In today’s factory environments, there are many barriers to building a high-performance supply chain, but the four most common are; lack of visibility due to data silos; lack of predictability, due to a lack of visibility and the inability to identify changes necessary to get processes back on-track; incomplete information, due to incompatible or incomplete reporting systems; and optimisation at the local level.
Lack of viability/Data Silos
Even the simplest supply chain generates a tremendous amount of data with its ERP system and supporting applications.
This data lets managers perform deep dives into some aspects of their operations and most ERP systems do provide basic reporting capabilities.
However, these reports are rarely flexible enough to address specific questions or immediate needs.
Nor do they encompass the entire supply chain.
Managers have a choice: work from an incomplete view or spend hours compiling information to create it.
A high-performance supply chain performance management system must enable visibility across operations.
The ability to follow a process, from the moment raw materials ship from the supplier to the moment finished product arrives at the customer, is critical.
Yet, the sheer volume of data that managers need to work with makes this difficult to achieve.
On the selling side, data about sales, accounts receivable, fulfilment, finished goods inventory, and logistics.
On the buying side, data about purchasing, accounts payable, raw materials and semi-finished goods inventory, production and logistics.
There is also data from customers, logistics providers, and suppliers.
All of these have their respective applications and data silos.
The system must integrate data from all of these sources and present information consistently, in a way that provides different views of performance (customer-centric, product-centric, process-centric), highlights issues clearly; and provides answers when managers still have time to act on them, rather than after the fact.
Managers also know they need better visibility into their customers’ needs.
However, a recent survey by Deloitte shows that a mere eight percent collaborate with customers across key areas, from strategic planning and forecasting to inventory management and cost reduction.
The reason? Poor visibility.
The result? Strains on key processes.
This lack of visibility leads to the second barrier to high-performance supply chains: the lack of predictability.
Lack of Predictability
Predictability is knowing that a plan will unfold as it should at a known cost.
The more confidently a factory manager can predict, demand, quantify, costs and targets, the better able they are to secure suppliers and build processes.
Sourcing can happen sooner.
Production can ramp up earlier.
Lead times can be reduced.
Buffer inventory management can be minimised.
Problems can be identified and resolved before a production run begins.
Unpredictability causes variation between expected and actual results.
Left uncorrected, the problem is likely to reoccur with continued detrimental impact on the supply chain.
Usually, this is because the root cause of the variation can’t be found and the process isn’t fixed.
When this happens, managers fall into a constant game of catch-up — moving resources and materials around the globe at the last minute, rather than proactively driving performance.
Incomplete Information
The constant game of catch-up is often due to the third barrier: incomplete information.
Lacking the time to fully analyse and understand a problem, managers have no choice but make hasty decisions based on pre-configured ERP reports that provide a historical or partial view of the problem.
These reports help managers solve their immediate problems but prevent them from nailing improvements that can lower costs or improve efficiency on a larger scale.
In the high-performance supply chain, every piece of information is delivered in the greater context of the entire process.
Effects of decisions can be evaluated so that people understand the cost-to-serve and make better decisions.
Complete information enables better collaboration.
Local Optimisation Manufacturers are spreading supply chain operations across the world.
Yet, according to Deloitte, most optimisation is still done at a local level — by product, function, facility, country or region.
Few companies make global optimisation a top priority or allocate human resourced to achieving it.
This localised approach to optimisation is to be expected, given that most managers see silos of information rather than a complete, integrated view.
Also, without a clear link to strategy, managers cannot see or predict the impact their actions will have further down the line.
Their actions can be about delays, changes, cost increases, or shortfalls further down the line that ultimately hurt customer satisfaction.
Luckily today, solving these issues for the factory environment today are supply chain performance management solutions.
These encompass the complete range of business intelligence and enterprise planning software capabilities that companies need to build and manage a high-performance supply chain: interactive scorecards and dashboards, business event management, reporting and analysis, data integration, planning, budgeting, forecasting and consolidation.
(*)The Challenge of Complexity: Critical Trends in Supply Chain Management Across Global Manufacturing, Deloitte, 2003
Key contact:
dmerchant@au1.ibm.com
02 9430 2200
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