Category Archives: Performance Management

Inventory Management: We Can Do Better

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Inventory Management: We Can Do Better

Inventory Management: We Can Do Better

Each day through the COVID-19 pandemic, I tune into Anthony Cuomo’s (governor of New York) daily briefings. It is my break in the day. As a multi-tasker, when Governor Cuomo broadcasts, I use the time to work out on my rowing machine.

His opening line is, “Let’s start with facts. While we all have opinions, let’s start by reviewing the facts.” When he says this, I smile and row harder. I wish that all discussions could start with the facts.

Reflection

In my day-to-day work in supply chain management, I find more encounter more opinions than facts. …most discussions are fueled by over-zealous and self-serving marketing programs. Strong opinions and egos (mostly male) abound… For over two decades, I obediently tapped my foot to technology leaders’ glibly spouting opinions. I seek facts, but I find that they are few and far between.

The lack of fact-based discovery makes me itch…

A Story

Last week on my Network of Networks call, a proud technology salesperson, let’s call him Jim, announced, “I am speaking at Logimed next week on the impact of Just-in-Time (JIT) on the COVID-19 response. Downsizing inventories over the past decade crippled the response.” As I heard Jim speak, I twisted in my seat unsure what to say.

I struggle when I hear opinions that don’t align with facts. So, let’s start with the data. (Yes, am that geeky kind-of-gal that likes to ground discussions in data.) In Table 1, I share research collected for the Supply Chains to Admire analysis on the average days of inventory by industry across the period of 2004 to 2019 by increments to match economic shifts. The period of 2007-2008 was the downturn of the recession while the period of 2009-2013 marked the recovery. (The source of this data is a syndicated data provider of public reporting termed “Y-Charts.”)

So when we start with the facts, it is clear that every industry peer group increased the days of inventory. In addition, each peer group is markedly different. So, why have we not reduced inventory?

Now I will share my opinion.

  1. Complexity. Supply chain leaders in the beverage and household products industries struggled to manage complexity.
  2. Supply Chain Leadership. With average operating margins of 20-22%, medical device and pharmaceutical companies are supply chain laggards.
  3. Supply Management. Industries like automotive pushed cost and waste backward in the supply chain.
  4. Network Design. Only 9% of companies actively design the supply chain with a focus on buffer design.
  5. Factory Scheduling. With the evolution of the advanced planning market and the growth of the market share of ERP expansionist companies, solution capabilities in factory scheduling weakened.
  6. Executive Understanding. Many executives do not understand the form and function of inventory and the need for inventory buffers.
  7. Balance in S&OP. While 82% of companies have an S&OP process, less than 50% of company processes are balanced and only 1/3 of companies actively run “what-if” scenarios.

Read more at Inventory Management: We Can Do Better

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AI This. Not So Fast.

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AI This. Not So Fast.

AI This. Not So Fast.

Grounded during this pandemic, and unable to interact with clients in person, I try to write 3,000 words a day. Morning after morning, fueled by good black coffee, I type away. I share insights, based on research, for the supply chain leader. I write for this blog, craft reports from research for our newsletters, create blogs for Linkedin, and build articles for Forbes. I am also developing a framework for my new book. Stay tuned.

Frequently, when I post about an issue, a well-intending consultant or an aggressive business development executive will tout the evolution of the autonomous supply chain as the answer. The comment is usually something like, “Implement RPA or AI to solve this problem.” Or, “If you need an answer, implement my solution.” When this happens, I sigh. This type of response is just not helpful. Everyone tries to be a cool kid with over-zealous comments on posts, but unfortunately, there is no truth in advertising in the supply chain market. (If the industry were grounded in truth in advertising repercussions, there would be far fewer signs in the airports from consultants and technology providers.)

Background

The autonomous supply chain is a vision, but it is not today’s reality. I find in my Supply Chains to Admire research that 96% of companies (when compared to their peer groups) are unable to drive improvement while delivering higher performance year-over-year on a balanced scorecard of growth, inventory turns, operating margin and Return on Invested Capital (ROIC). I define supply chain excellence as year-over-year performance better than the peer group on this balanced scorecard. Ecolab, L’Oreal, and TJX are exceptions. They did it. Each company ranks in the 4% of companies beating their peer groups.

