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New Research Report from APICS: What’s Keeping Supply Chain Leaders up at Night

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APICS and Michigan State University have recently partnered to research top concerns among leaders of supply chain management. This week, both organizations released their latest joint research report: Supply Chain Issues: What’s Keeping Supply Chain APICS- professional association for supply chain and operations managementManagers Awake at Night? (Report also available for complimentary downloading)

This research represents Michigan State’s research efforts profiling challenges among more than 50 supply chain organizations. Supply chain management executives were asked to assess the challenges their organizations are currently facing along with new opportunities. The research effort was led by David J. Closs, Department Chair and John H. McConnell Chair in Business Administration and Patricia J. Daugherty, Bowersox-Thull Chair in Logistics and Supply Chain Management at Michigan State University.

The six most common issues that were cited by executives were:

  1. Capacity /resource availability
  2. Talent
  3. Complexity
  4. Threats/challenges
  5. Compliance
  6. Cost/purchasing challenges

Upon reviewing the report, Supply Chain Matters noted lots of common theme similarities that have been identified by other multi-industry focused executive surveys. An important difference in this latest APICS-Michigan State report, however,  was how talent issues, namely  recruitment, retention, or skills development, permeates all of the other five areas of executive concern. Much of this was summarized in the citing of one executive’s statement:

It’s a different type of talent that we’re going to need if we’re going to keep up with the pace of change.

A further common challenge identified by this Michigan State as well as other surveys, is the impact that B2C or B2B Omni-channel business is having on supply chain complexity, SKU proliferation, process and system complexity as well as costs. Similar themes were raised in the third annual PWC Viewpoint study involving 300 retail and consumer goods CEO’s that was administered in late 2015. That survey concluded that over 80 percent of executives were still attempting to breakdown the organizational silos that were hampering a singular Omni-channel customer fulfillment experience. That activity invariably impacts the supply chain in many different dimensions.

Our readers will likely find other common themes and concerns identified in each of the areas. In conjunction with its latest research series, APICS has announced a series of upcoming webinars addressing topics such as capabilities, costing, global talent development, purchasing, sustainability, Omni-channel and complexity.


Uncovering Hidden Cash Lurking in Existing Business Systems

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In today’s business environment of high global uncertainty, activist investor influence and global manufacturing activity contraction, industry supply chains are once again under pressure to uncover opportunities for reducing costs. It seem as though the mantra continues to be a constant effort to drive down costs, increase efficiency and profitability.

After many months, and perhaps years of cost-cutting, the effort becomes harder and harder.

But, what if there are hidden opportunities that have been overlooked up to this point? What if built-up inefficiencies among existing business processes and supporting software applications are driving unnecessary inefficiencies and cost?

This type of opportunity for discovery of hidden opportunities for cost reduction and cash generation can often manifest in complex and precision engineered business systems environments such as SAP ERP.  Without constant diligence to exception reports or data misalignments, the system can inadvertently prompt its own set of inefficiencies and cost burdens. Areas of opportunity to uncover such hidden cash opportunities can be in procurement, inventory management, supply chain operations or customer service.

As an example, perhaps the single most common byproduct of an imbalance of product supply and demand can be excess open procurement and inventory.  The more complex in terms of number of plants, product lines, ERP instances, and the larger the potential exposure.  In SAP ERP environments, when demand shifts downward, MRP creates an Exception Notice in a process termed MD04.  If there is not constant review of MD04, unneeded and excess component supply continues to flow in.  Real cash money is spent to pay the supplier, the freight, the receiving dock workers, and locations in the warehouse are taken up.  The problem can become more compounded in industries such as food and pharmaceuticals where raw materials inventories have shelf-life expiration and there are added risks for unnecessary inventory write-downs.

Another area of potential inefficiency is data misalignment. In the day-to-day pressures to get work completed and customer orders fulfilled, teams can be innovative to find ways to work around systems for the sake of time. Transactional data errors where users inadvertently do not update a completed process in the ERP system cause the system to view orders as incomplete when they really are complete. When multiple organizations or teams download and modify data in individual Excel spreadsheets without closing the data loop in the backbone ERP applications supporting business processes, other system misalignments occur. The result can often be undiscovered bloated inventory.

What if a technology vendor, with multiple years of built-up experience in uncovering hidden value in SAP ERP environments offered over a period of just five days, the opportunity for customers to uncover at least 10 times more in hidden business costs in their SAP ERP environments or the evaluation is complimentary?

