Based on our own experience with most of our customers that own SAP, as well as talking to many others, it seems that the IT folks are initially rather cautious when it comes to integration of Best-of-Breed supply chain planning systems to SAP-R3®, or any other ERP system for that matter.
It may come as a surprise that there are only about 15 core data tables used in supply chain planning systems, and only some of these data will have to come from transactional-based ERP systems, whether its SAP-R3, ORACLE®, QAD®, or any other. So the hard part is not the actual integration to these ERP systems, but making sure the incoming data from them is accurate. In fact, moving data in-and-out of brand-name ERP systems is through fully standardized mechanisms or Adaptors, especially with SAP.
On that note, there is a well-defined architecture to move data around with SAP. It is broken into 3 main parts: 1) SAP’s ERP Interface, 2) An API and Middleware adaptor, and 3) The Supply Chain Planning Master Data Management module. The set up is straightforward:
SAP’s Production Interface serves three functions; it moves static data outbound from SAP, it receives static data inbound to SAP, and it moves transactional data both in and out of SAP.
The planning API is broken into 2 functional areas. The first functional area deals with the movement of static model data such as: product, BOM, or Route information to the applications and results data such as Forecast, Production Plan from the supply chain applications to SAP, and the second area with real-time transactional data. The final process is used to transform the customer’s data into the form needed for the planning modules. This is accomplished through the Master Data Management layer.
Once you peel back the integration hype (or sheer panic in some cases), you will see that that all supply chain planning systems bolt-on to SAP in the same way and just as easily—whether its by a third-party or SAP, itself. This makes it almost effortless to tap into the standard interfaces and have ready-to-go integration available. What this means is that the actual movement and transformation of the data is not going to be the risky part of a supply chain planning project—so there is no need to panic.
The focus for managing risk should be on the process and where the data has originated instead, i.e. SAP’s core transactions. Any good planning system will provide a strong Master Data Management module of its own to help you clean and efficiently structure the small amounts of data that are coming from your transactional systems or any other sources.
Feel free to comment below on how your experience has been when it comes to integrating planning data to SAP.
For more information on this topic read the paper: Integrating Planning Data Is Not That Scary!
Planning a supply chain is a complicated task and requires a lot of complex calculations.
However, it does not require a lot of different kinds of data. This is an important point to remember. In this blog posting I want to discuss what to worry about when it comes to getting data for your supply chain planning system, and what not to worry about.
Basically, planning calculations need to consider all kinds of different data elements at the same time so the system needs to utilize a data architecture that is separate from the ERP system’s. This means that all planning systems, whether they are offered by an ERP provider or a Best-of-Breed provider, need to be bolted-on to the ERP system with integration middleware. I know that even the thought of integration to an ERP system makes many IT folks nervous, but when it comes to supply chain planning systems the integration should not be the biggest worry.
Let’s break it down; there are 3 data factors for IT folks to think about when a new planning system is being launched. In the order of easiest to hardest, they are:
1) Integration to ERP Transactional system
2) Getting the planning data complete and clean
3) Making sure the planning system will scale and be reliable
Integration to the ERP Transactional System
This is the one that everybody spends most time worrying about, but it really is not that hard and it’s the easiest to get passed. First, there are only about 15-20 data tables that are required for supply chain planning. The ERP transactional system will only contain about 10 of the key data elements. Things like process routes, resource alternatives, resource capacity and resource availability, demand planning hierarchies do not have strong representations in ERP transactional systems. These need to be defined in the Manufacturing Execution System (MES) or the supply chain planning system, itself. Second, there has been a standardization of the data integration in-and-out of ERP systems. The data-exits have been set up and well documented. Both Best-of-Breed and the ERP vendors use the same data-exits. Third, there are standard interfaces for supply chain planning that have been standardized over the years in major ERP systems, like in SAP® and Oracle®. So to sum it all up, a small set of data needs to be interfaced using a method that has been worked on for over 10 years. So, not much to worry about here.
Getting the Planning Data Complete and Clean
This is one of the factors to worry about. You must pay attention to the Master Data Management (MDM) part of the application that comes with your supply chain planning system. The data for planning needs to be verified carefully to get the best results, so strong master data management is critical. This means that the MDM part of the supply chain planning system needs to be able to identify errors in data, its structure, and also make sure its correct in context with other data. The contextual checks are what make MDM for supply chain planning systems so important. Basically, The MDM for planning needs to take the data from other systems and clean it up with input from the user. It also needs to make it so that it is easy for the user to add data to the system that does not exist anywhere else. Note that attribute-based master data management makes this easier, by enabling data definition based on product characteristics.
