Author Archives: Tim Gray

Impact of New Generation Robots

I was stunned when I first met the collaborative Robot Sawyer at the Imagine 2030 Supply Chain Insights Summit in September this year. All I could think was how many jobs will these guys take. The list of features is awesome but for me the three pivotal features were

Sawyer doesn’t need to be programmed to do a task, you show it.
Sawyer can safely operate alongside human workers, without light curtains or guard rails
I was expecting Sawyer to cost $300K. I was shocked to find that he starts at $29K

Together with Sawyer’s big brother Baxter, these bad boys are set to make a real difference in production, giving manufacturing companies a very competitive advantage.

Tractica anticipates the global robotics industry is expected to surpass US 151 billion by 2020, annual robot unit shipments will increase from 8.8 million in 2015 to 61.4 million by 2020, with more than half the volume in that year coming from consumer robots.

In 1961, General Motors unveiled Unimate, a robot that was designed to ease the production process; this was a 4000-pound robot and harbingered the use of robotics in manufacturing (Pugh, 2013). However, technological advancements and evolution of artificial intelligence and its use in embedded systems have enabled organizations to adopt and use robots in various stages of the manufacturing process (Sachs, Benzell, & LaGarda, 2015). Robots are now faster, cheaper, and moreintelligent because of the amalgamation of nanotechnology and artificial intelligence.

In its report, PricewaterhouseCoopers observed that in the last decade or so, the orders for robots globally has increased by more than 200 percent, with one of the key markets being the United States and Canada. The report also indicates that the number of registered patents for robotics related patents grew past the 5000 mark in 2013 from 1000 patents in 2001. This trend demonstrates an increased uptake and use of robots in the manufacturing process. Consequently, it is important to establish the effect that this increased focus on the use of robotics in the manufacturing process has had in the industry.

With the emergence of more intelligent and cheaper robots, manufacturers have diversified their application of robots in the manufacturing process. Whereas in the past robots were limited to the most basic and menial tasks, the new robots are being increasingly used in more specialized manufacturing processes (Pugh, 2013). The amalgamation of nanotechnology, robotics, and artificial intelligence has seen the application of robots in tasks that require precision which in some instances even a human being cannot handle. For example, Carlsson (2012) observed that robots are increasingly being used in pharmaceuticals and biomedical technological manufacturing firms, where the manufacturing process requires precision and the automation of the processes has enabled firms in the industry to achieve the same. In addition, the emergence of more intelligent and dexterous robots has fostered human-robots collaboration in the manufacturing process, where robots and human being work together in the production process; robots are now socially sensitive, have near human capabilities, and can, therefore, interact with human beings (Baily, Manyika, & Gupta, 2013).

Further, the emergence of the new generation robots has resulted in cost savings in the manufacturing sector. The new generation robots are cheap to maintain and will work shifts that would have normally been handled by multiple employees, resulting in the cost of labor savings. In addition, whereas human beings are likely to miss work because of various reasons, there is no likelihood of absenteeism where robots are concerned, unless when undergoing maintenance (Pugh, 2013). Other proponents of automation or uses of robots argue that coupled with their low maintenance cost, robots present an opportunity to manage costs of doing business for manufacturers who otherwise, would have had to incur expenses such as health insurance cover, salaries and remuneration, and other personnel related costs (Carlsson, 2012).

On the other hand, robotics presents an opportunity for further growth of a previously declining manufacturing sector. Baily et al. (2013) observed that the current resurgence of the United States manufacturing sector is attributable to technological advancements such as the developments in robotics. The primary reason as to why companies outsourced manufacturing jobs to other parts of the World such as China was that labor was cheaper in those countries. Yet China is investing heavily in robotics firms around the world, while also developing and manufacturing its own robots in a government-backed, robot-driven industrial revolution. Chinese companies are going through enormous efforts and invest large amounts of capital to automate their production and shed the dependence on “cheap labor,” which is getting increasingly expensive and uncompetitive with other “cheap labor” economies. (Wolf Richter, 2016).

