The Time-to-Action Dilemma

dreamstime_m_26639042If you can’t answer these 3 questions in less than 10 minute
(and I suspect that you can’t), then your supply chain is not the lever it could be to
 drive more revenue with better margin and less working capital:
1) What are inventory turns by product category (e.g. finished goods, WIP, raw materials, ABC category, etc.)?  How are they trending?  Why?
2) What is the inventory coverageWhat will projected inventory be at by the start of a promotion or season.  Within sourcing, manufacturing or distribution constraints, what options do I have if my demand spikes or tanks?
3) What proportion (and how many) of your customer orders (or margin or revenue) shipped at 99% on-time and in-full?  How many at 98%? And so on . . . Do you understand the drivers?

The slack time that global competition is allowing you to have between planning and execution is collapsing at an accelerating rate.

You need to know the “What?” and the “Why? so you can determine what to do before it’s too late.  

You need to answer the questions that your ERP and APS can’t so your supply chain makes your business more valuable.

Since supply chain decisions are all about managing interrelated goals and trade-offs, data may need to come from various ERP systems, OMS, APS, WMS, MES, and more, so unless you have a platform that consolidates and blends data from end-to-end at every level of granularity and along all dimensions, you will always be reinventing the wheel when it comes to finding and collecting the data for decision support.  It will always take too long.  It will always be too late.

You need the kind of platform that will deliver diagnostic insights so that you can know not just what, but why.  And, once you know what is happening and why, you need to know what to do — your next best action, or at least viable options and their risks . . . and you need that information in context and “in the moment”.

In short, you need to detect opportunities and challenges in your execution and decision-making, diagnose the causes, and direct the next best action in a way that brings execution and decision-making together.

If you don’t have all three now – Detect, Diagnose and Direct – in a way that covers your end-to-end value network, you need to explore how you can get there.

As we approach the weekend, I’ll leave you with this thought to ponder:  Leadership comes from a commitment to something greater than yourself that compels maximum contribution, whether that is leading, following, or just getting out of the way.”

Optimizing Pick Waves in Your Warehouse

If you ship a wide variety of products, either directly to consumers or in less than pallet quantities to business customers, then the challenge of delivering your goods in the most timely and efficient fashion can be particularly perplexing.  Once you have the order, the first and most critical step is releasing orders to the warehouse. 

Your greatest delay and cost likely occurs in the picking process, driven by travel time, both horizontally and vertically. Releasing orders to the warehouse in a FIFO fashion will probably leave you with troublesome inefficiencies, even if you have wireless, automatically directed picking with task interleaving.  However, releasing orders in a wave that maximizes picking efficiency can create other bottlenecks in packing and shipping.  Other schemes for creating pick waves include batching orders and releasing them by pick zone, by destination zip code, by carrier pickup time, or by some combination of these or other attributes of either the items or the customers.  Of course, batching orders means one must decide how large the batch should be.  Wave planning decisions should not be taken lightly.  Nor should they be approached intuitively because the implications for both service and cost are quite real. 

Fortunately, rigorous, quantitative analysis can be achieved through discrete event simulation.  As a manager of process improvement for a high volume, direct-to-consumer, multi-billion dollar enterprise, I had the opportunity to simulate various wave planning strategies and evaluate the impact on service, cost and workflow.  I have only heard of one other instance of this analysis, but I hope that I am simply ignorant of a growing use of simulation to periodically analyze and select the best wave planning approach. 

If you run a large, multi-zone fulfillment center that ships relatively small orders and you aren’t simulating to find the pick waves that will help you meet your objectives, you are missing a great opportunity.  That’s the bad news.  But the good news is that the service and cost savings are there for the taking if are willing to do the analysis (or get someone to do it for you).

Thanks for stopping by Supply Chain Action, once again.  I trust that you will remember that since we aren’t promised tomorrow, we must live today well.

Have a wonderful weekend!

Creating a Premier Order-to-Cash Process

This is not what I would consider an extremely fascinating topic.  I tend to be more fascinated with decision sciences.  However, I think this topic deserves a simple, comprehensive perspective on what makes an O2C process a good one.  A premier O2C process possesses the following hallmarks:

1) Standardization.  That is not to say that all orders are treated in the same way, but that you have determined beforehand what types of orders you will receive and how each type will be handled.  Standardization applies to how orders are anticipated, qualified, promised, priced, allocated, fulfilled, invoiced, collected and serviced.

2) Automation.  How information technology is used to automate this process so that it can be done fast, cheaply, and providing customer service equal to the goal for each type of order.

3) Integration. O2C cannot exist in a vacuum. Manufacturing, distribution, customer service, and planning not only surround O2C, but must support it without gaps or interruption.

4) Visibility.  You probably already have a view to orders internally.  In most cases, customers will need to view their orders as well.  In both cases, the most advantageous scope of visibility should be provided with the least amount of effort.  In some cases, suppliers may need to see orders as well.  Certainly, third party logistics service providers may need this.

5) Performance Management.  How will you measure O2C success?  Is it cost-based, or service-based or both?  A measure of perfect orders will most certainly apply (on-time, quantity complete, damage free, defect free, invoice accuracy, etc.).  In addition, you may want to include some of the following:

  • Days Sales Outstanding (DSO)
  • Cash-to-cash (C2C)
  • Revenue and margin (by various dimensions like customer, product family, etc.)
  • Order cycle time
  • Line fill rate
  • Order fill rate
  • Order service level
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