External Insights Critical to Effective Supply Chain Performance

Traditional forecasting models that leverage historical data to predict future performance are the tools used by most supply chain executives to plan critical functions, yet these predictions are frequently inaccurate. In fact, research from KPMG International, in cooperation with the Economist Intelligence Unit, shows that most quarterly forecasts are off by 13 percent—meaning that supply chain managers are basing their decisions for ordering materials and scheduling distribution on erroneous projections. The result can mean surpluses or shortages, potentially costing companies millions either way.

There is a better way to anticipate supply chain demands—one that can vastly improve projections, and decrease the discrepancies between forecasting and reality, therefore helping supply chain executives perform their jobs more effectively. Few companies take into account macroeconomic factors, global manufacturing activity, consumer behavior, online traffic, weather data, etc. when making business projections. Yet companies that do identify leading performance indicators using such external data earn more than a 5 percent higher return on equity than those that use only internal metrics. Leveraging external factors, in addition to internal performance measures, is proven to result in more accurate, effective forecasts. Not to mention that improving forecast accuracy can represent huge bottom-line benefits. For a billion dollar manufacturing company, for example, improving forecast accuracy and overall return on equity even 1 percent can equal a $3 million increase in net income.

Forecasting accuracy, improved through external factors, benefits multiple business functions—from financial operations (shareholder value) to human resources (adequate staffing) to marketing (product innovation)—but is especially impactful on the supply chain management function.

Improves Inventory Management

Improved forecast accuracy using external drivers equates to reduced inventory management costs, ultimately improving bottom-line profit. By accounting for external factors, companies can see a 10 to 15 percent improvement in forecast accuracy, significantly decreasing the cost of excess inventory. By ordering raw materials based on correct projections, supply chain managers no longer have to worry about discounts necessary to move excess inventory or the cost of warehousing excess materials because they are ordering accurately from the start.

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Why Supply Chain Visibility Tools are a Good Investment

Global supply and demand networks introduce distance, cultural and time-zone challenges, creating a need for greater visibility. Moreover, businesses are under constant pressure to cut supply chain costs and improve cycle times while meeting customer expectations. Ongoing mergers and acquisitions create even more complexity as each new division finds itself operating in silos and unable to leverage economies across the organization.

According to a recent report by Lora Cecere, founder and CEO of Supply Chain Insights LLC, two of the top global supply chain business pains for companies are increasing regulations and compliance and decreased clarity on decision-making across global and regional teams. Other major pain points included the ability to effectively use data; product quality and supplier reliability; availability of skilled people to do the job; and risk management.

To manage the opportunities and risks requires three supply chain visibility capabilities: quick access to global supply chain information; proactive supply chain alerts and the ability to manage by exception; and efficient collaboration with global trading partners. This type of visibility is more than tracking and tracing on the transportation leg. It’s following a product concept and subsequent purchase or sales order from design to final delivery, with all the compliance and finance steps along the way.

With easy access to real-time information, a company can monitor performance across the commercialization and purchase order lifecycles, including sourcing, logistics and import and export operations. With this insight, a company can improve its understanding of the impacts of decisions across its supply chain and respond quicker to potential issues. Similarly, supply chain visibility tools can help identify key metrics and create alerts to manage safety stock levels and minimum/maximum inventory levels, for example.

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Tapping into the ‘big data’ that can help Greek supply chains to be more agile

Supply chain platform provider GT Nexus has begun tapping into the big data that has accumulated in its system to help shippers, carriers and forwarders provide “assurance of supply”.

In an interview prompted by the possibility of a Greek exit from the Eurozone, GT Nexus’s EMEA director of marketing, Boris Felgendreher, said the Greek crisis bore all the hallmarks of major disruption – the sort that shows the limitations of supply chain planning.

“This sort of situation puts a premium on being agile, in respect of companies being able to move from one sourcing location to another, and that is always difficult. This particular disruption has an added element in that it is financial,” he said, alluding to the fears of a ‘Grexit’ and the problems Greek companies have with making and receiving payments.