Making Sure the Data Structure Can Scale
This is another thing to worry about. Even if the data is clean and complete, the system will not work properly if it is not structured to be efficient and reliable. If the system is slow, the users will not be able to complete the needed steps in the process and will give up. Make sure to check how the data is structured for scalability. A point to remember, memory-resident cache is critically important for planning systems. Understand how this is architected for all the planning modules needed. Is there a single point of failure? Can you add user-defined attributes in the memory resident cache? Can you change the imbedded logic in the memory resident cache? If the answers do not show that the system is scalable, configurable, and reliable, then the system will fail because the IT staff does not have the ability to change any of this.
In summary, data integration between ERP and a new planning system is the easiest part of its implementation but most IT folks seem to focus most of their worries on it. Maybe because its under the control of the IT staff to fix. What you should really be concerned about is the part that is not under their control, which is the underlying power of the planning systems’ data management capabilities. This has a big impact on the data runs and takes more effort to fix. Even a bigger concern should be the questions related to scalability and configurability of data cache within it. If that is not right you are dead in the water.
About the Author: Bill Green is the Vice President of Solutions at Adexa, for more information about him please visit http://adexa.com/company/green.asp
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
What is the most popular supply chain planning tool in the world? The answer: Spreadsheets! Its used for demand planning, Sales and Operations Planning, inventory planning, or any other type of planning you can think of. But is this really the best tool to use? Most popular response is: “it gets the job done.” Well, using a knife instead of a power-screwdriver may also get the job done, but how fast, how efficient, and how satisfactory is the end result?
The fact is that by using spreadsheets we would not even know how well or how badly the job was done until we run into issues of delivery and/or high inventory cost. And then we blame it on variability of demand, late supplies, rush orders, unreliable suppliers, equipment breakdown, and so on. We have been dealing with all these problems for decades. Shouldn’t our planning system take these factors into account? Let me just say it bluntly, these are all excuses. The right tool and a preventive plan can quickly react and avoid 99% of these issues before they occur. And more importantly, it will ensure that you have no surprises.
Just like anything else, supply chains of today are more complex than the supply chains of yesterday. So it makes perfect sense to need much more sophisticated planning systems. Inherently, supply chain planning is a highly complex and collaborative process. It requires 100’s, if not 1000’s, of parameter to be considered, including resources, routing, demand signals, supply capacities, inventory levels, locations, priorities, etc. etc. It is almost impossible for one planner, with a static system, to take into account and optimize for all of these factors. And even if such miracle can take place then what happens as soon as one of these factors changes. How quickly can you re-align everything?
The fact is that spreadsheets are simple and passive systems and forced to look at data locally. Simple because they hardly integrate different business processes and need a simplified view of the world to work, e.g. fixed lead-times. And they are passive because they can be programmed to consider only one or two objectives, that are important to the planner, at any given time. When orders are late and customers are screaming, priorities change. When Inventories and cost is going through the roof, then priorities change, again. Spreadsheets are just not capable of dynamically dealing with all global objectives, from multiple-streaming sources of data, at one time. And you certainly can’t expect the system to Alert you in real-time when things go wrong. They are just not designed for that! The end result is loss of market share, dissatisfied customers, too much inventory, too much build-ahead and not enough of what is in demand. Sounds familiar?
I know these words may come as a shock to some of the readers, but it should not. If you are running a multimillion dollar facility with a tool that was not designed for that purpose then you should focus on more sophisticated tools that consider the availability of every resource, man, and machine, and figures out the right supply at the right time, based on dynamic changes in demand. Updating your model in spreadsheets on monthly, or even weekly basis is not going to work since your model is incorrect to begin with. Lead-times are variable, not fixed; demand is unpredictable (random) within certain variances; suppliers miss due dates; and your machines or outsourced production sites don’t always cooperate. I know what you are thinking; all this can be fixed by just increasing lead-times (slack times). But that wont work; as lead-times are increased across different products, we start the orders sooner than later. So when the demand changes, we end up with a lot more WIP inventory that is no longer needed, and continue building them. To that end, we inhibit our own ability to react faster to what is actually needed today and focus on expected demand.