The sharp falls in the price of industrial robots and a steady increase in their capabilities each year, robotic automation is equalizing manufacture costs anywhere in the world against the cost of human labor. With the calling for bringing back the jobs, this could pretty much be the key. Robotic automation can, however, give the necessary leverage to high-cost countries to bring back their outsourced manufacturing. Thoughtful and clever implementation will be needed, and the timing is crucially important, and the time is …… NOW!

So what are your thoughts on robotic automation and bringing the jobs back? Any comments gladly appreciated.

Tim Gray

PROPHIT SYSTEMS

References

Baily, M. N., Manyika, J., & Gupta, S. (2013). US productivity growth: An optimistic perspective. International Productivity Monitor, (25), 3.

Carlsson, B. (Ed.). (2012). Technological systems and economic performance: the case of factory automation (Vol. 5). Springer Science & Business Media.

PricewaterhouseCoopers. (2014, September 9). The rise of robots. Retrieved November 17, 2016, from http://www.pwc.com/us/en/industrial-products/next-manufacturing/robotics-rise-of-robots.html

Pugh, A. (Ed.). (2013). Robot vision. Springer Science & Business Media.

Sachs, J. D., Benzell, S. G., & LaGarda, G. (2015). Robots: Curse or blessing? A basic framework (No. w21091). National Bureau of Economic Research.

Wolf Richter (2016) Why China’s Multi-Decade Manufacturing Miracle is Over

Please Fasten Your Seat Belts! Ladies, Gentlemen, and Hal.

I was snapped into awareness, as I digested the following numbers

Let me interpret this in a different way, you could take a driver-less taxi to and from work all week for what it costs you in a single trip today.

Do I think driver-less vehicles are set to disrupt and reshape the way we live? You bet I do.

The Impact of Driver-Less Vehicles in the Logistic Industry

The supply chain industry is advancing at tremendously high speed, are you able to adapt to new changes fast enough, and adopt the contemporary trends should you want to stay afloat.

At the Imagine the Supply Chain of 2030 Global Summit, the keynote address on “Embracing the Autonomous Supply Chain and Rethinking Innovation” resonates with my view about the future. The Age of Autonomous vehicle is emerging, and it is disruptive. The economic and social impact is huge, and beyond the scope of this article. Industries are affected or will be affected. Whether it will be good or bad is yet to be seen.

In recent news, “Tesla to enter the semi truck business, starting with ‘Tesla Semi’ set to be unveiled next year”

“Uber acquired self-driving lorry startup Otto this summer in a deal worth up to $680 million and it plans to put the company to work next year.”

“Otto’s technology allows existing trucks to be ‘retrofitted’ with self-driving technology which can handle driving on U.S. highways. It doesn’t entirely automate the process since human drivers are needed to negotiating coming on and off highways, but the technology may enable drivers to rest more and make their deliveries faster in the future.”

Although the technology remains under development, the first attempts already being tested out. It might not be long before we start getting our deliveries from a vehicle without a driver. Are you prepared to adapt to new changes fast enough, and has the ability to adopt the contemporary trends should you want to stay afloat. Is it time to start thinking about a new business model?

Key Benefits of Driver-Less Vehicles

In 2014, DHL Trend Research has launched a report on “Self-Driving Vehicles in Logistics”, which provides DHL’s perspective on implications, highlighting the key elements and the potential of autonomous technologies.

A few key benefits from autonomous driving outlined by the report:

Improved Safety: Minimize human error to reduce road traffic accident.

Higher Efficiency: Traffic flows faster with vehicle to vehicle communication. Freight trucks will be able to travel 24/7 without requiring driver rest time.

Lower Environmental Impact: With fewer vehicles on the road and more efficient fuel consumption, autonomous systems are programmed to minimize environmental impact.

Greater comfort: The driver becomes a passenger. He or she doesn’t have to watch the road ahead but can rest and enjoy other activities.

