The following commentary is a Supply Chain Matters guest posting authored by Jim Barnes, Services Managing Director, Institute for Supply Management (ISM).
One of the biggest challenges in our industry is gaining recognition of the value procurement and supply chain management brings to the corporate bottom line. We know supply management increases shareholder value by making business more competitive and more profitable, yet it’s hard to tell the story. The perception is we’re not very strategic but are overly tactical: processing paper, comparing one price against another and policing what other departments order.
To change this perception many in supply management are exploring the option of automating some functions to move away from tactical processing and focus more on strategic interactions with suppliers. Generally speaking, automation can help reduce the number of people doing tactical work; reduce the amount of money needed to do that work; and provide supply management professionals with more time to develop better relationships with suppliers.
There are several factors to keep in mind when considering the option of automation:
- Know which processes can be automated and which cannot;
- Recognize your human resources may not be interchangeable; and
- Realize if you automate a bad process, you’ll just get bad stuff quicker.
Most transaction processes lend themselves well to automation, and there are tools to automate the bidding and RFP processes, too. However, it’s very hard to automate the human interactions in supplier relationships like strategic sourcing and negotiating.
As you automate processes and free up supply management professionals, don’t assume everyone has the ability to move into a more strategic, interactive role with suppliers. At ISM Services, we offer clients the opportunity to survey their supply management professionals to determine if they tend to be more tactical or more strategic. Then we put them through a negotiation exercise where they can learn the difference between the skill sets, the value of both and determine where their strengths lie. Participants learn that many times it makes sense to negotiate as a team with the best combination of negotiating styles to suit the objective.
It’s important to remember that automation on its own is not the answer; you still need to have a good process in place. One of our clients had a highly manual, time consuming process for receiving goods and verifying documentation. When they first automated the process they merely replicated their manual process, and it yielded the same result, a very high exception rate. After spending significant effort to re-engineer the process, they learned to rework and reset the rules to get much better results from the process.
Another problem can arise when departments are automated and outsourced at the same time, or at a later date. For example, supply management professionals who automate their accounts payable and outsource it can run into problems because the new people managing it don’t have the important knowledge of the inner workings of the company. The result, according to an experienced practitioner-friend of mine, is “your mess for less.”
So how do you decide which automation strategy is best for your company and avoid some of the pitfalls? First, determine what you want to accomplish in which departments and then establish the metrics to measure your progress and accomplishments. For example, do you want to take work out of a process? Do you want to eliminate onerous authorizations or unnecessary three-way match requirements? In the end you want to eliminate work of lesser value to the company and instill more strategic practices with your suppliers.
Second, take time to explore your options because there are quite a few available. Talk to your peers to find out what is working for them. Attend conferences and visit the vendors there and try their tools. ISM Services does not recommend nor endorse automation software but we are available to help you evaluate it against your goals.
When managed well, automation can be a game changer in the supply management industry. It can result in more efficient and cost-effective processes and give supply management professionals more time to collaborate and innovate with suppliers. It can shift the perception of procurement and supply chain management from tactical order processor to strategic partner in the C-suite.
Machine learning technology, which is a form of artificial intelligence, has now made its way into the area of procurement process support.
A simplified explanation of this technology is that algorithms actually “learn” from data and information patterns to make subsequent predictions based on such patterns. Supply Chain Matters has previously pointed out how machine-learning has been applied to manufacturing and supply chain planning focused processes. The technology when leveraged to support B2B direct procurement support can bring added scale and improved value for direct spend supplier collaboration. The added benefit for this type of technology is the ability to leverage item-level business intelligence as well as to provide more timely and robust support in the area of master data management.
In a previous commentary, Supply Chain Matters raised awareness to the critical importance of seamless interoperability for B2B business networks. Teams are well aware of the pain associated with maintaining connectivity and end-to-end visibility throughout their constantly changing B2B network. Managing today’s complex supply chain networks therefore demands not only end-to-end transactional messaging management but key planning, replenishment, and supply-chain decision support.
Teams that are dealing with existing ERP backbone systems such as SAP, require and expect seamless integration. They often have the added challenge in assessing and evaluating SAP’s changing product strategies and application roadmaps related in support of supplier networks. In the specific case of SAP’s Ariba cloud-based network, there are elongated roadmap timetables concerning full direct materials processes support as well as migration to the HANA platform.