Finally, stop worrying about availability of data for a more advanced planning system. If you have enough data to run spreadsheets, then you definitely have enough data to get started on a better planning tool. You will see that the better planning systems are designed to measure, clean, and filter your data over time. This will enable you to scale and improve your planning capabilities quickly.
Look forward to your comments and if this topic is of interest to you then I suggest the following epapers:
How to Justify A Supply Chain Planning System?
Common Pitfalls in Supply Chain Planning System Implementations
Dr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
When it comes to an Inventory Management system, we have moved to a whole new level of solutions called Multi-Echelon Inventory Optimization systems (see previous posting on Supply Chain Planning Blog). This technology brought about a big change to the all-critical inventory planning function. To that end, it has evolved quickly like anything else in technology today. So in this posting, I want to touch on some of the major differences between the MEIO solutions that were initially introduced into the market, and the ones that are available today.
Operations research and mathematical programming techniques are great at finding answers but fail to explain why. This is like your boss telling you what to do without telling you why you are doing it, what the consequences are, and how the decision was arrived at. As wise as your boss might be, he may fail to see all the different angles, and his "good" decisions are only relative to what he is trying to optimize. For example, your boss may ask you to increase production of XYZ Widgets since the demand is high. In his mind he is meeting the customer service goals, increasing revenue, and keeping the production line fully utilized. So what's wrong with that? He is optimizing for all of the above criteria, except that XYZ is not a high-margin product. In fact based on competitive pricing, it is losing money in certain regions, meaning that the more you produce the more you lose! So by doing this, not only he's hurting the profit levels, but also taking away opportunity to make and sell other high-margin products. Another simple example, a new line of product is launched and you are wondering how many should be made based on current market demand? The strategy is to make as many as possible based on supply capacity, in order to capture market share. However, by selling the new line you are cannibalizing the sales of the old inventory-- wrong timing and inventory policy, costing you millions!
This process has some deficiencies:
1- How do we know that the boss has looked at every criterion that is relevant?
2- What are the alternatives and consequences that may lead to better results for all, rather than a few.
3- Unless you know why a decision is made how can you justify it, and not put the company at risk?
First generation MEIO systems were kind of like your boss. They would just say what to do without telling you why you are doing it and what the repercussions are. Many of Today's MEIO systems have the capability to go much further to explain the results, allow "what-if" analysis, show you alternatives, and most importantly tradeoffs-all at your finger tips, in real-time!
When designing an inventory strategy, transparency is needed to evaluate the different alternatives and to examine the impact of the decisions on your enterprise, as a whole. For every gain that is expected, there might be a sacrifice of other products, as well as customer delivery performance tradeoffs. The new MEIO systems are no longer that "black-box" that tells you here are your two choices-take it or leave it. Just like a brilliant analyst, your MEIO system should tell you what happens when you increase production of one line vs. another, show why you need to make more of this and less of that, and explain how you can set your inventory targets to make the best of both customer service levels and reduce cost, at the same time. But more importantly, it should walk you through your decision scenarios and its financial consequences. Now this does not sound like an inventory planning system that our father's used...does it? Don't even get me started on spreadsheet-based systems.
By the way, I am very interested to get some feedback on what you are using in your enterprise for Inventory Planning, today? And how it's working for you? So feel free to comment on this posting and I am sure others will share too.
If you are interested to follow up on in this topic, there is an informative ePaper called Demystifying MEIO that I highly recommend, at: http://web.adexa.com/multi-echelon-inventory-planning-epaper/ . Feel free to click and read it at anytime.
Dr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
Many companies say that they want to Optimize Inventory, but they often have different things in mind when they say it.
Of course, they are all looking to make better use of the inventory on-hand, and they all have the goal of keeping customer service high and inventory low. However, what makes them different is that each company may have a dissimilar root cause as to why they are not doing better with it.
