its executive management team and significantly impaired Manugistics' perception in the marketplace. Business has been picking up, but the company still has ground to cover and lags significantly behind i2.

* Manugistics will also find challenges in making its Internet B2B trading exchanges and application service provider (ASP) model successful. Not the least of its difficulties arise from its late entry into these markets where competition is already fierce. Application service providers face a different set of priorities than traditional software vendors, such as maintaining an ongoing relationship to clients through intermediaries such as application hosting providers, and many changes need to be accomplished within the organization to achieve the transition.

* Traditionally, one of its advantages over newer supply chain management entrants, the implementation expertise and industry knowledge of Manugistics' support staff has shown some signs of loss due to attrition. This is especially true for its transportation group. Though periodic housecleaning can be healthy, high turnover can make potential hires think twice about jumping on board.

Adexa

Adexa, Inc., which is the vendor formerly known as Paragon Management Systems, was incorporated in 1994. Adexa has perennially spent more effort on product development that it has on sales and marketing, a fact that has not helped its profile in the marketplace.

Vendor Strengths

* Broad product suite with advanced features: In iCollaboration, Adexa has built significantly on its original Pacemaker suite, adding product lifecycle management, extended enterprise planning, and collaboration. Other vendors offer broad suites, but Adexa's is the only one that was built from the ground up on a single data model. A host of third party software alliances further extend its applications into electronic procurement, order management, warehouse management, transportation management, and data warehousing.

* Strong vision for expanding supply chain management to multi-enterprise collaboration: Adexa has no plans to peddle Internet trading marketplaces and focuses instead on providing the collaborative decision support capabilities that marketplaces need to fulfill orders effectively. Adexa's vision involves not merely giving customers and suppliers access to iCollaboration via a web browser, but more importantly delivering advanced planning features geared specifically for business-to-business collaboration. The company is also working on intelligent agent technology to automate B2B transactions to improve speed and reduce the level of human intervention.

* Excellent growth: Some of Adexa's growth comes in many cases as a result of being the second choice, acquired by clients who are unsatisfied with their first selection. In instances where Adexa does compete head-to-head with other supply chain management vendors, it often comes out on top due to its ability to demonstrate a working solution.

Vendor Challenges

* Poor visibility in the supply chain management marketplace: As Paragon Management Systems, Adexa failed to capture significant mind share among top level corporate IT professionals, those vested with the power to make buying decisions. As Adexa, the company hopes to shed this anonymity and take part in more software evaluations.

* Reliance on small direct sales force: Adexa's direct sales channel is grossly undersized compared to its competition, especially i2. Adexa had 32 quota-carrying salespersons, which made up 14% of its total employees. This compared poorly to the industry average of 22%, not to mention the fact that its competitors have significantly more salespersons in absolute numbers. Adexa has recently made additions to its sales force, but will require more time and training prior to executing to full potential.

* Lack of capital a barrier to growth: As a private company, Adexa's growth is limited to some extent by the supply of venture capital funding. With the recent decline in software company valuations, private funding will be harder to come by, even for established firms. Although it has accomplished much in terms of product development and alliances, continued growth as a private company may be difficult without significantly diluting its equity base.

Now that we've discussed each of the vendors in our model, let's take a look at some of the other parts of WebTESS.

First, we'll go to the Weigh Criteria section. Do this by clicking on the "weigh criteria" option on the top menu bar.

Weigh Criteria

The weigh criteria screen is used to assign your own customized weights to the selection criteria. Weights represent relative levels of importance for the criteria. Within the decision tree in the left panel, click on any one of the criteria, and its sub criteria will be displayed in the right panel with their respective weights. You can create customized weights by clicking on the colored bars to the right of the criteria.

For the supply chain management model, the weights chosen are based on settings we obtained from past clients and represent a broadly defined standard. Product functionality remains the most important criterion, but is followed closely by service and support. Corporate viability comes next, then product technology and corporate strategy have roughly the same level of importance.

Next, we'll take a look at the vendor ratings. Do this by clicking on the "view ratings" option on the top menu bar.

View Ratings

The view ratings screen displays how the vendors perform across all the criteria defined in the model. You can display comparative ratings by one choice (all the criteria ratings for one vendor are displayed) or by one criterion (all included vendors are rated across the criteria highlighted in the tree in the left panel). To see how one vendor option rates against the criteria, go to the 'view ratings' option on the top menu bar and select the 'one choice for all criteria' option. This brings up a list of all the criteria and shows how the vendor displayed in the 'Option' text box scores. Now - to see a comparison, go again to the 'view ratings' option on the top menu bar and select 'all choices for one criterion.' This lists all vendor options taking part in this selection with their accompanying ratings.

Next, let's see the overall results by bringing up the score card. This is done by clicking on the "score card" option on the top menu bar.

Score Card

The Score Card screen shows both the overall and detailed scores of the selection model choices. The individual choice can be selected from the drop down box below, and its strengths and weaknesses will be displayed on the left. The bottom scoreboard provides detailed comparisons of selected criterion from the left panel. A criterion shows up as a strength if it passes a threshold of 90% percent match and a weakness if it falls below 50%. By expanding the criteria hierarchy to the left, you can drill down into lower levels of the model to do comparisons. The hierarchy can be navigated in exactly the same way as Windows Explorer.

Well, that's a very brief overview of WebTESS and only begins to cover all of its capabilities. It also allows you to create charts and reports and contains a full on-line Help feature. To wrap up, I'll just take a few moments to give you some general pointers on how to use our technology.

Both WebTESS and TESS, the desktop version, offer major advantages if you want to use them for adding to the quality of your own research. Each model is fully documented with comments on the factors and models.

If you want to create a shortlist of vendors because there are some criteria that are really critical to you, look through the model and click on those criteria. You can shortlist the vendors quickly that way, and then run through the rest of the model with those selected vendors.

I should add that our desktop product TESS is also available and you can contact our sales department concerning TESS and model licensing.

Thank you all for participating and please e-mail any additional questions you have to supplychain@technologyevaluation.com and we will get back to you as soon as possible.

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/

SCT Fygir To Lubricate Valvoline’s Supply Chain

2010-08-18T00:48:00.001-07:00

On the heels of its win at Equilon, SCT Corporation recently secured another high-profile contract in the petroleum products sector with Valvoline, the $1.1 billion lube oil division of Ashland Inc. Valvoline will use Fygir Supply Chain Planning suite as part of a larger initiative to support its e-business efforts. The contract has a total value of more than $4 million in license fees and services.

Acquired by SCT in 1998, Fygir supply chain suite provides the critical ingredient for SCT's integrated enterprise planning and execution suite, iProcess.sct. iProcess.sct binds together SCT's Adage Supply Chain Execution software, advanced planning features from Fygir, and ecFoods' Internet Trading Exchange. The combination neatly unites ERP, Supply Chain Management (SCM), and e-procurement.

The Fygir suite itself consists of modules for advanced planning, advanced scheduling, and demand planning. The Fygir products enable users to improve their supply chain management performance and make their manufacturing process more efficient by applying mathematical techniques to optimize the supply chain.

Market Impact

Lube oil represents just one component of Valvoline's growing business that now includes antifreeze, automotive chemicals, refrigerants, appearance products, and lube services franchising. As companies like Valvoline/Ashland expand their product mix, it becomes increasingly important to maintain visibility across multiple business units to avoid overlap and ensure best use of common resources.

In Valvoline's case, Fygir can help address inefficiencies that erode margins and pull down profits. For example, though Valvoline's operating income increased 40% to $74 million in 1999, compared to $53 million in 1998, increased expenses in Latin America and lower international revenues robbed the company of an even stronger bottom line. In 1998, large inventories of its R-12 automotive refrigerant product at the distributor and retail levels reduced demand and resulted in lower gross profit.

These problems are by no means unique to Valvoline but are common in the industry and represent a golden opportunity for supply chain management tools like Fygir. The petroleum sector is not among SCT's core industries but shares similar processes and problems with chemicals manufacturing and food & beverage, both of which are well-represented in SCT's client base. The king of petroleum supply chain management is indisputably Aspen Technology, which counts among its clients 17 of the top 20 refining and exploration companies. We expect Fygir to continue to do well within petroleum as it offers more "out-of-the-box" functionality than Aspen Technology.

User Recommendations

Fygir has found wide success in the process manufacturing industries and these users would do well to include this component of iProcess.sct in selections with other best-of-breed supply chain management software from Logility, and Aspen Technology.

For users considering a migration to Oracle based servers, SCT could help ease the transition. The company currently has an agreement with Oracle Corporation allowing it to sublicense a limited-use Oracle system, which enables a client to use Oracle with its software products at a significantly lower cost than a full-use Oracle license. The agreement expires in July 2003.

SOURCE:
http://www.technologyevaluation.com/research/articles/sct-fygir-to-lubricate-valvoline-s-supply-chain-15976/

Supply Chain Management Systems for Service and Replacement Parts: Players, Benefits, and User Recommendations

2010-08-18T00:47:00.002-07:00

The differences between new parts production supply chain and service and replacement parts supply chain are significant. Companies using conventional supply chain management (SCM) methods to track their service and replacement parts supply are failing to grasp the special needs of the aftermarket. Further , one can even differentiate between the inventory optimization approaches of new production parts. Pure distribution parts include finished consumer goods (not including fashion/apparel items due to their seasonality idiosyncrasies, see Intentia: Stepping Out With Fashion and Style; Part One: Characteristics and Trends of the Fashion Industry), with a large number of items, large number of locations (whereby store levels can get out of hand), and with a desire for very high customer service levels (98 percent or more). The vendors that cater to these customers would be the likes of ToolsGroup. Mixed manufacturing and distribution for new parts require the exact positioning of parts. Exact positioning is highly important for manufacturing and configuring (postponement) purposes, because bill of materials (BOM) logic is heavily leveraged for inventory planning and optimization. Leading vendors in this market include Optiant, LogicTools, SmartOps, or i2 Technologies.

Part Four of the Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts for SCM series.

These solutions typically leverage stochastic optimization using nonlinear modeling techniques to analyze input data for randomness. This knowledge is applied to determine an optimal inventory policy at a particular node in a multi-tier supply network. Namely, as supply chain variability has increased, the data has become more random. Consequently, user companies need to not only look at the nominal values per se, but also at the probability of the value. For example, they need to know what the probability is of the forecast value, the purchase/transportation lead time, the manufacturing run time, the supplier quality, etc.

Contrary to these new parts production segments, aftermarket service and replacement parts are typically "slow movers," but may be critical for the operation of expensive equipment, often containing associated service level agreement (SLA) penalties for inadequate service. Thus, for the reasons of repair and indenture level and SLA considerations, one has to optimize inventories for required service levels and end-equipment availability. Varied service and customer entitlements complicate things, since aftermarket service must support warranty commitments; contract extensions, which might include same-day or next-day service; and direct or through distributor part sales. These entitlements may have different service objectives, which may include fill rates, response times, or system uptime maintenance.

How is risk factored into decision-making for service parts? In this case, forecasting might use demand history, but perhaps more importantly, mean time between failure (MTBF) data and an analysis of causal factors can provide item- and location-specific estimates of usage. This data can also be used to calculate the probability of demand occurring during the planning period in question. For example, a forecast might state that there is a 12 percent chance that the user will need a specific part in the next thirty days at a specific location. However, this forecast is risk-based, rather than consumption-based, as it is in new parts production supply chain planning (SCP).

Moreover, the design of the distribution network including which parts and how many of each are positioned at which depot(s) is another risk based evaluation. Typically, this dictates a multi-tier or multi-echelon depot strategy, where tactical planning involves risk-based decision-making that considers the probability of demand and therefore, the probability of a stockout. To refresh our memory, stockout costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs (not to mention lost face before the customer and hurting SLA penalties). Thus, the strategy include issues like, if we have a 20 percent chance of needing a single unit of a specific part in the next thirty days, what are the odds that we will need two? Moreover, given the part delivery lead time, what are the odds that the demand for two will create a stockout?

Given the random, sporadic nature of service events, forecasting approaches cannot eliminate the uncertainty of demand. Hence, inventory decisions must be evaluated on the basis of risk, whereby the considerations should include MTBF; the number of a particular asset type to be maintained; the product life cycle stage; the locations of assets and available spare parts; SLA commitments; the cost of downtime and of the service or replacement part, etc. To deal with these variables effectively companies must address the complexity and the need to manage risk directly. Some vendors, as will be described later, have developed approaches incorporating these factors into the proprietary models and algorithms.

Service and replacement parts inventory optimization is a big issue for a wide gamut of manufacturers. Aeronautical and defense (A&D) companies that design products for high reliability figure most prominently, but they still have to maintain stocks of complex and expensive spare and replacement parts, since the impact of any type of failure is large and requires the widespread and global stocks of parts for rapid replacement. The situation becomes even more complicated with rotable parts, such as the interchangeable elements of an aircraft that are removed, rebuilt, or reinstalled, which, almost as a rule, are always on a different aircraft. In an industry where every nut and bolt is important for safe operation, immense amounts of attention and effort are used to track interchangeable components and subassemblies for costing, replacement scheduling, and mean time-for-failure (MTFF) prediction.

A&D companies design low-volume, high-cost products for high reliability, but still maintain stocks of complex and expensive spares, since the impact of any failure in this industry, is large and requires adequate stocks of parts at several locations for rapid replacement in case of repair. On one hand, minimizing the number of new parts introduced into the market (and subsequently into inventory) should be a major aim, particularly because parts face obsolescence as new finished product are introduced. Yet, on the other hand, rotable parts and reusing ("harvesting") repaired components only adds to the complexity and likely impaired the efficiency of this process. Further, lot and serial tracking capabilities, the so-called tail effectivity, permits users to tie every part (within part lists and diagrams) on a plane back to that one entity. For more information, see MRO and Spare Parts Management Considerations.

Similar low-volume, high-cost, high-impact concerns are applicable to a range of other manufacturers, such as automotive and high-tech/electronics makers of complex medical equipment, large industrial systems, and mining equipment. All have immense, installed bases and complex, multi-echelon supply chains with high occurrences of slow-moving parts. Manufacturers of durable goods, like household appliances, have an additional issue with the need for highly mobile service van stocks. In addition to original equipment manufacturers (OEM), asset-intensive manufacturers, and service organizations, like refineries, chemical plants, primary metals producers, telecommunications, utilities, and municipalities, have to maintain large stores of spare parts to minimize the impact of failures on their revenue generating activities.

Considering the complexity of spare parts considerations, these vendors initially focused on specific vertical markets. For instance, Manugistics and Xelus (now part of Click Commerce [NASDAQ: CKCM]) are regarded as the market leaders in inventory optimization solutions for the demanding needs of the A&D industry. Manugistics has a lengthy experience in the commercial airline sector where carriers like Delta and Continental Airlines have been using its revenue management and optimization applications. The vendor has further strengthened its focus with the acquisition of former Western Data Systems (WDS) in 2002, a depot repair ERP solution provider (see Manugistics Indulges in the Open M&A Season).

Still, both vendors have applied their solutions to other industries that have to deal with expensive, low-volume service parts requirements, like telecommunications, industrial equipment, and high-tech/commercial electronics. Although i2 has Southwest Airlines as its marquee A&D customer, i2 has focused more on industries with somewhat higher-volume and complex supply chains, such as segments of the telecommunications and commercial electronics industry, as well as automotive parts. This similarly holds for other traditional (new parts) SCP providers, which are also beginning to realized the service parts SCM opportunity. Among such companies are Infor Global Solutions (www.infor.com, via its recent acquisition of the demand planning vendor Mercia Software) and Logility (NASDAQ: LGTY), whose client roster includes Komatsu Europe International, a provider of construction and mining equipment, and Delco Remy International, a manufacturer and re-manufacturer of automotive electrical and drive-train/power-train products.

To that end, recent service parts enhancements to the Logility Voyager Solutions SCM suite include more robust forecasting techniques for normal, seasonal, short-life cycle, intermittent demand, end-of-life (EOL) purchases (all time buys), and reverse logistics planning. Streamlining the reverse logistics process is critical for companies that manage high value, service exchange units from return to refurbishment to re-sale. Logility also provides a method to forecast returns and conduct make/buy analysis, which helps companies synchronize their inventory investments with service-level goals, and accelerate the receipt of returned goods into inventory.

Pure-play providers beside Xelux, such as Servigistics, Baxter Planning, and MCA Solutions have focused exclusively on the requirements of service parts inventory management and optimization, and have gained recognition in some market segments for their deep spare parts management expertise and scalable technical solutions. Servigistics has carved niches in medical devices and commercial electronics and MCA in telecommunications and industrial equipment; while Baxter often competes with MCA in telecommunications, and with Servigistics in high-tech/electronics. The enterprise resource planning (ERP) (and possibly SCP too) leader SAP has long been dabbling with delivering a spare parts and MRO solutions, via a longstanding alliance with Caterpillar-Ford Motor, but a solid, commercially available solution is yet to come. International Business Systems (IBS) has capabilities in determining part criticality measures and optimum service levels, as a result of its acquisition of Stratman Software. Yet, today's ERP systems generally do not contain adequate, let alone advanced spare parts planning functionality.

The spare parts planning market thus seems a prosperous area, as seen by Click Commerce's interest through acquiring Xelus. Click Commerce started out as one of several up-and-coming SCM vendors focused on coordinating and optimizing supply chain processes across multiple channels of suppliers, customers, and partners. It features leading-edge technology that is based on open Internet standards and a component-based architecture. Also, over the past few years, the vendor has rapidly corralled its partner relationship management (PRM), and moved beyond product portfolio by acquiring several niche providers, such as

* ChannelWave, a former PRM peer's channel management and service automation software assets in 2005,

* Optum, a warehouse management vendor, in 2005, which had previously acquired V3 Systems and WorldChain, respective providers of software for supplier management and vendor managed inventory (VMI), in 2004,

* bTrade, a specialist in connectivity and Internet-based electronic data interchange (EDI) for trading partner management, in 2004,

* Webridge, a provider of secure extranet portal solutions, in 2004, and

* Allegis, a data center and hosting PRM provider, in 2003 (see Click Commerce Acquires Allegis).

In addition to Xelus' forays in leveraging radio frequency identification (RFID) in tracking and analyzing service parts, Click Commerce hopes to hereby broaden its footprint with the service parts planning and reverse logistics expertise of Xelus. Xelus should eventually manage the entire gamut of operations, from ordering, moving and fulfillment of parts, including raw materials, via subassemblies and finished goods to aftermarket, spare parts. But, the acquisition also points out that the spare parts market is also challenging one even for pioneers like Xelus or former Slimstock Systems (now offered by Railpart UK Ltd.). Namely, Xelus has been in business for over twenty-five years, and with solid functional products that are, unfortunately, based on older technology. Therefore, it has lately struggled to compete with the likes of MCA Solutions, which provides solutions for service parts management that may not necessarily have all the functional "bells and whistles" or the largest install base, but is based on modern Java 2 Enterprise Edition (J2EE) technology.

