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Supply Chain Matters Executive Interview with Kinaxis

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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.


Demand Sensing Lessons Learned in China

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As thought leaders in supply chain management, we often point out the critical importance for firms to more quickly sense geographic or regional changes in product demand and respond to such changes with integrated supply and fulfillment capabilities. This week, The Wall Street Journal highlights (paid subscription) how certain high-profile consumer product goods companies were hampered in China by not having such capabilities.

The report notes that a sudden change among China’s consumer buying trends suddenly occurred as millions of consumers elected to shift their buying practices away from larger retail outlets in favor of online marketplaces. The WSJ indicates that an estimated 461 million Chinese consumers, nearly a third of the population, are now shopping online. Further cited is Nielsen data indicating that nearly half of Chinese consumers are buying groceries online, compared to a quarter of consumers on a worldwide basis. Global CPG firms such as Beiersdorf, Colgate-Palmolive, Nestle and Unilever were reportedly laggard in the sensing of this channel buying shift.

For Unilever alone, the shift toward online buying accounted for a 2.7 percent drop in global revenues. The CFO of Unilever is quoted as indicating that CPG firms in China were “too slow to react to the changes in the marketplace.” Another Unilever executive is quoted as indicating: “It’s very, very difficult for us to be absolutely sure (of inventory levels) because the visibility across the extended supply chain in China is not that great.”

Many CPG firms distributing products in China had targeted their merchandising and inventory strategies towards large retailers and thus were not able to sense the changed buying patterns until inventories grew.

Many of these firms are likely to have acquired important learning and are re-focusing supply chain strategies more towards online fulfillment channels including more direct presence.  There will obviously be further learnings in the months to come.

Suffice to state that in today’s complex supply chain universe, generalized market support and distribution strategies will not suffice.  Each major market requires its own set of product demand planning, sensing and supply chain response strategies.

Bob Ferrari


Moving Beyond Key Performance Indicators

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In our prior Supply Chain Matters posting we called attention to the evolving attraction for leveraging predictive analytics in supply chain decision-making practices which has added to the continued pent-up demand for data scientists. We highlighted a guest contribution indicating that big data and more predictive analytics capabilities can be non-effective if not preceded by a rigorous review in determining if current key performance indicators (KPI’s) and business metrics are actually capturing the true drivers of business outcomes.

During SAP’s recent 2015 Sapphire and ASUG conference, SAP co-founder and Supervisory Board Chairmen Hasso Plattner’s conference keynote touched upon this very aspect, which warrants repeating. He touched upon the notion of the boardroom of the future, not being occupied by reviewing historically based KPI’s but rather “fact-based management.” Hasso described this as a “massive change on how companies manage information” and further, “we cannot hide data anymore”.

That last statement may well resonate with our readers since too often, KPI’s are selected to measure can-do performance areas tied to individual organizational, team and personal bonuses that do not necessarily link to an overall business outcome required for products, processes, margins and/or risks. They are too- often, anchored in past performance coupled to a consensus of what can be comfortably accomplished vs. what should be expected given the industry and business environment.  Concerning or bad news can be hidden until it is too late for the business to overcome the effects.

In his keynote, Hasso addressed such a change as “moving from dashboards to active boards.” That is an important and far different metaphor.

It implies continuous and changing analysis grounded in overall outcomes and assumes that business events will indeed be constantly changing and that performance metrics should set both a target and a constant moving analysis of potential outcomes based on various business and product scenarios. Such a moving analysis assumes that organizations and teams can be fluid and flexible, responding to market opportunities, threats or risks in a more proactive and collective manner and in the context of best desired outcomes. It further implies that management is very actively engaged in understanding how the end-to-end supply chain is contributing or detracting from desired and/or expected outcomes. Bonuses and performance are tied to best enterprise outcomes vs. individual outcomes.