According to the report, “It’s the next evolutionary step to start applying this technology to outside premises and on public streets. Beyond warehousing operations, analysts expect many more applications in future along the entire supply chain, particularly in outdoor logistics operations, line haul transportation, and last-mile delivery (DHL Trend Research, 2014)”.

However, as the report explains, autonomous technologies still have some way to go before reaching full maturity. Considerable catching up is also required regarding regulations, public acceptance, and issues of liability. Despite these barriers, some compelling use cases have already emerged, clearly indicating that many organizations are willing to develop and deploy self-driving technologies.

OK, SO what does this mean for us?

As far as I can see the immediate impact for many of my clients will be the need to reassess their network design. I wouldn’t be advocating taking long term leases on Distribution centers (DCs) or setting up chains of highway diners. As driverless trucks come on line, the cost balance will shift to more frequent deliveries and less double handling. This may well trigger a revitalization of manufacturing hubs, with individual plants being able to economically service much larger catchments, without a complex and costly distributed warehouse network.

What’s Next?

Supply chain leaders should always embrace innovation and be prepared. We all understand the importance of having robust and evolvable systems that can be easily adapted to accommodate any future disruptions. The question is what you are planning to do about it today.

What are your thoughts on this? Any comments gladly appreciated.

Tim Gray

Prophit Systems

Reference

Self-Driving Vehicles – The road to the future? (2014, DHL Trend Research): http://www.dhl.com/en/about_us/logistics_insights/dhl_trend_research/self_driving_vehicles.html
Uber Wants Your Long Haul Trucking Business (2016, September):http://www.supplychain247.com/article/uber_wants_your_long_haul_trucking_business/Autonomous_Vehicles
Proudly Brewed. Self-Driven (2016, October):https://blog.ot.to/proudly-brewed-self-driven-95268c520ba4#.jlia9f2s8

I was snapped into awareness, as I digested the following numbers Let me interpret this in a different way, you could take a driver-less taxi to and from work all week for what it costs you in a single trip today. Do I think driver-less vehicles are set […]

Finding SCM Talents in 2017 and Beyond

In September 2016, I was lucky enough to attend Lora Cecere’s (founder of Supply Chain Insights) Imagine the Supply Chain of 2030 Global Summit. I found the conference extremely insightful and wanted to share with you some of my key takeaways from the event. This is the first article in a four part series to be published in the coming weeks, “Incubate your own talents”.

Talent shortage in the supply chain industry is a known issue, especially with the demand for middle management positions. The rapid expansion and increasing complexity of the industry, the qualifications needed for supply chain professionals are expanding. The industry does not have enough qualified people making invaluable decisions.

Great talent lies within every company waiting to be discovered and developed. But most of us tend to ignore this fact, or perhaps lack the sheer knowledge of it. We look outside whenever there is a need for specific skills in the organization. As a proactive business in the supply chain management industry, you should identify and cultivate talent within the existing talent pool. Sourcing internally is better than looking outside for several reasons.

Improved employee morale and engagement

Employee engagement plays a major role in the success of an organization. Employees who are involved in development opportunities feel a sense of belonging and appreciation. It’s a sign that you care about their personal and career development goals, and this, in turn, creates morale, motivation and greater job satisfaction in your workforce (Gill, 2014).

Boosts employee performance

Employees with opportunities for career advancement strive to achieve something more valuable and meaningful than their day-to-day work. Developing talents internally enables employees to have a more well-rounded skill set, which help enhances their performance. They become motivated, inspired and equipped to train other people around them.

Decreased employee turnover

Many companies in the supply chain management industry may see internal talent development as a gamble. If an employee resigns, the investment is watered down, and he could potentially move to a competitor. This is a mere misconception. The truth of the matter is that talent development is essential in the retention of employees. In fact, it’s a proven retention strategy that is adapted by successful companies in the industry. Employees who are appreciated and inspired are more likely to stay loyal to your company, reducing turnover as well as the direct and indirect costs that come along with it (Wilson, 2016).

