Supply Chain Planning Blog

kameron hadavi

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Inventory Optimization is like Baseball's Moneyball

Posted by kameron hadavi on Wed, Oct 10, 2012

iStock Baseball Money XSmall resized 600

How do the Oakland A’s achieve results like this at a fraction of cost of a team like the Yankee’s?

2002 New York Yankees: Team Salary $126 million; 103 Wins 59 Losses; Division Winner
2002 Oakland Athletics: Team Salary $ 40 million;   103 Wins, 59 Losses; Division Winner
2012 New York Yankees: Team Salary $198 million; 94 Wins 68 Losses; Division Winner
2012 Oakland Athletics: Team Salary $ 55 million;   93 Wins, 69 Losses; Division Winner

You have most likely seen or heard of the story behind the movie “Moneyball”.  In 2002 the Oakland Athletics had a very limited budget to “carry” their team roster through the season, and they still had to compete with topnotch teams in their league.  Some of the teams they had to compete with, like the Yankees, spent up to four times (4x) as much as they did on their “inventory” of ball players (i.e. “products” in baseball).   The A’s turned away from traditional thinking on how to allocate their budget to field a team, which meant relying on the gut feel of managers and buying the highest priced players.  Instead, they started to rely on “Sabermetrics”, the use of statistical analysis to determine the most cost-efficient baseball players based on measure of in-game activity/history.  Hence, based on mathematical models, the A’s figured out how to best optimize the team at every position on the field.  The result was that Oakland won 103 games in 2002, made it to the playoffs, and tied with the Yankees for most wins that season. Again, Yankees spent more than three times (3x) of what Oakland paid for its team, in the same year.

 
Coming back to the manufacturing world, in the same manner that Sabermetrics can help optimize the baseball players on a team, Multi Echelon Inventory Optimization (MEIO) can optimize your inventory that is deployed throughout your supply chain, in order to achieve target customer service levels, and maximize profit.  There are obvious parallels in taking the Moneyball philosophy to the optimization of inventories.  Instead of the General Manager in baseball using statistics to determine the best players to have on a baseball team, the Supply Chain Manager can use statistics and mathematical models in a MEIO system in order come up with the highest profitable scenarios.  By examining these scenarios, the Supply Chain Manager can decide how to right-size the inventory levels at different locations, and achieve targeted customer service levels, at the highest margins.


Of course, instead of baseball metrics (e.g. RBI’s, on base%, ERA, salary), there are statistical supply chain metrics (e.g. Demand variability, supply variability, BOM, Inventory value, etc.) that can be used to objectively calculate the value of each unit of inventory that you plan to place at a given “position” in your supply chain (e.g. Raw Materials, WIP, Finished Goods, etc.).  This would make it possible to optimize inventory deployment for meeting certain customer service objectives, and squeeze the most profit out of your supply chain, while not exceeding the budget allocated for working capital. 

 
The Oakland A’s are back in the playoffs again this year, with a budget that is one-third of the Bronx Bombers.  Not surprisingly, the use of statistics (i.e. the right system) is helping them get the most out of their small budget.  


Adexa has the equivalent of Moneyball’s Sabermetrics for your Supply Chain, it’s called the Inventory Optimizer to ensure each dollar of inventory is spent in the best possible way.

 

About the Author:  Bill Green is the Vice President of Solutions at Adexa, for more information about him please visit William Green profile link.    

Topics: Multi Echelon Inventory Optimization, Supply Chain Planning, Inventory Planning, MEIO, Inventory Management System, Manufacturing Software, Inventory Optimization, Inventory

Reducing Supply Chain Risk With Better Inventory Planning

Posted by kameron hadavi on Tue, May 10, 2011

Supply Chain Riak ManagementIn our last blog article, we talked about how today’s advanced planning technology can help with managing risk in a supply chain (read: Use Advanced Planning To Manage Supply Chain Risk). More importantly, we talked about how uncertainty (i.e. risk) in the supply chain, most often, leads to imbalances in the inventory levels. The following table was used to show how common supply chain issues lead to either too much, or too little, inventory at different points in the supply chain.   

Inventory Planning Issues

The good news is that many of the most frequent risks, and their impact on the inventory levels, are quantifiable.  For example, most companies have a good idea as how reliable major suppliers are, how often certain machines breakdown, or how accurate are their demand planning & forecasts. Furthermore, the negative effects that indirectly  propagate to other parts of the supply chain can also be considered.  For example in Japan, many of the suppliers who were not directly damaged by the recent earthquake, still felt the ripple effects of difficulties in procurement of raw material, shipping Finished Goods, and other logistical problems.  These too, can all be calculated with a proper supply chain inventory model.

Let’s talk about how supply chain planning technology can help.  Since risk and its effects on inventories can be measured then wouldn’t it be logical to manage supply chain risk from within your Inventory Planning system? In fact, today’s advanced Multi-Echelon Inventory Optimization (MEIO) systems are intelligent enough to be used for supply chain risk management.   Forecast streams, incremental costs, revenue factors, service impact, etc. can all be dynamically modeled in a MEIO system.  Supply chain risk scenarios can be simulated and their effects on inventory levels, profit margins, and customers can be closely examined.   Such a technology can make it a lot easier to decide whether it would be worth to operate at a higher cost structure (for example, by introducing alternate suppliers, or increasing buffer inventories), or consider other options to mitigate risk. In some cases, you may even realize that it would be too expensive to greatly reduce certain risk factors.  That is your choice, but as long as you can fully and systematically assess the consequences.

An MEIO system with supply chain risk management capabilities would be most useful in assessing the more frequent risks, causing the infamous inventory seesaw effects, rather than risks that may occur twice per century—such as Japan’s recent earthquake. Take Apple for example, which was in middle of iPad2’s launch, as the disaster occurred.  According to CNBC, some of the components of this device are built only in more advanced manufacturing countries, such as its unusually thin battery.  Chances are that Apple will not dramatically change this supply strategy due to a similar risk in the near future—even as it delayed iPad2’s launch date in Japan by two months, and the wait time for all online orders increased to 4-5weeks.  However, you can be sure that Apple has assessed many alternate supply strategies based on risks of much higher probability.      

Risk assessment can never be too accurate.  A Multi-Echelon Inventory Optimization system can be your best tool in simulating, assessing, and mitigating risk factors, and their full impact on your supply chain.   Feel free to use the comments section to tell us what tools you are currently using to manage risk in your supply chain.

For more information about MEIO, use the following links:

Download this ePaper: Demystifying Multi-Echelon Inventory Optimization

Youtube video: Inventroy Planning Defined As Part Of S&OP

 

Kameron HadaviAbout the Author:  Kameron Hadavi is the Vice President of Marketing & Alliances at Adexa, for more information about him please click here.

Topics: Multi Echelon Inventory Optimization, Supply Chain Planning, Inventory Planning, Enterprise Risk Management, Risk Planning

Supply Chain Planning for South Africa's Largest Processor of Chicken: News Release

Posted by kameron hadavi on Tue, May 03, 2011


Supply Chain Planning for FoodLos Angeles, CA, May 3, 2011—Adexa, Inc., the global provider of Supply Chain Planning and Demand Planning solutions, announced today that Rainbow Farms (Pty) Ltd, South Africa’s largest processor and marketer of chicken, has selected Adexa as its supply chain solution provider.  The first module, Adexa’s Collaborative Demand Planner will be implemented at Rainbow and Vector Logistics, one of the country's major 3rd-party logistics service providers for the CPG/food industry, and also for Rainbow.

The management teams of both companies are determined to improve and automate their joint Sales and Operations planning processes.   The goals of the project include reduction and optimization of inventories throughout the supply chain network, and creating a fully collaborative platform that drives the supply chain through more accurate and intelligent customer forecasts.  

“We want to make better use of our infrastructure, reduce inventory and working capital, and further improve on our high standards of customer service,” said Chris Creed, Managing Director for Vector Logistics.  “To that end, we needed collaborative tools to get closer to our customers, and more advanced planning systems for production and profit planning.  Tools provided by our own ERP system, and the spreadsheets, did not take us nearly far enough, but Adexa will.”

“Rainbow and Vector are very important and strategic customers to Adexa,” said Cyrus Hadavi, Adexa’s CEO.  “As a result of their selection, we have established new sales and support channels, in partnership with Sizwe Africa Business Consulting, to better serve them and our upcoming customers in that region.”

About Rainbow Chicken and Vector Logistics  

Rainbow Farms (Pty) Ltd, is South Africa’s largest processor and marketer of chicken.  Vector Logistics (Pty) Ltd, a division of Rainbow, is a specialist third-party logistics service provider (3pl) for the food and food-related industries within southern Africa across the retail, wholesale and food service sectors.  Visit: www.rainbowchickens.co.za and www.vectorlog.com

For more informaiton contact:

Ron Wilson

Marketing Director

888-300-7692 (Ext. 3)

rwilson@adexa.com

 

South African partner:

Richard Harris

Director, Sizwe Africa Business Consulting

+27 82 805 3360

Richard.harris@sizweafrica.co.za

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, 3pl Logistics, Food Industry, S&OP

When should I ignore the customers when planning my supply chain?

Posted by kameron hadavi on Wed, Apr 06, 2011

Supply Chain PlanningThe first answer for most people is:  “never”.  So, lets put this in context, we are not asking if you should totally ignore your customers’ demand and market signals; we are really asking how important is it to track and consider individual customer demands/orders when planning your supply chain?

If you are a  business-to-consumer enterprise, the individual demands do not really impact your supply decisions.  For example, giant consumer product companies (from TV to toothpaste) do not track the individual orders when planning supply.  They are all aggregated up to a total demand for a product.  To that end,  this aggregated-planning approach is ubiquitous in the CPG industry, which has high volumes and low variety of consumer products.  For these industries, it is sufficient to aggregate all the end item demand into a total, and then net the total demand from the on-hand inventory, one period at a time.  The required production, or distribution, is calculated to make up for the predicted deficit.  That production quantity goes through a Bill-of-Materials Explosion (or the equivalent DRP calculation) and the dependent demand is used to do the same calculation on the next level of the BOM.  Devised in the mid 1980’s, this CPG logic is the dominant logic used by most supply chain planning systems, today.   Of course, each company has its own variations on how to handle capacity and material constraints, or includes an LP (Linear Programing) engine to optimize on cost, but the basics of the logic are all the same--they all lose visibility to individual customer demands when planning. 

How about turning the question around, when is it not OK to ignore customers when planning your supply chain?  When does a company need to look for a different logic in their planning system, than the typical CPG logic described above?  The answer is when you have critical constraints in your supply chain that cause you to have to stop treating all customers, and the associated demands, in exactly the same manner.  This comes into play when you need your planning system to help you figure out what orders should get critical capacity, special priority, or materials that are in short supply.  Examples of this are contractor capacity that is used to make multiple products, but is in short supply.  Another example is a critical common component that goes into multiple products.  The need to have visibility into orders when planning also comes into play when customer specifications require dependent levels of the BOM to be processed differently from each other.  An example of this is “date-code” considerations, or qualifications for specific manufacturing locations.  In each of these cases, the identity of the order and its attributes are important while planning it.   

In conclusion, when looking for a new supply chain planning systems (like for demand planning, inventory planning, S&OP, etc.), a company should do the simple check outlined above and decide if traditional CPG logic used in most planning systems today is sufficient to handle their requirements.   Given today’s savvy customers and their complex needs, many enterprises opt for much greater demand visibility and attribute based planning systems. 

To learn more about this topic download this ePaper: Attribute-Based Planning: How To Avoid Commoditization.  

Topics: Supply Chain Planning, Demand Planning, Order Fulfillment, Order Planning

Monolithic Power Systems Plans With Adexa: News Release

Posted by kameron hadavi on Wed, Apr 06, 2011

Monolithic Power SystemsApril 7, 2011-- Adexa announced today Monolithic Power Systems, a high performance fabless semiconductor company, has selected and are implementing Adexa’s supply chain planning, and demand planning solutions. 

 “Our product portfolio has grown to hundreds of diverse products for worldwide customers, and we interact with multiple Foundries, Assembly and Testing sites.  We turned to advanced information technology solutions to further optimize the whole demand and supply planning process, and to ultimately better service our customers,” stated CEO, Michael Hsing, of Monolithic Power Systems.  

With deployment of the new systems, Monolithic Power Systems expects to further improve visibility, accuracy, and performance optimization in its supply chain, while enhancing collaboration across multiple business units.

“We selected Adexa through a long RFP process involving multiple leading vendors.  Adexa demonstrated very strong expertise in our industry and system implementation, and overall commitment to their customers”, added Dr. Henry Zhao, Director of Global IT of Monolithic Power Systems.

“Semiconductors has always been a big focus for us,” said Cyrus Hadavi, Adexa CEO.  “In the past year we have been seeing strong demand for our planning solutions from the Fabless side of the industry.  We are glad to see this trend continuing into this year as Monolithic Power Systems is being welcomed into our customer base."  

For more information about challenges and planning solutions for the fabless industry, download this ePaper: Overcoming The Shortcomings Of Fabless Planning Systems 

 

About Monolithic Power Systems, Inc.