There are four main areas of supply chain planning to focus on when trying to get more from your inventory investment. From top to bottom, and with different time-horizons, each one is critical to get the whole picture right, so it’s important to target them individually:
1) Reduce forecast error with better Demand Planning
2) Establish better inventory target levels with Multi-Echelon Inventory Optimization (MEIO)
3) Further synchronize supply flow with better Sales & Operations Planning
4) Improve daily Inventory Management
Reducing Forecast Error
The two key factors that will impact the amount of inventory that is required in a supply chain are lead-times and demand uncertainty. Although, forecasts will always be wrong, there is a great deal that can be done to increase their accuracy with improvements in process and technology. Remember, you have to do everything possible to be less wrong. Forecasts and “consensus demand” (i.e. aggregation and agreement on one forecast number, by all departments) are also used to determine forecast error. So, if a company does not have a strong process in place to facilitate collaboration, they will not be able to do well in any of the other areas.
Demand Planning is a critical component of inventory management. We have a new ePaper on this topic entitled: Planning Demand for Profit Driven Supply Chains. Feel free to download it by clicking on the title.
Multi Echelon Inventory Optimization
The amount of inventory buffering should increase along with the value of a product, the amount of uncertainty in demand relative to the sales volume, and a company’s response time to deal with supply chain surprises.
Where to place inventory can be very difficult to figure out in an end-to-end supply chain with many products. There are many ways to rebalance how inventory budgets are allocated, inventory pooling and production postponement strategies can be complex and hard to execute, as planned. A Multi-echelon Inventory Optimization (MEIO) system will enable a company to consider all of these in deciding where in the supply chain and how much inventory to have. If your company is using a manual system, and pretty much guessing at how many days of coverage to have for each product, or does not have a good process in place to calculate statistical safety stock values and its “What-if” impact on customer service, then you should be looking into how an MEIO system can help your supply chain.
If you would like more information on Inventory Managment and its "Optimization", I recommend reading this paper: Demystifying MEIO.
Sales and Operations Planning
As part of the S&OP process a company needs to determine how to meet the inventory demand that comes from buffer stocks, forecasted demand, and backlog. Or it may be that capacity or material constraints, or other operating efficiency concerns, drive a company to purchase or build inventory ahead of when it’s actually needed. Regardless, the supply planning process that feeds a consensus S&OP plan is the place that these decisions are made. If a company does not have a good S&OP process in place, then it will not be able to make good decisions around inventory. Furthermore, if the S&OP system in place does not consider the effects of finite capacity, materials, and operating constraints, then control over inventory levels will not be achieved.
For more information about S&OP process, I suggest viewing this recorded webcast: S&OP 101: For all manufacturing executives
Inventory Management
Even with a perfect plan, a company cannot keep inventory low and customer service high unless they can execute on moving inventory through the supply chain to meet customer orders. Better Inventory Management will give improved visibility of inventory through the supply chain and create the orders to move the inventory when required. Inventory Management gets the target levels from the MEIO system, and then executes as orders and forecasts are received. If a company does not have good visibility into inventory, forecasts, and orders then an improved Inventory Management system will surely help.
A last thought, there are many areas of supply chain planning that can have an impact on reducing inventory and improving customer service. Typically a company will focus on Demand Planning first, and then Inventory Management, while putting in place simple ways to set inventory target levels. They would then focus on better inventory targets with MEIO systems and better supply side S&OP planning. Each company is different, and it is important to address each area based on your needs.
About the Author: Bill Green is the Vice President of Solutions at Adexa, for more information about him please visit http://adexa.com/company/green.asp
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
Inventory is a very interesting phenomenon! You never know exactly how much you need until you actually need it or you know you have excess until it is too late! The major problem, or should I say opportunity, is that inventory is a function of both time and randomness. Randomness has to do with your competitors pricing, quality, weather, economy, acts of God, contagious disease, strikes, etc. All of these factors and many others have an impact on your demand. For example Toyota's quality problems lead to increase in demand for other auto makers, warm weather increases demand on beer, N1H1 outbreak increased the demand for certain type of medication.
So you ask yourself, how often do we have such events and should I care? The answer is Yes! Because the weather maybe more predictable than your competitor and your customers' forecast! In other words, it is very hard to tell how your competitors are going to change the game and take market share from you, or how your customers can change the demand based on how they feel and market conditions. So it is a constant game of balance between Supply and Demand. If you play the game long enough then you should become an expert. Just like chess you can develop strategies to make the right move and be prepared no matter what your competitor does or what the changes in demand are. Being prepared is what the science of inventory planning is all about. We refer to this as Inventory Optimization. It allows you to decide how much inventory is enough, where and when. The two factors that you need to be concerned about are Cost and Service Level. On one hand you can have every possible item available in Finished Goods which is inconceivable. Or keep no inventory, another unlikely scenario. People talk about "zero" inventory; I am not sure what this means? Does it imply that every time I want to buy a note book, somebody needs to go out and chop a small tree down and put it through the paper mill? But one thing is for sure, your optimized inventory level is some place between those two points.
Inventory planners, like any other type of planners, need to have their slide rule (some of you may not be as old as me to know what these are!) or their calculators, to figure out where and when they should keep inventory up and down the supply chain. This is a very complex problem even without the randomness that we talked about. There are many different products each with their own Bill-of-Material and different production routings and capacity requirements. Shared resources and inventory buffers, as well as raw materials, are needed to build and store intermediate products at different stages of production. Very often subcontractors, distribution centers, consignment locations, and hubs are also part of the equation. I think you all agree that spreadsheets are too simple and rigid to do the job even-though it is of the most widespread tools. Now let's add randomness and seasonality to this. Are we having fun or what?
Here is the good news, an MEIO (Multi echelon Inventory Optimization) system is designed to be the tool that inventory planners need to deal with exactly the kind of problems that we just talked about. It has the capability to model different layers of supply chain, take randomness into account at every stage, look at the cost and service level requirements, and then come up with how much of what needs to be kept at every critical point of the supply chain. And if you don't like what it proposes, you can change the parameters and run it again and it will give you other alternatives so that you can make a wise decision. Think of it like what a structural engineer does when she designs a high-rise. The load at every floor can be different, the structure may have to be resistant to winds of up to 60 miles an hour, and there might be earthquake and fire hazards to consider. Given all these potential "random" events the structure needs to deliver certain level of safety (i.e. service level) to its residents. The optimization programs that Structural engineers use resembles very much the MEIO system that we described above. It shows you how to build a supply chain that can be resistant to changes at lowest cost. The only difference is that in our building analogy you do it once, hoping that it will last forever. However, using an MEIO system, you have the opportunity to re-design your inventory plan on weekly or monthly basis so that your supply chain can withstand new conditions. That is the beauty of a system which allows you to have enough flexibility to change with your demand, business conditions, management objectives, and moves of your competitors!
Multi Echelon Inventory Optimization systems are fairly new in the market but picking up a lot of momentum by helping to solve a common and complex supply chain problem--as Demand Planning systems did starting a decade ago. The right MEIO solution can make your supply chain a lot more efficient, save a bunch of money, and most important of all make your customers very happy.
We have a comperhensive ePaper on this topic, just click on: Demystifying MEIO.
Dr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
What do all manufacturing companies, regardless of industry, have in common? Inventory! It's the lifeline of every company that sells goods. How can it be evil?
Inventory to a supply chain is like water to people. Too much of it would drown you. Too little makes you dysfunctional. So how much is enough? Just as in people, the real question is how fast are you running? Hence, the amount of inventory you need has to do with how fast you can move it. In addition to knowing how much is needed, you also need to know when and where you need the inventory. The fact is that, just like energy, inventory does not get destroyed but transforms from one type to another. And the decision is yours as when you want to transform it from Raw inventory to Work-in-Progress, to Finished-goods; or to decide when to bring it to your site, or move it to another location. These are tough decisions to make, with potentially big impacts on your supply chain. You see, inventory planning is based on a very large number of potential configurations of product types, locations, and timing based on demand and supply factors. So making good decisions about what to do with your inventory can be very complicated! But wait I am not done yet! On top of all these factors, you also have to worry about Acts-of-God, Mother-Nature and even "luck". Yes, luck! In our customer base, we have a major brewery with demand that swings heavily based on weather during the holiday weekends. We also know of a major food processing company in South Africa that is already planning for spikes in demand for "chicken" during the 2010 World Cup. Other examples, SARS in Asia caused shortages of high-tech semiconductor components, and H1N1 Vaccine was in serious shortage, just recently. .
So back to the question: How much, where and when? Most supply chains have many different layers of inventory or echelons. Examples are raw material, buffers in between sites, WIP, finished-goods, distribution centers, consignment locations and more. At any given time, for each layer of the supply chain, decisions need to be made regarding how much, and what type of inventory is needed to maximize your service levels, and minimize your cost. A simple question like that for even a few products can be complex, for hundreds or thousands of products can be mind-boggling, especially when you bring in chance and probability.
