Supply Chain

Words can be like X-rays, if you use them properly—they’ll go through anything. You read and you’re pierced. -Albert Einstein

At a Glance

• The outbreak of an epidemic has brought the global supply chain to a halt, pushing major global economies towards a crash of financial markets and recession.The focus at this time should be safety, recovery and cure instead of worrying about lack of essentials due to stunted supply chains.
• There is a need to create an ecosystem of businesses that are collaborating through a well coordinated and integrated supply chain to allow more stability even in a crisis.
• Many factors that are well thought out can contribute to a better global technological footprint where businesses across the globe can facilitate more growth and well-being of economies.

Introduction

During difficult times the world requires better ways to function without taking the entire economy down. One such event is the Coronavirus outbreak that caused a ‘slow down to shut down’ of all businesses due to the pandemic. Since the 90s when the computer technology revolution happened, we have seen various situations of slump and recession that gave rise to newer ways to function and advent of disruptive technologies changing the face of the world. Increased globalization and interdependence on different economies made the world a better place with enhanced living conditions and more opportunities to easily navigate through the world.

Many disruptive technologies came to life during the last 3 decades that are now in every man’s pocket. We all know what they are. Smartphones, Internet, Direct to consumer tools, Search portals, AI, ML, BOTS, IOT,…..and the list goes on. This coronavirus pandemic however is showing us that we are not fully integrated yet. Why has the world slowed down when we have so many technological advancements and tools out there that were created to never face this situation? As such countries need to focus on safety, recovery and cure instead of worrying about not being able to supply essentials due to social distancing. This is not a case of a tsunami that has destroyed road infrastructure, it is merely a need for people to work remotely and avoid exposure, and an inability to control movement of the supply chain from the comfort of your home.

By 2023, over 30% of operational warehouse workers will be supplemented by collaborative robots.Source: Gartner, 2020 report

With this statistic, you would never really expect to see businesses or trades freeze, as operations would run smoothly with a proper collaboration.

A major blind spot has surfaced. A lack of being able to control the global supply chain seamlessly from a remote location with the press of a button. This lack is causing millions to lose their life savings in 401K plus other investments, driving to a bad economic situation. By the time the world has recovered from the pandemic, you are now dealing with an unplanned financial mess.

Added to that is an unfortunate imbalance in prices of all commodities as they are unable to handle the reaction of the slowdown impacting life of an average consumer and creating a downward spiral in the market sentiment as well as lowering the morale of people. Natural course of life is always towards moving upwards until a huge obstacle surfaces due to such incidents. The blind spot here is:

• not being able to foresee a situation that could force us to stay isolated and is not enabling us to move things around without any hindrance.
• of a holistic system that does not have enough integration between all the isolated systems that are in place.

We have seen glimpses of hightech warehouses with inventory arranged on pallets, controlled by bots that receive an order and move them to packaging areas. But taking the vision further, imagine the following scenario:

A hightech warehouse with functions such as inventory management, packaging and shipping, fully handled by bots controlled through a device by a warehouse operator, shipment load planning done through a bot, and shipment automatically scheduled once the transportation planner firms the plan. A truck that is in-transit can be monitored by the planner. All of this is achievable through integrated technology that can manage the supply chain at every point of operation.

By 2022, application integrations delivered with robotic process automation (RPA) will grow by 40% year over year.Source: Gartner, 2020 report

This is just one use case of moving material from one point to another. There is a lot more importance given now than ever to automate operations within the warehouse. During an unforeseen situation, operations should still run without jeapordizing customer orders.

Where is the integrated technology?

With all the advancements in technology, a larger number of people still saw the required changes in digitization as a total unnecessary spend. Very few players would have foreseen the need to automate their business operations and integrate them into an overall supply chain. You would often see technologically advanced companies thrive even in difficult market conditions.

What are the success factors to build a strong ecosystem that can lower the possibility of a breakdown in supply chains?

• Thought leadership that encourages adaptability and technology centricity. This is a repeated message given to businesses through many sources that educate leaders, helping them to make the correct decision. A general shift in thought process would help companies move the economy along with their own well-being towards a greater picture of a business process revolution.
• A smart supply chain and end consumer planning mechanism to suggest the right actions. Businesses at different levels of the value chain need to quickly make business decisions to move their operations forward.
• A unified platform that can track operations and notify the status of an operation to relevant personnel at various touch points in the overall supply chain, ensuring continuity in the process and avoiding a breakdown.
• Connected devices through IOT that can pass on signals to automatically perform the next step in the process via a controlled signal from the warehouse operator or supervisor.
• Indicators set for different thresholds on the devices that are automated to gather information early on and proactively handle any issues or problems that could surface.
• Advanced analytics that are more geared towards how the individual business is trending in comparison to how the entire value chain is functioning, basically a business that is part of the value chain has to be in sync with the overall supply chain.
• Integrated technology that enhances the ability to understand the market situation, assess and recommend the business users to make various business decisions such as stocking up inventory, optimizing spend and scale up or scale down of business initiatives.

If larger and midsize companies are progressing towards adopting versatile technologies, smaller businesses that want to emulate the larger market leaders would need adoption of similar platforms.

