Supply Chain Planning Blog

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.

 

 

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

How easy is it to Integrate Supply Chain Planning Data to SAP®?

Posted by Bill Green on Tue, Aug 31, 2010

Integrating to SAP R3Based 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 Integration Diagram

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!

Topics: Supply Chain Planning, Integration, ERP, SAP, Best-of-Breed

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

Inventory Planning | What Does It Mean To Optimize Inventory?

Posted by Bill Green on Thu, Apr 22, 2010

Inventory Optimization

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.

 Inventory Planning

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 his profile link.     

 

For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.

 

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

Run Your Supply Chain Like You Are Selling Diamonds!

Posted by Cyrus Hadavi on Tue, Mar 02, 2010

Demand Planning with AttributesI 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. 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, Demand Planning, Inventory Planning, Attribute Based Planning, Manufacturing Planning, Operations Planning, Differentiate

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