We thought everything was working fine. Great planning, a great network in place. Excellent computer systems. Visibility into our supply chain. Well-trained staff. We thought the “i”s were dotted and the “t”s were crossed. Then SOMETHING happened. Could be almost anything, but it was unexpected, had no easy fix, no recovery plan in place, you name it. So now two things have to happen: (1) damage control; and (2) fix the system.
If you have followed my writing at all, you already know I am the great advocate of Supply Chain Control Towers. Why, because they provide such great VISIBILITY into the whole supply chain. That easily translates into reduced supply chain costs. Let’s see how! In Part 1, we examined Supply Chain Visibility: A Critical Strategy to Optimize Cost and Service
I have found some good ideas on how visibility can cut supply chain costs from consultant John Berry.
There are plenty of sophisticated methods and algorithms out there to help calculate safety stock levels. However without good supply chain data, it’s almost impossible to implement any kind of rigorous inventory management process.:
- The unfortunate reality is that organizations frequently don’t have precise information about on-hand inventory counts. This could be caused by a less-than-reliable ERP or WMS implementation. Data latency is another common culprit for inventory blindness. Often inventory data is processed in batches. In a high velocity distribution center operation, even a 15 minute batch window can cause huge distortion on on-hand inventory counts. In fact it’s common to see daily, weekly or even monthly inventory reconciliations. Often organizations outsource fulfillment operations to 3PLs without properly thinking through data integration. And often, inventory visibility is completely based on an emailed spreadsheet! Keeping safety stock to offset bad processes is completely wasteful.
With the growth in scope of Supply Chain Management (and possibly a new Supply Chain Control Tower), we need to re-evaluate if the leader of SCM should be a “manager”; (as is the case in many companies today); or should the position be a director or vice-president.
Recently, the LinkedIn SCM Professionals held a group discussion on “What is the difference between a SCM Manager , director or VP ???? Just fancy names or what?” I summarized this very exciting discussion. The best comment came from member RANJIT SARKAR : SCM Manager is a person sailing a boat in the river with all the ups and downs, Director or VP is a person sitting on the bank of river shouting and instructing to the sailors.
A general consensus of this discussion was that SCM manager’s focus is on the tactical side of the day to day operations with about 90% of his/her time spent on purchasing-warehousing-inventory management-planning and scheduling issues and all the daily issues that arise from those areas.
The Director spends about 65% of his/her time on those same issues but 35% is spent on looking at numbers and the analysis of the numbers pertaining to PPV, inventory dollars, supplier spend, forecast to plan accuracy and shipments and monthly numbers.
The VP spends about 10-15% of his/her time on the tactical issues which is really done through meetings about the issues with their staff and may sit in on some major issues with suppliers be it in logistics, purchasing, or manufacturing issues but the other 85-90% of his time is spent on strategic issues. Why the numbers are not where they need to be? How to improve on the numbers? Budgeting for the next year and three years out, capital expenditures, market forecasts, staffing overall, new product development, cultural issues within the organization, and potential M & A’s or consolidations of existing facilities.
A while back I wrote about 5 Must-Haves to Qualify as a Supply Chain Manager. This was more at the tactical level. Recently I wrote about the qualifications of a supply chain manager. I moved the position to the C-Level and reviewed some executive search companies and also some high-powered job hunters who have their own web sites. Shown below is a composite of possible qualifications for a C-Level Supply Chain executive :
General Manager/Operations & Supply Chain Executive with extensive global operations P&L experience in (fill in the blank: any “hot” industry), primarily with major Fortune 200 corporations. Skilled in managing profit centers and developing/implementing initiatives designed to improve and streamline manufacturing/supply chain and planning process to include business development, quality, customer service, product development, on-time and order-to-delivery cycles, using owned or contracted factories and third party OEM providers.