Reduced hustle and cost of hiring new employees

Internal recruitment is obviously less expensive and less time consuming compared to external recruitment. It is not unusual for an external hiring process to take two months or more from the time you advertise the job to the first day at work. And the processes in between this period – interviewing and short listing candidates – are mind-numbing. Finding a candidate internally, whether to fill a new position or to backfill a position, does not require such extensive amount of effort and time.

Guaranteed success

Employees who are progressively trained and promoted into new roles are likely to achieve greater success than their external counterparts. Of course, the internal recruits will have better knowledge of internal systems and company values enabling him to take less time in settling in the new position.

Adopting a culture of developing talent within your company, rather than outside, is a great way to leverage the output of your employees, boost their morale and amplifies their loyalty. You skip you the rigorous process of recruitment and are rest assured of success in the new role assumed. It’s an investment with a definite ROI.

References

Supply Chain Insights LLC, Supply Chain Talent (2014, June – October)

Supply Chain Insights LLC, Global Summit Survey 2016 (2014, August)

Gill, A. (2014, November 3). Human Resources. Retrieved November 14, 2016, from The top 10 Benefits of Ongoing Staff Traiing and Development: http://www.saxonsgroup.com.au/blog/human-resources/top-10-benefits-of-ongoing-staff-training-development/

Wilson, T. (2016, May 18). Talent Space. Retrieved November 14, 2016, from The Benefits of Cost Effective Talent Development: http://www.halogensoftware.com/blog/the-benefits-of-cost-effective-talent-development

PROPHIT SYSTEMS ANNOUNCES U.S. LAUNCH

PRESS RELEASE

APAC Supply Chain Solutions Leader PROPHIT SYSTEMS ANNOUNCES U.S. LAUNCH

Prophit® Systems Pty Ltd the innovative leader of Supply Chain Software that makes complex supply chains simple, officially opens for business in the United States. First stop Atlanta.

Prophit® Systems – Atlanta

3333 Piedmont Road,
Suite 2050
Atlanta, GA 30305

PROPHIT SYSTEMS to help SMBs Simplify, Automate and Optimize Supply Chains

Prophit® Systems is thrilled to bring its proven solutions that help manufacturers improve supply chain visibility, streamline the S&OP process and ultimately increase profits to the U.S. market.
“Our success through APAC has been founded on our belief that our systems must simplify and amplify our customers planning process. The speed with which we implement our skin in the game approach and the profound, tangible business value each of our projects deliver has redefined the Supply Chain planning space in APAC.
We are delighted at the demand for our products and services here in the U.S. We are seeing deep interest from the mid-market manufacturers whom have been looking for a solution provider that they can trust to work with them to deliver outstanding results immediately. “ Tim Gray, Managing Director, Prophit Systems.
Prophit® Systems has been actively working behind the scenes for some time, with U.S. subsidiaries and their APAC suppliers, talking to market participants and collaborating with international partners. The company’s exceptional reputation has already gained the attention of the U.S. market, particularly within specific industries such as the Packaging Manufacturing, Dairy Processing and CPG manufacturing.
Leading manufacturers such as Amcor, Visy / Pratt Industries and Browns Dairy (formerly Fonterra) use Prophit® Systems for Forecasting, Capacity Planning, network optimization, inventory optimization, Scheduling, Sequencing, replenishment optimization and shop floor control.
Our commitment to the U.S. market is steadfast and further expansion plans are already underway with more Prophit® Systems locations within the next year.
The launch of the Prophit® Systems Atlanta branch follows the decisive investment into their global expansion strategy. The China Office was launched in early 2015 and we have established implementation partners to distribute Prophit® in Europe. The growth of Prophit® Systems international operations, particularly within the North American region has gained attention and is already being championed by local clients within the United States with significant strategic partner arrangements being confirmed.