Readers may want to checkout Supply Chain Matters sponsor Every Angle Software’s announced Business Value Discovery program offering. It includes an analysis of business value draining activities and an evaluation of results monetized into optimistic, realistic and pessimistic categories. Every Angle will produce an additional proposal to realize quick win savings along with recommendations to harness longer-term recurring ones as well.

Bob Ferrari

Disclosure: Every Angle Software is one of other sponsors of the Supply Chain Matters blog.


Top Ten Most Read 2015 Supply Chain Matters Content

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This Editor had the opportunity to view our Supply Chain Matters readership analytics (thanks to Google Analytics) for all of 2015 and can now share our ten most popular 2015 commentaries during the year.  Supply Chain Matters Blog

In reverse order:

Number 10

Highlights of the APICS Annual 2015 Conference held in Las Vegas in October, and specifically ex-GE CEO Jack Welch’s keynote interview. Welch expressed a number of insights on the topic of leadership, and more specifically, supply chain management, and the professionals who manage today’s supply chains. We are very pleased that this commentary made our top ten.

Number Nine

Our September commentary related to Tesla Motors contracting of strategic supply of lithium for its new gigafactory. Our commentary addressed the  broader strategy unfolding, one that extends beyond automotive supply chain needs, including the power storage needs of homes and businesses. The site was chosen because of its close proximity to supplies of the all-important raw material of lithium as well as to the Tesla factory in California.

It seems that our readers were quite interested in all news related to Tesla  since the auto manufacturer appears twice in our Top Ten.

Number Eight

Our July commentary addressing the needs of supply chain business intelligence for SAP environments, specifically that as supply chain business processes become ever more complex, teams try to fill the gaps with downloads of static reports and ancillary spreadsheets to provide more meaningful operational analysis. We felt and sense that this is indeed representative of the broader SAP community, and brought awareness to other options. Our commentary brought wider attention to Supply Chain Matters Named sponsor Every Angle Software who’s self-service operationally focused business intelligence tool includes an extensive list of European installed base customers with SAP backbones.

Number Seven

Our January commentary, “Extended supply chain” is the new supply chain, a guest contribution by Prashant Mendki, Director Alliances and Business Development for supply chain systems integrator Bristlecone. The commentary called for a holistic “integrated extended supply chain” rather than independent business processes where the entire ecosystem would be treated as part of the supply chain, and where suppliers would have complete visibility into key customer demand and have their response plan ready.

Number Six

Our September market education commentary bringing visibility to Xerox’s new more cost affordable smart labeling technology and the availability of two printed electronic labels that can collect and store information about either the authenticity or condition of products flowing across the supply chain. From our lens, the availability of such advanced labeling technology will foster new, more affordable dimensions of item level tracking, security and authenticity specifically related to products. This author characterized the development as the dawning of item-level tracking technology that industry supply chain teams have versioned for quite some time.

Number Five

The highlights of our Supply Chain Matters interview with Irfan Khan, CEO of Bristlecone while attending the Gartner Supply Chain Executive conference. Our interview touched upon a number of areas including predictive analytics applied to supply chain decision-making needs. Irfan opined that mainstream acceptance of the full spectrum of smarter analytics (Descriptive, Prescriptive and Cognitive) applied to supply chain and manufacturing capabilities will take additional time for most organizations to be fully prepared to leverage. He confirmed organizational change management readiness and client skill impacts that take time to work through

Number Four

Oracle’s July announcement of expansion of public cloud capabilities applied to order fulfillment, specifically Oracle Order Management Cloud and Oracle Global Order Promising Cloud. Out takeaway for readers was that Oracle remained committed toward a broader development and release plan surrounding SCM applications in the public cloud platform than perhaps other competitors such as SAP.

Later in 2015, in conjunction with Oracle Open World, the full Oracle SCM Cloud suite was announced by Larry Ellison in his opening keynote. From our lens, Oracle had developed one of the broadest cross-functional supply chain management, public cloud based applications currently available in the marketplace. That stated, there are qualifiers in that this public cloud suite provides standard functionality as opposed to the ability to support customized customer business needs. Its strength resides in faster time-to-value and potentially lower IT infrastructure deployment costs.

Number Three

Our highlights and impressions regarding the FedEx acquisition of both Genco and Bongo International. Genco was one of the largest 3PL’s in North America and Bongo International provides an e-commerce platform that facilitates international customers purchasing items from domestic websites.  We were intrigued by the low price paid for Genco which as less than current earnings.

Number Two

Our February commentary reflecting on Tesla’s operating results reflecting some supply chain strainsOur observation was that while showing some supply chain strains at the end of 2014, even more challenges remained for Tesla’s supply chain in 2015. Tesla has often demonstrated the effective use of advanced technology applied to manufacturing and supply chain business processes, and that 2015 will be no exception to that trend.