Monolithic Power Systems (MPS) is a high performance analog semiconductor company headquartered in San Jose, California. Formed in 1997, the company has three core strengths; deep system-level and applications knowledge, strong analog design expertise, and an innovative proprietary process technology. These combined advantages enable MPS to deliver highly integrated monolithic products that offer energy efficient, cost-effective solutions.  Visit: www.monolithicpower.com

Topics: Supply Chain Planning, Demand Planning, Fabless, Semiconductors

Planning Proliferation Of Products In A Fabless World

Posted by kameron hadavi on Wed, Oct 13, 2010

Semiconductor Supply Chain Palnning“Complex” is the common word we hear from many of our Fabless Semiconductor customers in describing their supply chains.  We talked a bit about that in our last blog posting entitled: Fabless Semiconductor Planning: Between a-rock-and a-Hard-place!  In this article, I want to touch on another culprit in complexity of a Fabless enterprises (or Semiconductors in general), proliferation of products

It’s no secrete that Fabless supply chain are faced with ever increasing number of products, and with that comes a lot more part#’s.   It’s one thing to deal with 3 products, and another thing to deal with 30.  The part#’s involved increases exponentially with every end-product.  Imagine this, in most cases our fabless customers are dealing with 100’s of end-products.  This makes crunching through the numbers for a supply chain “plan” very difficult and slow.  Remember, in planning the entire supply chain, these part#’s have to be used for demand planning (when the customers order it), operations planning (how to build it), inventory planning (what to keep on hand), and Supply planning (which suppliers to use and when).   The level of complexity is mind-boggling.

One of the new trends in dealing with this level of complexity is through Attribute Based Planning.  We have written a lot about this in the past but it seems like our readers can’t get enough of it, and for good reason--it works.  Attributes really simplify modeling the entire supply chain by utilizing the “characteristics” of products to describe them, rather than using unique part#.  For example, you may have a grade A, B, and C chips, at speeds of 1.66Ghz, 2.66Ghz, and 3.0Ghz.  You can give all 9 potential combinations a unique product name, or you can have only 3 product names by referring to the attributes of (Grade + Speed).  This is a very simple example, but you can learn a lot more about this by either reading the Attribute Based Planning ePaper or watching the “What is Attribute Based Planning” video on the Supply Chain Planning Channel

You can apply attributes to all levels of planning but there is a catch--your planning system has to be able to handle attributes for the process its intended for.  For example, for Demand Planning, the customer orders have to be described by their attributes within the system.  For Production planning, the product routes have to defined by attributes within the same system, and so on.  Basically, the entire logic and algorithms of your planning system has to be attribute-based, or you are stock with the unique part#’s. 

For fabless companies, who deal with massive product proliferations, attributes will make life a lot easier on your many planners.  They get to collaborate together much faster, and avoid a lot of clutter.   Below, see how Silicon Laboratories is using attributes in their planning environment.  Also, For more information on this topic download: Overcoming The Shortcomings Of Fabless Planning Systems ePaper.

 

Kameron HadaviAbout the Author:  Kameron Hadavi is the Vice President of Marketing & Alliances at Adexa, for more information about him please click here.

Topics: Supply Chain Planning, Demand Planning, Attribute Based Planning, Fabless, Attributes, Semiconductors

Fabless Semiconductor Planning: Between A-Rock-And-A-Hard-Place!

Posted by kameron hadavi on Tue, Oct 12, 2010
Fabless Semiconductor PlanningMost fabless semiconductor companies are stuck between a rock-and-a-hard-place.  On one end, they have big customers demanding what they want, when they want it; and on the other end, they have big suppliers manufacturing their products—some 16 time zones away.    Synchronizing and managing capacities and deliveries through a complex supply chain like this cannot be easy.  Compounding the complexity is the short life-cycle of such products and the long manufacturing lead-times through outsourced Fabs.  With every new product, you basically have to revamp a good part of your supply chain, quickly.    The common theme to all of these challenges is time and uncertainty

Now let’s break the time and uncertainty factors down to their components.  When it comes to manufacturing anything, there is always a Planning cycle-time, and a Manufacturing cycle-time.  The latter, is the pure production time it takes to manufacture a product.  Fabless companies don’t control the manufacturing lead-time, since all of their production is outsourced.  However, they do have the opportunity to manage the suppliers’ capacity that is committed to them—which becomes part of the Planning cycle-time.  They also have to worry about the uncertainty of what they will order with the amount of capacity that they have been promised.  This makes the Planning cycle-time, and accuracy of the plan, twice as important to a fabless enterprise.   Planning cycle-time, is the amount of time a company needs to plan, react, and/or rollout a new plan based on market demand, inventory positions, and supplier capacity commitments.  Its reduction translates into less uncertainty and increased accuracy.  To that end, reducing planning cycle-times is a colossal competitive factor in this market.  Imagine cutting weeks out of your planning lead-times, which would directly impact your customer service, market share, and competitive positioning—amongst other things.  