And although Greece itself has accepted the terms of its bailout, a number of Eurozone countries have still to ratify the deal, meaning the threat of a Greek exit persists.

However, Mr Felgendreher explained that a recent development by GT Nexus could offer firms a way to circumvent these issues through a “fusion of the physical and financial supply chains”, following an agreement between the platform developer and trade finance solutions provider SeaburyTFX.

SeaburyTFX has developed a funding programme that leverages big data on the GT Nexus platform to deliver suppliers access to low-cost capital. The programme opens the flow of capital into the supply chain to reduce costs and risk by basing funding decisions on the trading partners’ performance history, instead of the buyer’s or supplier’s credit.

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Visibility Is Key when Driving Supply Chain Performance

At its heart, supply chain management requires a balancing of operational efficiency, customer satisfaction and quality. Managing the true cost to serve for each and every order is the aspiration to allow better negotiation and value creation across the supply chain. Customer- and consumer-centricity helps anticipate product and service requirements. Supply chains are becoming more extended and complex with a consequent increase in risk and the need for resilience. There are multiple data sources making it difficult to manage and measure end-to-end processes and metrics. Aligning priorities through integrated planning remains pivotal, but there is an explosion of data available that needs to be incorporated and the value extracted to understand how supply and demand issues impact profit and revenue targets.

New technology provides greater supply chain transparency. Strategic supplier engagement continues to be important as a way of reducing costs and mitigating risk. Effective supply chain management can be either a compelling competitive differentiator or, conversely, a source of risk, cost and poor customer service.

Organizations are looking to enable better and more consistent decision-making across complex processes with diverse systems and data. Many are leveraging business intelligence (BI) platforms to give them the capability to make decisions across the organization, including environments in which mobility and access to decision-critical information on the go is crucial. Putting the information in the hands of the people on the front line—those managing supply chain processes—is key to enabling decision-making at the point of decision. But this requires synchronizing an enormous amount of data that comes from many systems and sources in a way that it can be easily consumed by people who need to act on the insights.

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What do you think is important in Supply Chain Performance Management? Share your opinions with us in the comment box.

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Visibility Is Key when Driving Supply Chain Performance

At its heart, supply chain management requires a balancing of operational efficiency, customer satisfaction and quality. Managing the true cost to serve for each and every order is the aspiration to allow better negotiation and value creation across the supply chain. Customer- and consumer-centricity helps anticipate product and service requirements. Supply chains are becoming more extended and complex with a consequent increase in risk and the need for resilience. There are multiple data sources making it difficult to manage and measure end-to-end processes and metrics. Aligning priorities through integrated planning remains pivotal, but there is an explosion of data available that needs to be incorporated and the value extracted to understand how supply and demand issues impact profit and revenue targets.

New technology provides greater supply chain transparency. Strategic supplier engagement continues to be important as a way of reducing costs and mitigating risk. Effective supply chain management can be either a compelling competitive differentiator or, conversely, a source of risk, cost and poor customer service.

Organizations are looking to enable better and more consistent decision-making across complex processes with diverse systems and data. Many are leveraging business intelligence (BI) platforms to give them the capability to make decisions across the organization, including environments in which mobility and access to decision-critical information on the go is crucial. Putting the information in the hands of the people on the front line—those managing supply chain processes—is key to enabling decision-making at the point of decision. But this requires synchronizing an enormous amount of data that comes from many systems and sources in a way that it can be easily consumed by people who need to act on the insights.

Read more at Visibility Is Key when Driving Supply Chain Performance

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Cloud-Based Supply Chain Faces Scrutiny

Cloud-Based Supply Chain Faces Scrutiny

As the supply chain looks for new tools to manage increasing complexity, as well as a need to manage risk and other variables quickly and proactively, cloud-based solutions, which are relatively underutilized today, will become more common.

What are some of the common misconceptions around cloud computing and supply chain applications?

Supply chain has generally been a very slow adaptor to new technologies, and cloud computing is no exception. Besides data security and ownership, other factors come into play around how the infrastructure would behave in terms of excess volumes and concerns the in-house IT team may have with feeling helpless when it comes to issues around performance, managing downtime, and handling end customer pressures.

Often, lack of management support is cited as a reason for not adopting cloud technology. Why do you think the corner office is reluctant to support these sorts of initiatives?

Not all senior managers have yet to fully understand the implications of moving into cloud. They still look it as a pure cost saving initiative vis a vis the risks and the litigations they may end up facing in case they encounter issues around their data. Managers would like to hear success stories that [demonstrate that the concerns about] data security are all addressed by big product vendors, which are now moving over to cloud.

What are the best ways that supply chain managers can “speak the language” of business leaders to quantify the potential benefit of cloud-based apps for the supply chain?

The ROI of moving to a cloud-based service is very fast. Customers need not invest in capex for their expensive infrastructure, licenses, and upgrades. This can be very easily worked out. Another factor is that often, companies invest in large IT teams and have to constantly manage them – thereby deviating and investing in a division that is not their core business. By moving to the cloud, they can overcome this by maintaining a lean IT team.

Do you have any personal views about utilizing cloud-based system? What do you think are the advantages and disadvantages?

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Asia Pacific leaders to boost supply chain performance by 10 per cent

Asia Pacific leaders to boost supply chain performance by 10 per cent

Political leaders in Asia Pacific have pledged to improve the performance of supply chains in the region by 10 per cent by the end of 2015.

At the Asia Pacific Economic Cooperation (APEC) leaders’ meeting in Beijing, China this week, the region’s politicians committed to building capacity and offering technical assistance projects to meet the target. They also welcomed the establishment of the APEC Alliance for Supply Chain Connectivity to support the aim.

A declaration following the summit also called for increased resources for the APEC Supply Chain Connectivity Sub-Fund to be able to meet this goal. A network has also been set up to work on making supply chains more sustainable.

The leaders also promised to implement the World Trade Organization’s Trade Facilitation Agreement, which aims to speed up the movement of goods around the world and details co-operation measures between customs and authorities.

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5 Solutions For Supply Chain EHS Performance Neglect

5 Solutions For Supply Chain EHS Performance Neglect

The need to manage environment, health and safety (EHS) performance across our organizations and throughout our global plants has never been more apparent. While considerations of EHS performance were once limited to one organization’s performance within its four walls, things have changed. The increased reliance on supply chains extending across the globe, the visibility and traction afforded by online communications and social media, and the growing need to improve and report on end-to-end sustainability performance are compelling businesses to account for EHS performance across their supply chain.

As EHS regulations and best practices become more comprehensive and expansive, we’re seeing a new imperative in managing EHS supply chain performance. No longer is it acceptable to simply manage EHS performance within your own organization. And a number of high-profile examples in recent years have helped illustrate this trend. However, many global manufacturers are still grappling with how to extend EHS performance visibility beyond their organization and across their supply chain.

Five Ways to Improve and Integrate Supplier Performance

So, how do we proactively account for the possibility such adverse events will arise? We need to extend EHS capabilities across our supply chains.

1. Implement progressive policies that extend across the supply chain

As a global manufacturer, you may be dealing with a wide range of different levels of EHS regulations across various regions and jurisdictions around the globe.

2. Appoint an EHS and/or sustainability champion

Just as an internal EHS executive would champion exemplary EHS and sustainability performance within his or her own organization, this individual also ought to be afforded the power to apply similar requirements and accountability mechanisms across the supply chain.

3. Build a robust supplier EHS review process

Reviewing supplier EHS performance is not a new thing, but it tends to take a back seat to managing EHS performance internally.

4. Extend risk management capabilities across the supply chain

If you have risk-based capabilities built into your internal EHS performance programs, consider extending the risk frameworks you apply internally across your supply chain.

5. Drop suppliers that underperform

It’s tough medicine, but just as executives boot key members of their leadership team when a scandal arises or when systematic deficiencies persist, making an example of suppliers that underperform on the EHS front will show you’re serious about EHS

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Six Best Practices Utilities Can Employ to Improve Collections Performance

Six Best Practices Utilities Can Employ to Improve Collections Performance

Utilities face increasing pressure from stakeholders and communities to improve their financial performance and profitability by minimizing write-offs for uncollectible accounts. West Monroe Partners recently benchmarked clients to identify best practices used to improve utility collections performance. While collections performance is highly measurable, visible, and actionable, it is also influenced dramatically by local ordinances and challenges that are unique to each utility. Our benchmarking effort identified six best practices that utilities can employ to improve their collections performance. Some utilities are hesitant to change collections practices, fearing a corresponding drop in customer satisfaction. West Monroe’s benchmarking found the opposite to be true — generally, utilities that implement and strictly enforce collections policies have higher customer satisfaction.

Best Practice #1 – Collect and Maintain Good Customer Data

To enhance collections performance, you first need to know your customers and debtors. At account setup, utilities should positively identify customers by requiring a social security number or driver’s license number. With this information, utilities can review past payment behavior (if available), or perform soft credit checks.

Best Practice #2 – Practice Premises-Based Billing

It is difficult to verify tenant demographics, and tenants’ transient nature increases utilities’ risk of not collecting payment. To address this risk, some utilities capture both tenant and property owner data, and will bill property owners or landlords in the event of tenant non-payment, especially in high tenant populations (e.g., college towns).

Best Practice #3 – Employ Customized, Risk-Based Processes

Aggressively treating all past-due accounts in a similar fashion is expensive, unrealistic, and could impact public-perception of utilities. To combat this, and to maximize effectiveness of treatment, utilities should use analytics to segment customers into low, medium, and high-risk pools.

Best Practice #4 – Make it Easy to Pay

By sending timely bills, with actual meter reads, and presenting bill information in an engaging and clear layout, utilities can improve on-time payment. When necessary, estimated bills should leverage customer history, seasonal usage patterns, and weather trends to mimic the actual amount due as closely as possible.

Best Practice #5 – Leverage State Laws and Local Ordinances

Multiple utilities surveyed cited issues of political pressure when attempting to perform collections activities. Survey results indicate that utilities which have a published delinquency policy, including fees, timelines, and cutoff practices, face the least political pressure.

Best Practice #6 – Make Utilities Accessible

While our firm typically works with utilities to improve business performance and enhance customer experience, we also strongly believe that utilities provide a commodity service that everyone deserves access to. Fortunately, this is something utilities can incorporate into their collections strategy.

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Performance Management or Employee Development? Is there a Way to Merge Both?

Performance Management or Employee Development? Is there a Way to Merge Both?

If you ask an employee on what a performance management is, he or she will mention that it is nothing but the annual appraisal of his or her performance followed by salary revisions. Employees also tend to view performance management process with a lot of skepticism, as generally they are not happy with the subjective appraisals and get dis-satisfied with their salary revisions.

An effective performance management system should not stop with just once a year performance appraisals and salary revisions. It should be much more comprehensive, and one of the key goals of such an effective performance management system should be to develop employees.

What is employee development?

Employee development consists of activities that are initiated by an organization that would help in the overall development of an employee. An effective performance management system is one which gives high priority for employee development.

Benefits of employee development

When a performance management system focusses on employee development as well, the return of investment from such a system would be good due to the following reasons:

1) Well trained employees become more competent and execute their responsibilities productively.

2) Employees become happy as their development is taken as the prime focus.

3) When leaders are groomed within the organization, it helps in succession planning and reduces the associate costs and risks in hiring a new employee.

4) When facilities are created for employees to do their job effectively and obstacles are removed, it ensures that organization goals are met.

How do you convert your Performance Management System to Employee Development System?

Most companies do performance appraisals once a year and use performance management software for streamlining the process (self-evaluation, 360 degree feedback, manager’s feedback & rating, recommendation, etc.). Due to the volume of the work and stress associated with this process, the process stops with the salary revisions. Ideally, the HRs and managers should extend this process to identify the training needs, strengths & weaknesses of the people/organization, people development needs and put a clear roadmap for addressing them.

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