Although Click Commerce has good technology, an intriguing product roadmap, and an outstanding list of customers, such as Microsoft, Delphi, Honda, Citibank, FedEx, Carrier, Samsung, Hitachi, and Ryder, one should wait and see how the company, with no prior expertise in planning, will enhance the product. Also, the footprint has now become indisputably large and ambiguous, and one that will involve some notable integration work.

Potential Results and Benefits

Discussing the results of risk-based service part planning solutions deployments with multiple vendors shows a consensus. Those manufacturing enterprises that have not produced effective strategies for managing spare parts (including parts for field service and plant maintenance) will likely leave significant amounts of money on the table in terms of excess inventory carrying costs or missed potential sales opportunities. On average, spare parts planning systems lower inventory levels by up to 35 percent while simultaneously improving customer service levels, decreasing expediting costs and increasing field service technicians productivity, for example, increasing first-time fix rates. Some enterprises implementing these systems have reportedly seen payback times of six to nine months, while some have subsequently found out that as much as 40 percent of their parts inventory is obsolete.

According to Baxter, the result is the right product in the right place at the right time from the right source, while Xelus' inventory optimization customer, Delta Air Lines, reported an eleven percent maintenance cost reductions in 2002, which is a no small chunk of change for a financially embattled company.

MCA's management, related the success of Cisco, whose service business has over 100,000 supported service parts, over 700 stocking locations, and multiple classes of support contracts with 10 million assets to be maintained. Many of Cisco's larger customers have different service contracts for specific sets of products or locations, while other customers are not covered by any service contract, but still require service parts and support. Despite employing a variety of ERP, SCM, and CRM systems, Cisco found that none of the existing software met its requirements for service parts forecasting and inventory positioning. Thus, in 2001, Cisco implemented MCA's Service Planning and Optimization (SPO) software product, and within five months, Cisco had rolled out SPO worldwide, with over 1,000 users. The results included service level increases from 94 percent to 97 percent, while spare parts inventory was reduced by 21 percent.

Servigistics' customer Cray Computer objectives were reducing inventory without compromising parts availability, and Cray has 14,000 service parts and with sites in 30 countries. Cray reported a 27 percent inventory reduction without compromising service part availability or customer service. The like case study list could go on—while these vendors might have nascent install bases, some of them like MCA tout 100 percent customer success and availability for references.

Summary and User Recommendations

Why should prospective user companies care about spare and replacement parts SCM solutions? Well, they might have customer commitments to maintain, but the service parts and accompanying services revenue (tapping into the value of the aftermarket) is a key element of their financial success. According to Brian Albright of Frontline Solutions, "Aftermarket parts and services have a profit margin as much as 10 times that of initial product sales and account for 20 percent to 30 percent of revenues, and 40 percent of profits for most manufacturers".

Improved service management boosts revenue from both service offerings and new product sales, while improved customer service and enhanced offerings increase customer retention, and draw new service business, providing an additional, low risk and likely repeated revenue stream over a long period of ownership. Increased customer satisfaction rates, in turn, aid new product sales. Further, some advanced risk-based service planning offerings allow service organizations to move from a focus on simply selling parts, to comprehensive offerings tailored to the needs of individual customers, including premium and differentiated service offerings as well as multi-supplier support.

Asset intensive industries such as A&D, automotive, computer, data storage, medical equipment, semi-conductor, telecommunications, with large investments in spare and replacement parts inventories, high parts, field personnel availability, and SLA requirements, have limited options to lower inventory while increasing parts availability. Implementing well-suited service parts planning can cut inventory levels up to 50 percent, resulting in reduced inventory carrying costs, lower new purchase expenditures, and fewer parts becoming obsolete. Network rationalization, more effective planning, and less need for expedited shipping provides further savings.

Prospective users should evaluate the value of these solutions in their business in terms of increased service revenue, decreased cost, and increased customer satisfaction. They should define their overall SLM strategy to achieve a tangible return on investment (ROI) from the holistic initiative, while determining their service management requirements based on real business needs. They should look for integration of the SLM business processes from the viewpoint of their customers, as to integrate the service requests with the activity in the field.

Enterprises should look at vendors with deep products and experience in managing service operations in their industry, bearing in mind the suitability of a particular product for their real life problems, and with reasonably fast runtimes (i.e., quick "number crunching" capabilities for a vast number of service part numbers and supply chain echelons). They should also look for mobile and multi-platform solutions. Although these features may not be needed today, they will be requirement in the long term. Enterprises that offer MRO services or are looking to incorporate part criticality and failure rates into their replenishment strategies should consider offerings from the specialized spare-parts planning vendors described in this article, while other prospective users might want to consider offerings from general SCP/demand planning vendors.

Typical and necessary software components (and accompanying master data models) that are in place for these add-on solutions to work, include

* a sound supply chain model (from ERP, SCM, or legacy enterprise systems);
* a robust model of inventory impact on service;
* forecasted demand and lead time probability distributions; and
* optimized reorder points and order-up-to (minimum/maximum) levels for the items/item groups.

Nevertheless, one should try to avoid overlaps with existing enterprise applications, such as ERP and SCM systems, to reduce integration needs. These systems should be able to conduct inventory optimization across items, what-if scenario capabilities, and ideally a seamless handoff to execution systems. Prospective users should certainly consider a pilot implementation to prove the value proposition of the chosen solution.

In the long term, the aforementioned vendors should on their hand try to bring the cost of these tools down for the mid-market (given the current complexity and price attractiveness, mainly for the large corporations), provide simpler drilldowns and rationale explaining why the system made the choices it calculated, in order to bolster the user acceptance. Results are often counterintuitive and unexpected to "ordinary, non-academic mortals", despite being beneficial suggestions. On their hand, prospective users should at least be informed about optimization principles to be able to evaluate the fit of the optimization model used to solve the problem and produce the right data. They should also be knowledgeable enough to determine the fit of the tool to generate a logical answer to improve a decision. Rather than getting bogged down into vendors ramblings of their "perfect" algorithms, users should challenge contesting vendors to participate in proof-of-concept demos and pilot projects using users' data. Last but not least, the need for better ties with SCE systems go without saying.

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-systems-for-service-and-replacement-parts-players-benefits-and-user-recommendations-18090/

Most Misunderstood Link in Supply Chain Management

2010-08-18T00:47:00.001-07:00

Most Misunderstood Link in Supply Chain Management

Critical to sales, customer service, quality, cash flow, and to a company's very survival, credit and collections is often caught up in a 1950's risk management time warp.

Lots of things have changed since the '50s, besides the color of my hair. One thing that has remained fairly constant though is how most business executives view the credit and collection function.

They Don't Know What They Don't Know

An 18-year-old kid knows everything worth knowing, or so he believes. Most business executives know everything worth knowing about credit and collections, or so they believe.

There are two questions I ask potential clients about their credit and collection operation:

1. How do you measure performance?
2. Do you have usable written policies and procedures?

If clients have any kind of trackable numbers with which to measure credit and collection performance, those numbers are usually tied to average turn-time on the accounts receivable (A/R)—the days sales outstanding (DSO) or collection days index (CDI)—and percent of A/R written off as a bad debt loss (money the customer didn't pay). The same as in the '50s. As for usable written policies and procedures, many of these companies have none; only a few have actually documented the why, what, how, and when. The problem with many of these companies is that they have had the same policies and procedures since the 1950s.

"The new guy learns from the old guy, who learned from the dead guy." (Scott Stratman)

The problem with verbal understandings is that everyone gets to be the policy maker and there are as many policies as there are people. Many companies have a loose collection of forms, memos, and letters that they mistakenly call policies and procedures. They can't hand these so-called policies and procedures to someone new and reasonably expect the person to know how things work.

If you think you have usable policies and procedures, pull them out and see if they answer the following questions:

1.

What is the purpose of the credit function?
2.

What is the goal of credit approval, and does that goal complement the purpose?
3.

What is the goal of collections (delinquent A/R management), and does it complement the purpose?
4.

How is credit approval performance measured, and does it complement the goal?
5.

How is collections measured, and does it complement the goal?

People Forget

Eli Goldratt, in his book The Goal, says people in business forget why they're in business, that they get caught up in the process (details) and lose sight of the purpose (vision). I think Goldratt is too kind. I think many people in business never knew the purpose of what they do to begin with. Recently I was visiting with a chief executive officer (CEO) and his vice president (VP) of purchasing, and I asked the VP what the purpose of his function was. He stumbled around and came up with something about customers' needs and balancing that against various other factors.

If the head of a department can't clearly state why that department exists, what are the chances his people know? Or care?

Considering the costs of extending credit to customers—namely, the additional administrative expenses, the cost of time and money that goes with carrying A/R, and the potential for loss (bad debt)—why should any business extend credit? What is the purpose of the credit function?

Why Credit?

Businesses incur the costs of extending credit terms for the following reasons:

1.

It is a customer requirement. These companies are doing business with customers that require that they be given time to ensure they receive what they ordered; they require time to process the bill for payment. If credit terms aren't extended to such customers, the company loses profitable sales.
2.

The customer sells downline. Customers add value to the goods or services they buy and then sell downline to their own customers. Such customers require time (credit terms) to add value, make sales, and perhaps to collect their own A/R before they can pay vendors and suppliers. And if credit terms are not extended, profitable sales are lost.
3.

It is customary. In some industries, credit terms are customary, which means that other vendors and suppliers (competitors) extend credit terms. If credit terms aren't extended, profitable sales are lost.

The only reason to incur the costs that come with extending credit terms is to get profitable sales that would otherwise be lost.

Measurements over Purpose

How performance is monitored and measured means more than any stated purpose. Remember the first question I ask prospective clients: how are you measuring performance? If they are using DSO and bad debt, they are not measuring for how well the function performs in getting profitable sales; they're measuring for risk. The old comeback to credit being a lubricant of commerce, and allowing for the expanded movement of products and services is, "a sale's not a sale until you're paid." Consider this: If the purpose (vision) of credit is "to get profitable sales that would otherwise be lost," then should not the goal of credit approval be "to find ways of accommodating profitable sales while remaining confident of payment"? Who says we can't have our cake and eat it too? Stop painting credit as "the sales avoidance department" by measuring for what you want—profitable sales.

Factors in Credit Approval

There are three main factors companies consider when deciding to extend credit to a customer:

1.

Customer profile and how the customer does business (i.e., process, paperwork, accounts payable [A/P] cycle, etc.).
2.

Customer past performance. If they've never paid anyone in the past, chances are real good you won't be the first they will pay.
3.

Seller's product value (i.e., the margin on the sale, the current demand for the product or service, and lending company's current capacity).

Based on these factors, the goal is to find ways to maximize sales and minimize risks.

Enforcement of Payment

Why do I hate the word collections when used to describe the management of delinquent A/R? Collections has always been defined as "the enforcement of payment." The problem with this definition is that the vast majority of “past dues” aren't trying to stiff creditors; there are very often good reasons why payment isn't made when due.

A recent survey of 1,550 companies found that, on average, 73 percent of the total past due A/Rs are tied to “something going wrong”: sales and service disputes, wrong shipments, overages or shortages, damages, returns, unissued credits, missing backup, lost paperwork, wrong purchase orders (POs), and on and on. A certain percentage of past dues are using vendors or suppliers as a form of short-term financing (the float), but they're not collection agency material. Other past due customers can't pay when due for good reasons, but will be able to pay in the near future.

It is the very smallest percentage of past dues that are trying to avoid making payment. Past due A/R management is "the process of completing the sale." The goals of delinquent A/R management should be to

1.

Keep customers current and buying. Find out what stands between the customer and payment, and resolve the problem so that we get all the repeat business we can (the most profitable sale).
2.

Identify early on the small percentage that represents a potential for loss, and control bad debt by limiting further credit sales and by successfully improving on position (personal guarantees, returns, barter, conversion to a promissory note with additional security).

Summary

Lots of things have changed since the '50s. Customers today have more goods and services to spend their money on than ever before in human history. Unlike the '50s, a business today must be concerned with quality. And unlike the '50s, competition is crawling out of the woodwork and out of cyberspace.

Ask yourself two questions:

1.

How are you measuring the performance of your credit and collection function?
2.

Do you have usable written policies and procedures that support why (the purpose) credit exists?

You may find that you have forgotten a critical link in supply chain management.

The Author

Abe WalkingBear Sanchez is an international speaker, trainer, and consultant on the subjects of cash flow and sales enhancement and of business knowledge organization and use. Founder and president of www.armg-usa.com, Sanchez has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982, and has spoken at many venues, including the Shakespeare Globe Theater in London (England). A hard-hitting and fast-paced speaker, he brings life and energy to a critical business function whose true potential has yet to be realized by most businesses.

SOURCE:
http://www.technologyevaluation.com/research/articles/most-misunderstood-link-in-supply-chain-management-19354/

Reference Guide to Supply Chain Management (SCM) Features and Functions

2010-08-18T00:46:00.000-07:00

This SCM reference guide provides insight into the supply chain management (SCM) features and functions currently accessible on today’s market. This guide will help you understand which features are essential for your organization and which are not.

You can also download a comprehensive guide in Excel format, with all of the nearly 2,600 SCM functions and features, at TEC’s Supply Chain Management (SCM) RFP Template page.

Before we get started, here is a short definition of the role of SCM software in supply chain activities:

What Is SCM Software?

SCM software manages product flows from supplier, to manufacturer, to customer. In brief, it manages supply and demand for an organization. According to APICS, SCM software refers to

the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

SCM systems integrate all features of procurement processes, warehouse management system (WMS) features and functions, transportation, and logistics, as well as other product planning modules.

To learn more about the distinction between advance planning and scheduling (APS), SCM, and enterprise resource planning (ERP), read TEC’s article Comparative Analysis: Are You Still Confused About APS, SCM, and ERP?

About This SCM Guide

Our SCM request for information (SCM RFI) template is composed of almost 2,600 criteria; consequently, we’ll focus here on the “big picture” features only.

We’ve brought SCM features together by broad category:

1. Warehouse management system (WMS)
2. Transportation management system (TMS)
3. International trade logistics (ITL)
4. Supplier relationship management (SRM)
5. Demand management
6. Supply chain analytics
7. Order management
8. Service parts planning
9. Product technology

These categories correspond to a high-level functional breakdown of software features. In this reference guide, we give a short explanation of how each category impacts your supply chain management processes.

If you would like more information about full listings of enterprise software functions and features (SCM, ERP, and other enterprise software categories), please see TEC’s RFP Templates.

Supply Chain Management (SCM) Software Functions and Features

SCM functions and features, submodule #1: warehouse management system (WMS)

Functionality
This category includes the general warehouse management functionalities such as warehouse configuration, bin location and product setup, inventory control, license plate tracking, quality control, picking, packing and shipping, etc.

Adaptability
The adaptability module in SCM software covers business processes, decision support, and reporting.

Warehouse management system (WMS) technology configuration
The technology configuration addresses WMS-specific functionality such as radio-frequency identification (RFID), security, and internationalization supported by each vendor. It also touches on programming and other technologies used in the development of the WMS application.

SCM functions and features, submodule #2: transportation management system (TMS)

System definition and implementation
The TMS should include tools and applications to enable to create profiles for all your contracts, associated carriers, and trade lanes for inter-modal and multi-leg moves. This should support regional as well as international transportation movements. The key to the successful operation of the TMS is a robust foundation created during the system implementation.

Transportation management operation functionality
Transportation management operation functionality allows distributors to align their transportation operations with their supply chain strategies and overall business objectives. This includes areas that take into consideration the entire shipment life cycle, from planning, network optimization, and execution, to shipment tracking and analysis.

SCM functions and features, submodule #3: international trade logistics (ITL)

Collaboration
True collaboration across a global and disparate set of entities and information systems requires a neutral and secure environment. This type of environment enables all players to engage in an electronic dialogue to collaborate in acquiring, transferring, transporting, and settling with regional and international trading partners. In addition, the data model should take into account the different roles of all participants and manage these through a set of rule-based processes. As such, the system implementation should include clear definitions in terms of buy-sell relationships, financial terms, and service level agreements, as well as related contact details and user profiles for suppliers, customers, and related service providers.

Content
The system should support all the data and information required in order to establish a true total cost of goods sold at the time of the initial buy-sell transaction. The SCM software should also enable users to track incremental costs as the shipment is processed from point of origin to final point of receipt. All costs and activities should be available at the transaction initiation point and can be classified by the primary components, which are product costs, compliance costs, and logistics costs.

Commerce
Starting with the initial request for goods—whether this is an RFI, a request for quotation (RFQ), or a formal purchase order, all information that is exchanged during the shipment life cycle should be facilitated by the international trade logistics (ITL) system. This requires a synchronized system and process, where the product and shipment requirements are integrated into an automated order fulfillment environment. The product item master and associated tables will determine the cost of the product as well as the relationship between the product and any duties or tariffs that are applicable. Tables related to customs duties and tariffs as well as associated rates of exchange and transportation costs should be available as part of the system functions. This will enable the user to obtain an estimated total cost of goods sold as well as a final cost of goods sold, to highlight any variances or discrepancies. This implies a data model that includes an understanding of all the data exchanged and processed at the product and item level, between order management systems, as well as the data exchanged with warehouse management and transportation systems.

SCM functions and features, submodule #4: supplier relationship management (SRM)

Design
Best practice dictates that strategic suppliers be involved in the new product process from the very beginning—i.e., the concept, requirements, and design definition phase. Supplier relationship management (SRM) suites support this with functionality for requirements collaboration tools, component selection tools, and bills of materials (BOMs) grading.

Sourcing
Many consider sourcing to be the heart of SRM and commodity management to be the heart of sourcing. Advanced sourcing suites are rich in analysis and decision support technology to absorb huge amounts of data quickly and make intelligent sourcing decisions. They also lay the foundation of execution through RFI, RFQ, and RFP processes, and manage performance against contracts. Risk management is an area which spans the full life cycle, in particular association with the sourcing function.

Procurement
Procurement is generally divided into material requirements planning (MRP)-driven procurement (sometimes referred to as direct materials procurement) and requisition-driven procurement (sometimes referred to as indirect or maintenance, repair, and operations [MRO] procurement), although some long-lead-time, first-run direct materials are ordered via requisitions. This division reflects substantial differences in the two methods of procurement. Management of catalogs supports requisition-driven procurement and the sourcing processes that precede MRP-driven procurement.