One of the major benefits of working with best-of-breed technology vendors is their ability to innovate at a quicker pace than larger ERP providers. Because such vendors often support customers with existing ERP backbones, best-of-breed vendors understand that they must integrate information as seamless as possible. In the specific area of procurement and B2B business networks, ERP vendors have often accelerated their own path to innovation by acquiring emerging cloud-based vendors.
Nipendo, a cloud-based global provider of B2B network based supply chain technology recently announced that it was awarded a U.S. patent related to: “automated reconciliation of cross-enterprise transactions and digital documents.” Nipendo Supplier Cloud leverages this machine learning technology in the automated reconciliation of Procure-to-Pay processes throughout the entire supplier base, including direct goods suppliers.
What makes Nipendo’s technology different among existing vendor approaches is its leveraging of best-practice process templates (business rules) that govern interactions among suppliers and trading partners. Rather than custom programming and field-to-field information mapping that is often required in EDI grounded processes, machine learning techniques are applied to automate the majority of processes. The business rule platform enables teams to more quickly exchange real-time information with suppliers, orchestrate supply chain processes, and reconcile transactions to existing ERP systems. The advantage to teams is noted as simplicity, speed, and scale in supplier collaboration, and we tend to agree.
In our observations of the procurement technology landscape, this was our first awareness to such leveraged use of machine learning techniques, and we were impressed.
For further information, readers can explore Nipendo’s B2B Integration Solutions web page.
© 2015 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters® blog. All rights reserved.
Disclosure: Nipendo is a current client of the Ferrari Consulting and Research Group LLC
A lot of electronic alerts come across the desk of Supply Chain Matters regarding web content focused on key topics and challenges involving today’s supply chains. We only elect to share content that we feel will serve the interest levels of our global based readers.
Thus we recently came across a blog posting on EBN: Talking about Supply Chain with John Kern, Cisco.
EBN Editor-in-Chief Hailey McKeefry recently interviewed the Senior Vice President, Supply Chain Operations at Cisco. This author has heard John Kern speak at prior industry conferences and has spoken with John on past occasions. I find John to be a visionary leader.
In the EBN interview, John articulates the mission of supply chain management- namely on enabling the success of the company strategy. He further speaks to the uniques challenges underway within high tech supply chains, in-particular, customer shifts from capital investments to services investments.
John further articulates Cisco strategies regarding the challenge of demand and available supply of supply chain talent. Pay particular attention to what is defined as the “landing zone”, which is defined as what the supply chain needs to look like in three years in terms of locations, skills, generational mix, roles and leadership.
By our lens, this is an insightful interview and worthy of reading and reflection. Take some time on the beach or in the yard to review it.
Bob Ferrari, Executive Editor
Continuing with our Friday theme of information technology developments related to supply chain manufacturing and product management, Supply Chain Matters calls reader attention to what we believe are two recent noteworthy tech announcements with broader implications.
Cisco IoT System Annoucement
Earlier this month, Cisco announced its offering of an Internet of Things (IoT) technology platform targeted to support large-scale industrial networks. The announcement was somewhat unique in that this new Cisco IoT system includes a technology architecture consisting of six technology pillars and the technology providers Fog Computing System. The announced system further includes 15 new IoT focused products within these respective pillars, addressing support in areas of network connectivity, physical security, data analytics and overall data management.
The broader implication of the Cisco announcement relates to specific IoT industry vertical support and key strategic partners. Partners such as General Electric, OSISoft and Toshiba, among others, are porting their respective IoT applications to run on the Fog Computing network.
Perhaps the most significant partnership is that related to GE and that equipment manufacturer’s strategies related to its industrial Internet ecosystem of partnerships and its own Predix equipment intelligence platform. The GE and Cisco relationship has a focus to extend industry focused collaboration that includes oil and gas, transportation, healthcare and power generation industry sectors. This happen to be key industry verticals for the most promising IoT business focused applications.
GE has other key technology partners that include Amazon Web Services, AT&T and Intel. However, from our lens, the latest Cisco IoT System announcement provides evidence of Cisco’s commitment to provide turn-key technology components and provide added influence with GE and other Cisco industry and IT system integration partners.
Cisco obviously wants to be a power player in IoT.
Thin Film to Unveil Smart Wine Bottle
Thin Film Electronics announced a partnership with G World Group to undertake a trail of what is claimed as the first “smart wine bottle” utilizing printed electronics label technology.