How can you battle time by achieving shorter lead-times?  Or in terms of fabless, how can you reduce your Planning cycle times and increase plan accuracy?  Before I answer that, let me ask you a question, how can a manufacturer produce goods faster?  The simple answer is: better technology, and faster machines.  The same thing goes for planning systems.  If you want to fundamentally do it faster then you will need a new technology that can help you plan faster, collaborate more, and give you more visibility, thereby enabling better plans.  There are many processes that need to have faster planning times such as demand planning, operations planning, inventory optimization, and of course supply planning.  In picking the right system for your enterprise make sure you consider all these processes and how well the system adheres to your supply chain.   After all what’s the use of faster delivery times, if your inventories and cost is going through the roof.   

Adexa is one of the providers of such technologies and systems, with a great deal of focus on the fabless industry.   Below, one of our fabless customers talks about how they are using our systems to deal with fabless industry's tough challenges.   Also, For more information on this topic download: Overcoming The Shortcomings Of Fabless Planning Systems ePaper.

Kameron HadaviAbout the Author:  Kameron Hadavi is the Vice President of Marketing & Alliances at Adexa, for more information about him please click here.

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, Fabless, Operations Planning, Cycle time, Semiconductors

Can A "Light" Supply Chain Planning System Get Too Thin?

Posted by kameron hadavi on Tue, Sep 07, 2010

Light Supply Chain Planning SystemsWhen it comes to planning software, the terms “Lightweight”, or “Light” can be very misleading. After all, what is a “light” planning application? The word itself really has no objective meaning, or a standard definition that can be measured to see which applications meet the requirements. In most cases, the term “light” is a marketing idiom that is used by a software vendor looking for a new market niche to sell products. To that end, buyers should take extra care in choosing a solution presented as such. Let’s look at some big claims that are made about “light” planning solutions and some pitfalls to be aware of:

1) Lower Cost: Lightweight applications are trying to target a lower cost buyer.

Beware: A better measure here would be to understand the cost of the software and the potential business savings that can be realized with the given software package. Generally smaller companies look for “lightweight” since the potential for savings is less due to their size.

2) Fast: Speed is important in a planning application since it enables a planner to quickly analyze the plan, and run “what-if scenarios”.

Beware: The “lightweight” planning software offer more speed by cutting functionality. An application should be examined based on the time that it takes to run, its ability to compare scenarios, and the level of granularity of the plan. The best of both worlds is a planning tool that offers functionality options to tradeoff speed and granularity. That way the company can reduce granularity in areas that are not important to the business and include detail in areas that can drive savings. A great example here is Sales & Operations planning.  If you cannot properly model demand, inventory, or capacity, then you cannot make decisions about any of them.

3) Easy to Use: “Lightweight” sounds like something easier to use.

Beware: It may be a simpler application, but it may be harder to get business results. If the software does not do the analysis required because it cannot be configured properly, then the user has to figure things out using something else (back to the spreadsheet)—the old spreadsheet is easy to use, but it makes the job harder to do.

4) Fast to implement: “lightweight” is easy to implement, typically because there is not a lot to implement.

Beware: Better measures would be the time to get the initial business results, and time-to-payback on the software cost. Also, make sure to ask how the software configuration can be changed over time to continue to get additional savings and scale. It is much safer to implement limited functionality of a robust application than to figure out you came up short, later . Again, the ultimate lightweight planning tool is a spreadsheet, but it won’t grow with your business.

The bottom line is that most businesses are already running the most popular “lightweight” planning tool out there and it is called a Spreadsheet. It is inexpensive, it runs fast, its easy to use, and fast to implement. But can you run an enterprise on it? Use the above criteria to get away from the marketing buzz and figure out the best software for you and your business.

Here is another blog posting that you may be interested in: Are You Still Using Spreadsheets To Plan Your Supply Chain?

 

Kameron Hadavi

About the Author:  Kameron Hadavi is the Vice President of Marketing & Alliances at Adexa, for more information about him please click here.

Topics: Supply Chain Planning, Light, Sales & Operations Planning, Lightweight, Systems

Are You Still Using Spreadsheets To Plan Your Supply Chain?

Posted by kameron hadavi on Thu, Jul 22, 2010

Spreadsheet PlanningWhat 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

Cyrus HadaviDr. 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.

Topics: Supply Chain Planning, Excel, Spreadsheets, Planning

Who Do You Blame For Your Supply Chain Woes?

Posted by kameron hadavi on Thu, Feb 25, 2010

Supply Chain BlameIs 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.

Topics: Supply Chain, Supply Chain Planning, Planning Process, Planning People, Planning Systems