Fulfillment
The bulk of fulfillment functionality is traditionally performed by ERP and related systems such as order management, warehouse management, and distribution management systems. As companies virtualize and suppliers become increasingly involved in the fulfillment process, some functionality is appropriate within SRM. SRM systems should support a range of modern inbound inventory management practices, such as kanban and vendor-managed inventory (VMI) and provide visibility into the inbound pipeline. Returns management becomes important in SRM for situations where components are being returned to and repaired or replaced by suppliers.

Manufacturing
As with fulfillment, the bulk of manufacturing functionality is traditionally performed by ERP systems. However, the important supplier-facing processes of quality and engineer change order (ECO) management may be done outside the ERP system as part of an SRM suite.

Settlement
The primary SRM-related function for settlements is in reconciliation between the original order, actual received goods, and the invoice. Advanced settlement processes may also be supported, such as evaluated receipts or electronic invoice presentation and payment.

Utilities
There are several areas that span across the lifecycle categories. Specifically, you need project management utilities during design, sourcing, and manufacturing. The same is true for managing BOMs and managing cost.

Infrastructure
SRM is by nature an integrative function and requires the infrastructure to support that integration, as well as to manage the massive volume of related content, alerts, and data.

SCM functions and features, submodule #5: demand management

Promotion planning
Promotion management systems allow your organization to plan promotions with your trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware include the following:

* Promotion plans are frequently not integrated into the demand stream.
* Promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.

Pricing and profit optimization
The pricing and profit module manages profitable and sellable prices for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus, the ability to track and report history is equally important for managing pricing activities.

Forecasting
Reliable forecasts are based not only on algorithms that are appropriate to the business setting, but also on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensuring that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions.

Merchandise planning
Merchandise planning analyzes demand at the item level. It allows organizations like merchants (retailers) to understand demand based on issues ranging from demographics, store locations, shelves, and support, to purchasing as well as the positioning of merchandise in the retail channel.

Life cycle planning
Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up, or supplied with excess in later stages. In addition, firms are frequently left with excess inventory thanks to ECOs or other product changes, as well as at end-of-life, due to poor planning and visibility into demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information.

Consensus planning
Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-the-dock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecast—one number—upon which the supply chain will act.

Collaborative planning
Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the Voluntary Interindustry Commerce Solutions (VICS) Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points).

Sales and operation planning (S&OP)
S&OP is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.

Vendor-managed inventory (VMI) replenishment
VMI replenishment allows the co-management of inventory by both customers and suppliers. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, VMI dynamically detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order.

Event planning
Event planning for various marketing events has become more complex as more firms use a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need finely tuned planning to be successful. Today, systems must move from PowerPoint-level tools to strong profit analytics for ensuring market success and return on investment (ROI).

Metrics and reporting
Metrics and reporting capabilities today must be forward-looking to report (but more importantly, prevent) negative business performance. Beyond excellent modeling and simulation capabilities, metrics systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders, naturally.

Demand management systems architecture
Demand management tools have unique and high levels of integration requirements. These requirements should be factored into your evaluation of SCM functions and features if your organization places a high priority on demand management functionality.

SCM functions and features, submodule #6: supply chain analytics

Supply chain optimization
Supply chain optimization modules allow you to design the best-fit (optimal) supply chain by time, cost, and other factors, in order to create responsive and lean supply chains. Each module has a unique specialty such as logistics or inventory. In addition, the optimized network blends and trades off all these factors.

Supply chain event management
Supply chain event management (SCEM) or supply chain network systems are a new class of solutions designed to monitor, notify, analyze, measure, and control business process and execution types of activities. These systems take advantage of new architectural principles brought about by several forces: high-availability, publish-and-subscribe architectures; tools like Java; the maturity of artificial intelligence (AI) rule-based programming capabilities; emerging agent technologies; and Web architectures and standards such as simple object access protocol (SOAP) and extensible markup language (XML). These solutions allow open, real-time views into global information, as well as the ability to pinpoint and drill into key information, sensing deviations in business plans versus execution expectations (unplanned events).

Production and supply planning
Today's supply chain planning systems have significant advantages over the manufacturing resource planning (MRP II) systems of the past. These systems incorporate up-to-date algorithms and philosophies on how supply chains work. In addition, they have a technology advantage over MRP II, in that they are memory-resident, which allows the solutions to solve simulation issues extremely quickly, with very large arrays (models). These large models solve simultaneous, multi-level, and multi-node problems that MRP II systems cannot.

SCM functions and features, submodule #7: order management

Order promising
The order promising submodule includes criteria for available-to-promise (ATP) and configuration management across multiple databases, integration of configuration management with multiple unique BOMs, and integration with demand and replenishment orders.

Inventory management and visibility
Many organizations want to provide real-time promising, so inventory visibility from multiple sources is critical.

Sourcing
A primary attribute of a distributed order fulfillment system is the ability to perform multi-stage sourcing and assembly. This requires a very open architecture to integrate seamlessly with various systems and supply chain nodes, in a real-time fashion.

Execution visibility
Once an order has been promised, keeping track while the order is built and shipped has become a critical function in the supply chain.

Inbound and assembly coordination or multi-site staging
Many orders are sourced and built by a network of partners. Frequently, notification of cancellations does not occur. Keeping these orders synchronized is critical toward meeting schedules as well as avoiding over-building or building ahead of demand.

Shipping and outbound management
Once an order has been created and built, it must be shipped. Notification of advance shipments to customers is key to seamless transportation, as well as tracing, tracking, and receiving the orders.

Order management-specific technology
A distributed architecture is key to a successful order management system, whether supply chain nodes are internal or external to the enterprise.

SCM functions and features, submodule #8: service parts planning

Planning
Service parts planning deals with the creation and replenishment of a supply network for service operations. This can include original equipment manufacturers (OEMs) and service partners, as well as service logistics providers.

Service delivery and execution
The service delivery and execution submodule includes functionality for integration with call center systems (for dispatching requirements), service response prioritization and optimization, allocation of scarce parts, and dispatch.

Workforce optimization
Workforce optimization is used for determining the right skill mix and location of personnel to support service demands. This can include on-site, co-managed personnel at the customer site.

Logistics transportation and reverse logistics
Transportation planning and execution has a significant role to play in the service supply chain. As in traditional models, there is always a trade-off in time and cost between fixed assets and delivery responsiveness in serving customers. Dynamic repair needs such as emergency breakdowns in remote settings can exacerbate delivery problems. In addition, reverse logistics issues, such as pickup of parts for delivery to third-party locations for repair, are addressed in this submodule.

Analytics and reporting
The service planning system is a wealth of information for many organizations which are accountable for product planning and design, asset and capital management, and general customer relationship management. Therefore analytics and reporting features are not just designed to enable functional excellence, but also to feed these other key areas of the value chain.

SCM functions and features, submodule #9: product technology

Architecture
Architecture refers to the framework for organizing the planning and implementation of data resources. It also refers to the way the system is designed and the manner in which all components are connected to one another.

User interface
User interface refers to the manner in which people access and interact with the software. The user interface should facilitate the user's easy operation of the software.

Platforms
The platform refers to the framework, both the hardware (e.g., type of processor) and the operating system that allows a computer or set of computers to function.

Application tools
Application tools are the components that provide the ability for an application or program to work.

Reporting
Functionality for reporting refers to technical options for generating and delivering reports.

SaaS and hosting options
This category refers to features for software-as-a-service (SaaS) or hosted solutions

SOURCE:
http://www.technologyevaluation.com/research/articles/reference-guide-to-supply-chain-management-scm-features-and-functions-20849/

Supply Chain Management: Morphing the Functional Scope of Service Parts

2010-08-18T00:45:00.002-07:00

There are many requirements involved in the supply chain management (SCM) of service and replacement parts that make the process different from traditional, "new parts" SCM (see Part One). As a result, some specialist SCM solutions have been developed to address these challenges. Some might resemble conventional SCM solutions, but feature different approaches. The requirements of service and replacement parts SCM solutions also vary given the wide range of members that exist across multi-node supply chains. Each of these members can be grouped into a few major solution functional categories.

Part Two of the Lucrative but Risky "Aftermarket" Business: Service and Replacement Parts SCM series.

Service and replacement parts resource management, which is the main focus of this article, consists of a variety of solutions that are comparable to supply chain planning (SCP) components in conventional SCM suites. Service and replacement parts management has inventory optimization at its core that determines the best way to stock inventory across the supply chain to maximize service levels while minimizing investment. In other words, the basic goal is to maintain the optimal placement of resources, including parts, tools, and service technicians, across service regions to meet service level agreement (SLA) commitments at the lowest possible cost.

These spare parts planning systems provide the means to define and implement a spare parts inventory strategy that meets enterprise objectives. In other words, they tend to help enterprises understand the relationship between a customer service target level and the value of the inventory required to support it. To that end, they combine forecasting with replenishment logic to determine the optimal level and mix of parts to carry at each stocking tier, given certain capital investment targets and customer service level goals. Unlike finished goods, where nearly 100 percent customer service levels are desirable, here only certain classes of spare parts need to be available all the time, at all supply chain nodes.

Spare parts planning systems might also improve user productivity, since by automating the basic forecasting and replenishment process, planners and inventory managers can focus on exceptions and more-strategic planning activities, such as how to handle expensive, slow-moving items or how to use substitute parts to reduce costs or obsolescence.

Achieving this goal requires a mix of tools. These range from strategic tools identifying demand profiles, service objectives, and the best way to position resources to meet demand, to tactical tools determining what orders need to be placed to meet strategic objectives. Such goals include managing the risk inherent in allocations and transships; repair or new purchase orders; new product introductions (NPI) or discontinuations; and the replenishment and redeployment decisions.

Tactical refinements of inventory optimization entail setting minimum and maximum inventory levels, which recognizing stochastic, changing demand and lead-time. The algorithms required to provide this support are significantly different from those found in conventional, new parts production SCM, and justify the use of focused, point solutions, including dynamic programming, simulation, mixed integer optimization, etc. In the case of inventory optimization, two parts may be present:

1. Multi-echelon optimization determines optimal stocking levels of an item at a particular location, based on the item's possible investment levels. In this case, an echelon is the level of supply chain nodes, or disintermediation. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, the other echelon consists of the nine wholesale warehouses, and the third echelon consists of the 350 retail stores. Each echelon adds operating expenses, holds inventory, adds to the cycle time, and expects to make a profit.
2. Multi-item optimization determines the optimal allocation of inventory investment across items in a product group.

Even fundamental concepts like customer service level are different in the service and replacement parts milieu. Namely, in new parts production, the customer service level (synonymous with customer service ratio, fill rate, order-fill ratio, and percent of fill) is a measure of the delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock (MTS) company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Likewise, in a make-to-order (MTO) company, the customer service level is usually a comparison between the number of jobs or dollars shipped in a given time period and the number of jobs or dollars that were supposed to be shipped in the same period. Yet, in the service and replacement parts world, with a high level of unpredictability, how can one forecast the dollar amount of service or repair parts that were supposed to be shipped during a particular period?

Thus, given the random nature of service and breakdown events, it is clear that demand uncertainty (which can be measured by the standard deviation, mean absolute deviation [MAD], or variance of forecast errors) cannot be eliminated through traditional forecasting methods. Hence, trade-offs must be evaluated on the basis of captured future risk assessments; estimates of demand probability distribution, relevant to specific customer products; and locations at future points in time. The decisions made across the planning horizon thus constitutes an exercise in risk management

Bundled with these, customer relationship management-like (CRM) solutions provide a means to manage service requests considering contractual or SLA entitlements (or restrictions) and resource availability. Additionally, relevant logistics management solutions manage the rapid dispatch of parts to customers and the return, repair, or discontinuation of broken or condemned parts. Service requests can come from many places in addition to a problem report from a customer, and these service requests must be routed to the right company representative and then efficiently dispatched for field service.

In addition to reported problems, effective service management requires that service problems and preventative maintenance calls be proactively generated by these applications. As the service request is reviewed, company representatives must have the ability to review all past service requests, as well as all relevant contracts, SLAs, and warranties in order to determine customer entitlements and the best course of action. Near real-time tracking of service delivery and repair activities across depots and service centers are other crucial components of the execution side. In this regard, mobile, wireless technologies are playing an increasingly important role.

Service Life Cycle Management

This brings us to service life cycle management (SLM), which is a holistic business initiative focused on the after-sale service of products and clients. Simply put, SLM focuses on making more money from the product after the initial sale and is a way to become a strategic part of the customer's business after the sale is completed. Another benefit of SLM is the automation and optimization of the service processes in the field, since resource utilization and efficiency can be increased through effective call scheduling, allowing more service to be performed with fewer technicians. Companies see the value of completing service calls on the first visit through deploying the right technician with the right skills and service parts at the right time.

Perhaps most importantly, SLM can integrate service-oriented business processes that span from the time of the service request, to the satisfaction of need, to billing or warranty. SLM, like any other business initiative that involves new business processes is best implemented alongside other strong enterprise applications. Two primary capabilities that are required in this process are call center and field service applications. These two categories of software provide support for capturing or generating the initial service request and manage them through to completion all the way to the back-office. In order to manage the total life cycle of the service requirement in a continuous business process, integrated call center and field services capabilities are essential.

Call center applications must manage the demand for service through to completion, in order to satisfy the needs of the customer and the manufacturer or distributor. The initial service request may come from a number of different sources, all of which must be captured and processed through the call center. In addition to telephone, self-service, or e-mail requests, an increasing number of products are being embedded with self-monitoring capabilities that can evaluate the health of the product and self-report on service needs.

Once the service request has been reviewed and targeted for service, field service applications must then be able to ensure that optimal resources are deployed to provide the service. Once dispatched, technicians or service representatives should have ready access to information about the product they are servicing; the customer; and the product's maintenance history and configuration in order to complete the service on the first call. In addition to being knowledgeable, the technician should be armed with the appropriate parts and tools for the job—parts that may have been planned months in advance, when applicable (e.g., in case of periodic maintenance).

Service representatives should then be able to close the loop on the service call and provide the home office with appropriate information on the time and materials used to complete the call, which is then used to generate appropriate billing and update warranties and SLAs. For more information, see Service Lifecycle Management—Tapping into the Value of the Product Aftermarket.

Moreover, given the existence of a number of various third party providers in the service and replacement parts supply chains, there is a need for service and replacement parts network management applications to coordinate all the parties involved in supporting the needs of OEMs and asset owners. This requires a collaborative infrastructure that integrates business processes and automates transactions across SCM trading partners. The integration and role-based portal presentation of network information, like product designs, service contracts, and asset and service histories are another key responsibility of this functional suite of solutions.

Last but not least, enterprise asset management (EAM) or computerized maintenance management systems (CMMS) solutions are also related, despite their focus on asset owners instead of the service and replacement part providers per se (for more information, see EAM Versus CMMS: What's Right for Your Company?).

Nevertheless, integrating information about assets (e.g., drawings, service history, etc.), and asset owners and their activities into the service and replacement parts supply chain is critical, as companies shift to newer outsourced EAM business models. Proactive maintenance strategies, such as reliability driven maintenance (RDM), enabled by external access to plant instrumentation monitoring and alerts is a prime example of how tight integration between EAM and spare and replacement parts SCM can facilitate better handling (for more information, see Reliability Driven Maintenance—Closing the CMMS "Value Gap"?).

This concludes Part Two of a four-part note.

Part One discussed the business challenge.

Part Three will continue analyzing service parts planning.

Part Four will cover players and benefits and make user recommendations.

About the Authors

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-morphing-the-functional-scope-of-service-parts-18086/

Logility Signs First ASP Deal with ebaseOne

2010-08-18T00:45:00.001-07:00

Collaborative supply chain solution vendor, Logility, recently partnered with ebaseOne, which will use its ASP infrastructure to deploy Logility's supply chain management applications to customers. The deal is the first in what is expected to be several partnerships with ASPs for supporting Logility's i-Connection announced last July. Logility's Value Chain Solutions will be offered as part of OneServ, ebaseOne's solution for small to mid-sized companies.

Market Impact

Logility has achieved an impressive 33% total revenue growth over the past five years, demonstrating that it can still compete effectively in a supply chain management market dominated by much larger players. It sells its planning and execution solutions to mid market companies primarily within the process manufacturing industries, such as food & beverage, chemicals, but also consumer packaged goods and apparel. Logility claims to be happy with its current rate of growth, but is also aggressively targeting the application hosting market. EbaseOne, the first partner to be selected by Logility, offers applications for a flat monthly fee in the core areas of customer relationship management, sales force automation, marketing management, financial management, procurement, human resources, e-business, supply chain management, electronic document management, business intelligence, and office productivity. Hosted applications offer smaller companies the benefits of automated business processes without the large initial costs and support overhead associated with traditionally installed applications. Many other enterprise application vendors are forging relationships with ASPs to more easily deploy their mid market offerings and make them more attractive to budget constrained IT departments. A recent example is JD Edwards' partnership with MCI WorldCom for hosting services.

The partnership with ebaseOne has at least one factor in its favor. Logility's Value Chain Solutions can deliver a competent solution with relatively little customization for companies with straightforward business processes and small, self-contained organizations. Such characteristics are typical for many small to mid-sized companies. A potential risk concerns ebaseOne, which has operated as an ASP for barely a quarter (since November 1999). In its last fiscal year, it posted losses in excess of $2 million, over three times greater than its revenues at roughly $650,000 .

User Recommendations

Small to mid-sized companies should take a closer look at the web-based versions of Logility's suite offered through ebaseOne, but will want to ask the following questions.

1. Does OneServ allow integration to applications that are not part of ebaseOne's offering, such as online trading networks?

2. Does ebaseOne have more application providers in the pipeline for partnerships to provide revenues for the fledgling company?

3. Will ebaseOne allow clients to move the applications in-house in the event they no longer want to subscribe to use them?

SOURCE:
http://www.technologyevaluation.com/research/articles/logility-signs-first-asp-deal-with-ebaseone-15513/

Current Trends in Supply Chain Analytics Systems

2010-08-18T00:44:00.001-07:00

Supply chain execution, planning, and optimization systems have been available in the market for a couple of years. These systems have been implemented across various industry sectors and organizations, with varied degrees of success. In many supply chain projects, one of the most important issues is the reporting, monitoring, and performance tracking mechanism, which generally remains unaddressed. Supply chain projects usually bring about a complete change in the way an organization plans, optimizes, and executes. Hence, these projects take a long time to stabilize.

Typically, as soon as the new supply chain system goes live, an organization is eager to have the basic transactions—production planning, materials planning, and procurement—up and running, and it rushes to put these in place. The organization focuses on the transaction reports, and supply chain optimization, monitoring, and performance management all take a “back seat” (are placed second in importance).