OK, here is the good news: MEIO. Multi Echelon Inventory Optimization is designed to do precisely what we have talked about, i.e. minimize your cost of reaching targeted service levels. MEIO deals with the elements of chance and probability at every layer of the supply chain and keeps a tight-eye on cost factors. It knows that Raw material costs a lot less than Finished-goods and has the potential to transform to what the market needs. In other words, MEIO takes into account postponement strategies and the potential to deliver a certain level of service. As the user specifies higher service levels, the system shows the potential increases in cost and recommends what to get, and where to keep it, in order to protect against surprises. It is really cool. And the good thing is that it will save you a significant amount of money in a short period of time.
So you owe it to your company to ask: Do we have enough of what it takes to deliver what we need? Are we losing money for keeping too much or losing opportunities, and market share, because we don't have enough? If you know the answer to these questions, do nothing and you are in great shape. If not, take a look at what MEIO can do for your company.
Inventory is GOOD only if there is the right amount, in the right place, at the right time! MEIO shows you what the "right" is for you.
Dr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please
click here.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
I want to encourage you to plan and sell your products like Diamonds!
Allow me to elaborate. Diamonds are sold based on attributes, not product-ID (i.e. SKU-number). Nobody goes to a jeweler asking for a piece of rock, spends lots of money, and walks out of the store with a smile. Instead they ask for a diamond based on the 4C's (Carat, Color, Clarity, and Cut). So the bigger, brighter, cleaner and nicer cuts get priced higher and higher. As logical as this may seem, it amazes me to see how many manufacturers still sell their products like a commodity--giving away valuable things for free. And the root cause is usually the fact that their supply chain planning systems are not capable of handling attributes, in the first place. We see many manufacturers that don't utilize attributes when it comes to planning their supply chain and inventories, and yet work with a mind-boggling number of SKU's. Most of them also complain about high inventory costs, and poor customer service, too. Let's see why that is the case, and how attributes can apply to your products and supply chain-unless you manufacturer the first generation Model-T cars.
The fact is that just about everything has attributes, people do (e.g. kind, tall, smart), Products do (e.g. red, non-combustible, fast), machines do (e.g. speed, efficiency, precision), customers do (e.g. VIP, International, new), materials do (e.g. high surface tension, low grade, hazardous), countries do (e.g. tariffs, sanctioned, no-child labor), Logistics do (e.g. Rail only, Air Express, hazardous route), etc. etc. Adding attributes to all of these objects is not too hard; just add new fields to your data base.
What is important is the ability to plan with these attributes for your entire supply chain, beginning with demand planning, to operations and inventory planning. The ability to have an algebra by which attributes are used and planned with is critical in supply chain planning systems. Imagine having an inventory of sweaters without knowing how many of them are Large, Med, or Small, and how many of them are Red, Yellow, or Green. Clearly you could not make efficient use of this inventory, or forecast and build the right products. As mentioned, there are a lot more attributes than just style, size and color. The following is a typical scenario for a top-retailer:
"A NEW customer is interested in a NON-COMBUSTIBLE product made using a HIGH PRECISION machine, from SOUTHEAST ASIA region. Also, it can not be built in any country with CHILD LABOR, and can only be transported using RAIL or SEA."
Can you imagine having hundreds of customers, with thousands of products, and then trying to forecast and commit with so many different attributes involved. Don't forget, raw material and inventories also need to be planned with just as many attributes. In its full sense, Attribute-Based planning means the ability to take all the relevant product parameters into account when forecasting, planning, sourcing, selecting, pricing, promoting, differentiating, allocating, building, storing, committing, transporting, pegging and more. Without a planning system that considers the attributes, it would be impossible to do the math, plan the supply chain, and commit orders accurately. In fact, lack of attributes in the planning process causes some level of "commoditization," which reflects a company's inability to correctly distinguish its products from the others. In turn, customer requests are undermined, and products' costs and prices are not represented accurately. In most cases, this hurts the profitability of the enterprise in the long run, even if it has a monopoly over the market.
There are a lot more benefits to Attribute-Based planning. I highly recommend reading the more comprehensive ePaper that we just published on this topic: Attribute-Based Planning: How to Avoid Commoditization. Also, Feel free to comment on how you use attributes in your supply chain, or if you are looking for any ideas on how to make better use of attributes specific to your environment.
