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In this together: Jason Barclay, Picme (November/December 2008)
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Companies have often talked about supply chain improvement, but what does this really mean
in an environment where direct purchase cost is the key?
Currently, manufacturers are able to pass on price rises throughout the supply chain for the
ever-increasing cost of energy and raw materials, but is this sustainable in the medium to long
term? And can consumers afford this additional outlay?
If we consider true lead times, it is not unreasonable to assume that products being made
upstream today will not reach the end consumer for several months. To improve efficiency, and
therefore cost, organisations within supply chains need to work together to determine what
creates value and how to make it flow quickly along the supply chain.
If we consider the entire length of supply chains, organisations need to develop new ways of working between them that
reduce overall cost, lead time, inventory and the subsequent working capital involved. And traditional methods of reviewing
supply chain performance need to be replaced to meet the challenges ahead. Simply calculating earnings before tax and
deprecation will not motivate companies to seek decreasing lead times.
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BRIC building: Nick Gill, Capgemini (September 2008)
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Until recently, emerging market economies were mainly thought of as a source of low-cost
manufacturing and cheap labour. This view led to substantial increases in the foreign direct
investment (FDI) in these countries from the early 1990s onwards, as more industries became
globalised and companies in the developed nations attempted to gain access to the rapidly
growing domestic economies of the BRIC nations – Brazil, Russia, India and China.
A less-reported but growing trend, however, has been the growth in outward foreign investment
from these emerging economies. Although FDI from BRIC nations is still small compared to that
from developed countries, it is fuelled by inward investment and strong growth in their home
economies.
This growth is allowing emerging multinationals to manifest ambitious internationalisation
objectives that threaten the Western business model and promise to reshape the current
business landscape.
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Leaning towards innovation: Nigel Issa, Atos Consulting (August 2008)
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Today there is a clear distinction in performance between organisations that invest in their product innovation capabilities and
those that do not.
The global economy enables businesses to rapidly eliminate competitive operational cost advantages through outsourcing and
low-cost country production. As a result, organisations are increasingly competing and sustaining competitive advantage
through innovation. This means pressures to innovate have never been greater, which in turn generates greater pressure on
companies’ product innovation capability. The need to compete via innovation has been heightened by increased regulation and specialisation of consumer needs. As a
result, the velocity and volume of demand for new or customised products has significantly increased.
Von Braun in The Innovation War (1997) found that: “Since the 1950s product lifecycles have shrunk by a factor of four as a
result of the accelerating pace of innovation.” The implication is that organisations have to innovate more – ie, bring more
products to market – in shorter timeframes than they were previously used to.
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Think now, save later: Gideon Hillman, Hillman Consulting (May 2008)
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The debate about extending the use of RFID across supply chains and negating barcodes has gone on for many years and will
doubtless continue for many more. But whether it’s conducted in the media or at conferences, the debate is usually being
argued by individuals with significant sector and technology knowledge and presented to an audience who may not have the
same level of understanding, but are the intended users of RFID technology.
What companies really need is a short, simple summarised overview that helps them to increase their awareness of the needs,
wants, do’s and don’ts when planning their RFID supply chain systems.
The single most important message is that defined objectives and planning are paramount.
It is recognised that RFID will enable – and already has in some cases – a new era of business optimisation, managing and
increasing efficiencies throughout the supply chain. However knowing that it can assist your business, and understanding how
it will do so, are two very different things – let alone knowing how to actually implement a system that provides a sound return
on the investment, whilst meeting your objectives.
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Missing link?: Adam Jura, Datamonitor (April 2008)
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Agility is a term that’s been used extensively within the manufacturing industry in recent years. It’s been applied to
areas such as IT, production, go-to-market, supply chain and even talent management, and it doesn’t look like abating.
What makes it such a fascinating concept is that there is no end point for manufacturing companies – it’s a constant
struggle to improve on existing operations and processes. But actually achieving this agility can be challenging for
companies that ultimately have a wide range of operational concerns.
Datamonitor’s research into the manufacturing industry has highlighted a number of strategies that companies can execute
to drive agility across organisational units and functions. Not least of these is linking plant-floor and enterprise systems –
the subject of Datamonitor’s recent report, Linking plant-floor and enterprise systems for greater manufacturing agility.