We just published a follow-on commentary reflecting on Tesla’s 2015 delivery performance leaving some Model X customers rather frustrated.

 

Finally, our Number One most read 2015 content was:

Our unveiling of the full listing of 2016 Predictions for Industry and Global Supply Chains published on December 15th.  We interpret that to mean that our readers are keenly focused on what lies ahead in the New Year, and that’s OK with us.

 

We trust that all of our line-of-business, IT and cross-functional supply chain readers have gained value and insight from our independent lens on supply chain focused business developments, business process and technology challenges among various industry and global perspectives. We believe we have accumulated a truly in-depth library of industry-specific and functional content.

Once again, as we enter our ninth year and remaining as a top ten or top twenty-five presence among supply chain blogs, we again thank our loyal global based readers and our sponsors for their continuing support.

Bob Ferrari, Founder and Executive Editor

© 2016 The Ferrari Consulting and Research Group and the Supply Chain Matters® blog.

Content appearing on Supply Chain Matters® may not be used by any third party without written permission of the author and/or our parent, The Ferrari Consulting and Research Group LLC.


Boeing Agrees to Pay Fine and Submit to Enhanced Quality Compliance Systems

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In what is being reported as a first-of-its kind settlement with U.S. federal regulators, Boeing has agreed to pay $12 million in penalties as part of a settlement mandating Boeing 737Max Linetighter oversight of suppliers and tighter quality controls inside its own production facilities.

This settlement resolves 13 pending or potential civil enforcement cases with the Federal Aviation Administration (FAA).  According to reports, the settlement subjects Boeing to as much as $24 million in additional penalties if manufacturing, auditing and regulatory reporting improvements are not implemented in the coming five years.

In its announcement, the FAA stressed the importance of internal corporate controls to insure that the design-to-manufacturing to maintenance processes are “operating according to the highest standards.” FAA Administrator Michael Huerta stated:

Compliance requires all certificate holders to develop and implement internal controls that ensure they’re operating according to the highest standards. “Boeing has agreed to implement improvements in its design, planning, production and maintenance planning processes, and has already implemented several of these improvements.”

Process areas cited for attention include, among others:

  • Improved management and accountability systems including a requirement that Boeing managers review regulatory compliance performance.
  • Improvement in internal audit processes across designated processes with audit teams reporting directly to Boeing’s Vice President of Quality.
  • Enhanced supplier management to determine whether incomplete work is being accepted.
  • Review and simplify at least 15 process specifications used to design, build, deliver and support Boeing products.
  • Report to the FAA at least on an annual basis on the effectiveness of Boeing’s regulatory compliance activities including a final comprehensive report after the fifth year of the agreement.

According to the FAA statement, prior issues involved installation of fuel tank flammability reduction equipment on Boeing 747 and 757 aircraft and insufficient corrective action after discovering that a supplier was providing incorrectly shaped fasteners. Details related to other specific enforcement matters were not released by the FAA.

Supply Chain Matters readers might recall that in March of 2014, after the FAA initiated a thorough formal joint review of Boeing’s 787 Dreamliner aircraft program, a subsequent report indicated that Boeing had placed too much reliance on suppliers for the overall quality of 787 components and systems.  It further stated that Boeing’s sometimes ambiguity in stating what was required of partners led suppliers to believe that they had met requirements.

Certain suppliers within Boeing’s supply chain will likely feel the effects of this new announced compliance agreement with the FAA. It comes as Boeing continues to ramp-up its production cadence for delivery of booked customer orders involving newly designed aircraft that stretch out over the enhanced conformance period.

This development is yet another reinforcement of the importance of effectively integrating product lifecycle management, manufacturing and quality management systems together in a continuous information and decision-making flow.


Key Themes from Kinexions 2015 and How They Relate in 2016

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This author has penned another in my series of guest postings on the 21st Century Supply Chain blog, hosted by supply chain planning and response management technology provider Kinaxis.

Kinexions 2015, the annual Kinaxis training and user conference, featured some fascinating speakers that delivered timely messages and themes for the supply chain management community regarding important competencies. As we enter 2016, such messages will take on a special meaning, and in this guest contribution, I touched upon some of the key takeaways that stood out for this author and how they relate to our 2016 Predictions for Industry and Global Supply Chains.

To view this commentary, click on:  Kinexions 2015 Key Themes and How They Relate to the Coming Year.  The themes on innovation, supply chain change, skills development and integrated business planning will indeed manifest themselves in the coming year.

Bob Ferrari

Disclosure: Kinaxis is one of other sponsors of the Supply Chain Matters blog.


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