Supply Chain Planning Blog

News: Semiconductor Leader Switches to Adexa SCP Systems

Posted by kameron hadavi on Tue, Jan 26, 2010

Semiconductor Supply Chain PlanningPress 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: info@adexa.com  

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, Announcements, Adexa, Multi-Echelon Inventory Planning

Retune your supply chain planning from JIT to Available-on-Demand

Posted by Cyrus Hadavi on Thu, Nov 12, 2009
demand planningHere is a question for you, is JIT a push-system or a pull-system? For decades you have been lead to believe that it is a "pull" system, but in fact you are "pushing" to make parts available, thinking that the resource will need it or use it. Just because the resource used the previous supply does not mean that it will use the next. In other words, the past is not necessarily an indication of the future. You may have already known that, and may argue that just filling buffer-zones is the best way to minimize inventory, especially if the buffers are not owned by your company.  However, you are just passing the responsibility of holding the supply to some other point in the supply chain, along with the associated cost-of-capital that goes with it. Naturally, the buffers need to be able to handle the largest tolerable demand surge.  So, if the past demand is more than the future, then inventory will sit there until it is needed or written-off. 

With that in mind, I think it's logical to say that a JIT system that looks at historical demand is really a push-system, but we want to do better than that.  We want to be able to look to the future in order to have a real pull-system.  At the end of the day, JIT is a cost-reduction system to keep up utilization and reduce inventory levels in a supply chain that has fairly steady demand.  What happens if the demand changes all of a sudden? What if red-widgets are more popular than green ones, today? How fast can you propagate the changes by resetting all of the buffers?  Undoing the buffers is like pushing the proverbial tooth paste back into the tube!  It will stay out until you finally use it, or wash it down the sink.  Of course as long as the supply chain is simple, with a linear flow, flat demand, and just a few constraints, fixed buffer-based inventory planning will still work well.  But it will also come down crashing if you have tens of different products sharing resources, constant changes in demand patterns, or supply lead-times.  These factors, and many others, change the production "rhythm" to the market.  Should the supply rhythm on a certain product be bang-bang-bang-bang, or would it be bang-----bang-----bang---.bang?  Which rhythm would generate the most revenue and profit while satisfying your customers?  

In the final analysis, JIT is a system of Available-on-Supply and it pushes based on a fixed rhythm associated to the speed of a machine or inventory availability. In that case, you better prey the historical demand does not change.  Why would you want to be held hostage by your supply?!  So what should we do if we want a system that is Available-on-Demand, that is more responsive to changes in the market place.  A system like this would change the "beat" and buffer-allocations based on the actual demand, and would be more attuned to the market-whether it be bang-bang--bang, or bang-bang...bang-bang-bang---bangbangbangbangbangbang--------bang.   For each product you would have a different "bang" profile.  The combination of all the profiles sets the rhythm for your entire supply chain.  Hence, when you put it all together, the result is a beautiful orchestration of drum-beats harmonized to the tune of the market demand.

To dynamically re-tune and reallocate material, capacity, and buffers is not easy but it's being done by many best-in-class companies out there.  You basically need two critical components, visibility and control of your supply chain.  That means visibility into your demand, inventory levels, and the ability to quickly control your production capacity, and suppliers' capabilities.  It is not a near sighted system that only looks at one level down the stream.  You must understand what needs to be done in all areas of the supply chain as the demand conditions change. To have this kind of control over your supply chain, it takes some reexamination of your processes and advanced technologies in the areas of Demand Planning, Multi-Echelon Inventory Optimization, Production Planning, and Performance Management.  Demand Planning will focus on making sure you are getting accurate demand signals from the market, MEIO will help you manage the right buffers for the expected demand, Production Planning will control your supply flow to those buffers, and Performance Management will give you dashboard like visibility over all of these critical points in your supply chain.  Again, I have said this many time before, but it's very hard to do this with spreadsheets and pure experience.  So take a little time to see how advanced technology can help you in one or more of these areas and you maybe surprised how quickly you can retune your supply chain from JIT to Available-on-Demand.  

If you are interested in this topic, I also suggest reading: How-to-Guide: Justify A Supply Chain Planning System, or feel free to contact us at any time.  

Cyrus HadaviDr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.

Topics: Supply Chain, Supply Chain Planning, Demand Planning, Supply Chain Performance Management, Inventory Planning, JIT, Adexa, Multi-Echelon Inventory Planning

Multi-Echelon Inventory Planning — Is it for you?

Posted by kameron hadavi on Tue, Oct 06, 2009

Inventory PlanningInventory is insurance against the unknowns in the supply chain. It protects you if surprises occur with demand or supply. Just like the insurance you buy for yourself, it is important to spend the right amount of money in the right points of your supply chain in the form of inventories (i.e. safety stocks).