The two environments of the plant-floor and the enterprise have traditionally been disparate, as manufacturing
companies invest in what are effectively divergent IT strategies.
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Staying power: Greg Cudahy, Thomas Jacobson & Tiago Salvador, Accenture (Jan 08)
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These days, there’s no question that more and more companies are recognising the key role pricing plays in improving
performance. This growing awareness of the need for strategic pricing has led to a surge in the use of sophisticated pricing
optimisation software – and a noticeable increase in the ranks of chief pricing officers.
Yet, in reality, most companies’ pricing competencies are paper thin. Despite pockets of analytical expertise in pricing at many
organisations, the insights gained are not getting to where strategic pricing decisions are being made.
There are abundant examples – which financial analysts are all too familiar with – of companies being drawn into bloody
price battles; and other companies are in danger of defaulting to a ‘win-at-any-price’ mentality as soon as the economy
weakens.
Companies are developing a sense of their customers’ willingness to pay based on demographic and geographic factors. But
on their own, these and other capabilities cannot consistently test or track the effectiveness of various pricing moves. In short,
most of today’s pricing capabilities are simply not sustainable.
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All-seeing software: Simon Holloway, Bloor Research (November 2007)
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Scenario 1 – No-one needs to tell you that hospitals are busy, sometimes hectic, places. Patients, doctors, staff and
equipment are continually on the move. Scenario 2 – Production shopfloors and warehouses can be littered with expensive assets that people cannot find quickly
enough to answer the urgent order. Scenario 3 – How many people are in a facility prior to the fire alarm going off? Locating people and especially equipment
can be a time-consuming and frustrating task.
In all these scenarios, real-time locating systems (RTLS) can help. But what is an RTLS? Well it is any wireless technology
that can be used to continuously determine and track the real-time location of assets and personnel.
An RTLS solution typically works by utilising battery-operated radio tags and a cellular locating system which detects the
presence and location of the tags. The locating system is usually deployed as a matrix of locating devices installed at a
spacing of anywhere from 50 to 1,000 feet. These locating devices determine the locations of the radio tags.
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Treasure hunt: Barry Payne, Chandresh Harjivan & Mark Deck, PRTM (September 07)
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Procter & Gamble. Eli Lilly. Boeing. These three companies, all at the top of their game, have
something important in common: technology scouting, the ability to rapidly identify and locate
emerging technologies to develop innovative products.
This is no coincidence. For the third year in a row, the Economist Intelligence Unit’s survey of
CEOs has reported that the failure to innovate is the one of the top risks faced in developed
markets today. Indeed, 45% of participants in its 2007 CEO Briefing survey said they plan to
rely more on outside sources of innovation over the next three years.
As more and more companies realise, traditional approaches to innovation – where R&D
organisations conceive and develop ideas internally – are no longer sufficient. To remain
competitive, it’s now critical to supplement internal efforts with new technologies from the outside.
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Wisdom of crowds: Tony Fish (June 2007)
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Web 2.0 (two dot zero) as a movement is about the network effect, collective intelligence, wisdom of crowds, tribes, clans,
clubs and all other manner of long-tail matters.
Web 2.0 is the passing phase from the first manifestation, 1.0 – which centred on cost reduction – to the intelligent web.
Moving from 1.0 to 2.0 is the same as moving from separation, isolation and solitude to relationship, engagement and
conversation. 2.0 companies are being built on a number of principles, which are different and have a significant impact on
back-office systems, the supply chain and channels.
The Web 2.0 movement collected its name in October 2005 – when Web 2.0 was first described by Tim O’Reilly
(www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html). The movement has at its heart an ideology of
‘harnessing collective intelligence’. The intelligence arises from consumers; as users interact with websites, they provide data
on what is liked, wanted, demanded or worth sharing.
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Wasting away: Ian Curling, PSM Consulting Services (May 2007)
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In the western world, according to the experts, one in three of us is destined to become
overweight. There seems to be very little evidence of any trend towards ‘leanness’. Except
for supermodels, personal success seems to be reflected more in kilos added rather than
kilos lost!
So is this trend for the individual also being reflected in the health and wealth of the
business corporation? It is 16 years since Womack, Jones and Roos gave new life to the
concept of ‘lean’ in their landmark book ‘The Machine that Changed the World’, and it is 10
years since they applied lean thinking to the total corporation, not just the manufacturing
processes.