Most organizations have been operating with a supply chain system for a fair amount of time, and they have advanced along the learning curve. That is, they have reached a certain level of understanding of supply chain management (SCM). Now their focus is moving toward the next level of complexities: supply chain monitoring and performance management.

Following are some of the more important goals organizations are trying to reach, the functionalities they require to achieve these goals, and current trends in the area of supply chain reporting, monitoring, and performance management.

1. Corporate strategy to operations strategy
Organizations are trying to create a framework for top management to link corporate strategy and operations strategy. So once senior-level executives (CXOs) decide on on a corporate strategy’s objectives, they want to break it down at every level of the organization’s hierarchy. At each of these levels, the key performance indicators (KPIs) are designed to align to the top-level key performance index.

For example, the chief operations officer (COO) may be targeting a 5 percent reduction in costs for the current financial year. To meet this objective, the COO may plan to reduce SCM costs by 4 percent. SCM costs may be the responsibility of the vice president of supply chain. SCM costs, in turn, may be broken down further into lower-level KPIs, which might be the responsibility of lower-level managers. Thus, the operations strategy is modeled to align with the top-level corporate strategy.

2. Dashboards and scorecards
Organizations are looking forward to visually intuitive dashboards that display the current status of KPIs vis-a-vis their targets. Color codes are an added advantage in that they denote the status of various KPIs. Organizations require a flexible tool that will allow them to model the scorecard by giving different weights to various KPIs.

3. Target setting
The supply chain analytics system should be able to capture the target values of KPIs, and should provide the functionality to direct to the bottom level the target that is decided at the top level of the organization’s hierarchy, based on some predefined logic.

4. Benchmarking
Benchmarking is an important feature for organizations that want to measure their performance against industry standards. Thus, the system should be able to capture data from various publications that publish KPI benchmark figures for various industries.

5. Predefined KPI models
Organizations anticipate the benefits of out-of-the-box, predefined KPIs that are based on popular industry-standard supply chain models, such as the supply chain operations reference (SCOR) model. They believe that the out-of-the-box content will help save on implementation time. The system should be flexible to support any changes that an organization might want to make to the KPI hierarchy or the KPI formula.

6. Flexible reporting structure
The system should have various predefined reports. The reporting structure should be flexible so that users can customize reports by adding or removing columns to meet their requirements.

7. Drill-down feature to perform root cause analysis
The drill-down feature is essential, as this allows users to navigate through the various levels of the KPI hierarchy. This will enable users to perform a root cause analysis of any supply chain problem, thus saving valuable time when diagnosing and correcting problems. The drill-down functionality should also be available for various dimensions, such as product, product group, customer, customer group, company, region, etc.

8. Role-based access
The system should support role-based access to data, KPIs, and reports, which is required to maintain data confidentiality and data integrity. Role-based accessibility should also be supported at the various levels of the dimensions. For example, a user may have access to the delivery schedule report only for certain product categories and certain regions.

9. Simulation and what-if analysis
Simulation is a very important feature, as executives can simulate various scenarios and perform what-if analysis. They can see how the KPIs perform under different conditions. For example, the vice president of supply chain may change the value of the production schedule adherence KPI to see how it affects inventory levels. This will help to fix the KPI target at an optimal level.

10. Predictive modeling
Predictive modeling will help the system build relationships between various KPIs, based on the past transitional data. For example, the system should be able to find the correlation between forecast accuracy KPI data and the finished goods inventory data, based on past information. The system needs a predictive engine to perform such analysis. Once relationships between KPIs have been established, the system can store them, which will help users to perform root cause analyses.

11. Alerts
The system should be able to generate alerts and send notifications, through e-mail or other means, about changes or problems, thus allowing the person responsible to take timely corrective actions.

SOURCE:
http://www.technologyevaluation.com/research/articles/current-trends-in-supply-chain-analytics-systems-19305/

The Demand-Driven Supply Chain and Demantra

2010-08-18T00:43:00.000-07:00

Demand-driven supply chains focus on pulling demand and maximizing effectiveness and profitability while traditional supply chains push products and create efficiencies. This difference is the key to improving all supply chain processes and generating significant cost savings and growth.

The concept of the Demand-Driven Supply Chain is the convergence of marketing and supply chain management. In the consumer products industries, this is of key importance. Marketing drives demand through the use of promotional activities advertising, deals, point of sale promotions, etc. The supply chain must stay in synch with marketing and marketing must stay in-synch with the supply chain for the generated demand to be fulfilled. The Demand-Driven Supply Chain requires a single, consistent, demand-based plan that optimizes marketing, inventory and replenishment decisions.

Demantra

One vendor pursuing this concept is Demantra (www.demantra.com). The Demantra Suite claims collaborative 360 visibility into enterprise planning. The Demantra Spectrum Suite includes: Marketing Planning and Analytics, Demand Management and Inventory Planning and Optimization. The vendor claims documented results including forecast error reductions of as much as 40%, driving finished goods inventory reductions of up to 60%, plus proven ROI of 100% to 500% in the first full year of operation. Demantra claims 65% of its customers in North America with an additional 35% in Europe. Demantra targets its solutions to a limited number of industries including:

Demantra Spectrum strives to enable the convergence of marketing and supply chain management by balancing consumer demand against shelf life, appropriately planning production resources/constraints initiated by trade promotions, and determining the demand quantities for new product introductions. Spectrum's planning & analysis collaborative environment addresses companies with their primary business concerns: customer satisfaction and retention, freeing-up working capital by reducing inventories, increasing returns on trade promotions, bringing new products to the market faster than competitors, and achieving top-line growth by reducing stock out situations. The objectives of end-to-end supply chain visibility are better plans, better service, increased inventory turns, and higher profit margins.

Case Study: Gulistan Carpet

Headquartered in Aberdeen, North Carolina, Gulistan Carpet (www.gulistan.com) is a 76-year-old, privately held company with three separate plants that produce more than 16 million yards of carpet each year. With a focus on fashion and quality, they have shunned the commodity market and produce high-end product for both residential and commercial customers. They distribute through some 4,000 retailers nationwide, from small independent shops to large home center retailers.

Gulistan had determined that their existing planning process was breaking down. It was based on historical dealer orders and relied heavily on manual intervention. The objective of this process was to determine what styles would continue to be made and how many, as well as what styles would become obsolete. Given the broad range of styles and ever-changing customer preferences, it was extremely difficult for planners to make informed decisions. As a result, they ran the risk of accumulating the wrong inventory in some cases and stocking out in others. Richard Witt, Vice President of Supply Chain, Gulistan Carpet tells us, "It was like trying to use a Ouija board to determine which styles to continue making, we clearly needed a better statistical model to help us drive our production."

Gulistan's goal was to reduce inventory while maintaining high service levels, and to better manage the product mix and distribution channels based on accurate demand planning. Their strategy to achieve this goal was to leverage accurate customer level forecasting to drive production and inventory management. Gulistan needed to model product and distribution channels and to forecast and analyze data at all levels of aggregation. They chose Demantra's Demand Planner. It provides Gulistan with forecasts at the customer level, factoring in key variables such as seasonality, trends, cannibalization and life-cycle management. Complex decisions regarding new product phase-in and product obsolescence are now made based on accurate and real-time market information. As a result, Gulistan is able to forecast at varying levels of aggregation and calculate recommended safety stocks by factoring in forecast error, customer service-levels and lead times. Lowering the forecast error substantially has had a direct impact on reducing the safety stock levels.

Gulistan's results include:

* 25% reduction in inventory with no decrease in customer service

* 40% improvement in forecast accuracy

* Capability to forecast down to the SKU level

Recommendations

Enterprises with complex products and supply chains and those with significant promotional activities and other such events should consider the concept of the Demand-Driven Supply Chain. Integrated marketing, inventory and replenishment decisions clearly hold significant promise for these enterprises.

If Demand-Driven Supply Chain is appropriate to the enterprises business, Demantra should be placed on the short list.

While a relatively small vendor by traditional metrics, it's development of satisfied customers, scale and expertise in the emerging market of the Demand-Driven Supply Chain bodes well for its future. Demantra, however, must make the marketing investment to be seen as a player within its target markets. This includes the missionary role of selling the concept of the Demand-Driven Supply Chain as well as its own solution.

SOURCE:
http://www.technologyevaluation.com/research/articles/the-demand-driven-supply-chain-and-demantra-16940/

Supply Chain 101: The Basics You Need to Know

2010-08-18T00:42:00.002-07:00

The reality of today’s global economy is such that manufacturing firms everywhere face stiff competition as a result of outsourcing to countries where cheaper labor is readily available. Because of this, new methods of manufacturing and delivery have been created, and out of this has come supply chain management (SCM).

To better appreciate this relatively new area of technology, one needs to understand the general supply chain model, the economic factors involved in the supply chain process, and how the software market has developed solutions to meet the challenges faced by today’s manufacturers and distributors.

Fierce competition is not today’s manufacturers only concern. Rising fuel costs, an increase in the number of government regulations, a greater need for visibility (as products or components move cross country and across nations), maintaining customer satisfaction—all these issues are forcing organizations to look for faster, more efficient ways of producing and moving goods. SCM software is now available to accommodate the needs of manufacturers today.

So What Exactly Is Supply Chain Management?

SCM encompasses the areas of customer requirements, warehouses, distribution centers (DCs), factories, and suppliers. The two main goals of SCM are 1) to combine all manufacturing and distribution functions into an integrated process that enables manufacturers to lower the costs of manufacturing, known as true lean manufacturing, and 2) to allow the efficient distribution of the products delivered throughout the supply chain and to the final customer, whether a business or a consumer.

SCM is thus a dynamic way of producing one or many goods through a network of suppliers and manufacturers, strung together by different transportation and logistics methods or networks.

The five stages of SCM are 1) planning, 2) sourcing (procurement), 3) making the product, 4) delivery, and 5) returns (reverse logistics). This process allows products to move back and forth throughout the supply chain, allowing companies to leverage different resources to make better products and to lower manufacturing and distribution costs throughout the supply chain.

Figure 1 depicts the entire supply chain, including manufacturers and distributors. The first thing to note is that many types of manufacturing and distribution models can be developed because of the generality of the model. As well, there can be as little as two parties involved in the supply chain, or many different manufacturing and distribution partners located in different countries. Multiple networks can be involved to develop and deliver final goods to their destination, be it to retail locations, business locations, or a hybrid of both, or goods can also be procured from the Internet or telephone order.

In figure 1, there are six main paths. Path (1) and Path (6) are the “simplest” of the paths in the diagram. Path (1) indicates a simple wholesale distribution model, where goods are sourced from one or just a few different providers, and are sent directly to one or many retail locations. Path (6), on the other hand, is what is known as reverse logistics. Reverse logistics is the act of moving goods from their final destination back to the original manufacturer because there is a problem of some kind with the product. Even though it is indicated as a line directed back to “Original Supplier(s),” reverse logistics can be a very complex process, especially if it involves moving products back through multiple countries, and tracking and accounting for these items tends to be complicated.

Paths (2) to (5) show the combination of manufacturing a good and distributing it to either a final DC or to another manufacturer for additional assembly or further manufacturing purposes. All of these paths end at a “Final Destination” even though hundreds of parties can be involved in the manufacturing and distribution of the goods.

Economic Factors Involved in the Supply Chain Process

SCM is very complex, and because products move through multiple partners, it is quite difficult to achieve maximum profits, minimum costs, and to gain the needed competitive edge. As well, as figure 1 shows, SCM has many nodes that connect suppliers, manufacturers, and distributors together. The supply chain also brings manufacturers and distributors closer to the outsourced producers, creating a value chain, where each manufacturing process and each product is tracked from the manufacturer all the way to the final consumer.

In order for this value chain to be created, throughout the supply chain as well as at each node, software has been developed to help companies turn out a profitable bottom line and increase market share in their respective industries. Using these software solutions, profits are maximized, costs are kept to a minimum, and scheduling and timing are kept in check.

The immediate economic factors relating to the increased adoption of the supply chain model are discussed in Infor’s 2007 report, Charting a New Course in Effective Distribution Supply Chain Management:

Financial analysis of the distribution industry shows that businesses are stretched so far, that for the average $100 million wholesaler, pursuing one additional percentage point of revenue growth would generate negative six percent in cash flow, whereas pursuing an additional percentage point in total operating expense improvement or days in inventory would generate an additional $250,000 in revenue.

To reverse this dangerous trend, it’s imperative that wholesale distributors quickly chart a new course to supply chain effectiveness. They must regain control of their operations and match their investment with their demand levels to ensure profitability.

In addition, collaboration between partners can be daunting, especially since each partner wants to make a profit. Because of this and other factors (such as rising petrol prices and the steady increase of goods being manufactured in China and Eastern European countries), international collaboration and quick inventory turnover are essential. SCM software can equip a facility with the capacity to receive the increased volume of product shipments coming from lower-cost countries.

Software Solutions for Today’s Manufacturers and Distributors

Because of the growing complexity of today’s supply chains, including geographic and international issues, financial constraints, and the sheer number of players that can be involved, SCM software has been developed so that manufacturers and distributors can work without missing a beat.

People typically involved in supply chain activities include manufacturers, distributors, logistics professionals, procurement specialists, vendor managers, commodity buyers, planners, and even retailers. All of these players need assistance in solving complex business issues that arise in the supply chain.

SCM software addresses the needs of both manufacturers and distributors. The software can be customized to meet manufacturers’ needs by sourcing and obtaining the materials required to produce semi-finished or finished goods, and to aid distributors in moving products quickly and efficiently, allowing maximum visibility across the logistics network.

Supply chain software includes many types of software solutions that may be sold as stand-alone modules. Yet when combined together, these solutions give supply chain professionals the visibility they need into their operations. In terms of lean manufacturing, a hybrid of both manufacturing and distribution modules is used, giving way to maximum efficiency and low or zero wasted materials in the manufacturing environment.

Components of SCM Software

In a typical SCM solution, software modules included are a warehouse management system (WMS), transportation management system (TMS), supplier relationship management (SRM), international trade logistics (ITL), procurement, demand management (DM), supply chain analytics, order management, and service parts planning.

At the heart of an SCM solution lies both the WMS and the TMS applications. The WMS solution deals with the inventory that is to be moved throughout the supply chain. For inventory movement within the warehouse to be efficient, the process must be optimized through visibility of the products. Visibility is usually enabled by radio frequency identification (RFID) technology.

The TMS software is one of the key components to the supply chain. This software manages the scheduling of all transport modes used to move products from one location to another, in addition to finding the best routes to take and determining which products are best transported by what type of transportation (that is, truck, rail, sea, or plane). TMS software also allows individuals within the transportation network, such as drivers or managers, to log in to a transportation portal to communicate directly and make updates in real time.

The ITL module within the SCM suite handles the details for international trade. Collaboration between countries, compliance issues, tariffs and taxes, event management, shipment tracking, and import and export management are all dealt with by giving many people across the supply chain access and visibility into the issues that can occur at any node within the supply chain, and not only into the products themselves in the international context.

SRM software enables suppliers and delivery site individuals to access supplier portals for the following two reasons: 1) to facilitate communication among these parties and to update them on any problems the supplier may be experiencing at its end, and 2) to allow managers to use scorecards to rate suppliers as good, average, or poor. For example, if a supplier is not complying with standards or is not respecting delivery times, or if the supplier’s goods are simply not available, the supplier will be given a poor rating. If the supplier receives too many poor ratings or if the problems continue to occur, the supplier can be justifiably replaced by a new one.

DM software gives both manufacturers and distributors the ability to forecast and manage the demand for particular products sold within their respective markets. DM software takes historical sales and warehouse data, and provides a guideline to what should be procured and at what time, taking into account seasonal variability. This helps in the planning of what is needed to be produced and how much of each material is to be procured. DM software can also help manufacturers obtain particular components from different sources to produce complex products within appropriate timelines. The software may also take data from the human resources (HR) application to schedule laborers according to production demand. For more information on DM, please see Attribute-based Demand Planning: A Powerful Tool for Process Manufacturers.

Supply chain analytics is a tool that allows managers and others involved in decision-making processes the ability to create what-if scenarios, enabling work-around scenarios to be put into place before incidents occur. This also enables production and supply chain planning to be optimized.

Finally, order management and service parts planning are modules that would typically be areas of manufacturing, yet they are geared toward supply chain manufacturing, allowing for true lean manufacturing.

The Final Word

SCM software has been designed to meet the needs of firms with global distribution, logistics, and manufacturing needs. Lean manufacturing and visibility in the supply chain are crucial elements for both distributors and manufacturing executives. Moving products among multiple locations and countries can be a daunting task, and SCM software offers the flexibility to track all inventory at any point in the supply chain.

Additionally, the issues of compliance, scheduling, flexibility, coordination, and visibility can be greatly improved because of the combination of business processes integrated into SCM software, no matter how complex the supply chain is.

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-101-the-basics-you-need-to-know-19287/

HK Systems Gives Birth To Software Company, irista™

2010-08-18T00:42:00.001-07:00

On June 1, HK Systems announced the formation of irista, a separate company that will assume its supply chain management software business. As a wholly-owned subsidiary, irista will inherit all of HK Systems' software products and client services, including software acquired from Endura Software Corporation and Kitimat Systems in 1998. The launch of irista also marks the introduction of its Application Service Provider (ASP) hosting services, through which the subsidiary seeks to expand the reach of its products.

Market Impact

HK Systems hopes irista will achieve better publicity for its SCM/Enterprise supply chain management suite that is built around applications for advanced order management, warehouse management, and transportation management. With its deep roots as a material handling systems vendor, HK Systems has had difficulty in educating the broader market about its Supply Chain Execution (SCE) solutions since supplementing its warehouse management software with Endura's order management and Kitimat's transportation management software. Part of the problem lies in the false perception among many users that HK Systems software only works with its material handling systems. The new company will make use of sales and marketing resources from HK Systems, which last year increased its staff by 40% in these areas.

The launch of irista mimics a trend among supply chain management vendors to achieve a higher profile for their products amid a multitude of competitive offerings. One-word name adoption seems to be popular as evidenced by Essentus (Richter Systems), Provia (Haushahn Systems & Engineers), Intrepa (The Summit Group), Demantra (Eventus Logistics) and others. In addition to being easy to remember, small novel names produce few if any unrelated Internet search results, making it easy for corporate IT buyers to locate the right company. With the proliferation of such monikers, however, irista will need to work hard to differentiate itself and distance itself from parent HK.

User Recommendations

In addition to its OMS, WMS and TMS products, HK Systems/irista offers applications for replenishment management, financial management, equipment management, and supply chain visibility as part of its distribution suite. Users who are interested in irista's hosted applications should consider the distribution products to be the most stable as these have been available through HK's Java-based browser-accessible portal for over twelve months. The logistics products including transportation management have been available in hosted form for less than a year, although all irista's products use the same Java technology, HK System's former e.SCM/Enterprise.