Such a change does not occur overnight and will take time to evolve. As noted in a previous commentary, executives need to be granted the broadest end-to-end supply chain leadership and accountability with certain mandates to address existing value-chain challenges and to improve business outcomes. Supporting staff with data science skills, while critical, are not the primary skill need.  Knowledge of the business, the end-to-end supply chain, and organizational change management needs to be coupled to data science skills.

In the meantime, we advise supply chain leaders to indeed recruit talent with data science skills, and then rotate these new superstars among various supply chain functional and geographic assignments.  Challenge them with local problems and with introducing positive overall change. Insure active mentorship and sponsorship with the end goal being a select group of business analysts that can take on the most difficult challenges while garnering the respect of others.

Bob Ferrari


JDA Software Announces a Strategic Partnership with Google

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During our recent attendance at the JDA Software’s 2015 Focus customer event, Supply Chain Matters highlighted some important shifts in the company’s cloud based development strategies.  This supply chain planning technology provider recently formed JDA Labs, an R&D group tasked with delivering more innovative products. Included in Focus customer and industry analyst communications was an announcement of a new strategic partnership that has significant implications.

This week, the company formally announced its new collaboration with Google, and specifically the Google Cloud Platform. Like other software providers JDA had cloud platform choices to consider, and the eventual entry of the Google Cloud Platform into the supply chain and B2B business network technology arena is a noteworthy and watershed development.

Google Cloud is by our lens, a late entrant into this arena, and thus has the opportunity to play out as an industry disruptor. Readers should pay close attention to the quote provided by Google executive Dan Powers. The statement that the supply chain and Omni-channel industry is ripe for innovation in public cloud attests to a future direction.

Today in an event being held in New York, JDA executives will be featured speakers at a Google Next event. Expect more joint presentations and joint strategy in the coming months. This is an area to watch, and we make that statement objectively, despite the fact that we have a business relationship with JDA.

As we noted in our previous Focus related observations, JDA finally has the opportunity to take true advantage of cloud-based technology deployment, the same application that can run in either behind the firewall, private or public cloud-based platforms. With the depth of its planning, customer fulfillment and supply chain execution based applications footprint, we could well foresee a new identity to JDA, and one more related to B2B end-to-end, cloud-based, multi-tiered applications provider.

Bob Ferrari

Disclosure: JDA Software is one of other current sponsors of the Supply Chain Matters blog.


Sales and Operations Planning as a Decision-Making Process

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When this author speaks to audiences regarding the current challenges and sometimes frustrations among multi-industry Sales and Operations Planning (S&OP) teams, I often remind my audience that the longstanding purpose of S&OP is to serve as the mechanism for more-timely decision-making regarding overall business and value-chain planning. That tends to be an important reminder since too many S&OP teams become entrenched and vested in the single number, single plan perspective. A lot of time and energy is spent on chasing or reconciling that “one”, cross-business number of expected supply chain customer fulfillment as opposed to improved methods for more dynamically sensing product demand, more quickly responding to market opportunities, or charting different possible paths to successful business metric performance. The notions of S&OP being a decision-making enabler takes on ever more added perspective for businesses that are directly supporting larger volumes of online customer fulfillment.

Today’s constantly changing and complex sales channel fulfillment requirements require far more dynamic decision-making capabilities. This will include deeper, cross-application information connections to product demand pipelines, augmented with traditional and social media based demand sensing. As noted in a prior commentary reflecting on predictive commerce and machine learning, the implication of increased online product fulfillment is that S&OP planners need to capture and model the various market attributes that shape online demand pretty much at the SKU or “item-level” while filtering out the “noise”.

S&OP teams now have the opportunity to determine how will the customer buy as well as be able to take advantage of demand signals that are being generated closer to point-of-sale or point-of-influence.  We further anticipate more-timely information connections with external or outsourced suppliers along with key customers, leveraging cloud-based planning and fulfillment synchronization networks.

At the same time, teams focused on being more demand-centric need to insure that expected business outcomes in revenue, product margins and other performance measures are achieved.  In the context of decision-making, that means that teams should consider the effects of any planned customer fulfillment decision on business result outcomes.