So in the last 10 years what have you really done to embrace leanness in the way you think
and act in your business enterprise?
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From plastic planes to asthma inhalers: Tony Cronshaw, PA Consulting (March 07)
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What do these products have in common: the ‘Femidom’ female condom, an aircraft made with
composite materials, and the latest asthma inhaler? The answer is that all of these innovations,
along with a raft of other ‘breakthrough products’, are pushing the boundaries of product
complexity to new levels. At the same time, they present unprecedented challenges in terms of
quality assurance (QA).
The reason that western companies are moving to ever more sophisticated manufacturing is
clear: products with genuine ‘breakthrough’ features can command a premium in the market.
Whether it’s a new type of condom giving women more choice and control, quieter and more
fuel efficient aircraft, premium food/beverages or the latest type of asthma inhaler, these
innovations typify a trend to design advanced products that deliver new benefits for the
customer, whilst restoring sales premiums otherwise eroded by low-cost imports.
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The ultimate profit opportunity: A Mukherjee/R Sipcic, Accenture (January 2007)
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To make informed forecasting and replenishment decisions, many companies bring together operational elements of production
and distribution with sales and marketing, executing sales and operations planning (S&OP) collaborative improvement processes.
As cross-functional and consensus-based processes, S&OP activities create value by keeping supply and demand in balance.
But most S&OP arrangements fail to consider or fully account for the effects of pricing and promotional strategies on the
upstream supply chain.
So how does the use of sales and marketing instruments affect upstream replenishment capabilities and overall profitability?
How do capacity, lead times and production status relate to a company’s ability to react to pricing or promotions-induced
demand swings?
Companies should extend the traditional S&OP process to include joint pricing and operational tactics. As Accenture’s
research and client experience confirms, this combined effort can help maximise a company’s profitability and accelerate its
journey to high performance.
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What's new?: Professor Robert Austin, Harvard Business School (November 2006)
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The future belongs to those who know how to create new things. I said this to a friend of mine,
a world-class product development manager, and he had this to say: “That’s right! We’ve got to
get manufacturing back in this country!”
But that’s not what I mean by ‘new’. There is, of course, a sense in which a manufactured
product – say, a new car rolling off an assembly line – is new. That particular car has not
existed in the world before. But there is also a sense in which that car is not at all new.
Before anyone performs the first operation involved in making a car on an assembly line, the
car and the process for making it are completely pre-specified in exacting detail. If there is
anything surprising about the car that results – if it is different from the product prespecification
in any way – we have a phrase for that: we call it a ‘quality problem’.
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Tales of the unexpected: Simon Bragg, ARC Advisory Group (September 2006)
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What if forecasts were 100% accurate, both in terms of the timing and quantity of customer orders? What if production
adhered to its planned schedules and suppliers always delivered on time, in full, with the right paperwork? Then supply
chain management would be trivially simple. The main issues would probably be supply chain design, perhaps
execution automation, and some optimised routing and scheduling. In this nightmare scenario, supply chain
management would be so trivial that most supply chain managers, consultants and analysts would be out of a job.
Thankfully, forecasts are lucky or lousy, production always runs into unexpected problems, and suppliers are unreliable.
It is, therefore, how uncertainty is managed that is the key supply chain problem. The challenge is to build a supply
chain that is robust against demand, production and supply uncertainties.
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Good and bad complexity: Nick Toone, Arthur D Little (June 2006)
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Dealing with organisational complexity has become an ever-increasing preoccupation for the boards of multinational
corporations. One key to the success of the best companies is the way they deal with complexity. Some have realised that the
complexity of a product or service offering is often a larger drag on profits and growth than any other single factor in a
business. For others, complexity has driven outstanding market returns and prevented the entry of competitors.
The most obvious sign of increasing complexity in business is an ever-broadening portfolio of products and services. Most
multinationals face constantly changing customer requirements, globalisation and intensifying competition. This, coupled with a
desire for growth, leads to a diversification and expansion of their product and service offerings, increased product
customisation, multiple distribution channels and differentiated service bundles.
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Breaking down the barriers to efficiency: Batey/Hoey/Evans, Capgemini (April 06)
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The drive to increase business efficiency is now a survival issue. Globalisation and internet commerce bring mounting
competition from low-cost producers. Along with cost pressures, organisations face demands for improved customer
service and reduced order-to-delivery lead times.