Obviously the 7 points listed above are not the only factors that can boost trends to the next generation supply chain, but emphasising and being aware of the above can definitely help you decide if you have invested in the right tools that will propel your business forward. The trend would be geared towards better integration of all technological elements, be it collaboration, process automation, connectivity, analytics and recommendations through artificial intelligence ultimately controlled by a person. This infrastructure should cater to small businesses who especially are more spend conscious and may hesitate to do the right thing due to a fear of draining cash.

Intelligent process is not a buzzword, but a necessity to move your business forward and help the world economy be more stable.

Key Takeaways

• It is high time that life is controlled through a remote set of connected devices under the control of real people.
• Man is still the master of a fully connected and well integrated technology that enhances the ability to collaborate and communicate with each other.
• The objective is to make it easy on the individual or business encouraging them to make the decision in favor of business continuity and overall economic development.

REFERENCES

https://www.bcg.com/publications/2018/why-specialty-chemical-distributors-need-to-raise-their-game.aspx

At a Glance

• Per Harvard Business Review, US corporations lose half of their customers every five years on an average, unable to meet their demands and needs on-time.
• An industry report* showed that on-time delivery motivates 72% of customers to repeat purchase from the same seller.
• The most important step towards achieving optimal on-time delivery metrics involves solving operational issues at the grass root level.
• Organizing a well-structured Daily Operational Meeting (DOM) not only increases productivity but also improves customer service.
• 61% customers in the United States reported that they would even prefer paying to receive their purchases on the day they order, per Logistics Bureau.
• Implementing a modern ERP solution will streamline your business processes, meet customer requirements and ensure on-time delivery.

In Part 1 of this series, we brought out the challenges like lack of communication across departments and inefficient business processes that hinder the on-time delivery of products.

As discussed in the prior blog, a few Key Performance Indicators (KPIs) that are critical in measuring delivery performance in logistics and supply chain operations are:

• On-Time Delivery (OTD) or On-Time Performance (OTP)
• Delivery in Full (DIF)
• Delivery in Full On-Time (DIFOT), On-Time Delivery in Full (OTDIF) or even On-Time in Full (OTIF)
• Cost as a percentage of sales
• Inventory Turns (days)

Consistent problems with OTD not only affect your business and its reputation, but also customer relations and company’s supply chain. On-Time Delivery in Full (OTDIF) can be impacted due to a variety of reasons. To name a few:

• Bad forecasts
• Supplier delays
• Quality delays
• Product rejections
• Other technical and operational issues such as ineffective Material Resource Planning (MRP) system and outdated ERP system.

Per McKinsey, poor service levels cost the US CPG industry a staggering $24 billion dollars a year. -McKinsey, 2018

Steps like identifying the root cause of late deliveries and prioritizing to avoid them coupled with an effective plan to get rid of such problems help your organization increase your on-time delivery metrics and productivity.

In this part, we will highlight the remedial measures that need to be taken to enhance DIFOT metrics.

Since bringing in a crop always starts with harvesting the “low-hanging fruit”, I decided to get my team together to discuss the challenges that we faced to know where to begin. In considering the lack of solid processes, planning and communication challenges, I instituted daily operations meetings. What followed wasn’t rocket science, but pure magic.

What is Daily Operations Meeting (DOM)?

An operations meeting is conducted to discuss and review the process, progress and performance of the team, evaluate the pre-defined goals in key performance indicator, identify and analyze the issues and come up with a corrective plan to improve the overall operational performance.

01. Organizing the Daily Operations Meeting

You might think, “It’s just a meeting – how complicated could organizing it be?” Who should attend, who should document the meetings, what are the ground rules, what will be the structure/flow of the meetings, and what will be the frequency? These questions must be answered and you will only get one chance to encourage buy-in from the team.

Organizing a daily operations meeting can be quite tricky and complicated. You need to plan in advance the following factors:

• Plan the target audience/attendees for the meeting and clearly define who will attend the meeting.
• Plan the documentation process and define who will maintain the minutes of the meeting.
• Define the ground rules.
• Organize the structure / flow of the meeting and its frequency.

I decided to start with a core team that consisted of the Customer Service Manager, Supply Chain/Procurement Manager, Director of Operations, Quality Manager and Engineering/Maintenance Manager and added Operations Supervisors and VP; sales later.

I scheduled these recurring daily meetings and asked my Customer Service Manager to document the meetings with minutes that would be placed on a shared directory. I established some ground rules intended to get everyone to participate with one common goal: an improved OTD percentage.

02. Structured Operations Meeting

An effective operations meeting must have a properly organized predefined structure to achieve the purpose of the meeting – an improved OTD percentage. We should plan the agenda of the meeting in advance, prioritize the problems as to which issue to be addressed first, what comes next and must strictly adhere to the structured agenda.

There had not been an Operations Meeting in more than two years and the team was skeptical that this would provide value. Instead, they saw it as another thing to steal the valuable time. I began with expressing the ground rules:

• Be professional;
• Recognize we have a common goal;
• Recognize that passion drives energy that can be perceived as hostile, but that is intended to drive positive change and comes from an honest place;
• Trust each other;
• It’s not a blame game; and
• No finger-pointing.