If spent wisely, inventory dollars will have a beneficial impact on a company's ability to service its customers properly and help keep direct and indirect costs low. Too much inventory wastes capital, and increases the risk of obsolete goods.  With too little inventory, you are risking lost sales, stock outs, and increased direct costs from disruptions in operations.  There are many stakeholders that worry about inventory positions at many different levels of the supply chain, and their objectives are not always the same; in fact it may be contradictory.  For example, sales people love to cushion themselves with lots of inventories in order to make sure they will always have product to sell, while the CFO wants to cut inventories as much as possible in order to save capital and improve the Return-on-Asset ratio.  So optimized management of inventories can be become a very difficult issue and its complexity can skyrocket as the number of tiers in your supply chain increases.   

In the recent past, a whole new breed of supply chain planning solutions have been developed and dedicated to better management and optimization of inventories.  They are called Multi-Echelon Inventory Optimization (MEIO) systems and there are a handful of vendors that provide them.  Of course different systems use different algorithms and techniques to address this highly complex issue, so you definitely need to do your homework before jumping into purchasing one.   

Adexa includes multi-echelon inventory planning as an option in its Sales & Operations Planning (S&OP) platform. We like to think we have a distinct advantage in this area due to our holistic approach to planning the entire supply chain, not just parts of it.  Naturally, that is very important since inventory planning is not done in isolation.  It should heavily consider factors such as demand forecasts, manufacturing capacities, and supplier capabilities, within one integrated planning environment.  But Adexa actually throws in one more advantage.  We tie all of this planning data to key financial measures.  That basically means, you can review your supply chain planning decisions based on their financial impact, especially when it comes to revenue, profitability, and return-on-assets.  

Many supply chain managers are looking to learn more about MEIO and trying to understand if their company should be utilizing this type of inventory planning solution. The simple answer is if your enterprise has a multi-tier supply chain (e.g. more than one plant, DC feeding regional DC's or customer hubs, etc.), or if your products have key components that are used commonly across multiple end-items, then you should be considering MEIO as a way to cut costs and increase customer service levels. 

For more information you may want to check out one of our latest webcasts on this topic by visiting our Supply Chain Planning Webcast Library.

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, Planning Data Integration, Sales & Operations Planning, S&OP, Multi-Echelon Inventory Planning

How to Justify a Supply Chain Planning System?

Posted by Cyrus Hadavi on Wed, Sep 30, 2009
SCP SelectionAlmost everyone understands the role that people, processes and systems play in running a modern day enterprise.  What they might disagree on is the importance of the role each one of these legs plays to holdup and grow the enterprise. The role of people and processes are given.  The Systems' role is the least understood aspect of the three. There are many managers who believe systems are all the same and as long as the basics are covered any additional sophistication does not add any value. We disagree! And here is why:
  • Systems enforce good practices and processes: Companies spend a lot of time and money to design business processes only to see them deteriorate very quickly as people and organization, as well as processes change.  Systems are capable of cross checking millions of variables in the business and point out inconsistencies, lack of proper data and information, or point out who has not done their part. They can check and monitor what we should be doing and how we are doing it!
  • Unlike people, systems are fast, very fast! How can you check across 3 continents, to provide reliable delivery information to an end customer when you have thousands of products, suppliers, customers?  In addition, systems are capable of analysis across millions of variables.  An example is a system for Multi-Echelon Inventory Planning where it can calculate the right level of inventories across multiple layers of the supply chain to ensure the desired service level.  It does not matter how many people you throw at this and how often they meet, they will not be able to optimize nearly as well or as fast! So how is that done now in most companies? Well just using their gut feeling and experience which might be good but it can be done better, and in most cases, a lot better. The right system for inventory planning can easily save millions of capital dollars and facilitate for much better customer service.
  • System tie processes together, for exmpale planning to execution, sales to operations, and forecasting to financials. Generally disparate spreadsheets are incapable of integrating these processes resulting in waste, delay and sub-optimal results.
  • Systems allow you to plan more frequently which results less inventories.  Systems can help us plan what to build, where to build, where to keep, what to keep and when to do it all-accurately.  And they can plan the entire supply chain in minutes, allowing multiple planning runs per day as the demand and supply conditions change. In the absence of the right system, inaccurate plans are done based on spreadsheets, once a week or month, resulting in excess inventory and lower customer service levels.
  • Systems keep people accountable, e.g. forecast accuracy by sales or customers, commit vs. actual in production, and supplier delivery performance. They also play an active role to point out where the excesses are and where the deficiencies lie.

Given the above, would you trust millions of dollars of your assets to just a spreadsheet?

There is a comprehensive eBook on this topic with a lot more detailed information.  To download please click on "How-to-Guide: Justify a Supply Chain Planning System".

Topics: Supply Chain, Supply Chain Planning, Inventory Planning, SCP System, Multi-Echelon Inventory Planning