HK Systems/irista's WMS is well-suited to companies with automated material handling operations and should be a contender in selections for automotive parts and other hard goods, publishing, and third party logistics industry applications.

SOURCE:
http://www.technologyevaluation.com/research/articles/hk-systems-gives-birth-to-software-company-irista-15886/

Using Visibility to Manage Supply Chain Uncertainty

2010-08-18T00:40:00.000-07:00

Leonardo da Vinci was once quoted as saying, "Art is difficult to replicate, and unpredictable in its application, other than by Mother Nature". This explains why there are so few Stradivarius violins on the market. Yet today, contemporary art is easy to replicate by using modern duplicating technology. However, in the case of modern manufacturing, "art" has mostly been replaced with statistical measurement and process control. For this reason, supply chain processes require the same kind of structured views to monitor, measure, and analyze activities within the modern supply chain that manufacturing entails to mass produce. Supply chain management (SCM) is the art and science of managing uncertainty. Supply chain visibility (SCV) provides the event level data and information required to make the concept of process control for the supply chain a reality.

Process uncertainty burns brightly in the manufacturing and supply chain flow of the extended enterprise. Demand and supply management, market dynamics, capacity, security, service and support activities, and network management all contribute to the enterprise uncertainty. SCV and supply chain event management (SCEM) are tools and techniques designed to quell uncertainty. SCV is much more than "track and trace"; it is the transparent view of time, place, status, and content that monitors events within supply chain processes. SCV measures the performance of processes and organizations, and notifies interested parties when processes fall out of the acceptable range of performance.

The use of science in supply chain management (SCM) has been evolving since the seventies when manufacturing resource planning (MRP) forecast modeling was first introduced to identify constraints. The eighties brought constraint based planning, manufacturing requirements planning (MRP-II), distribution requirements planning (DRP), electronic data interchange (EDI), and track and trace. Enter the nineties with enterprise resource planning (ERP), advanced planning and scheduling (APS), and the Internet. Today, we delve into continuous loop manufacturing, peer-to-peer computing, service oriented architecture (SOA), and the means for inter- and intra-enterprise SCV.

Understanding the Nature of and Responding to Uncertainty

When event level detail of supply chain activity is visible, multiple alternatives can be deployed to manage uncertainty. These include the following:

Eliminating the source of uncertainty. Visibility can identify sources of uncertainty and shed light on events in order to identify systemic process problems. For example, it can identify bottlenecks and provide other opportunities for improvement in processes, such as new product introduction (NPI). A Web-native application and platform can provide a single view of individual and aggregated events.

Protecting the supply chain defensively from unanticipated variability. Visibility can help predict the range of variability, as well as reveal when to deploy reserve resources and when to use resource buffers.

Protect actively by making supply chain processes more flexible. When changing conditions are visible, they can be identified, and users can respond immediately. For example, resources can be reallocated and transported across a network as conditions warrant.

Visibility Technology Options

Traditional ERP and SCM systems such as supply chain planning, order management, and logistics management provide static and fixed views, because the systems themselves are rigid. However, emerging interdependent supply networks (ISN) use collaborative planning and forecasting, distributed order management, and collaborative transportation planning to extend visibility beyond the edge of the enterprise. They are also mobile and can exploit new technologies like global positioning systems (GPS), active radio frequency identification (RFID), information exchanges, and satellite communications. As a result, global visibility is now reality, thanks to these and other technological advances.

Although many independent SCEM vendors have disappeared, supply chain offerings still include visibility software licensed technology, as well as visibility services. Visibility deployment providers include

* Visibility services, which are characterized by rapid rollout and economies of scale, and an ability to reduce an enterprise's data management burden. Example providers include GT Nexus, MDI/Bridgepoint, DesCartes, and many third party logistics companies.

* All major ERP and SCM vendors, as well as innovative companies, such as RiverOne, G-Log (Oracle), Viewlocity, and Pelion Systems. Look for a data model that supports event monitoring at the edge of the supply chain.

* Information exchange companies, which have deep integration experience and can add application layers. Vendors include Sterling Commerce, GXS Information, and Cyclone Commerce.

SCV Applications Have Emerged from Various Sources

SCV applications are a requirement for managing future supply chains, and competition has been fierce among vendors offering such solutions. Supply chain execution (SCE) vendors were the first to embrace the concepts of SCV as an extension to their SCE suites and now, almost every major SCE vendor has rolled out a version of SCV and SCEM, with many having plans to expand their product footprints over time. SCE vendors are using SCV technology to connect modules in their applications, integrate with enterprise systems, and create sockets into which the external trading community can link.

The scope of SCV and the simplicity of its deployment will become a differentiator for traditional SCE vendors. A few US-based initial, SCE entrants with original products in SCV or SCEM technologies, include Texas-based EXE Technologies, Inc., (now part of SSA Global) with EXEconnect; Georgian-based Manhattan Associates with InfoLink; Wiscons in-based RedPrairie with Logistics Controller; New York-based Optum, Inc. with TradeStream; Michigan-based Provia Software, Inc. with Viaware DSS; and Michigan-based Yantra Corporation (now part of Sterling Commerce), with PureEcommerce.

Supply chain planning (SCP) vendors have also gotten in on the act, with SCP software companies like Logility of Atlanta, Georgia (US), which offers its Voyager XES product; and i2 Technologies, located in Dallas, Texas (US) that has developed its Global Logistics Monitor software to address SCV and SCEM needs. Its rival, Manugistics, headquartered in Rockville, Maryland (US), offers its NetWORKS Collaborative Services, which includes NetWORKS Monitor, Visibility, and OneView for measurement.

Major enterprise application software (EAS) vendors are also offering SCV or SCEM solutions. Mighty SAP (Walldorf, Germany) initiated a major internal development project called the Event Tracking Server (ETS). Initially focused on SAP's Logistics Execution Systems (LES) software, but expandable to advanced planning optimization (APO), business to business (B2B), and customer relationship management (CRM), ETS is designed to provide multifaceted monitoring, notification, and proactive simulation and control of events as they unfold. SAP's WebOnline/Business Warehouse (BW) and InfoCubes act as the backbones for measurement functionality, and this technology is now interwoven with NetWeaver.

Best-of-breed entrants to the SCV/SCEM applications market are the most intriguing, and also the most difficult to quantify in terms of functional footprint, value proposition, and return on investment (ROI). They tend to cover a particular business process, like supplier management, inventory control, asset tracking and management, logistics, or customer management, but because of their niche offerings, many are considered acquisition bait. In fact, many of the initial entrants, such as Categoric, Celarix, Sage Tree, Vigilance, and Saltare, have already disappeared.

Summary

Supply chain visibility has come a long way since the initial track and trace capabilities of the eighties. Web-based automation of supply chain business processes and workflows is achievable, especially with the advance of SOA in the foreseeable future. Supply chain visibility can help characterize the nature of uncertainty and manage appropriate responses. Visibility, event management, and actionable response will ultimately play a role in the rapid consolidation of planning and execution, thanks to data transparency. Enterprise walls and barriers must come down; however, even with the advent of such promising technology, the true benefits visibility enables won't be fully realized without organizational and process realignment.

SOURCE:
http://www.technologyevaluation.com/research/articles/using-visibility-to-manage-supply-chain-uncertainty-18257/

What's in a Name for Supply Chain Vendors?

2010-08-18T00:39:00.002-07:00

Adexa/Paragon is the latest in a series of re-christenings to occur over the past year among niche supply chain management vendors.

As explained in its recent press release, "within the name Adexa are implications of 'adaptability' and 'dexterity'. Adexa's collaborative planning solution, iCollaboration, helps companies adapt their operations to the new rules of e-business while increasing the dexterity and responsiveness of their extended supply chains through improved communication and collaboration with customers and trading partners."

Of course, it also gains a certain alphabetical advantage in vendor directories and search engines. The rest of the new faces:

Provia Software: On July 12, 1999, warehouse management system (WMS) vendor Haushahn Systems and Engineers became Provia Software. According to the company, "the name Provia was chosen because of the word's combined Latin roots. The word Provenio means 'proven'. The word Via means 'a way'. The combination of the two reflect the notion of a proven way to success." Provia's VIAWARE suite of supply chain execution products includes warehousing, transportation and yard management solutions.

Intrepa: Formerly The Summit Group, Intrepa has a slightly more complicated origin. In 1998, The Summit Group merged with CIBER, Inc., a provider of management consulting and IT services. Two of the original Summit founders, now of Intrepa, purchased their product Logistics PRO back from CIBER in October 1999. Logistics PRO offers warehouse management and transportation management capabilities for the AS/400 with an NT version due out in the first half 2000.

Essentus International: On January 17 of this year, Richter Systems changed its name to Essentus, presumably to promote what it feels is the essential nature of its solutions in providing the backend fulfillment infrastructure for web-based retailers in the fashion industry. Essentus's supply chain execution products are targeted for softgoods manufacturers and distributors .

Market Impact

For Intrepa, Essentus, and Adexa, the name change is part of a initiative for positioning in the electronic fulfillment market. On the other hand, Provia has taken a more conservative stance, hoping the new name communicates its good track record of solution delivery to its 350 customers.

The basic theme underlying all the moves is the desire for differentiation in a crowded marketplace. There are at least ninety small and mid-sized supply chain execution (SCE) vendors vying for attention and competing for growth in the U.S. alone.

In addition to being shorter and easier to pronounce, the makeovers provide each vendor a chance to make a new start, though it is difficult to say whether more tangible changes will one day accompany the catchy names. Many of the smaller supply chain execution vendors will not find success independently and will ultimately choose to merge or drop out of this fragmented software market .

User Recommendations

For most of these events, users need only make note of the new names, update their bookmarks, and revise information in their supplier databases. Other than that, little else will change in the short term.

Whether the changes ultimately provide better market visibility, spark revenue growth, improve chances for a strong IPO, or drive changes within the vendor organizations is an question that will not be answered for at least 12 months.

SOURCE:
http://www.technologyevaluation.com/research/articles/what-s-in-a-name-for-supply-chain-vendors-15476/

Globalization Has a Profound Impact on the Supply Chain and Supporting Information Technology

2010-08-18T00:39:00.001-07:00

In recent years, the World Trade Organization (WTO) often has pointed out the staggering acceleration of global trade since 1995, and the prospect of continued and dramatic increases in global trade throughout this decade. It is estimated that 55 percent of all raw material for American manufacturing now is sourced outside the US. This is in comparison to only 10 percent to 12 percent just a few decades ago. Statistics like this highlight the growing importance of globalization. At a macro-economic level, the World Trade Bank defines globalization as the growing integration of economies and societies around the world. It is interesting that the key action word in this definition is integration. Integration at a systems level has been the nemesis of information technology (IT) professionals for decades. If we look at globalization at a micro-economic level, or business level, then globalization represents the extension of enterprise business operations around the world. Whether viewed at the macro- or micro-level, however, globalization is causing quite the buzz nowadays, and it is not likely to end any time soon.

When we speak of globalization and its effect on modern enterprises, it must be viewed in the context of two additional contemporary inflection points. One of these is the Internet, which has transformed how most enterprises conduct business today. Another is the transition from a push manufacturing and supply chain paradigm to a pull approach, or, more specifically, the advent of the demand-driven supply network (DDSN). These three forces are driving enterprises toward significant transformation of their supply chains, and in turn, this is having a profound effect on IT.

As shown in figure 1 above, the confluence of these three forces, globalization, the Internet, and DDSNs, will undoubtedly drive information technology and innovation. This will place new challenges and opportunities at the doorstep of the chief information officer (CIO), who will have to use creative teams of IT professionals to meet the changing demands of the business community.

Globalization Implies Expanded Operational Risks

A move toward globalization within an enterprise is rarely a strategically planned event. The number of contact points and amount of business conducted off-shore tend to sneak up on operations people over time. It may begin with the strategic sourcing of a component from abroad, or an arrangement for services with a new business partner overseas. Regardless, as the likelihood of globalization impacting an enterprise increases and the risks mount, senior executives need to consider a more strategic approach toward globalization initiatives. Of particular importance are the less obvious operational risks that indirectly affect the day-to-day business operations of an enterprise. As shown below, the business and IT consequences are considerable. The risks detailed hereafter highlight the need for global data transparency, well defined global business processes, and the global IT enablers to support them.

Expanded Operational Risks

Enterprise Impacts for IT and Business

* Political risks
* Economic risks
* Infrastructure risks
* Resources risks
* Labor risks
* Regulatory risks
* Quality risks
* Security risks
* Legal risks
* Contractual risks
* Patent risks
* Reputation risks

* Risk identification, weight, value, and prioritization
* Risk mitigation
* Risk management
* Critical global organizational capabilities
* Global operations management
* Global business processes
* Global business information management
* Global IT enablement

Supply Chain Impacts Are Considerable

Globalization's impact on the supply chain is profound. It creates the necessity for an enterprise to have the following global supply chain management (SCM) capabilities.

* Supply chain planning
* Supply chain execution
* Supply chain visibility
* Supply chain event management (SCEM)
* Supply chain business intelligence
* Global, Web-enabled supply chain collaboration

IT enablers for such global supply chain requirements include supply network integration through interdependent supply networks (ISN) (see Supply Chain Management Is Evolving toward Interdependent Supply Networks), and real time data and event visibility through SCEM software, which includes monitor, notify, simulate, control, and measurement analytics capabilities. Furthermore, at the core of any global supply chain framework is service-oriented architecture (SOA), whose components include Web services, portals, applications servers, security and analytics frameworks, business process management (BPM), and multi-echelon data management. Examples include IBM's WebSphere, SAP's NetWeaver with ESA, and Oracle's Services Oriented Enterprise (SOE). i2 Technologies has also developed an intriguing global supply chain SOA framework it refers to as the i2 Agile Business Process Platform.

As the trend toward globalization continues, the necessary technology will develop. A good example of this causal relationship between globalization and the emergence of the required technology enablers is the current transformation of transportation management systems (TMS). A recent ARC Group report on TMS states: "Globalization is forcing TMS to become multi-modal in order to serve the needs of global demand". Historically, TMS solutions focused on ground transportation, either on local operations that use local common carriers or on domestic private fleet operations. However, intermodal processes, such as ocean carrier offloading, demurrage, or container-on-rail, have gained importance to many industries as a result of expanding global operations. Business logistics processes are expanding with more complexity and global logistics networks are evolving. Global demand for an integrated ocean, air, ground, truck load (TL), non-truck load (LTL), fleet management, and common carrier solution is finally gaining momentum due to globalization, capacity constraints, increasing haul rates, and rising fuel costs. TMS solution providers, such as SAP, Oracle with G-Log, Manugistics, and i2 Technologies, are aware of this growing need and are driving software enhancements toward these expanding global needs.

Globalization Drives New IT Priorities

Integration in its many and varied forms has been a priority of IT professionals for many years, and will remain so for many more years to come. Globalization has only renewed and heightened the focus on integration. Globalization has also driven the need for greater data transparency. Global data transparency implies a vision of supply chain operational data that is at the right place at the right time, in a form that addresses critical, priority needs of data and business information. This vision may be realized by what has become known as a single version of the truth (SVoT) relative to customer, product, and partner information. SVoT is conceptually a virtual data repository, in which data related to product, customer, supplier, and trading partners is available to all global participants in a consistent and timely manner (see Single Version of the Truth). An IT environment that facilitates an SVoT schema should support key processes throughout the enterprise, ensuring a consistent view of data across the global supply network for all participants, as well as benefits for all global players.

In addition to global data issues, the most often cited IT concerns regarding globalization include the following.

* Adherence to global BPM
* Localized network reliability
* Local and global Web disruptions
* IT governance
* Global distribution and education of technology
* Common global business practices for digitized intellectual property

This list represents only a small subset of the plethora of IT issues that can arise from an enterprise globalization strategy that is not designed with a comprehensive examination of the risks and causal relationships driving globalization.

Summary

Globalization's profound impact on enterprise supply chains and the corresponding IT requirements, business processes, communications, data transparency, integration, and need for global technology enablers will challenge IT professionals for the foreseeable future. With globalization, the role of the CIO has also become dramatically more complex, as information management is a ubiquitous concern for global enterprises. Finally, globalization requires a new global business mindset, with new strategies, business processes, and enabling technologies, as well as global, real time data characterized by actionable response capabilities.

SOURCE:
http://www.technologyevaluation.com/research/articles/globalization-has-a-profound-impact-on-the-supply-chain-and-supporting-information-technology-18401/

i2 Technologies at the Front of the Supply Chain

2010-08-18T00:38:00.000-07:00

i2 Technologies is the largest and fastest growing vendor of supply chain management software with $456 million in revenue over the last twelve months and a 48% average growth rate over the last five years. For the second quarter of 1999, total revenues were $131.4 million, an increase of 57% over second quarter 1998 ($83.6 million). Net income in the second quarter was $8.5 million, compared to $0.6 million for the same period in 1998. Employment at i2 grew 123% from 1006 in 1997 to 2244 in 1998, with headcount currently at about 2400. The rapid expansion is fueled by a powerful sales and marketing machine and corporate development strategy that emphasizes speed over perfection. i2's product offering consisted of three applications as recently as 1996. Since that time, it has combined internal development with acquisitions of established vendors to achieve what is arguably the most comprehensive SCM offering of its peers. i2 is determined to challenge the large ERP vendors for CRM market space, as evidenced by its acquisition of SMART Technologies, a provider of internet-based CRM solutions. i2 plans to incorporate SMART's application technologies into its "Intelligent eBusiness" suite that will include applications to enable internet collaboration among trading partners, and support web-based ordering with real-time visibility to supply from multiple sources. *

Delivering on vision: While able to conceive and articulate architectural visions, i2 has been less successful at delivering fully developed, bug-free applications to support them. Clients and third-party integrators often discover the gap only after the implementation is well underway.
*

Business consultants, though skilled in Rhythm applications, often lack industry-specific knowledge. This is in part due to the rapid growth of the company and the inevitable learning curve faced by new staff. i2 relies heavily on implementation partners such as Andersen Consulting and PricewaterhouseCoopers.

Vendor Predictions

*

Acquisitions: i2 continually demonstrates its willingness to make strategic acquisitions (Think Systems - '97, ITLS - '98, SMART - '99) in order to expand its product offering to new market segments.
o

It is likely that i2 will acquire a current SCE partner, such as IMI Corporation or EXE Technologies within the next 24 months. (80%).
o

Look for at least one more internet-based CRM or EAI company acquisition as i2 expands its eBusiness suite. (70%).
*

Growth projection: Expect 35-40% average growth over the next 3-4 years, less than previous years, but ahead of the rest of the market (70%).