Supply chain planning technology provider ToolsGroup recently announced a rather unique simulation based capability that the provider terms as “Instant Replay”, a term chosen to depict what occurs more often in televised sports or a “golf swing analyzer.”  During our recent discussion with CEO Joe Shamir, Shamir described this application as allowing S&OP planners to look back at prior demand, inventory, supply and service level events to  analyze how past actions added to or subtracted from business goal performance and visually compare three scenarios:

  • Actual: what happened within a specific time interval
  • Planned: what should have happened, based on the S&OP plan
  • Potential: optimized recommendations based on the specific circumstances at the time, without the benefit of hindsight.

S&OP is indeed a process that supports integrated business planning and more informed decision-making.  The good news is that technology advancements, simulation and predictive analytics based capabilities are becoming available to allow more dynamic planning and decision-making without the need to be anchored in a “single-number” approach.

Bob Ferrari

Disclosure: ToolsGroup is a current client of the Ferrari Consulting and Research Group.


A Track Record of Persistent Shortages of Life-Saving Pharmaceutical Drugs

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Supply shortages involving critical drugs across multiple pharmaceutical focused supply chains should not be a surprise to our Supply Chain Matters readers.  We have called attention to this situation since 2011-2012.  However, what should be of concern is the ongoing persistence of this problem and how it impacts timely and quality-focused delivery of life-saving healthcare services.  Further, there are now brewing perceptions that the industry may have other intentions, namely, not concentrating on the increased supply needs of generic drugs.

On Monday, The Wall Street Journal featured a page one report: Drug Shortages Plaque U.S. Medical System. (paid subscription required)  The report cites University of Utah Drug Information Service stats indicating that the number of drugs in short supply in the U.S. has risen 74 percent in five years. Once more, a graph indicating the reasons for such shortages has the top three categories listed as: “Unknown” accounting for 47 percent; “Manufacturing shortages” accounting for 25 percent; “Supply and demand” accounting for 17 percent. These statistics, by our lens, should not by any stretch, be viewed or perceived as being complimentary to pharmaceutical supply chains, especially when “Unknown” is the leading reason.

The article’s authors cite interviews with company executives, pharmacists and regulators pointing to several causes that are noted as not building enough production capacity, not adequately maintaining production equipment and failure to control contamination in aging plants. There is a further observation that crackdowns on shoddy quality by the U.S. Food and Drug Administration (FDA) have worsened the shortages because some companies have responded by shutting down all production of a particular drug.  But the authors also point to another theme: (we quote)

Many of the scarce drugs are older, injectable treatments that can be complex and costly to manufacture, but which command relatively low prices because they aren’t protected by patent. Hospitals and doctors’ offices are the main buyers of the drugs. Companies can’t easily increase prices because insurers reimburse many generic hospital-administered drugs under a payment system that is more frugal than for other medicines.

This theme of generic drug shortages is similar to previously reported shortages.

A U.S. federal law passed in 2012 provides the FDA with increased powers to prevent and resolve drug shortages. Supply Chain Matters called reader attention to the new powers of the FDA in a 2012 commentary on the crackdown on Ranbaxy. According to the WSJ, the number of declared new shortages decreased by 44 in 2014, from a peak of 251 in 2011.  That obviously is some progress made in the last four years but more is definitely needed.

The article goes on to call attention to continued global-wide shortages of critical drugs such as BCG, a potentially life-cycle drug utilized to treat bladder cancer and how specific manufacturers have not responded to market need. It notes how doctors have been forced to either postpone or suspend BCG treatments since shipping delays are expected to persist in next year.

Supply Chain Matters is calling attention and making wider visibility to the continued supply shortages because we feel strongly that the industry needs to face up to its problems and work with regulators and physicians in constructive solutions to such problems. Supply shortages will continue to motivate illicit and unsavory global distributors to introduce more counterfeit or lower quality supply in the market.

The open question remains as to which organization is directing supply chain supply strategy.  In the meantime, quality healthcare outcomes continue to be at-risk.

Bob Ferrari

 

 


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