Supply Chain Matters called prior reader attention to Thin Film’s application of a printed electronics label applied to premium liquor bottles for Diageo. This latest announcement provides added application of this technology for premium wines and opens further opportunities to combat or defeat counterfeiting of specific products.
The latest announcement indicates that G World and Thin Film will execute a field trail in collaboration with Fermgrove Wine Group, a Western Australia premium wine company. Fermgrove, owned bt the Chinese food group Pegasus, is a supplier of five-star premium wine in the Asia-Pacific region and exports more than 600,000 bottles of wine annually to China. Since counterfeit wine is pervasive throughout Asia, the new labeling technology will be tested to provide product authenticity as well as supply chain visibility.
G World has placed what is termed as a 7 figure unit order for Thin Film’s NFC Open Sense tags which leverage near field communications technology to authenticate the track products and detect the product’s sealed or open status. As noted in our previous commentary related to Thin Film’s smart label technology applied to Johnnie Walker Blue Label® bottles, the tags remain active after the factory seal is broken, allowing the brand to extend dialogue or strengthen relationships with customers through customer relationship management focused programs.
Once again, this singular smart label trial opens-up the possibilities among multiple supply chain related business process and/or brand marketing loyalty use cases. The reading or sensing of the label can be accomplished with NFC enabled devices, such as smartphones or other mobile devices, which opens up further opportunities to be able to leverage such capabilities without the addition of more expensive infrastructure or proprietary networking or label reading technologies as was the case with the initial phases of RFID labels. Thus far, there have been trials conducted within pharmaceutical, fresh produce and premium beverage use cases. We may well witness the commercial introduction of this new item-level tracking technology in the not too distant future.
Technology marches on.
Supply Chain Matters has provided previous commentaries citing next generation technology involving smart item-level labeling technology that can be applicable to either supply chain business intelligence, demand sensing or tracking needs. Evolving next-generation labeling utilizes printed electronics and near-field communications (NFC-enabled) smart labels to track products and their various states. This new evolution is the dawning of a new era for item-level tracking, one that will harness the potential of the Internet of Things (IoT) as well as the abilities to bring together the physical and digital aspects of supply chain management the added ability to enhance the brand experience.
A technology provider we have profiled in this area has been Norwegian based Thin Film Electronics ASA. Our last commentary focused on Thinfilm’s joint announcement involving Diageo in the development of a prototype connected smart label for the Johnnie Walker Blue® brand.
This smart-label technology provider has now announced that it has received an additional $22 million in funding in a private placement involving several U.S. funds. According to the announcement, these funds will facilitate expansion of printed logic production needs to meet expected market demand from current and prospective customers, including Diageo.
The latest funding round is described as a significant opportunity to scale operations as well as to attract an additional investor base in the U.S. We would add that it is yet another reflection of investor interest in emerging new IoT based technologies focused on supply chain business process and intelligence needs.
This author recently had the opportunity to interview Kinaxis senior executive Trevor Miles where we explored some important topics related to multi-industry supply chain challenges and the Kinaxis efforts in supporting these challenges. In our conversation, we covered a number of topics related to supply chain business processes and enabling software technology, as well as the current state of predictive analytics.
The following summarizes our questions and dialogue.
Q: Would you describe for our readers, your current role with Kinaxis?
My role at Kinaxis is Vice President, Product Innovation and Thought Leadership, and my activities are focused in three areas. They include overseeing long-term strategic direction for products, working with key customers and prospects on future product direction, and providing an external voice for Kinaxis in areas of brand awareness, social-media dialogue and speaking at major conferences.
Q: What in your view have been some of the major accomplishments for Kinaxis during the past year?
We at Kinaxis are very pleased to see strong demand and continued traction among our key targeted industry verticals. The success of any SaaS company is obviously reflected in customer adoption and we are pleased with our broad market traction and customer adoption rates, highlighted in particularly by record quarterly growth in subscription revenue in Q1 of 2015.
From a product perspective, continued expansion of the Kinaxis RapidResponse functionality with the addition of multi-tiered inventory optimization, attribute-based planning and supply chain segmentation support continues to generate lots of customer interest.
A key business accomplishment was our very successful initial public offering last June on the Toronto Stock Exchange.
Q: In your travels, speaking at conferences and talking with prospects and customers, what do you sense as being the most dominant business process challenge described by cross-industry supply chain or Sales and Operations teams? In that same vein, what is described as the most significant technology challenge?