Shifts in Technology

Data science and cloud-based delivery offer promise, but supply chain planning is morphing slowly. …and at the edges. No technology company is attacking supply chain planning at the center.

Let’s celebrate that over the last two years, there were four significant acquisitions by traditional supply chain planning providers to deepen analytics capabilities:

  1. 07/2018 JDA purchases Blue Yonder (Purchase price confidential.)
  2. 11/2017 Logility acquires Halo for 9.3 M$
  3. 10/2019 Llamasoft merges with Opex (Amount not disclosed.)
  4. 06/2020 Kinaxis buys Rubikloud for 60M$

Examining The Current State

The analyst mindset is to track software evolution by taxonomy where like solutions are grouped, named and tracked. Supply chain planning is a subset of the decision support technology taxonomy. Other forms of decision support include revenue management, trade promotion management, cost-to-serve, and network design. Now in its fifth decade of evolution, supply chain planning is starting to change. The shifts are happening slowly at the edges. I am celebrating, but my hope is to drive seismic changes from the center. What we have now is not good enough, and I have my fingers crossed that COVID-19 will drive a significant and positive shift by highlighting the deficiencies.

Read more at AI This. Not So Fast.

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Resilience is the New Name of the Game in Supply Chain

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Resilience is the New Name of the Game in Supply Chain

Resilience is the New Name of the Game in Supply Chain

For the majority of Supply Chain’s history, this evolution has been driven by a knack for finding efficiency. Companies have leveraged digital tools, and evolving skills, to collect vast data about product or raw materials sourcing, transportation, logistics, and manufacturing. They’ve hired strategic Supply Chain professionals who can turn this data into actionable intelligence, and redesign the supplier, production, and transportation network to get products to market quicker and cheaper. They use advanced ERP software and S&OP strategy to match supply with demand, and turn over inventory faster and faster. “Just-in-time” production has become a hallmark of today’s Supply Chains.

Case in point: research firm Gartner includes the speed of inventory turns as a key metric in its annual Top 25 List recognizing companies for their excellence in Supply Chain.

Now, the top Supply Chain professionals are those who can find those efficiencies, while providing a strong customer experience that safeguards the company’s brand. It’s been a long evolution, and it’s made the field more ascendant within companies than it’s ever been, with a bigger seat at the C-suite table. Risk mitigation, innovation through supplier collaboration, and increased sustainability have also driven Supply Chain’s strategic value – but they’ve taken a back seat to efficiency.

Then came COVID-19.

As we’ve also written about recently, the COVID-19 pandemic has caused almost-unprecedented disruptions to a majority of companies’ Supply Chains – as many as 72%, according to a recent Supply Chain Canada survey.

We’re four months into the pandemic, and it appears that these disruptions have spurred another evolution:

More than ever, companies are focusing on Supply Chain resilience

All around the Supply Chain world, professionals are shifting their focus to make sure that they can withstand supplier disruptions, not only due to COVID-19, but to future emerging issues as well.

In our recent interview with Procurement Guru Jill Button about the particular Supply Chain challenges of the moment, she highlighted this shift, saying: “People are beginning to understand the risks and fragility of a Supply Chain and not having a sound Procurement practice. I think, as a field, we need to step up and embrace this moment.” In March, at the outset of the pandemic, industry thought leader Bob Ferrari wrote about how, in a world of supplier disruption, companies might shift from a just-in-time inventory model that maximizes efficiency, to one that prioritizes a diverse supplier base to maximize resilience.

Top consulting firms are taking notice too, in their own advice to corporate leaders: Bain, Deloitte, McKinsie, and Baker McKenzie, and others have released white papers in recent days on the importance of Supply Chain resiliency and risk mitigation in this new era.

Read more at Resilience is the New Name of the Game in Supply Chain

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How To Manage Organizational Knowledge Without Killing It

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Executives must create a climate of trust and openness for individuals to share individual knowledge.

Executives must create a climate of trust and openness for individuals to share individual knowledge.

Knowledge is identified as a multi-faceted concept, and is distinct from information and data.

Data has been defined, by Haridimos Tsoukas and Efi Vladimirou, as raw entities, and information is understood as a meaningful pattern within these raw entities. Knowledge can be understood as a concept for solving problems. In particular, Knowledge is a combination of rules, procedures, beliefs and skills that positively contribute to solving organizational problems. The key take-away for executives is that knowledge is a resource that enables organizations to solve problems and create value through improved performance and it is this point that will narrow the gaps of success and failure leading to more successful decision-making.