Vendor Recommendations

*

Continue existing initiatives in mid-market to increase market share, both internal development to scale down core applications and partnerships with mid-market systems integrators, such as Mastech.
*

Focus development efforts on reducing complexity of its product suite and integrating acquired technologies. RhythmLink, i2's integration platform for both its own modules and third-party products such as SAP, PeopleSoft, fails to deliver fully on its promise of seamless integration.
*

Leverage success in EHT to achieve better penetration into automotive and CPG markets: Over half of i2's revenue is confined to the electronics and high tech industry (57%). Its low penetration into other industry segments conflicts with its stated objectives, especially in the case of automotive (see Fig. 3).

SOURCE:
http://www.technologyevaluation.com/research/articles/i2-technologies-at-the-front-of-the-supply-chain-15263/

Computer Associates, Baan Japan and EXE Announce Strategic Alliance to Provide Total Supply Chain Management Solutions

2010-08-18T00:37:00.000-07:00

Computer Associates, Baan Japan and EXE Announce Strategic Alliance to Provide Total Supply Chain Management Solutions
P.J. Jakovljevic - October 13th, 1999

Event Summary

On October 4, Computer Associates International, Inc. (CA), Baan Japan, and EXE Inc. announced a strategic alliance designed to enable Japanese companies to create total solutions for the rapidly growing supply chain management (SCM) field. The companies will jointly market the new solutions, which will be built on Unicenter TNG, CA's industry-leading enterprise management software.

The new SCM solutions will incorporate Baan Japan's Supply Chain Solution and EXE's Nexus II to create a Japanese-focused supply chain management solution. Nexus II is an integrated distribution package utilizing object-oriented design technology. "This announcement really demonstrates Baan's global best-of-breed marketing strategy, which is to integrate its enterprise platform products with the premier solution providers," said Thomas N. Erickson, managing director, Baan Japan. "Along with CA, the leading supplier of end-to-end enterprise management solutions, and EXE, whose logistics system solution has the capability to excel in Japan, we can help define what we expect to be the de facto standard in SCM solutions in Japan." "After deploying supply chain management, the flow of manufacturing, sales and logistics becomes mission-critical, where a small problem can affect the total enterprise system," said Sumio Tanaka, president of EXE. "By this measure, integrated enterprise management is the lifeline of supply chain management. By leveraging the functionality of Unicenter TNG and Nexus II, we can quickly build low-cost and high-quality SCM solutions. This partnership will bring our clients the efficiency and reliability they require." The alliance will enable CA to extend Unicenter TNG to the rapidly growing SCM market segment. CA will focus on the manufacturing, logistics and service areas of the industry.

Market Impact

CA and Baan are not strangers to each other. When CA acquired ASK's Manman several years ago, Baan was subcontracted to develop the source code, after ASK's own development failure. This relationship expansion between CA and Baan, with the addition of EXE, will have the following effects:

*

CA supplements its ability to deliver supply chain management solutions to their customers in the reviving Japanese market. CA also obtains better coverage of the supply chain management market by strengthening an arrangement with vendors strong in SCM planning and execution products, and who have previous experience in integrating disparate enterprise applications components.
*

Baan and EXE gain a much needed boost to their indirect channel, and the opportunity to increase both their revenues, customer base, and visibility in the enterprise software markets outside their strongholds in Europe and North America, respectively.

User Recommendations

Current and prospective Japanese customers of CA, Baan, and EXE should exercise caution when evaluating these vendors as providers of complementary solutions. Improved technological integration is seldom guaranteed by joint marketing arrangements, and only comes after the arrangement yields considerable implementation experience. Furthermore, users are advised to identify and negotiate in advance the main contractor that will assume overall accountability for the project. Failing to do so may result with customers being caught in a middle of contractors' recriminations and finger pointing when things start to go awry.

SOURCE:
http://www.technologyevaluation.com/research/articles/computer-associates-baan-japan-and-exe-announce-strategic-alliance-to-provide-total-supply-chain-management-solutions-15566/

Supply Chain Management Vendor Finds Balance for Service Supply Chains

2010-08-18T00:36:00.001-07:00

The early years for Click Commerce (founded in 1996) centered on extranet enablement, and in particular, on demand chain solutions for business-to-business (B2B) and business-to-customer (B2C) e-commerce. Click Commerce's early channel management software allowed manual and dynamic creation of relationship hierarchies and online communities within a distribution channel, through the use of membership rules. The intent of this functionality was to help enterprises establish B2B distribution portals and B2B-to-consumer portals. In these portals, the relationships and business process rules between the enterprise and its channel partners are transparent to the consumer. Enterprise channel management strategies gradually gave way to the potentially explosive private trading exchanges (PTXs), leaving Click Commerce and competitor Comergent in a leading position for the sell-side PTX market. This market, however, never materialized.

Click Commerce also ventured into product information management (PIM), acquiring PIM vendor Requisite Technology in late 2005. Flagship client Delphi Automotive worked with Click Commerce to move its entire aftermarket catalog online, as the first step towards aggressively driving its aftermarket e-business. Large tier one suppliers looked to Delphi as a model for how to manage an aftermarket e-business strategy without rubbing distributors and original equipment manufacturers (OEMs) the wrong way. Delphi's initiative also continued Click Commerce's successful run at extranet implementations in automotive and heavy equipment channel management.

Click Commerce's Version 4.0, dating from early 2000, featured layered architecture consisting of the Relationship Manager platform and a suite of more than eighty application modules. Version 4.0 featured extensible markup language (XML) for communication between its application modules and an enterprise's legacy, enterprise resource planning (ERP), and other back-end systems, in order to streamline implementation and integration processes. Click Commerce licenses Relationship Manager and Application Suite at enterprise or divisional levels. The enterprise then authorizes its channel partners, and in some cases the consumer, to access the modules, including the enterprise's ERP software and other legacy systems, via an Internet connection and a browser.

More recently, Click Commerce has ventured into warehousing and service supply chain execution solutions, with the acquisitions of Optum Software in early 2005 (which had in turn previously acquired World Chain) and Xelus, Inc., a leader in services parts management, in June 2005.

Optum was an established supply chain execution (SCE) vendor with over 750 implementations of its MOVE WMS product; clients included Grainger, Federal Mogul, GE Aircraft Engines, and Pier 1 Imports. Like many SCE vendors, Optum realized that its core competency of complex, high volume warehousing and distribution systems could be transformed if the classical four walls and enterprise-constrained boundaries in SCM could finally be broken. Optum invested heavily in its TradeStream product; this was a collaborative integration and aggregation application which provided centralized visibility of order and inventory information. This was an ambitious undertaking, and a more difficult project than it seems, given the difficulties of connection technologies and critical mass participation within a specific supply chain community. TradeStream was piloted and implemented by Lucent Technologies, which brought credibility to the initiative.

The company which for three decades was known as LPA, renamed itself Xelus in mid-2000, to exemplify its new zeal. Xelus, a leading service parts inventory management application vendor, survived by dominating the market for best-of-breed service parts inventory and demand planning technology—first with customized systems, and then with software applications. After a difficult period from 2002 to 2004, the company emerged with new technology, leveraging its installed base of clients like Delta Airlines and British Airways.

Click Commerce's supply chain solutions, while diverse, find synergy and balance through Network Logistics.

Integrated service supply chains require the connection of demand, supply, and service, to power high performance supply chains that are lean, extended domestically and globally, agile and flexible, and demand-driven. Supply chain execution can be more complex in the service supply chain, as parts and assemblies have multiple and varied part identities, workflow, and assembly and disassembly processes. Service supply chain optimization is the key message and strategic thrust of Click Commerce. Service supply chain complexity is inherently plagued by critical issues of disconnected and error-prone manual processes, suboptimal fill rates and service levels, high inventory and cycle times, forecast inaccuracies, and limited flexibility. Click commerce is proceeding with its solution strategy based on the premise that time is the common metric across all links in the service supply chain. A tight coupling between decision support and execution systems is required in order to reduce cycle times, which translates into increased performance.

Network Logistics 4.1, the current generally available suite, addresses the critical service supply chain issues via rapid trading partner integration; n-tier supply chain coordination; global supply and demand visibility; order and forecast collaboration; real-time sense and respond capabilities; predictive, exception-based event management; and supply chain analytics. More specific to service parts management than previous releases, this release also offers subinventory tracking of inventory details, attribute and rule specifications based on part group, parts substitution, user level configurability, replenishment based on inventory condition, and enhanced serial number tracking.

Click Commerce has an ambitious product evolution roadmap that includes the technical progression of its Network Logistics and next-generation warehouse management system (WMS), towards a J2EE n-tier architecture, pure Java code base, with multiplatform support and database independence. The next generation WMS solution, WMX, scheduled for release in the fourth quarter of 2006, will be based on service-oriented architecture (SOA), and will be deployable as a service-and-use standard open source tool. Salient features will include voice identification and radio frequency identification (RFID) with compliance. Click Commerce is partnering with Vue Technologies for RFID, and pilot projects with Ryder and HP are under way.

Click Commerce recognizes that the playing field is highly competitive and fragmented with IT behemoths, best-of-breed operators, and B2B platform players. It is imperative for Click Commerce to differentiate via the provision of strategic business process-centric solutions, with technology and solutions that compliment ERP, designed for the extended enterprise. These complimentary solutions need to be flexible, adaptable, and efficient. Click Commerce believes that it will remain competitive because its composite applications will create true business process solutions that follow the current market trend toward integrated suites of best-of-breed applications. ERP has traditionally not been equated with highly agile performance, and Click Commerce believes it can provide process-centric solutions faster and cheaper, with an on-demand or license deployment model.

While manufacturers tend to perceive a conflict between best-of-breed and ERP suites, actual deployments indicate that coexistence is the norm. Recent analyst studies find that companies that implement a framework of leading functionality with strong integration between application solutions can achieve best-in-class operating results.

Manufacturers have dramatically improved inventory turns, and effectively positioned their service parts operations as a key profit center for the future. This coexistence between service planning and enterprise transaction application solutions has enabled service-oriented manufacturers to optimize their resources while supporting increasing demands and complexities with agreements at the level of customer service. Manufacturers have traditionally leaned towards best-of-breed functionality. However, until recently, the lack of acceptance of best-of-breed applications has been a key barrier to technology integration. Applications and integration technologies such as SOA are now evolving so that companies can obtain the best overall solution to their business problems.

Summary

Recently announced revenues of $58.7 million (USD) for fiscal year 2005 represented an increase of 128 percent over fiscal year 2004 results. Revenues appear to be evenly split between the three solution segments of demand chain, supply chain, and service parts. The balance of solution offerings appears to be achieving a positive result where the sum of the parts translates into a well-balanced whole. Given its head-to-head competition with major ERP vendors (SAP, Oracle, SSA Global, Infor, and Epicor) and Manhattan Associates, the largest best-of-breed supply chain execution (SCE) vendor, Click Commerce realizes that it will require focus, leverage, and near flawless execution. They are honing in on industry verticals like high tech, electronics, automotive, and aerospace, where they can leverage existing assets as well as its product strategy of an integrated and agile B2B suite delivering more for less. There may also be new opportunities in consumer goods and retail, with its WMX product attributes for RFID and voice identification coupled with strong value-added processing capabilities and next-generation architecture

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-vendor-finds-balance-for-service-supply-chains-18530/

Does Supply Chain Management Software Make Sense in Wholesale Distribution? Part 3: Meeting the Objectives

2010-08-18T00:35:00.001-07:00

Computer Associates, Baan Japan and EXE Announce Strategic Alliance to Provide Total Supply Chain Management Solutions

2010-07-30T03:00:00.001-07:00

Computer Associates International, Inc. (CA), Baan Japan, and EXE Inc. announced a strategic alliance designed to enable Japanese companies to create total solutions for the rapidly growing supply chain management (SCM) field. The companies will jointly market the new solutions, which will be built on Unicenter TNG, CA's industry-leading enterprise management software.

The new SCM solutions will incorporate Baan Japan's Supply Chain Solution and EXE's Nexus II to create a Japanese-focused supply chain management solution. Nexus II is an integrated distribution package utilizing object-oriented design technology. "This announcement really demonstrates Baan's global best-of-breed marketing strategy, which is to integrate its enterprise platform products with the premier solution providers," said Thomas N. Erickson, managing director, Baan Japan. "Along with CA, the leading supplier of end-to-end enterprise management solutions, and EXE, whose logistics system solution has the capability to excel in Japan, we can help define what we expect to be the de facto standard in SCM solutions in Japan." "After deploying supply chain management, the flow of manufacturing, sales and logistics becomes mission-critical, where a small problem can affect the total enterprise system," said Sumio Tanaka, president of EXE. "By this measure, integrated enterprise management is the lifeline of supply chain management. By leveraging the functionality of Unicenter TNG and Nexus II, we can quickly build low-cost and high-quality SCM solutions. This partnership will bring our clients the efficiency and reliability they require." The alliance will enable CA to extend Unicenter TNG to the rapidly growing SCM market segment. CA will focus on the manufacturing, logistics and service areas of the industry.

CA and Baan are not strangers to each other. When CA acquired ASK's Manman several years ago, Baan was subcontracted to develop the source code, after ASK's own development failure. This relationship expansion between CA and Baan, with the addition of EXE, will have the following effects:

CA supplements its ability to deliver supply chain management solutions to their customers in the reviving Japanese market. CA also obtains better coverage of the supply chain management market by strengthening an arrangement with vendors strong in SCM planning and execution products, and who have previous experience in integrating disparate enterprise applications components.

Baan and EXE gain a much needed boost to their indirect channel, and the opportunity to increase both their revenues, customer base, and visibility in the enterprise software markets outside their strongholds in Europe and North America, respectively.

Current and prospective Japanese customers of CA, Baan, and EXE should exercise caution when evaluating these vendors as providers of complementary solutions. Improved technological integration is seldom guaranteed by joint marketing arrangements, and only comes after the arrangement yields considerable implementation experience. Furthermore, users are advised to identify and negotiate in advance the main contractor that will assume overall accountability for the project. Failing to do so may result with customers being caught in a middle of contractors' recriminations and finger pointing when things start to go awry.

SOURCE:http://www.technologyevaluation.com/research/articles/computer-associates-baan-japan-and-exe-announce-strategic-alliance-to-provide-total-supply-chain-management-solutions-15566/

How Supply Chain Projects Morph Into Black Holes

2010-07-30T02:59:00.002-07:00

PeopleSoft Delivers Oxymoron In 'Supply Chain in a Box'

2010-07-30T02:59:00.001-07:00

At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.

According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.

PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.

The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.

Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.

We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services

SOURCE:http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/

SCT Fygir To Lubricate Valvoline’s Supply Chain

2010-07-30T02:58:00.002-07:00

On the heels of its win at Equilon, SCT Corporation recently secured another high-profile contract in the petroleum products sector with Valvoline, the $1.1 billion lube oil division of Ashland Inc. Valvoline will use Fygir Supply Chain Planning suite as part of a larger initiative to support its e-business efforts. The contract has a total value of more than $4 million in license fees and services.

Acquired by SCT in 1998, Fygir supply chain suite provides the critical ingredient for SCT's integrated enterprise planning and execution suite, iProcess.sct. iProcess.sct binds together SCT's Adage Supply Chain Execution software, advanced planning features from Fygir, and ecFoods' Internet Trading Exchange. The combination neatly unites ERP, Supply Chain Management (SCM), and e-procurement.

The Fygir suite itself consists of modules for advanced planning, advanced scheduling, and demand planning. The Fygir products enable users to improve their supply chain management performance and make their manufacturing process more efficient by applying mathematical techniques to optimize the supply chain.

Lube oil represents just one component of Valvoline's growing business that now includes antifreeze, automotive chemicals, refrigerants, appearance products, and lube services franchising. As companies like Valvoline/Ashland expand their product mix, it becomes increasingly important to maintain visibility across multiple business units to avoid overlap and ensure best use of common resources.

In Valvoline's case, Fygir can help address inefficiencies that erode margins and pull down profits. For example, though Valvoline's operating income increased 40% to $74 million in 1999, compared to $53 million in 1998, increased expenses in Latin America and lower international revenues robbed the company of an even stronger bottom line. In 1998, large inventories of its R-12 automotive refrigerant product at the distributor and retail levels reduced demand and resulted in lower gross profit.

These problems are by no means unique to Valvoline but are common in the industry and represent a golden opportunity for supply chain management tools like Fygir. The petroleum sector is not among SCT's core industries but shares similar processes and problems with chemicals manufacturing and food & beverage, both of which are well-represented in SCT's client base. The king of petroleum supply chain management is indisputably Aspen Technology, which counts among its clients 17 of the top 20 refining and exploration companies. We expect Fygir to continue to do well within petroleum as it offers more "out-of-the-box" functionality than Aspen Technology.

Fygir has found wide success in the process manufacturing industries and these users would do well to include this component of iProcess.sct in selections with other best-of-breed supply chain management software from Logility, and Aspen Technology.

For users considering a migration to Oracle based servers, SCT could help ease the transition. The company currently has an agreement with Oracle Corporation allowing it to sublicense a limited-use Oracle system, which enables a client to use Oracle with its software products at a significantly lower cost than a full-use Oracle license. The agreement expires in July 2003.

SOURCE:http://www.technologyevaluation.com/research/articles/sct-fygir-to-lubricate-valvoline-s-supply-chain-15976/

Identifying the ROI of a Software Application for Supply Chain Management Part 4: Just Give Us the Bottom Line

2010-07-30T02:58:00.001-07:00

Supply Chain Management Audio Conference Transcript

2010-07-30T02:57:00.000-07:00

I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:

According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.

They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.

They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.

And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?

The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.

So let's review these criteria categories.

Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.

Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.

Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.

Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.

Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.

Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/

Supply Chain Management Systems for Service and Replacement Parts: Players, Benefits, and User Recommendations

2010-07-30T02:56:00.002-07:00

Who Are The Players?

The differences between new parts production supply chain and service and replacement parts supply chain are significant. Companies using conventional supply chain management (SCM) methods to track their service and replacement parts supply are failing to grasp the special needs of the aftermarket. Further , one can even differentiate between the inventory optimization approaches of new production parts. Pure distribution parts include finished consumer goods (not including fashion/apparel items due to their seasonality idiosyncrasies, see Intentia: Stepping Out With Fashion and Style; Part One: Characteristics and Trends of the Fashion Industry), with a large number of items, large number of locations (whereby store levels can get out of hand), and with a desire for very high customer service levels (98 percent or more). The vendors that cater to these customers would be the likes of ToolsGroup. Mixed manufacturing and distribution for new parts require the exact positioning of parts. Exact positioning is highly important for manufacturing and configuring (postponement) purposes, because bill of materials (BOM) logic is heavily leveraged for inventory planning and optimization. Leading vendors in this market include Optiant, LogicTools, SmartOps, or i2 Technologies.