To remain competitive, businesses must re-invent themselves radically and fast. The solution we advocate here is a
‘shared service’ approach, which redefines selected operations as a series of interconnected services to replace
traditional independent functions. This approach is already well-established for back-office functions like procurement,
but now it can be successfully applied also to front and middle-office functions.
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Negative chain reaction: Gary Flood (February 2006)
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Though the Davos 2006 conference didn’t result in either any major anti-capitalist riots, or even that much useful
intellectual fodder, it did feature one very interesting discovery: the world, as anyone knows, is flat. Or at least this is the
current popular metaphor describing the impact of globalisation, and a useful insight into the global manufacturing chain
as it now stands.
The thesis is that more parts of the global economy have built up sufficient infrastructure to become part of the ‘alwayson’
world. BT CEO Ben Verwaayen was quoted at the conference as saying: “For the first time, you don’t need physical
proximity for a joined-up company.” He went on to characterise the phenomenon as equally “disruptive as the invention
of the steam engine”. Likewise Microsoft supremo Bill Gates pointed out that the People’s Republic of China already
has more cellphone users than the US and in four years will have more broadband connections than there are
households in America.
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What's the future for EAM?: John Hookham, Adrelia (November 2005)
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Information technology has transformed all aspects of manufacturing industry, allowing the introduction of Just-In-Time
and lean manufacturing. Technology has also changed the structure of factories and manufacturing plants. Where once
there might have been perhaps six production lines each with a team of operators, these have been replaced by a
single line requiring just two operators. These types of advances have not only had an impact on the production
department but have also changed the way companies have viewed the maintenance department.
In many cases the maintenance department operated outside the mainstream company business processes. While
production and finance deployed integrated enterprise resource planning (ERP) systems, the maintenance department
continued with its T-Card systems and filing cabinets. Maintenance was the ‘Cinderella’ of British industry, excluded
from the IT ball. However, companies are increasingly seeing plant maintenance as an investment rather than as a cost.
And where previously maintenance could operate as a separate entity, today changes in the production system need to
reflect back into the maintenance system.
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Model learning: David Corben, DSC Consulting (October 2005)
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System dynamics (SD) is a way of using computer simulation to explore the behaviour of systems over time. It focuses
on problem solving by way of redesigning systems and policies. SD was developed by Jay Forrester at MIT in the
1960s, and since then it has been used to study a wide range of business systems. Supply chains were amongst the
first systems to be modelled with SD – in fact most of ‘Industrial Dynamics’, the book that launched SD, is based on
modelling a production and distribution system.
The key idea of system dynamics is that the dynamic behaviour generated by a system is caused by the structure of
that system.
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All-seeing supply chain: A Ross/D Carter, Supply Chain Analytics (June 05)
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Probably the greatest challenge in achieving supply chain excellence is knowing when and where to take action and,
conversely, when to leave things alone. This applies both to short-term tactical actions around identifying and fixing a
fulfilment problem, and longer-term actions concerning improvement activities across the supply chain. And the reason
this is a major challenge is down to the sheer scope of the activities and resources that make up what we call the
supply chain.
Whilst the individual functions within the supply chain – such as production, purchasing, distribution, etc – have their
own specific procedures and ways of working, in most organisations these are focused on meeting functional targets,
not those of the overall supply chain. This is because the people working in these functions typically have clearly
defined functional targets and metrics, but lack both strong supply chain targets and metrics and visibility of the broader
supply chain.
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Why NFC is key to RFID: Tim Jefferson, The Human Chain (July 2005)
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Most people believe that retail and supply chain are the only areas where RFID technology can deliver significant
business benefits. But new technology and standards around using RFID as a short-range wireless technology may
provide significant business improvements in a wider range of vertical markets.
There is a now a number of different short-range wireless technologies, such as: Near Field Communications (NFC), including the ISO/IEC 14443, MIFARE and FeliCa standards; Ultra Wide Band (UWB) – IEEE 802.15.3 IEEE 802.15.3a; Zigbee – IEEE 802.15.4; and Bluetooth.
All these technologies provide short (less than 10 metres) wireless connectivity and have had various success in
providing connectivity for data and voice solutions.
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