ABOUT PROPHIT SYSTEMS – www.ProphitSystems.com
Prophit® Systems is an international Supply Chain software and consulting company headquartered in Sydney Australia. It provides “best of breed” supply chain software to manufacturers with highly complicated supply chain processes. With over two decades experience in the Supply Chain and manufacturing industry, Prophit® Systems consistently delivers a 100% ROI in under 12 months from implementation. The product range is designed to optimize all aspects of an organization’s supply chain and to allow them to fully capitalize on their ERP investment. Prophit® Systems is already the largest supply chain software provider within the APAC region and plans to also become one of the top providers within the North American market.

PRESS RELEASE APAC Supply Chain Solutions Leader PROPHIT SYSTEMS ANNOUNCES U.S. LAUNCH Prophit® Systems Pty Ltd the innovative leader of Supply Chain Software that makes complex supply chains simple, officially opens for business in the United States. First stop Atlanta. Prophit® Systems – Atlanta 3333 Piedmont Road, […]

Supply Chain Forecasting “Playbook”

The New Year brings a time of reflection.

It’s a common time to review how you are tracking to budget and how you see the next twelve months are panning out. Professional sports teams develop set plays that detail. When A happens we respond with B. These teams assembly all their set plays into “playbooks”. These playbooks are learned by all members of the team so that in a split second all players in the team can respond in a coordinated fashion, often with decisive outcomes.

Agile businesses are doing the same. They are using their planning processes to predict what might happen and prepare the set plays specific to their business.

Two recent examples of set plays we’ve been involved in:
1. A customer is running promotions of certain products without giving us the desired notice. They are responding to their competitors promotions. What can we do to support their un-forecast promotional activities?
2. If customer A is successful in acquiring customer B, they will expect improved pricing. How will we respond to their requests. What will be the full impact on our business?

Developing a playbook for the year ahead is not as hard as it seems. In practice this becomes a working document. The exciting outcome of this approach is it can drag your management team’s focus from what happened yesterday, to navigating and side stepping pending issues before they became a crisis.

Step 1.
If you take the time to confirm your best estimate sales forecast, zone in on those products and customers that are performing above forecast and those that are underperforming.
Identify the major risks and the opportunities around these forecasts.
Develop a high and a low range forecast based on a number of these risks and opportunities playing out.
Step 2.
Develop action plans to address the risks and seize the opportunities as they arise.
Step 3.
Phase the action plans according to Go – No Go criteria. These became your set plays.
Empower your staff with these set plays. If these conditions occur, invoke these actions. Then let me know you have done them.
Step 4.
Review monthly, see how your sales are tracking to forecast, review your best estimate, and see how it is tracking. Determine if your corrective actions / set plays are still current and still adequate.

Successful Supply Chain’s require simply but savvy forecasting methodologies with the right collective mind set.

Statistical modelling and supply chain forecasting

When I was first getting started in this business a good friend and colleague who knows a thing or two about statistical modelling advised me; “you must understand your demand before you try to fit a statistical model to it”. This advice has served our team well over the years.

A number of statistical supply chain forecasting tools advocate that they will automatically forecast your demand for you. This is a very enticing sales pitch; it implies that the software will do all the work for you. But before you turn your back on the task of forecasting and leave the software to do its thing, a word of caution:

Statistics are a great tool for summarising and projecting subtle trends in market demand when there is continual sales history;
Statistical tools are poor at predicting demand when the demand is lumpy with periods of no sales. (Examples: Project work, promotions etc.); and
Statistics will not predict abrupt changes to demand such as a customer changing their artwork, or a customer moving production of a particular range of products offshore. By the time your statistical model is responding, your warehouse could already be full of items that particular customer will no longer take!

Scenario

One of our packaging clients had invested in a supply chain forecasting software solution that ‘automatically’ adjusted its forecast algorithms to seek the best fit. The sales team were delighted. They no longer had to spend their time creating forecasts. They no longer needed to talk to the customer about emerging trends or understanding the reasons for errors in previous forecasts. They now had more time to go out and sell more product.