A frequent business process challenge often reflected by multi-industry sales and operations planning (S&OP) teams is the need to attack the various cross- functional information and decision-making silos involved in the process. I often hear needs related to having a more detailed understanding of the various tradeoffs of decision-making, especially related to various competing metrics. Today, many S&OP processes are supported by IT architecture that was largely functionally-focused which perpetuated islands of information. Whereas some of our competitors capture and synthesize data between organizations, our focus is to capture all pertinent information related to planning the entire supply chain.
Regarding the most significant technology focused challenge, it often relates to data. Many of our larger customers average upwards of 19 instances of an ERP application running across the supply chain network, some even higher. When considering today’s needs reflected in S&OP and more frequent new product introduction cycles, some information is not even in the existing ERP system but resides elsewhere. The challenge is making sense of the data and providing proper context in making data actionable.
Industry analyst firm Gartner recently modified its technology maturity model to include five stages, instead of the prior four. Stage 3 equates to integration of all data sources, and I find that repeated over and over again. The challenge is making sense of information.
While we are on the topic of technology, we should include elements of talent management. Today, there is a clear need for a more horizontal focus and understanding of the supply chain. Some organizations have a talent pool that remains too focused on vertical functional requirements without full consideration of the various tradeoffs and impacts related to supply chain-wide decision making.
Q: How is Kinaxis preparing to address the challenges described above?
Customers are looking for a solution to two fundamental challenges. They include the constant need for IT resources to mine ERP data in the desired format and the ability to support larger planning models. The Kinaxis Data Integration Server is directed at these data harmonization needs. By feeding raw data into a separate server we can facilitate significant reduction in the memory requirements for the planning server, allowing greater and more responsive performance in planning process needs along with more flexibility in data integration needs.
Kinaxis RapidResponse is architected as a single data model for planning and it associates data to specific people responsible for decision-making. With the introduction of both an integration server for housing and categorizing raw data, the planning server can be even more responsive in generating supply chain wide planning models. If a demand planner changes the future forecast, there is feedback as to how-much of the plan is likely to be met on-time. Planners can be more proactively alerted to unplanned events, as well as the consequences of the event. Additional what-if scenarios can be generated to ascertain most feasible approaches and/or tradeoffs in accomplishing a certain plan.
Q: Kinaxis and its teams have spoken previously about the notions of Supply Chain Control Tower capabilities. What’s your assessment of where this type of capability stands today? In your view, how long would it be before we begin to observe wider deployments of such capability?
There are two distinct approaches to control towers, one being a logistics execution approach, the other being an operations and planning resource approach. Kinaxis has advocated and supports the latter, but there is a role and value for both capabilities. The need to bring together planning and execution in a near real-time control tower perspective remains an important and differentiated capability.
The logistics approach is focused on day-to-day execution, namely “where’s my stuff?” and “Is it on-time?” From a change management lens, many organizations are not ready to get their hands around both execution and planning and there is currently more internal support right now for an execution focus. However, Kinaxis remains committed in support of the planning and operations focused supply chain control tower.
Q: Supply Chain Matters describes how more predictive analytics capabilities will be widely incorporated within supply chain planning, S&OP and response management capabilities? In your view, what’s the reasonable timetable for teams to expect to be able to leverage these capabilities across multi-industry supply chains?
Supply chain planning, in all its forms, has been predictive since its inception, demand forecasting being the perfect example. However we find that the notion of predictive analytics is a squishy term, and not clearly understood by industry supply chain teams. And the value of prescriptive analytics – for example, the ability to determine likely demand satisfaction issues based upon supplier decommits – has not been exploited fully by organizations. Supply chain communities are still trying to absorb the potential impacts of Internet of things and data lakes. These can be exploited by supply chain organizations to know sooner and act faster using prescriptive analytics. For predictive analytics it is more about knowing about the specifics of data being collected, the relevancy and context of the data before making the leap towards more predictive analytics. We do not see the supply chain organization leading the charge for predictive analytics, at least not now.
This concludes this executive interview with Kinaxis executive Trevor Miles. For further information, please click on the Kinaxis logo located in our Supply Chain Matters sponsorship panel.
Bob Ferrari, Executive Editor
Disclosure: Kinaxis is one of other current sponsors of the Supply Chain Matters blog.