Dr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
Is it the People, Process, or System?
Here we go again: "Systems can't solve our problems, we need to fix our processes." Have you heard that before? I bet you have. Also, have you heard this one: "We need better people!" Although, I do not disagree with the importance of processes and people, have you considered that it might not be their fault? The fact is that, Processes, People and Systems are like a 3 legged stool. You take one of them out...and well, you fall on your...(you know what) and it really hurts!
Let's consider each one. If you don't have the right people then you should not be in business--and you have much bigger problems than processes and systems to worry about, anyways. So let's assume that you have the right people. If so, then they are intelligent and experienced enough to put in place the right processes. OK, now you got the people and you got the processes, but why bother with systems--spreadsheets are just as good! I can hear the old-timers saying: "all my life I used spreadsheets and managed to get products out the door for 30 years," or "I don't need no fancy system to do my job!" Well, they have a point, they can do their job. That is not even the question. The real question is how fast can they do it? How accurately can they do it? And how about process integration? (That's gobbledygook for being in synch with everybody else in your organization).
We recently upgraded a client's planning system that took over 23 hours to generate a plan. That meant they were always two days behind in order to get the updated data, run the plan, and then execute the plan. They could have easily avoided building the wrong stuff if they simply had a faster system. Essentially you can lower your inventory by a large percentage if you plan more frequently. Also, you can make better use of your resources by making the right items and deliver on time-because you are making what you should be making in the first place. Now, I know spreadsheets are fast but they are not nearly as fast, accurate, and integrated enough to run an entire supply chain efficiently.
Another telling example: one of our large electronic clients with off-shore manufacturing, in China, used to take about 2 weeks to perform Available-to-Promise (ATP). Why? Well, it took a week in the HQ to check inventory levels and allocations; and another week in China to decide what can be done about it. They overhauled their supply chain planning system and now they are doing the whole thing in less than couple of hours! They did that simply by upgrading their system, and not even touching their people and processes. Remember, no matter how many people you throw at this and how good your processes are, ATP requires a ton of data, and disparate pieces of information, from allocations, to capacities, to suppliers to inventory, to priorities, etc., etc. By the time you bring all these information under one roof, it is too late and your data is too old for the correct decisions to be made. Only systems are fast enough, accurate enough, and integrated enough to pull all that information together in real-time, and give you an answer almost instantly.
Remember, this is not about systems being just faster than people; it's about how the right planning system can take your people, and processes, to a whole new level of efficiency and productivity--Whether it's for demand planning, inventory planning, S&OP planning or any other types of planning. But how do you know if you have the right planning system? Well for one thing, if it takes 23 hours to get an answer, or you are using spreadsheets-on-steroids, my guess is that you don't have the right one. If that's the case, stop blaming your people and processes and start looking for one. We recently published an eBook about how to justify a supply chain planning system, and that should provide a few good hints on what to look for when it comes to picking the right system.
I really would like to hear if you have any blame game stories to share with others...feel free to comment any time.
For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.
Press Release
Tuesday Jan. 26, 2010
Los Angeles, CA., Adexa, Inc., the global provider of Supply Chain Planning and Performance Management solutions, announced today that Integrated Device Technology (NASDAQ: IDTI), a world-leader in semiconductor manufacturing for digital media, has selected and implemented Adexa's complete Supply Chain Planning suite of solutions, including demand planning, Available-to-Promise, Multi-Echelon Inventory Optimization (MEIO), operational planning, and plant planning.
"This initiative touched every major process running in our supply chain," Said Adhir Mattu, Vice President of Global Information Technology at IDT. "Our team initially focused on Adexa because it ran much faster than our previous supply chain systems, and was easier to use. But the biggest advantage ended up being their industry expertise and ability to leverage best-practices at all stages of this critical project."
IDT is currently maintaining and running all sales, marketing, and planning forecasts on the newly implemented solutions. Moreover, attribute-based planning capabilities are targeted towards further increasing the planning velocity.
"By replacing competing systems with Adexa, IDT bestowed a great deal of trust in us," said Cyrus Hadavi, President and CEO of Adexa. "This is yet another confirmation of our leadership in providing the most comprehensive and fastest solutions for our customers in this industry."
For full version of this press release click: http://www.adexa.com/news_events/default.asp?id=513
Contact us if you have any questions, click: inquiries@to.adexa.com