Part Four of the Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts for SCM series.

These solutions typically leverage stochastic optimization using nonlinear modeling techniques to analyze input data for randomness. This knowledge is applied to determine an optimal inventory policy at a particular node in a multi-tier supply network. Namely, as supply chain variability has increased, the data has become more random. Consequently, user companies need to not only look at the nominal values per se, but also at the probability of the value. For example, they need to know what the probability is of the forecast value, the purchase/transportation lead time, the manufacturing run time, the supplier quality, etc.

Contrary to these new parts production segments, aftermarket service and replacement parts are typically "slow movers," but may be critical for the operation of expensive equipment, often containing associated service level agreement (SLA) penalties for inadequate service. Thus, for the reasons of repair and indenture level and SLA considerations, one has to optimize inventories for required service levels and end-equipment availability. Varied service and customer entitlements complicate things, since aftermarket service must support warranty commitments; contract extensions, which might include same-day or next-day service; and direct or through distributor part sales. These entitlements may have different service objectives, which may include fill rates, response times, or system uptime maintenance.

How is risk factored into decision-making for service parts? In this case, forecasting might use demand history, but perhaps more importantly, mean time between failure (MTBF) data and an analysis of causal factors can provide item- and location-specific estimates of usage. This data can also be used to calculate the probability of demand occurring during the planning period in question. For example, a forecast might state that there is a 12 percent chance that the user will need a specific part in the next thirty days at a specific location. However, this forecast is risk-based, rather than consumption-based, as it is in new parts production supply chain planning (SCP).

Moreover, the design of the distribution network including which parts and how many of each are positioned at which depot(s) is another risk based evaluation. Typically, this dictates a multi-tier or multi-echelon depot strategy, where tactical planning involves risk-based decision-making that considers the probability of demand and therefore, the probability of a stockout. To refresh our memory, stockout costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs (not to mention lost face before the customer and hurting SLA penalties). Thus, the strategy include issues like, if we have a 20 percent chance of needing a single unit of a specific part in the next thirty days, what are the odds that we will need two? Moreover, given the part delivery lead time, what are the odds that the demand for two will create a stockout?

Given the random, sporadic nature of service events, forecasting approaches cannot eliminate the uncertainty of demand. Hence, inventory decisions must be evaluated on the basis of risk, whereby the considerations should include MTBF; the number of a particular asset type to be maintained; the product life cycle stage; the locations of assets and available spare parts; SLA commitments; the cost of downtime and of the service or replacement part, etc. To deal with these variables effectively companies must address the complexity and the need to manage risk directly. Some vendors, as will be described later, have developed approaches incorporating these factors into the proprietary models and algorithms.

Service and replacement parts inventory optimization is a big issue for a wide gamut of manufacturers. Aeronautical and defense (A&D) companies that design products for high reliability figure most prominently, but they still have to maintain stocks of complex and expensive spare and replacement parts, since the impact of any type of failure is large and requires the widespread and global stocks of parts for rapid replacement. The situation becomes even more complicated with rotable parts, such as the interchangeable elements of an aircraft that are removed, rebuilt, or reinstalled, which, almost as a rule, are always on a different aircraft. In an industry where every nut and bolt is important for safe operation, immense amounts of attention and effort are used to track interchangeable components and subassemblies for costing, replacement scheduling, and mean time-for-failure (MTFF) prediction.

A&D companies design low-volume, high-cost products for high reliability, but still maintain stocks of complex and expensive spares, since the impact of any failure in this industry, is large and requires adequate stocks of parts at several locations for rapid replacement in case of repair. On one hand, minimizing the number of new parts introduced into the market (and subsequently into inventory) should be a major aim, particularly because parts face obsolescence as new finished product are introduced. Yet, on the other hand, rotable parts and reusing ("harvesting") repaired components only adds to the complexity and likely impaired the efficiency of this process. Further, lot and serial tracking capabilities, the so-called tail effectivity, permits users to tie every part (within part lists and diagrams) on a plane back to that one entity. For more information, see MRO and Spare Parts Management Considerations.

Similar low-volume, high-cost, high-impact concerns are applicable to a range of other manufacturers, such as automotive and high-tech/electronics makers of complex medical equipment, large industrial systems, and mining equipment. All have immense, installed bases and complex, multi-echelon supply chains with high occurrences of slow-moving parts. Manufacturers of durable goods, like household appliances, have an additional issue with the need for highly mobile service van stocks. In addition to original equipment manufacturers (OEM), asset-intensive manufacturers, and service organizations, like refineries, chemical plants, primary metals producers, telecommunications, utilities, and municipalities, have to maintain large stores of spare parts to minimize the impact of failures on their revenue generating activities.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-systems-for-service-and-replacement-parts-players-benefits-and-user-recommendations-18090/

Most Misunderstood Link in Supply Chain Management

2010-07-30T02:56:00.001-07:00

Reference Guide to Supply Chain Management (SCM) Features and Functions

2010-07-30T02:54:00.002-07:00

What Is SCM Software?

SCM software manages product flows from supplier, to manufacturer, to customer. In brief, it manages supply and demand for an organization. According to APICS, SCM software refers to

the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

SCM systems integrate all features of procurement processes, warehouse management system (WMS) features and functions, transportation, and logistics, as well as other product planning modules.

To learn more about the distinction between advance planning and scheduling (APS), SCM, and enterprise resource planning (ERP), read TEC’s article Comparative Analysis: Are You Still Confused About APS, SCM, and ERP?

About This SCM Guide

Our SCM request for information (SCM RFI) template is composed of almost 2,600 criteria; consequently, we’ll focus here on the “big picture” features only.

We’ve brought SCM features together by broad category:

Warehouse management system (WMS)
Transportation management system (TMS)
International trade logistics (ITL)
Supplier relationship management (SRM)
Demand management
Supply chain analytics
Order management
Service parts planning
Product technology
These categories correspond to a high-level functional breakdown of software features. In this reference guide, we give a short explanation of how each category impacts your supply chain management processes.

If you would like more information about full listings of enterprise software functions and features (SCM, ERP, and other enterprise software categories), please see TEC’s RFP Templates.

Supply Chain Management (SCM) Software Functions and Features

SCM functions and features, submodule #1: warehouse management system (WMS)

Functionality
This category includes the general warehouse management functionalities such as warehouse configuration, bin location and product setup, inventory control, license plate tracking, quality control, picking, packing and shipping, etc.

Adaptability
The adaptability module in SCM software covers business processes, decision support, and reporting.

Warehouse management system (WMS) technology configuration
The technology configuration addresses WMS-specific functionality such as radio-frequency identification (RFID), security, and internationalization supported by each vendor. It also touches on programming and other technologies used in the development of the WMS application.

SCM functions and features, submodule #2: transportation management system (TMS)

System definition and implementation
The TMS should include tools and applications to enable to create profiles for all your contracts, associated carriers, and trade lanes for inter-modal and multi-leg moves. This should support regional as well as international transportation movements. The key to the successful operation of the TMS is a robust foundation created during the system implementation.

Transportation management operation functionality
Transportation management operation functionality allows distributors to align their transportation operations with their supply chain strategies and overall business objectives. This includes areas that take into consideration the entire shipment life cycle, from planning, network optimization, and execution, to shipment tracking and analysis.

SCM functions and features, submodule #3: international trade logistics (ITL)

Collaboration
True collaboration across a global and disparate set of entities and information systems requires a neutral and secure environment. This type of environment enables all players to engage in an electronic dialogue to collaborate in acquiring, transferring, transporting, and settling with regional and international trading partners. In addition, the data model should take into account the different roles of all participants and manage these through a set of rule-based processes. As such, the system implementation should include clear definitions in terms of buy-sell relationships, financial terms, and service level agreements, as well as related contact details and user profiles for suppliers, customers, and related service providers.

Content
The system should support all the data and information required in order to establish a true total cost of goods sold at the time of the initial buy-sell transaction. The SCM software should also enable users to track incremental costs as the shipment is processed from point of origin to final point of receipt. All costs and activities should be available at the transaction initiation point and can be classified by the primary components, which are product costs, compliance costs, and logistics costs.

Commerce
Starting with the initial request for goods—whether this is an RFI, a request for quotation (RFQ), or a formal purchase order, all information that is exchanged during the shipment life cycle should be facilitated by the international trade logistics (ITL) system. This requires a synchronized system and process, where the product and shipment requirements are integrated into an automated order fulfillment environment. The product item master and associated tables will determine the cost of the product as well as the relationship between the product and any duties or tariffs that are applicable. Tables related to customs duties and tariffs as well as associated rates of exchange and transportation costs should be available as part of the system functions. This will enable the user to obtain an estimated total cost of goods sold as well as a final cost of goods sold, to highlight any variances or discrepancies. This implies a data model that includes an understanding of all the data exchanged and processed at the product and item level, between order management systems, as well as the data exchanged with warehouse management and transportation systems.

SCM functions and features, submodule #4: supplier relationship management (SRM)

Design
Best practice dictates that strategic suppliers be involved in the new product process from the very beginning—i.e., the concept, requirements, and design definition phase. Supplier relationship management (SRM) suites support this with functionality for requirements collaboration tools, component selection tools, and bills of materials (BOMs) grading.

Sourcing
Many consider sourcing to be the heart of SRM and commodity management to be the heart of sourcing. Advanced sourcing suites are rich in analysis and decision support technology to absorb huge amounts of data quickly and make intelligent sourcing decisions. They also lay the foundation of execution through RFI, RFQ, and RFP processes, and manage performance against contracts. Risk management is an area which spans the full life cycle, in particular association with the sourcing function.

Procurement
Procurement is generally divided into material requirements planning (MRP)-driven procurement (sometimes referred to as direct materials procurement) and requisition-driven procurement (sometimes referred to as indirect or maintenance, repair, and operations [MRO] procurement), although some long-lead-time, first-run direct materials are ordered via requisitions. This division reflects substantial differences in the two methods of procurement. Management of catalogs supports requisition-driven procurement and the sourcing processes that precede MRP-driven procurement.

Fulfillment
The bulk of fulfillment functionality is traditionally performed by ERP and related systems such as order management, warehouse management, and distribution management systems. As companies virtualize and suppliers become increasingly involved in the fulfillment process, some functionality is appropriate within SRM. SRM systems should support a range of modern inbound inventory management practices, such as kanban and vendor-managed inventory (VMI) and provide visibility into the inbound pipeline. Returns management becomes important in SRM for situations where components are being returned to and repaired or replaced by suppliers.

Manufacturing
As with fulfillment, the bulk of manufacturing functionality is traditionally performed by ERP systems. However, the important supplier-facing processes of quality and engineer change order (ECO) management may be done outside the ERP system as part of an SRM suite.

Settlement
The primary SRM-related function for settlements is in reconciliation between the original order, actual received goods, and the invoice. Advanced settlement processes may also be supported, such as evaluated receipts or electronic invoice presentation and payment.

Utilities
There are several areas that span across the lifecycle categories. Specifically, you need project management utilities during design, sourcing, and manufacturing. The same is true for managing BOMs and managing cost.

Infrastructure
SRM is by nature an integrative function and requires the infrastructure to support that integration, as well as to manage the massive volume of related content, alerts, and data.

SCM functions and features, submodule #5: demand management

Promotion planning
Promotion management systems allow your organization to plan promotions with your trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware include the following:

Promotion plans are frequently not integrated into the demand stream.
Promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.
Pricing and profit optimization
The pricing and profit module manages profitable and sellable prices for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus, the ability to track and report history is equally important for managing pricing activities.

Forecasting
Reliable forecasts are based not only on algorithms that are appropriate to the business setting, but also on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensuring that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions.

Merchandise planning
Merchandise planning analyzes demand at the item level. It allows organizations like merchants (retailers) to understand demand based on issues ranging from demographics, store locations, shelves, and support, to purchasing as well as the positioning of merchandise in the retail channel.

Life cycle planning
Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up, or supplied with excess in later stages. In addition, firms are frequently left with excess inventory thanks to ECOs or other product changes, as well as at end-of-life, due to poor planning and visibility into demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information.

Consensus planning
Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-the-dock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecast—one number—upon which the supply chain will act.

Collaborative planning
Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the Voluntary Interindustry Commerce Solutions (VICS) Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points).

Sales and operation planning (S&OP)
S&OP is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.

Vendor-managed inventory (VMI) replenishment
VMI replenishment allows the co-management of inventory by both customers and suppliers. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, VMI dynamically detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order.

Event planning
Event planning for various marketing events has become more complex as more firms use a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need finely tuned planning to be successful. Today, systems must move from PowerPoint-level tools to strong profit analytics for ensuring market success and return on investment (ROI).

Metrics and reporting
Metrics and reporting capabilities today must be forward-looking to report (but more importantly, prevent) negative business performance. Beyond excellent modeling and simulation capabilities, metrics systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders, naturally.

Demand management systems architecture
Demand management tools have unique and high levels of integration requirements. These requirements should be factored into your evaluation of SCM functions and features if your organization places a high priority on demand management functionality.

SCM functions and features, submodule #6: supply chain analytics

Supply chain optimization
Supply chain optimization modules allow you to design the best-fit (optimal) supply chain by time, cost, and other factors, in order to create responsive and lean supply chains. Each module has a unique specialty such as logistics or inventory. In addition, the optimized network blends and trades off all these factors.

Supply chain event management
Supply chain event management (SCEM) or supply chain network systems are a new class of solutions designed to monitor, notify, analyze, measure, and control business process and execution types of activities. These systems take advantage of new architectural principles brought about by several forces: high-availability, publish-and-subscribe architectures; tools like Java; the maturity of artificial intelligence (AI) rule-based programming capabilities; emerging agent technologies; and Web architectures and standards such as simple object access protocol (SOAP) and extensible markup language (XML). These solutions allow open, real-time views into global information, as well as the ability to pinpoint and drill into key information, sensing deviations in business plans versus execution expectations (unplanned events).

Production and supply planning
Today's supply chain planning systems have significant advantages over the manufacturing resource planning (MRP II) systems of the past. These systems incorporate up-to-date algorithms and philosophies on how supply chains work. In addition, they have a technology advantage over MRP II, in that they are memory-resident, which allows the solutions to solve simulation issues extremely quickly, with very large arrays (models). These large models solve simultaneous, multi-level, and multi-node problems that MRP II systems cannot.

SCM functions and features, submodule #7: order management

Order promising
The order promising submodule includes criteria for available-to-promise (ATP) and configuration management across multiple databases, integration of configuration management with multiple unique BOMs, and integration with demand and replenishment orders.

Inventory management and visibility
Many organizations want to provide real-time promising, so inventory visibility from multiple sources is critical.

Sourcing
A primary attribute of a distributed order fulfillment system is the ability to perform multi-stage sourcing and assembly. This requires a very open architecture to integrate seamlessly with various systems and supply chain nodes, in a real-time fashion.

Execution visibility
Once an order has been promised, keeping track while the order is built and shipped has become a critical function in the supply chain.

Inbound and assembly coordination or multi-site staging
Many orders are sourced and built by a network of partners. Frequently, notification of cancellations does not occur. Keeping these orders synchronized is critical toward meeting schedules as well as avoiding over-building or building ahead of demand.

Shipping and outbound management
Once an order has been created and built, it must be shipped. Notification of advance shipments to customers is key to seamless transportation, as well as tracing, tracking, and receiving the orders.

Order management-specific technology
A distributed architecture is key to a successful order management system, whether supply chain nodes are internal or external to the enterprise.

SCM functions and features, submodule #8: service parts planning

Planning
Service parts planning deals with the creation and replenishment of a supply network for service operations. This can include original equipment manufacturers (OEMs) and service partners, as well as service logistics providers.

Service delivery and execution
The service delivery and execution submodule includes functionality for integration with call center systems (for dispatching requirements), service response prioritization and optimization, allocation of scarce parts, and dispatch.

Workforce optimization
Workforce optimization is used for determining the right skill mix and location of personnel to support service demands. This can include on-site, co-managed personnel at the customer site.

Logistics transportation and reverse logistics
Transportation planning and execution has a significant role to play in the service supply chain. As in traditional models, there is always a trade-off in time and cost between fixed assets and delivery responsiveness in serving customers. Dynamic repair needs such as emergency breakdowns in remote settings can exacerbate delivery problems. In addition, reverse logistics issues, such as pickup of parts for delivery to third-party locations for repair, are addressed in this submodule.

Analytics and reporting
The service planning system is a wealth of information for many organizations which are accountable for product planning and design, asset and capital management, and general customer relationship management. Therefore analytics and reporting features are not just designed to enable functional excellence, but also to feed these other key areas of the value chain.

SCM functions and features, submodule #9: product technology

Architecture
Architecture refers to the framework for organizing the planning and implementation of data resources. It also refers to the way the system is designed and the manner in which all components are connected to one another.

User interface
User interface refers to the manner in which people access and interact with the software. The user interface should facilitate the user's easy operation of the software.

Platforms
The platform refers to the framework, both the hardware (e.g., type of processor) and the operating system that allows a computer or set of computers to function.

Application tools
Application tools are the components that provide the ability for an application or program to work.

Reporting
Functionality for reporting refers to technical options for generating and delivering reports.

SaaS and hosting options
This category refers to features for software-as-a-service (SaaS) or hosted solutions

SOURCE:http://www.technologyevaluation.com/research/articles/reference-guide-to-supply-chain-management-scm-features-and-functions-20849/

Supply Chain Management: Morphing the Functional Scope of Service Parts

2010-07-30T02:54:00.001-07:00

The Morphing Functional Scope of Service Parts SCM

There are many requirements involved in the supply chain management (SCM) of service and replacement parts that make the process different from traditional, "new parts" SCM (see Part One). As a result, some specialist SCM solutions have been developed to address these challenges. Some might resemble conventional SCM solutions, but feature different approaches. The requirements of service and replacement parts SCM solutions also vary given the wide range of members that exist across multi-node supply chains. Each of these members can be grouped into a few major solution functional categories.

Part Two of the Lucrative but Risky "Aftermarket" Business: Service and Replacement Parts SCM series.

Service and replacement parts resource management, which is the main focus of this article, consists of a variety of solutions that are comparable to supply chain planning (SCP) components in conventional SCM suites. Service and replacement parts management has inventory optimization at its core that determines the best way to stock inventory across the supply chain to maximize service levels while minimizing investment. In other words, the basic goal is to maintain the optimal placement of resources, including parts, tools, and service technicians, across service regions to meet service level agreement (SLA) commitments at the lowest possible cost.