Upon reviewing the plant performance, we found that there had been a significant increase in obsolete stock and key customer DIFOT was below expected levels.

When we attended the demand review the dynamic was interesting. Corrective actions that were assigned to resolve the stock outs, all focused on improving the statistics. Corrective actions to resolve slow moving and obsolete stock resulted in requests for the statistical algorithms to be tweaked. The business was allocating all responsibility for correct forecasts onto the systems statistical algorithms.

When we reviewed the new business, we found that sales had remained static. Some new customers had come on, but new sales to existing customers had declined. Perhaps lack of communication with existing customers was affecting repeat business.

Quick Fix

We continued the use of statistics, but we passed the ownership back to the key account managers.
Specifically we provided a portal where the account managers could adopt the statistical forecasts, or they could override them where they knew the statics were not correct, either way they had to choose the forecast they wanted. The ownership for slow moving and obsolete stock (SLOB) was again pushed back onto the account managers.

We coached the sales staff in conducting Business Review and Development (BRAD) reviews with their key customers to understand sales trends and prepare for future sales opportunities. These meetings were scheduled regularly for key accounts.

Information about pending artwork changes and promotions and other business changes that were identified from these BRAD reviews were utilised by the key account managers to override or correct the statistical forecasts as required.

SLOB dramatically reduced by adjusting the forecasts for known changes in products and lost work.

With increased customer contact, new business from existing customers increased.

The statistical tools continue to give a source of information to the key account managers , but responsibility is now on the account managers themselves to determine if it is correct.

Top TIPS

Forecasting should be owned by those who face the customers;
Statistics are of great assistance, if you understand their limitations; and
Sales can use forecasts to periodically talk to their customers. This builds market intelligence and seeds customer loyalty.

Tim Gray is a supply chain industry commentator and advises several businesses across APAC on supply chain systems. He is the managing director at Prophit Systems.

Mergers & Acquisitions and Sales Forecasting

When it comes to forecasting strategic acquisitions the need for containment can often result in an organisation’s planning functions not being directly involved in the processes. Initial scoping and feasibility is done at high level, and then project teams dive into risk assessments and due diligence functions.

At what point should the plans of these acquisitions be included into an existing planning system?

Scenario

Recently a Prophit Systems’ client successfully acquired a segment of a competitors business, thereby increasing their market share. To keep the details confidential, only a handful of people were involved in the financial modelling, and due diligence process.

When details of the acquisition became public knowledge the information provided was sparse and only available from the company’s senior management team. This created a number of costly problems that could have been easily avoided.

When Prophit Systems was asked to get involved, the client had realised that the sales figures that they had expected were not materialising.

In order to understand the cause of this discrepancy our team needed to compare the detailed sales to the expected sales. Unfortunately, the sales forecasting only existed at consolidated levels in balance sheets. The vendor had not provided detailed sales forecasts but rather historic sales figures.

To gain insight into where the problems were occurring, we built a forecast based on the historic sales. This forecast was detailed to the SKU, location and customer (SKULC) level. Having this level of granularity enabled us to slice the forecast vs. actual comparisons by item, by customer and by location to identify where underperformance was occurring.

It quickly became evident that the underperformance was localised to one account manager and another significant customer. Once the source of the issue was identified the Sales Manager was able to get to the root cause of the problems, and take appropriate action.

Now armed with a detailed forecast the Sales Manager was able to rapidly understand how the new business was performing, and where the hot spots were. Having a consolidated forecast of their finished goods requirements, they were also able to construct accurate projections of their raw material requirements.

The company’s acquisition also saw its total product volume increase by some 40%, and this led to an increase in the overall raw material required by the new-look business. Having detailed information about the consolidated material requirements our team leveraged this information to instigate a round of raw material price negotiations between the company and its suppliers.

Lessons Learnt

Obtain detailed forecasts as early as possible in your M&A transactions.
You will need this to build management targets, to help the transition and to facilitate the speed uptake of the management issues
Use these forecasts to chart your progress, and manage the transition of incorporating the new business. This is a risky time, where clients may jump ship. You need to manage the transition carefully.
Your raw material volume discounts thanks to the increased volume demand in an acquisition can be significant. The sooner the data is available to the various teams within the supply chain the earlier these discounts can be brought to bear.

Forecast with the ‘end’ in mind

Begin with the end in mind.

If you are implementing or reinvigorating a forecasting program, it is important to realistically review where forecasting will provide the most benefit and also which benefits will be most quickly realised.

Scenario

A business I worked with had 7 sites across Australasia, and we were helping them with improving their cost of manufacture. Prior to our engagement the management team had initiated a forecasting program so that they could have better information to run their business.
This business had a little over a thousand SKULs (Stock keeping unit by location). A choice had been made to forecast every SKUL every week out for a rolling year (52 weeks).
So every month they would review approximately 52000 pieces of data (1000 SKUL x 52 weeks) aiming to ratify these forecasts.

Not only was this a horrendous task, it was extremely error prone, it tied up planners at all sites, and created a lot of angst and resentment.
With a little coaxing we were able to confirm three significant reasons to continue forecasting:

The first reason was to ensure they did not run the customer out of stock
The second reason was to plan raw material purchasing on overseas suppliers
The third reason was to facilitate forward planning so idle capacity could be used to stock build for the peak periods

Quick Fix

Once we ratified why the business needed forecasts, we could then ascertain what detail was required and how to refine the system to meet those needs in the simplest way possible.

To ensure the customers were not run out of stock, we loaded the customers 4 week rolling forecasts directly into the execution system for stock replenishment, bypassing the forecasting system all together.

All high value Raw material purchasing had six month lead times. The Capacity modelling was required out 24 months . To satisfy these information requirements we provided an interface to input Forecasts in monthly buckets by customer. We then disaggregated these forecasts using historic usage to split their customer forecasts into SKU level Forecasts. These forecasts were then loaded back into the execution system to plan raw material purchases and do capacity modelling.

The punch line was that instead of managing 52,000 SKUL-period combinations we were able to reduce this 100 fold to 20 customer forecasts over 24 monthly periods. Upon simplifying the process the users found it easy to update their forecasts. The business found it much easier to ratify and therefore trust these forecasts. With confidence in their forecasts, our client dramatically and sustainably reduced their Raw material inventories.

Top TIPS

Understand the main benefits you expect from forecasting
Design the simplest solution that is fit for your business purpose
To seed the habitat and value of forecasting, plan for small wins quickly
Review your process to ensure that you are achieving your expected outcomes

Tim Gray is the principle consultant for StrategicAlliance a supply chain improvement consultancy.

Begin with the end in mind. If you are implementing or reinvigorating a forecasting program, it is important to realistically review where forecasting will provide the most benefit and also which benefits will be most quickly realised. Scenario A business I worked with had 7 sites across Australasia, and we […]

Do you understand the weaknesses in your supply chain?

As a SCM solutions provider we understand that there are an infinite number of variables that influence a supply chain’s efficacy. This fact can make identifying the true culprit of a supply chain failure incredibly difficult. In many cases when there is a catastrophic failure within a supply chain managers tend to look for direct cause and this in most cases will be identified as one or two outside forces that were beyond their control. However, what these witch hunts fail to do is look at the bigger picture and identify all the factors that contributed to a supply chain disruption.

In John Manners-Bell’s book, Supply Chain Risk, he draws parallels between the Swiss Cheese Model and supply chain management. The Swiss Cheese Model was developed by academics in the risk analysis field. The gist of the model is that factors contributing to everyday operating procedures can be present for long periods of time without showing any symptoms of contributing to a potential adverse effect. It is only once a specific set of these dormant factors come together that operating conditions will see upheaval.

“All organisations have latent conditions – on their own they do not result in catastrophic failure. However, what is required is an ‘active failure’ which, when these latent conditions align across a network or organisation triggers a disastrous event.”

John goes on to provide an example which most people managing supply chains can relate to.

Imagine a carrier carrying key components to a factory is late with its delivery. Consequently, the factory has to shut down or 24 hours, which sees millions of dollars of production lost. The most obvious culprit to this scenario is the carrier itself.

However, what if the company in question whose factory is standing dormant waiting for the parts was actively pursuing leaner manufacturing, which in turn, had seen a minimisation of inventory and safety stock? What if procurement had also minimised their cost by sourcing parts from a foreign-based supplier and an earlier shipment had been rejected due to a failed quality inspection?

What if when appointing the new supplier the new lead-times had not been accurately accounted for and the potential for something going wrong along the new delivery route hadn’t been factored into planning and forecasting models?

Now all of a sudden the carrier (and the driver responsible for the delivery who was subsequently ‘let go’) aren’t solely responsible for the loss in revenue. In this case management and the relevant systems need to own a lion’s share of the responsibility for the failure.

This reality plays a major role in how we at Prophit Systems develop and implement our offering. We focus on making the input of variables as easy and error free as possible, while making sure that triggers are in place that will alert managers of any potential future anomalies that could impact any part of the supply chain. Furthermore, our reporting tools are designed to deliver transparent insights so that the combination of factors that led to a negative outcome can be identified and addressed.

A Checklist for 2015

The New Year brings a time of reflection.

It is a common time to review how you are tracking to budget and how you see the next twelve months are panning out.

Agile businesses using their planning processes to predict what might happen, and prepare the practical action plans, specific to their business.

Two recent examples of action plan generation we have been involved in include:
– A company running promotions of certain products without giving our client the desired notice. They are responding to their competitors’ promotions, and cannot give the requested lead time. With this understanding, we have developed strategies to support these un-forecasted promotional activities.
– A competitor attempts to acquire a customer from our client. One of these two customers enjoys lower costs because of their volumes. They will expect improved pricing across both portfolios. Not sure I follow these 2 lines. Being prepared for the pending price negotiations, my client is now preparing defensive strategies to achieve cost downs, without sacrificing margin.

Developing a playbook for the year ahead is not as hard as it seems, if you follow the basic steps identified below:

Step 1.
Take the time to confirm you best estimate sales forecast, zone in on those products and customers that are performing above forecast, and those that are underperforming.

Identify the major risks and the opportunities around these forecasts.

Develop a high and a low range forecast based on a number of these risks and opportunities playing out.

Step 2.
Confirm the business consequences and corrective actions if you hit these high or low forecasts.

Develop action plans to address the risks and seize the opportunities as they arise. These will become your set action plans that will help you stay on the high side of your forecasts.

Step 3.
Phase the action plans according to ‘Go – No Go’ criteria. These become your set action plans.
Empower your staff with these set action plans. If these ‘Go’ conditions have occurred then invoke the action plans. (i.e execute the action plans and then confirm that you have done them.)

Step 4.
Review weekly and monthly, see how your sales are tracking to forecast, review your best estimate, and see how it is tracking. Determine if your corrective actions / set plays are still current and still adequate.

In practice these forecasts and set action plans become a working document. The exciting outcome of this approach is two fold: first you will find you are responding to opportunities much faster than if you are purely reactive,

Secondly your management team will feel and act more in control, as they look ahead at what will happen, rather than steering the company by looking in the rear view mirror.

Question – does this approach increase the likelihood of achieving desired approach? If yes, how? Hard ROI? Soft ROI? The 2 outcomes above seem to move to a soft ROI. Answering this question with both hard ROI and soft ROI will motivate the companies to follow your approach.

The New Year brings a time of reflection. It is a common time to review how you are tracking to budget and how you see the next twelve months are panning out. Agile businesses using their planning processes to predict what might happen, and prepare the practical action plans, specific […]

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