Knowledge, with its wide classifications, can be classified into individual and collective knowledge . Executives recruit followers based on their individual knowledge which refers to the individual’s skills, prior-knowledge, and proficiencies or sometimes referred to competencies. Collective knowledge, on the other hand, has been defined, by Sharon Matusik, as “organizing principles, routines and practices, top management schema, and relative organizational consensus on past experiences, goals, missions, competitors, and relationships that are widely diffused throughout the organization and held in common by a large number of organizational members”.

Thus, collective knowledge is part of the executive’s protocol and comes fairly natural at the higher echelons of the organization. Executives follow Thomas Davenport and Laurence Prusak’s concern that concludes that if an executive cannot inspire its followers to share their individual knowledge with others, then this individual knowledge is not valuable to the organization. Therefore, like tacit knowledge, individual knowledge can become a valuable resource by developing an organizational climate of openness for members to exchange their ideas and insights.

Executives must create a climate of trust and openness for individuals to share individual knowledge.

This is not new, Wolfgang Wagner and Katsuya Yamori show that new technologies drawing on social-software systems through sharing individual knowledge around the organizations can positively contribute to create collective knowledge.

Therefore, executives should build an atmosphere of trust and openness and use technology to convert individual knowledge into valuable resources for their organization to close the performance gap and help organizations prosper. Executives have been now introduced to one important category of knowledge. Knowledge can be articulated, or shared, and executives can now assess whether knowledge is a valuable factor for commercial objectives.

Read more at How To Manage Organizational Knowledge Without Killing It

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April manufacturing output feels impact of COVID-19

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While March began to show how the coronavirus, or COVID-19, began to truly impact the economy, things came into even starker perspective in April, based on data in the Institute for Supply Management’s (ISM) Manufacturing Report on Business, which was released today.

The report’s key metric—the PMI—at 41.5 (a reading of 50 or higher indicates growth)—declined 7.6% from March’s 41.5, falling for the second straight month, which was preceded by two months of growth. The April reading was 7.5% below the 12-month average of 49.0 and is also the lowest reading over the last 12 months and the lowest reading going back to April 2009’s 39.9. What’s more, ISM reported that April marked the first month that the overall economy contracted after a stretch of 131 consecutive months of economic expansion.

ISM reported that two of the 18 manufacturing sectors it tracks saw growth in April, including Paper Products; and Food, Beverage & Tobacco Products. And the 15 industries reporting contraction in April, in order, are: Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Miscellaneous Manufacturing; Computer & Electronic Products; Primary Metals; and Chemical Products.

Each of the report’s key metrics saw declines in April.

New orders, which are commonly referred to as the engine that drives manufacturing, saw a steep 15.1% decline, to 27.1 after a 7.6% decline, to 42.2, in March. This marks the third straight month of declines and is the lowest reading for new orders since December 2008’s 25.9. ISM said that two industries—Food, Beverage & Tobacco products and Paper Products—saw growth in April, with the remaining 16 all seeing declines.

Production—at 27.1—was down 20.2%, contracting for the second straight month and is the lowest figure since numeric ISM Report On Business index records were first issued in January 1948, with the 20.2% decrease from March representing the largest one month decline going back to January 1984, when it was down 20.7%. ISM said that two manufacturing sectors—Paper Products and Food, Beverage & Tobacco products—grew in April.

Employment—at 27.5—was down 16.3% compared to March, falling for the ninth consecutive month, and is its lowest reading since June 1949’s 27.2 reading, and represents the largest one-month percentage-point decrease going back to January 1948, when ISM began keeping numeric records. ISM said that each of the top six manufacturing sectors saw employment contraction driven by the furloughs and layoffs, due to a lack of new orders, with social distancing mandates also factoring into the number.

April inventories—at 49.7—headed up 2.8%, while contracting at a slower rate for the 11th consecutive month. The report explained that inventory contraction slowed as was expected, due to supply chain disruptions and the lack of labor to convert material, with 10 manufacturing sectors reporting higher inventory readings in April.

Read more at April manufacturing output feels impact of COVID-19

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Huawei’s European factory to boost supply chain efficiency

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Huawei's European factory to boost supply chain efficiency

The China-based tech giants, Huawei, is set to build a factory in France to produce 4G and 5G wireless equipment to accelerate supply chain efficiency.

According to analysts, the new facility will allow Huawei easier access to its telecommunications carriers in Europe, while also easing concerns over alleged spying for China’s government.

Stéphane Téral, executive director of telecommunications research at IHS Markit, commented: “At this stage of the mobile industry, it is critical for Huawei to have a radio communications factory somewhere in Europe to relieve the pressure on the existing ones in China. “We clearly see firsthand the disruption the coronavirus crisis is creating.”

It is expected that the factory will produce €1bn worth of products annually, while also creating 500 jobs.

It is thought that the company chose France due to the country’s ideal geographic position, mature industrial infrastructure as well as its highly educated talent pool. Peter Liu, vice-president analyst at Gartner, said: “The European facility will improve Huawei’s efficiency because the company will be able to integrate itself into the supply chain in Europe.”

The news follows Huawei’s launch of its 5G Innovation and Experience Centre in London which encourages increased collaboration between businesses and innovators in the development of 5G ecosystems. Victor Zhang, Vice-President of Huawei, added: “With the opening of our 5G Innovation and Experience Centre in London we, as a leader of 5G, are taking another important step. What we have opened today will enable true collaboration amongst UK businesses and technologists and showcase the huge potential of 5G applications for both the private and business sectors.”

Read more at Huawei’s European factory to boost supply chain efficiency

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Warehouse Drones: Real-Time Inventory Tracking by Air

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Using the Right Technology For Your Inventory Management

Using the Right Technology For Your Inventory Management

Warehouse Drones for Inventory Identification

Accurate and reliable data is essential to efficient and effective business operations.

Inventory management represents a significant portion of assets in a business.

Therefore, managers and other decision-makers need to accurately and timely know how much inventory there is and where it is located in order to make effective budgeting, operating, and financial decisions.

Companies that carry a significant amount of inventory are continually looking for innovative logistics solutions to improve the overall efficiency and effectiveness of their inventory checking process.

While some companies stop operations to carry out a full physical inventory check, others perform more targeted checks, with cycle counts in areas that deal with high-value or high-volume products.

Regardless of your approach, it often means that there is a team of individuals roaming the warehouse manually checking for inventory.

This can be time-consuming, expensive, disruptive, require equipment (people lifts), and exposes people to safety risks.

Most important of all, inventory accuracy is never guaranteed due to the verification process being manual, coupled with the time taken to execute.

Inventory Robotics: Automated Cycle Counting

Automatic identification and location of hard-to-reach inventory in warehouses

PINC’s UAS (Unmanned Aircraft System) is called PINC AIR, Aerial Inventory Robots™.

This warehouse drone solution allows companies to apply drone technology, coupled with advanced optical, RFID, and barcoding sensor capabilities, to significantly improve the operational effectiveness and efficiency of warehouse inventory cycle count.

The warehouse drone can be ordered by the operator to perform automatic inventory checks throughout the facility, accurately identifying inventory in put-away locations, at the frequency of your choosing.

Moving the process of information capture into the air provides on-demand checks of logistics inventories and avoids the time, expense, and risk of using a people lift to access difficult to reach locations within the warehouse.

Using extensive optical sensors, the inventory drone can navigate, identify inventory, determine inventory location, and fly safely in a warehouse environment.

The power in the drone inventory management solution lies within the sophisticated software capabilities that provide three-dimensional mapping, navigation, inventory identification, and location accuracy. Indoor flights do not require FAA approval.

Read more at Warehouse Drones: Real-Time Inventory Tracking by Air

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DHL: transforming logistics with startup partnerships

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DHL large electirc vehicle

DHL large electirc vehicle

Supply Chain Digital gets an insight into DHL’s partnerships with startups to drive digitalisation and sustinability within the business.

When it comes to innovations at DHL, the company values its partnerships both big and small. In recent years many startups have entered into the logistics industry. Markus Kückelhaus, VP of Innovation and Trend Research at DHL raises the question of why?

“The logistics industry is a very fragmented sector that is still catching up. Which is why this industry is interesting to startups,” says Kückelhaus who highlights that due to the industry’s small attempts at digitalisation, in addition to growing investments into logistics, there has been an increase in opportunities for startups.

Effidence

Founded in 2009, Effidence is a French research and robotics startup that develops collaborative robotic solutionsin logistics and agriculture. DHL has partnered with Effidence to develop its ‘follow me’ robotic trolleys.

Locus Robotics

Founded in 2014, Locus Robotics is an American robotic technology company that develops warehouse solutions to improve productivity. DHL has partnered with Locus Robotics to develop its Aisle picking robots.

University of Aachen

Established in 1870, the University of Aachen strives to drive innovative discoveries that impact global challenges. The German university partnered with DHL in 2012 on a new initiative to combat global warming. DHL worked with the university to develop its own electric vehicles as part of its mission to achieve zero carbon emissions by 2050. Currently DHL has 10,000 electric vehicles out on the roads aiming to replace all 55,000 global vehicles in its fleet to electric.

Read more at DHL: transforming logistics with startup partnerships

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SEE ALSO:

  1. DHL – the world’s leading contract logistics provider
  2. DHL’s innovation center driving digitalisation and sustainability
  3. DHL: Talent management within logistics
  4. Read the latest issue of Supply Chain Digital here

OM in the News: Amazon Marries Drones and Intermodal

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Amazon patent graphic for railroad sourcing

Amazon patent graphic for railroad sourcing

“Amazon wants its inventory everywhere”, writes Supply Chain Dive (Nov. 8, 2019). It is expanding its network of fulfillment locations with a focus on intermodal containers. Intermodal-based fulfillment, as Amazon’s patent application describes it, would allow the company to fulfill orders from rail, truck or ship. Here are the steps in the patent:

  • 1. Load intermodal container with inventory.
  • 2. A robotic system picks and loads items onto drone.
  • 3. Launch and retrieval system puts the drone in appropriate position for take-off.
  • 4. Drone departs container through opening in the roof.
  • 5. Drone travels to a customer’s home, delivers package.
  • 6. Drone meets back up with the container at a pre-calculated rendezvous point.
  • 7. Variety of sensors track container’s location.

But wait, drones need new batteries, their propellers might break, and without a human in the loop how does this operation keep running smoothly? Amazon thought of this. One of the details included in the patent application is a maintenance container where drones can have a robotic technician replace propellers or batteries. Amazon says containers could be loaded with inventory before the launch of a book or video game in anticipation of demand spikes, placing inventory in locations where it expects orders.

To compete with brick-and-mortar locations, Amazon wants to cut down on delivery time making it just as convenient to hit order on the marketplace as it is to drive down the road. But this requires a complex network of inventory in fulfillment and sortation centers across the country. It has already promised one-day delivery for a variety of SKUs. Amazon claims drones will enable 30-minute delivery. Making this happen will not just require drones, but a vast web of SKUs across the country.

Read more at OM in the News: Amazon Marries Drones and Intermodal

Six Ways To Optimize Your Supply Chain To Generate Profit

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Companies use multiple tactics to generate economic profit, including introducing new products, launching marketing campaigns or undertaking acquisitions. Supply chains offer an effective, though less understood, path to creating value through growth, driving down working capital, improving cash flow and lowering cost.

Surprisingly few companies understand the importance of the supply chain, and few have a formal strategy in place for managing global supply chain risk in the years ahead. This is especially dangerous given the volatility and uncertainty in trade relations between the U.S. and China, as well as other scenarios around the world. Besides geopolitical uncertainty, having the right talent, a holistic perspective and appropriate technology may all figure into the supply chain risk factor.

Use the following best practices to optimize your supply chain and minimize risk.

Redefine The Supply Chain

Best practices begin with redefining supply chain excellence and broadening its scope.

Create A Cross-Functional Team

Best practices for driving shareholder value through supply chain optimization can be easily implemented in any company for concrete results.

Focus On The Right Metrics

Following increased visibility and cross-functional team-making, focusing on the right metrics is the logical next step.

Connect With The C-Suite

Another essential best practice in supply chain optimization is building relationships throughout the entire company and starting conversations with the CFO and other key executives.

Manage Risks

Long-standing supply relationships have value, but disruption of those relationships can be devastating.

Total Value Optimization

The Total Value Optimization (TVO) framework promotes greater collaboration, integration and transparency.

Read more at Six Ways To Optimize Your Supply Chain To Generate Profit

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