Key strengths include:
• Financial skill strength in both P&L and asset management
• High level knowledge of finance, global manufacturing/supply chain operations, corporate IT
• Re-engineering skills using Six-Sigma process, cost cutting & flexibility
• Strong global background & outstanding leadership skills and style.
A recent article in the Wall Street Journal says that “Supply chain management as a proving ground for senior leadership roles, including CEO, is increasingly evident, with high profile examples that include Apple Inc. CEO Tim Cook and Intel Corp. CEO Brian Krzanich. One reason for this phenomenon is that supply chain leaders typically have integrated experience across very different and key functions in purchasing, manufacturing, engineering, strategy and logistics and often oversee new product launches and customer service. This unique set of functional skills is increasingly important to corporate competitiveness.”
It didn’t use to be that way in my earlier business career. Traditional path to the top varied. Finance was a great path (Reg Jones at General Electric). An engineer, Alfred P.Sloan, was a famous CEO at General Motors. Probably the best known CEO with a manufacturing background was Henry Ford. Lots of marketing / sales folks became CEO, such as Dave Whitwam at Whirlpool. Sometimes even lawyers rose to CEO, like Bob Wright at NBC.
Read more on Supply Chain Expertise is Expanding
Most Supply Chain Management executives are concerned with the risks from extended supply chains, but only a few have real end-to-end visibility into their supply chains. For those without this full visibility, outsourcing and globalization have put a “lot of rocks on their wagon.” They see increased demand/supply variability and increased lead times. They don’t see problems until it is too late and then, they are slow to react. We need to aim for a demand driven Supply Chain Management solution in the Cloud. For discussion purposes, let’s call it “SCM NET WORKS” Let’s start with a real time network. Where ever it is and whoever runs it, the aim is to get as many links in the supply chain on it as possible. It must be a multi-party network that uses the latest technology (Cloud, mobile apps, Big Data, etc). It is like a social network. It is a many-to-many network. It is bigger than a bread basket and it is faster than lightning. It will result in a real time decision-making supply chain operation that allows an unlimited number of trading partners to plan, execute, synchronize and optimize in real time all of the business processes and events that are going on in numerous extended supply chains. It includes everything from raw materials right up to the consumer.
Read more about Supply Chain on Demand
Is a Supply Chain Management Control Tower the only way to go? What issues are not yet solved with our current thoughts on SCM Control Towers? Are we looking at some type of a “Commercial Network” instead; or are looking at “SCM Control Tower 2?” In any event, there is a requirement for further automation of the process.
What are some of the drawbacks with our current implementation strategy?
- The “network” that is required for visibility sometimes requires lower-tier suppliers, public warehouses, wholesalers, etc. to “log in” to several different networks (one for each “important” SCM Control Tower they deal with. We need a simple, reusable network approach to bring everyone into the tower. The solution lies in B2B Networks (VAN2). Extremely time critical communications could be accomplished by “texting” selected members of the Control Tower community, then following up with an EDI message.
- Is there too much dependence on humans making decisions? Cannot some of the decisions being made be better automated? Can’t we use “decision support” technology to build automated responses at the back end of system?
Many companies keep avoiding social media contact center integration. But the CRM that we all know is morphing into CEM (Customer Experience Management). A conclusion is that CRM and marketing need to merge. So “CEM Marketing” will become a key player in customer engagement strategies. Marketers will be working as part of a cross-organizational team with executives and contact center agents to understand and reach out to customers. So where does “CEM Marketing” fit in the company organization? If you said SUPPLY CHAIN MANAGEMENT you are correct.
Control towers are used in many industries for different purposes: airports and railroads use them for traffic control; power plants have control rooms to monitor operations and third party logistics providers use them to track transportation activities. These are places where operations run well. Why not a “SUPPLY CHAIN MANAGEMENT CONTROL TOWER” to monitor and assure supply?