These spare parts planning systems provide the means to define and implement a spare parts inventory strategy that meets enterprise objectives. In other words, they tend to help enterprises understand the relationship between a customer service target level and the value of the inventory required to support it. To that end, they combine forecasting with replenishment logic to determine the optimal level and mix of parts to carry at each stocking tier, given certain capital investment targets and customer service level goals. Unlike finished goods, where nearly 100 percent customer service levels are desirable, here only certain classes of spare parts need to be available all the time, at all supply chain nodes.

Spare parts planning systems might also improve user productivity, since by automating the basic forecasting and replenishment process, planners and inventory managers can focus on exceptions and more-strategic planning activities, such as how to handle expensive, slow-moving items or how to use substitute parts to reduce costs or obsolescence.

Achieving this goal requires a mix of tools. These range from strategic tools identifying demand profiles, service objectives, and the best way to position resources to meet demand, to tactical tools determining what orders need to be placed to meet strategic objectives. Such goals include managing the risk inherent in allocations and transships; repair or new purchase orders; new product introductions (NPI) or discontinuations; and the replenishment and redeployment decisions.

Tactical refinements of inventory optimization entail setting minimum and maximum inventory levels, which recognizing stochastic, changing demand and lead-time. The algorithms required to provide this support are significantly different from those found in conventional, new parts production SCM, and justify the use of focused, point solutions, including dynamic programming, simulation, mixed integer optimization, etc. In the case of inventory optimization, two parts may be present:

Multi-echelon optimization determines optimal stocking levels of an item at a particular location, based on the item's possible investment levels. In this case, an echelon is the level of supply chain nodes, or disintermediation. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, the other echelon consists of the nine wholesale warehouses, and the third echelon consists of the 350 retail stores. Each echelon adds operating expenses, holds inventory, adds to the cycle time, and expects to make a profit.
Multi-item optimization determines the optimal allocation of inventory investment across items in a product group.
Even fundamental concepts like customer service level are different in the service and replacement parts milieu. Namely, in new parts production, the customer service level (synonymous with customer service ratio, fill rate, order-fill ratio, and percent of fill) is a measure of the delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock (MTS) company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Likewise, in a make-to-order (MTO) company, the customer service level is usually a comparison between the number of jobs or dollars shipped in a given time period and the number of jobs or dollars that were supposed to be shipped in the same period. Yet, in the service and replacement parts world, with a high level of unpredictability, how can one forecast the dollar amount of service or repair parts that were supposed to be shipped during a particular period?

Thus, given the random nature of service and breakdown events, it is clear that demand uncertainty (which can be measured by the standard deviation, mean absolute deviation [MAD], or variance of forecast errors) cannot be eliminated through traditional forecasting methods. Hence, trade-offs must be evaluated on the basis of captured future risk assessments; estimates of demand probability distribution, relevant to specific customer products; and locations at future points in time. The decisions made across the planning horizon thus constitutes an exercise in risk management

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-morphing-the-functional-scope-of-service-parts-18086/

ERP for Green Supply Chain Management in Manufacturing

2010-07-30T02:53:00.001-07:00

Squeeze Play in the Supply Chain Management Market

2010-07-30T02:51:00.000-07:00

To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) andtransportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence(BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.

In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management(PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuablesupply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.

This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.

The Downward Push of ERP Vendors

ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.

Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.

Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAPcorporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.

Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.

This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.

Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.

TRADITIONAL ERP FUNCTIONALITY	TRADITIONAL SCM FUNCTIONALITY
Electronic data interchange
Supplier relationship management
Customer relationship management	Warehouse management
Business intelligence	Slotting optimization
Financials	Labor management
Advanced demand planning	Yard management
Financial and item planning	Transportation management
Catalog planning	Carrier management
Web planning	Radio frequency identification
Promotion planning	Automated search and retrieval systems
Demand forecasting	Manufacturing execution systems
Promotion forecasting	Product lifecycle management
Replenishment	Event management
E-commerce
Manufacturing
Enterprise performance management
Point of sale
Human resources
Procurement

Figure 1. Traditional functionality of most ERP and SCM systems software.

The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.

SOURCE:http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/

How Supply Chain Management Helps Today's Engineer-to-order Companies

2010-07-30T02:50:00.002-07:00

How Supply Chain Management Helps Today's Engineer-to-order Companies

In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.

How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.

This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.

The Role of SCM in ETO Firms

The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.

ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.

Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.

How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?

How SCM Software Components Relate to the ETO Manufacturing Environment

The main modules of SCM software include the following:

Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.
Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.
International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.
Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.
Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.
Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.
Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.

SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.

Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:

Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.
The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.
The SRM software will choose the appropriate supplier. (A detailed example is shown below.)
Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.

Let's look at an example that illustrates the SCM process involved in ETO environments.

Figure 1: SCM at work in an ETO manufacturing environment.

Figure 1 represents a typical manufacturing situation. However, because of the nature of an ETO environment, precise components are needed quickly, thus putting pressure on suppliers to deliver components on time so that the manufacturer can meet its project deadlines.

In the above diagram, we will consider Supplier 1 a dedicated supplier, meaning that it usually provides the components to the manufacturer, and Supplier 2 up to Supplier N will be considered new suppliers.

In this example, let's say that Supplier 1 falls short on the order, creating a long lead time for the manufacturer—an unacceptable situation due to project deadlines. Whether the manufacturer obtains only part of the order or none of the order, it will have to choose another supplier, since deadlines need to be strictly adhered to in an ETO manufacturing environment. And let's say Supplier 2 has the component the manufacturer needs and can deliver it in a shorter time frame.

In this situation, let's examine how SCM software can allow the manufacturing firm to come out on top:

Having an SRM system in place, the manufacturer can see which supplier has what supplies, when they have them, and the lead times required to get the supplies to the manufacturer. The manufacturer can also see what suppliers have penalties for not delivering on time, and which suppliers can deliver the products to it right now.
The SRM software enables the manufacturer to choose the next appropriate vendor when the one it originally ordered components from cannot deliver for whatever reason. As shown in figure 1, if the first chosen supplier defaults on delivering the order, the SRM system will loop back to choose the supplier next in line. Once a supplier delivers the components in time to meet the project deadline, the manufacturer can finally produce the good and deliver it to the final destination.
The order management system can leverage the integrated functionality of the SRM system so that even before the order is sent out, the system can search for suppliers that can deliver the goods.
The TMS can integrate with the SRM system to ensure delivery of the products falls within acceptable tolerance levels of the project's budget, factoring in the continuing rise in fuel prices. This is done through transportation network optimization. (For a more information, please see the article Transportation Management Systems: The Glue of the Supply Chain.)
Supply chain analytics enables manufacturers to avoid potential problems in the supply chain, using SCEM. SCEM gives the manufacturer the ability to take into account unforeseen events, and to plan accordingly. Using figure 1 as an example, the manufacturer is able to see that Supplier 1 has had problems delivering products in the past. Entering the loop, the manufacturer will attempt to find another suitable supplier, taking into account each supplier's pros and cons.
Finally, once the product is produced, the manufacturer can use the above functionality to deliver the product to the consumer.

SOURCE:http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/

PeopleSoft Supply Chain Is Music To Mid Market Ears

2010-07-30T02:50:00.001-07:00

PeopleSoft recently announced that O-Cedar Brands has licensed PeopleSoft Accelerated Supply Chain Management (SCM). This mid market solution offers a full suite of Supply Chain Management applications, a rapid implementation methodology and flexible deployment options that give users a predictable implementation timeframe. Accelerated SCM automates core e-business functionality, including general ledger, payables, receivables, billing, purchasing, order management, inventory, production management, bills and routings, cost management, and production planning.

O-Cedar, a consumer products company based in Springfield, Ohio, makes a variety of bathroom and kitchen-cleaning supplies at facilities across the Midwest. The company selected the internet-hosted Accelerated Supply Chain Management solution to link critical business processes such as order-to-cash, procure-to-pay and plan-to-procure. By linking these key business processes, O-Cedar hopes to achieve a dramatic reduction in operating costs.

Says Bob French, PeopleSoft project leader and CIO at O-Cedar, "PeopleSoft's Supply Chain Management solutions will help us meet our continued growth initiatives by improving operations efficiency and managing customer profitability. Driving bottom-line cost savings into the supply chain has become an imperative for companies our size. We found this fixed-price solution to be a very strategic investment."

The solution will be hosted by PeopleSoft eCenter, PeopleSoft's application service provider. PeopleSoft eCenter provides single-vendor accountability for the Accelerated Supply Chain Management solution. PeopleSoft eCenter will implement the solution, manage operations, and provide on-going customer support.

Designed for businesses ranging from start-ups to companies with $500 million in annual revenue, PeopleSoft's fixed-price Accelerated eBusiness Solutions allow companies to extend business processes to include their customers, suppliers and employees. "In shopping for software vendors, we found that other mid-market Supply Chain solutions couldn't compete," French said. "PeopleSoft is committed to our success."

PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed as a lightweight supply chain product unable to compete effectively with applications from pure-play vendors like i2 Technologies and ERP rivals like Oracle and SAP. The win at O-Cedar Brands proves otherwise and is not merely a fluke. PeopleSoft has a distinct advantage over the pure-plays by its ability to offer a broader range of applications in conjunction with its supply chain solution.

The components of Accelerated SCM that offer the most differentiation are certainly the financials, such as general ledger, payables, and receivables. These represent critical areas in any organization that usually are not well integrated to manufacturing and distribution functions. Pure-play vendors focused solely on supply chain planning do not have the expertise or inclination to provide financial capabilities in spite of some half-hearted attempts in response to customers. As time goes by, ERP vendors like PeopleSoft are sure to gain ground on the pure-plays in offering solutions that address enterprise-wide needs with comparable depth of functionality.

Accelerated Supply Chain Management is deployed around specific industry verticals, including consumer products, technology, discrete manufacturing, and wholesale distribution. Vertical deployment is a strategy that most vendors attempt to pursue although many do not succeed. PeopleSoft has targeted segments that have been profitable in the past, such as consumer products, but others, like technology and discrete manufacturing are hotly contested in the supply chain management space and may prove to be an uphill battle.

Among the more alluring selling points of Accelerated SCM is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We generally frown on bold promises of speedy, trouble-free implementations and recommend that users conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick return on investment.

PeopleSoft delivers Accelerated Supply Chain Management in three ways. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with IS departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated SCM through its eCenter. Whatever the option, users will find PeopleSoft's graphical interface to be intuitive and easy to use. As always, prospective clients should choose the option that best suits their business environments and IT skill base.

SOURCE:http://www.technologyevaluation.com/research/articles/peoplesoft-supply-chain-is-music-to-mid-market-ears-16427/

SAP Highlights Supply Chain Management ToolsSAP Highlights Supply Chain Management Tools

2010-07-30T02:49:00.000-07:00

At last week's eBusiness Conference & Expo, SAP AG updated attendees on its supply chain management application, Advanced Planner and Optimizer (APO). The solution is designed to enable companies to perform collaborative optimization across their supply networks to facilitate customer service and order fulfillment. Available supply chain management modules include collaborative planning, forecasting and replenishment (CPFR), Internet-enabled vendor-managed inventory, ATP and shipment tendering. SAP has extended its pilot customer base to more than 350 installations in multiple industries worldwide.

SAP is working hard to win acceptance for APO amid the multitude of other supply chain offerings flooding the market. The number one ERP vendor has expanded its test sites to comprise more than 350 separate installations, a number that rivals the customer base of best-of-breed SCM vendor Logility. Its flood of APO applications parallels the deluge of press articles that filled news wires for two years prior to the beta release. SAP is able to maintain the intense campaign by virtue of its strong market position and wealth of development resources it can devote to ironing out bugs in the software and making enhancements based on pilot user feedback. SAP will eventually be successful in overcoming much of its competition, if only by using its sales and marketing muscle to quash efforts by other ERP and best-of-breed vendors (See TEC's Technology Research Note: "SAP AG - ERP Leader with a New Dimension" September 1st, 1999). SAP's marketing department is aided considerably through the company's decision to develop APO from the ground up, a fact that appeals to IT professionals who are looking for a seamless integration between ERP and supply chain. Less inspired is their attempt to differentiate APO's Available-To-Promise functionality by reshuffling it from the standard term into "Promise-to-be-Available."

Users wishing to acquire transportation planning, vehicle scheduling, repetitive manufacturing, or supply chain network design solutions should look to third party vendors such as i2 or Logility, as these modules will not be available until the second quarter of 2000 or later. Keep in mind that, although these vendors have certified interfaces to SAP R/3, access to the integrated system via an Internet portal will not be straightforward. Users should also approach the broader issue of SAP's ability to offer truly Internet-enabled solutions with trepidation. Ironically, initial reports of version 1.1 pilot tests indicated some limitations of APO regarding web enablement (See: "SAP APO: Will it Fill the Gap?" September 2nd, 1999). In any event, SAP's product test of APO version 2.0 was only completed within the last several weeks, leaving the "field test" in the hands of new clients.

SOURCE:http://www.technologyevaluation.com/research/articles/sap-highlights-supply-chain-management-tools-15527/

Supply Chain Management Is Evolving toward Interdependent Supply Networks

2010-07-30T02:48:00.002-07:00

Does Supply Chain Management Software Make Sense in Wholesale Distribution?

2010-07-30T02:48:00.001-07:00

Growing competitive pressures compel strategies and tactics that yield efficiency and efficacy within virtual supply chains. This is especially true for middle tier suppliers. For example, distributors are finding that they need managers who are not only good expediters and know their products, but who also understand how to use decision support tools to make their work more effective. Advances in information technology now make it more feasible for distributors to adopt these tools such as supply chain management software. This paper examines the steel service center segment of the wholesale distribution industry as a case in point of the challenges facing distributors and the relief offered through supply chain software.

Distribution Evolves

In many ways, steel service centers (SSC's) typify the evolution of wholesale distribution in general. Historically, wholesale distribution has remained on the trailing edge of the information technology curve. It has been more important to focus on other priorities. For example, steel service centers have advanced quality and precision in processing and handling steel.

Like many sectors of wholesale distribution, SSC's have found a niche in the supply chain because they provided a way for smaller manufacturers to buy products when they could not effectively negotiate with large, powerful suppliers. In the case of steel service centers, these suppliers are the integrated steel mills.

Many SSC's started as brokers, buying low and selling higher. But that provided little barrier to entry, no competitive advantage, and margins that could not be sustained. In an effort to differentiate themselves, many SSC's have progressed up the value chain, adding steel processing to their product/service bundle. Other types of distributors have incorporated value-added services that are appropriate for their own customers.

Software Matures

Supply chain planning software applications emerged on the market about 15 years ago. The applications have improved, the technology on which they have been built has become more available, and the architecture has become more open. The first companies to appreciate the potential of such applications were the most sophisticated in terms of their supply chain planning. These also happened to be larger companies who had significant IT budgets and expected to invest in these areas.

Twelve years ago, I wrote forecasting and inventory models in spreadsheets for the steel service center where I worked. It required hours if not days to key in the required data, which only became available once each month. At that time, these tools challenged the old, familiar decision-making processes of some of my colleagues.

Such decision tools are now commercially available "off the shelf". The Internet provides "anywhere access" to applications that are so enabled. Advances in technology now ease the integration of these decision tools with back end transaction systems, even those used by many steel service centers. This means faster, more accurate results for managers who now know more about how to use them.

Industry Structure

While supply chain management applications have proven themselves in the real-world use of operations management theory, competitive pressures continue to grow even more intense, particularly in distribution and in other middle tiers of supply chains. Managers in all industries have become more knowledgeable about how to manage supply chain issues like service and inventory investment. They are learning that mathematics can help decision makers do their job by making recommendations and then allowing them to focus in areas where their judgment and experience are needed most.

OEM's are placing increasing pressure on their vendors to bear more of the risk of time and money in the total supply chain equation. Vendors, including steel service centers, are being asked to hold inventory, thereby assuming the lead time risk and the risk of investing working capital. They are being asked to do this while maintaining, or even lowering, the amount that they charge the OEM for the product/service bundle.

The extended supply chain - all of the organizations, resources and processes that are required to meet customer demand - is much like a balloon, with the air inside representing time and money (cost). On the one end, OEM's compress the "balloon" so that the burden of time and money is pushed toward the middle. In some industries, the first tier vendors can push some of this additional burden on to their own suppliers-in essence, compressing their part of the supply chain balloon, forcing the burden of cost and time on down the line.

However, in the case of steel service centers, not only can they not pass this burden of cost and time on to the steel mills, but the mills squeeze the "balloon" from the other end, compressing time and money out of their portion of the virtual supply chain onto the steel service center.

All of this squeezing of time and money from one part of the supply chain to another occurs without ever reducing the total supply chain cost. In order to survive, the member of the supply chain on the receiving end of the "squeeze" will eventually have to find an outlet for this increased pressure. Too often, for a wholesale distributor such as a steel service center, this time and cost pressure shows up in red ink or lower margins on the income statement. The supply chain equation is a zero-sum solution over time. Simply moving costs around will not make the value chain any more profitable or effective over time. Unless the total volume of cost and time in the "balloon" is reduced instead of merely shifted, it must eventually be passed on to the end customer or absorbed by one of the links in the supply chain.

Passing costs on to the end customer or delaying final shipments is often not possible. For example, automobile manufacturers mandate cost decreases from time to time and penalize suppliers for late shipments. The only other option is for one or more partners to lose out through decreasing margins. Over time, this will force the disadvantaged partner to reduce investment and become less competitive. In the end, that trading partner will be replaced by a competitor who may face the same fate.

Structural Challenges

The steel industry presents some structural challenges for service centers that illustrate those faced by other distributors. Customers and mills have more relative bargaining power than service centers. That structure is not likely to change soon. However, the path to increased bargaining power within that challenging structure, as well as the road to survival, lies through a better way to manage the burden of cost and time that is being pressed on the SSC by the other trading partners. The steel service center must manage this cost and time more effectively than either its trading partners did or its competitors can. Essentially, this is taking some of the total time and money out of the supply chain equation-like letting air out of the center of the "balloon" that is being squeezed from both sides, making the entire supply chain more competitive than alternative combinations of trading partners.

The exciting part of this challenge is that nearly all of time and money that the steel service center can release from the supply chain "balloon", will go directly to its own bottom line.

SOURCE:http://www.technologyevaluation.com/research/articles/does-supply-chain-management-software-make-sense-in-wholesale-distribution-16464/

Does Supply Chain Management Software Make Sense in Wholesale Distribution? Part 2: The Critical Objectives

2010-07-30T02:47:00.000-07:00