The structure of our meeting started with an analysis of past due orders and expected receipt dates. We evaluated and came up with solutions to control past due orders and to accelerate receipt.

Then we looked at open work orders for the day/week and discussed any quality and maintenance needs that would create bottlenecks or delays. We discussed solutions to challenges that were brought to light and immediately determined that we needed to revise some processes and SOPs and, most importantly, work together.

03. How Our Team Improved – The Rapid Result

When the first major problem was brought to light in one of our meetings, the finger-pointing started (old habits are hard to break). But, over time the team realized that we were in this together, learned to be honest with each other and, most importantly, to be accountable for our own actions.

Within 90-days, our TEAM improved OTD from 76% to 98%. The biggest driver for this positive change was improved COMMUNICATION.

Insights to quickly help you improve your On-Time Delivery plan

Having discussed the challenges faced during OTD and the solutions to overcome such challenges, we will be taking it a step further and provide a winning a formula for actualization of our organizational goals.

Sharing success and acknowledgment of failure is motivational when success and continuous improvement are realized throughout an organization. It’s amazing what simple recurring operations meeting can produce.

01. Reliance on Systems and Team Members (Trust)

Improved demand forecasts and a systematic approach to surveying suppliers so that lead times can be updated to reflect current realities, along with a meticulous review of demand history and ongoing updates of safety stock levels, is the first step to convincing a team to increase its reliance on technology planning tools. This reliance will enable on-hand material availability and provide clear vision of customer requirements for improved production planning, including optimized machine utilization and labor resource availability. The more we rely on our systems, the more we improve and isolate opportunities for further improvement. As we gained more and more reliance on our systems and processes, we saw our OTD percentage increasing rapidly.

02. Improved Training Programs (Communication & Goal Congruence)

Heightened communication within the environment brought training deficiencies bubbling to the surface quickly. They were countered with focused training programs- ones that promoted improved safety, quality, operational efficiency and productivity. As issues were vetted in our operations meetings, we worked with our Human Resources team to implement improved training and saw an immediate correlation to reduced scrap and safety-related instances.

03. Updated Processes and SOPs (Goal Congruence)

With predictability and consistency as key goals, we moved beyond “form over substance” and updated our processes to reflect our true intentions. The new processes were streamlined and optimized which eliminated costly effort that our customers were not willing to pay for. Perhaps, the most significant contribution was the update of Standard Operating Procedures (“SOPS”). Improved operator training and accurate SOPs allowed us to reduce errors and produce product with high quality & purities and improved stability and consistency, which provided a roadmap for identifying issues in a real-time fashion so that immediate actions could be taken to rectify issues, delivering consistent results.

While harvesting low-hanging fruit is rewarding, true achievement comes to those that can stretch for the real treasure in the higher branches.

Make your product easier to buy than your competition, or you will find your customers buying from them, not you.” -Mark Cuban

ERP Helps You Achieve On-Time Delivery (OTD) KPI

If you are using spreadsheets to keep track of your supply chain, it’s time for you to switch to automation as manual processing is cumbersome and error prone, costing you millions. Deploying a modern ERP system can boost your supply chain efficiency: from better inventory control, to faster delivery of goods, to improved productivity.

A good modern-day ERP ensures stronger supplier relationships, streamlined shipping operations, and better customer communication through reliable lead, opportunity and quote tracking. The software offers fundamental benefits such as reduced lead-time, on-time shipments and reduction in cycle-time. Reduced lead-time is a critical parameter as non-availability of an item can create issues such as missing delivery schedule and losing customers to your competition.

The real-time data analytics helps you to better manage inventory levels and order fulfilment rates.

Per a global supply chain survey, data analytics will help grow DIFOT to 96% or above, which is at least 7% higher than the industry average.

Companies with a modern ERP get a 360-degree view of the customer. This holistic view of the customer relationships and their effectivity helps you to better serve customers. You can offer a tailored service to each customer, prioritize your best customers, and automate allocations, fulfillment and discounts for your “A” customers. Improved shipping operations give you the scope for reliable order tracking and shipping notifications.

ERP has really helped with a better distribution of information across the internal teams within our company.

Success Story

One of our clients, a US-based manufacturing company initiated an upgrade of their existing ERP software. The upgrade was imperative as the system was hurting overall profitability and enterprise-wise efficiencies. There was a lack of visibility of data, most communication was manual, inventory was all over the place, resources & human capital was untracked from a costing perspective etc. Within 6 months of upgrading their ERP system to a modern cloud-based system, their on-time delivery improved by 28% as the system was able to track each step of the operation with enhanced visibility of inventory and supply chain.

Key Takeaways

• Finally, most companies manage OTD not just as a single date but instead to a range of dates – missed (X) or expected (Y) dates.
• A structured operations meeting lead by a strong leader can do wonders to OTIF. Resolving operational issues at a micro level is essential.
• An effective ERP software solution helps drive efficiencies across the board.
• A metric that drives customer satisfaction will drive long-term customer retention and revenue for your organization.