The SCM Control Tower is all about having visibility throughout the supply chain. But if there is total visibility and no ability to make decisions, then it is not a control tower. To be a decision maker, you will need to run “what if” scenarios: forecast and recalculate the entire inventory if “your ship doesn’t come in” (something that literally could happen). To be able to calculate effects of events, it will require a LOT of data. Hence, we need to introduce BIG DATA to our Control Tower.
The Control Tower needs high quality data from both internal and external sources. With a global supply chain, a company is more vulnerable than ever. Suppliers are also vulnerable on the land, sea and air. Issues arise from political events, weather, security and health issues. The possibilities are almost endless. Yes, you can monitor news channels, weather forecasts, police radios; but it could be overwhelming. The answer is to automate the gathering process, then use data analysis to highlight YOUR hot spots. RSS FEEDS are increasingly available, even from local police departments (well, the “police blotter” is now electronic and applications are available to attach grid coordinates to almost anything). Even weather data can get more accurate by folding in the thousands of “backyard” weather stations that have become more popular. These little guys can provide METAR feeds. See how many are in your area at Wunderground. All this increased data (BIG DATA) will overwhelm you without analytic capabilities. Simplified, you have to automatically “sift” through it, pull out what applies (YOUR parameters), and utilize it (maybe “post” to your “trouble map”).
Recently we wrote about “Supply Chain Management and Logistics Risk”. While we did not get specific as to which risks are “bigger”, we did cover a lot, even pirate ships. Now, Zurich Insurance Group, through the Business Continuity Institute (BCI) has done a survey and gotten specific about causes of supply chain disruption. The top three: IT, weather events and outsourcing failures.
Any business that manufacturers and distributes globally must have end-to-end supply chain visibility today. This means more than just the “four walls” of the factory. It means all your suppliers: the status of their shipments to you and expected delivery. Your shipments to customers. Even the weather and political risks along the route. You must be able to adjust the whole cycle almost in “real time”.
The answer is a Supply Chain Management Control Tower. Our plan is to operate one that will serve multiple companies. It will be “Cloud” based (meaning not limited to a specific computer site). It will offer “Software as a Service” to clients.
We will be using top-of-the-line elements to operate it. IBM software, operations hosted by PROSOFT GROUP (an industry leader), marketing through the National Technology Sales Engine headquartered in Chicago.
A new term is appearing in the supply chain arena: “Supply Chain Control Tower”. Just as an airport control tower coordinates airplanes landing and taking off, a Supply Chain Control Tower coordinates inbound and outbound distribution flows. Sure sounds more professional than a “dashboard”.
Now, who is going to staff the control tower? Logistics was conceived by the military to get the right amount of supplies to the troops at the right time. Supply chain management takes a bigger approach of looking further back into the life of a product to its manufacture and even product design while integrating what were once thought to be unrelated disciplines: marketing and customer service.
Our Supply Chain Control Tower is up and running. Yes, the idea makes a lot of sense, but what are the benefits?
How do we make full use of our resources? What else do we need to add to it? If you take a look at an airport control tower, it usually is a boring place. Yes, they work around the clock but all you see is a super smooth operation. Operators viewing screens and talking calmly into headsets. When it is not “boring”, they usually throw visitors out. Our goal with our SCM Control Tower is to be a “boring” place.
We have been talking a lot about Supply Chain Management Control Towers. Yes, transportation (usually under logistics) is included in the control tower.
In many companies, transportation is outsourced to a 3PL, 4PL or 5PL provider. This provider is an expert at hooking your company up to any required transportation resources. Your provider already has some excellent tools available. A popular concept since the 1990’s has been the “Load Control Center” (LCC). We are looking at outsourcing, but yes, excellent software is available if you do it yourself.
You are in the process of staffing your SCM Control Tower.This group will be drawn from different areas of your company (different “silos”) and different skill sets (for example, a “hazmat” expert). Is your SCM Control Tower going to be a team building melting pot or a boiling cauldron of dis-function? You could draw the brightest and most hard working employees in and outside of your company; but if they don’t get along, it could wreck your business.
A couple of other things you might be interested in: