Yesterday’s post discussed the first day of the 2010 Council of Supply Chain Management Professionals (CSCMP) Annual Conference held in San Diego this week. In that post, I provided a link to a Supply Chain Digest video overview of the first day’s events. The magazine also posted a video overview of the second day’s events [CSCMP 2010 Day 2 Video Review]. In the latest overview, Supply Chain Digest‘s editor-in-chief, Dan Gilmore, is joined by Kate Vitasek, founder of Supply Chain Visions. The video runs about twenty minutes.
As I noted in yesterday’s post, I took part on a panel moderated by supply chain analyst Lora Cecere. Lora posted her own thoughts on the panel in her blog Supply Chain Shaman. Here is some of what she wrote:
“Want to save millions? Maybe even billions? According to my panelists on Monday morning, September 27th, at The Council of Supply Chain Management (CSCMP), it comes down to rethinking the ‘How’ and ‘What’ of Distribution Requirements Planning (DRP). DRP, MRP and ERP are push-based applications. They work from the inside of the enterprise out. Demand-driven value networks, a more effective design, require a pull-based signal from the outside-in. They also require flexibility. These traditional systems are rigid. The response is based on fixed, often inflexible rules. When demand volatility is low and inventory costs inconsequential, there is little impetus to change. However, in this time, of rising supply chain risk, increasing volatility, and pressure on working capital, two companies– Conair and Procter & Gamble – partnered with two best of breed vendors to tackle the problem with two very different, but synergistic approaches. This was the topic of my panel. I was joined by Jake Barr, Global Director of Procter & Gamble; Robert Byrne of Terra Technology; Jon Harding, CIO of Conair; and Steve DeAngelis, CEO of Enterra Solutions. Here I share insights from the panel.”
If you have followed what Lora has written in her blog, you know that she believes traditional systems need to change and much better information sharing needs to take place up and down the supply chain. She believes the future will be demand driven, but more near-real-time data sharing is going to have to take place to realize fully the benefits of a demand driven supply chain. She continues:
“Conair tackled the ‘how’ of replenishment. Known for the iconic hair dryer, Conair manufacturers a wide range of hair accessories and appliances. The company is privately held with revenues of 1 Billion. A competitive industry, Conair shifted 90% of production to China to reduce costs. However, in the face of rising costs of compliance fees, the COO of Conair searched for a solution. (Compliance fees equal 2.7% of revenues for consumer durable industry manufacturers. They affect the balance sheet in the form of deductions.) It is a tough problem. Retailer rules change frequently, often with little notice. The system for rule publication is not very sophisticated: often ad-hoc posting on the retailer’s portal. Conair threw people at the problem, but they could not keep up. Through a unique set of circumstances, the COO of Conair discovered Enterra Solutions. Enterra, fresh from building rules-based ontology solutions (artificial intelligence) to help sense security issues in the middle east, went to work on the problem. They built a system that senses rule changes, gives early warning on potential incidents and serves as a system of record to improve deduction resolution. Within 9 months, the solution saved Conair millions in fines and reduced staffing. It is so successful, that Enterra is now packaging the Software as a Service (SaaS) solution to help other manufacturers.”
Obviously, that is the kind of feedback that any company would like to receive. Here’s what Lora had to say about the rest of the panel discussion:
“For most companies in the room, the ‘what’ of DRP, or changing replenishment logic to improve out-of-stocks and prevent short-cycling of manufacturing was top of mind. In this area of the supply chain, P&G is the hands-down leader. For the last six years, Procter & Gamble has been hard at work solving this problem by improving demand sensing. In the words of Jake Barr, Global Director, Procter & Gamble, ‘We want to produce the products that we need only when we need them. Our systems are lean, and we need to be able to operate with shorter cycles. Demand sensing helps us achieve this.’ Jake attributes the implementation of Terra Technology Multi-Enterprise Sensing to improving demand forecast accuracy and reducing billions in inventory. So much so, that he now has a new goal. He now wants to use the supply chain to fuel growth.”
Before continuing with Lora’s comments, it’s worth pausing to consider the profundity of the statement that the supply chain can be used as a tool to fuel growth. Most often people consider supply chain investments part of the cost of doing business. As a result, they are looking to reduce costs in the supply chain as much as they can. As supply chain systems begin to sense and respond, how people think about supply chains could change dramatically. We might be at a tipping point. Lora concludes:
“Terra Technology’s multi-enterprise demand sensing engine uses multiple forms of downstream data – store transactions, retailer warehouse inventories, retailer shipments and orders – to find the best combination of downstream data to represent the true need for channel replenishment. The signal is used in the short-term horizon (one to four weeks) to set inventory targets and align supply. It has been successfully deployed in both modern trade and emerging economy supply chains. When asked by the audience, if this made the supply chain ‘twitchy’, Jake smiled. Why? Underlying Jake’s success to use the better signal from Terra Technology is P&G’s hard work on short-cycle, right-first-time manufacturing. In the face of the need for more flexible, dynamic supply chains, the traditional definitions of Advanced Planning Solutions (APS) and Enterprise Resource Planning (ERP) are crumbling. Companies are turning to new players and new techniques. This type of innovation, I think, will define the true supply chain of the future.”
When you consider the fact that there is an emerging global middle class consisting of millions (if not billions) of new consumers, it doesn’t take one long to realize that the importance of supply chains is only going to increase. If sense and respond systems can be implemented that turn supply chains into tools that fuel growth, all the better.