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To get a better understanding of the product and responsiveness, SupplyChainBrain met with some Kinaxis representatives and customers at the company's annual user conference.
Participants included Kinaxis CEO Doug Colbeth; COO John Sicard; Kevin O'Marah, senior research fellow at the Stanford Global Supply Chain Forum; Joe McBeth, vice president, supply chain, at Jabil; Erwin Hermans, vice president of supply chain solutions at Celestica; Tom Tael, Qualcomm's senior manager for business processes; Thomas LeBlanc, master scheduler at Varian Semiconductor; Mike Keltz, IT integrator at Lockheed Martin Aeronautics; and Lalit Panda, at that time CIO at D&M Holdings.
Separate interviews with each person can be accessed at SupplyChainBrain.
Q: It's a volatile world out there. What do you think is the biggest challenge facing your customers today?
A: Colbeth: I would say for three out of four of them, their biggest challenge is demand volatility.
Q: So what's the tool they need to overcome that and gain competitive advantage?
A: Colbeth: In a very simple sense, we have customers where demand is greater than their ability to meet that demand. So being able to model demand in advance and secure the supply lines is critical. It's essential to customer satisfaction. Because for many of our customers, if they lose their top customer, it's just devastating.
Q: How can they acquire the capability to meet the demand?
A: Colbeth: While there's been a lot of progress in lean manufacturing and in other areas, where there has not been much headway is in tools. What I noticed when I got involved in this industry was that everything was disconnected. Demand planning people had not even met the supply chain planning people. You would hear the term 'sales and operations planning,' but they had not necessarily talked with anybody at the factory level where you're doing your dynamic element of demand and supply. That's why Kinaxis set forth on a long and heavy investment in creating what I call a control tower where all of these capabilities are essentially a part of this single platform.
Q: Elaborate on what this control tower concept means.
A: Colbeth: We no longer think of the supply chain in a bubble. What happens in the supply chain has a dramatic impact on other areas of the business. For example, when there's a major event in the supply chain, managers want to take that info and model the impact on cash flow. So the idea of a control tower is to think beyond the supply chain and be able to simulate anything anywhere at any time. That's what the control tower enables a large enterprise to do.
Q: So, you've enhanced visibility. What else?
A: Colbeth: Obviously, you have to have visibility to a problem. And then the next thing is you have to be able to measure impact, and most companies aren't very good at that because quite often the data is scattered.
Collapsing the time to respond, that's where you create your scenario. That's absolutely critical. That's where you differentiate yourself from a competitor. So if you're not proficient at collapsing that time to respond, you could potentially lose your top customer, and that's just devastating.
Q: John, you say that planning by itself isn't enough today. What do you mean?
A: Sicard: For the last 25 years or so, people focused on planning better because it gives some degree of control over where you're headed. But it's not enough today because volatility is on rise. Whether it's demand volatility or unexpected events in the supply chain, what's changing is that organizations need to learn how to deal with plan variance better. We've exhausted all of the technological capabilities to plan, and now it's a question of building a competency and responding to plan variance. That's where I think the biggest change is.
You can wish that your demand signals are going to be accurate, but the truth is that's rarely the case. So the companies that actually win, hence the competitive advantage, are the ones that establish a really strong supply chain competency.
Q: What do you need to establish a world-class supply chain?
A: Sicard: There are three things that are critical. First, you need to understand sooner what's changing. The second element is, how can I project into the future what risk or opportunity is being created by that change? And the third, which I think is really a new innovation, is this: how do I know who needs to be involved? It sounds like a very natural thing to want to know, but there is true innovation there from a technology perspective. Many manufacturers are outsourcing, so the likelihood that you know the people who need to get involved in course correcting is very low.
Q: You say it's critical to compress time when making those course corrections.
A: Sicard: Yes, it is, absolutely. It's also important to have one place for all your information, to have one version of the truth. It gives you analytical speed. No one wants to wait 30 minutes to see what the impact will be on your business. In 30 minutes, 15 new things are going to happen to you. So having the technology that can do very deep analytics and on a massive scale in seconds is a critical element in terms of technology.
Q: Kevin, what's your view on the importance of demand volatility?
A: O'Marah: It's the No. 1 thing I hear about today, and I think it cuts across all industries - consumer goods and industrial products, electronics, even the upstream and raw material industries are feeling the same kind of demand volatility. It also concerns the internal supply chain organization around talent. 'How do I make sure I have the right skill sets inside my organization to deal with some of these new volatile demand challenges?'
Q: So how does one deal with that?
A: O'Marah: The best way to respond is to try to get your hands around what's coming from the marketplace. Then you build a response capability in the supply chain and upstream in the sourcing organization. And even in your own manufacturing plants. That gives you the flexibility to surge when necessary and pull back without too much inventory being left around or business being left on the table.
Q: What is a must-have technological capability that a so-called world-class supply chain has to possess?
A: O'Marah: The single-most important thing probably is dealing with uncertainty. It's about trying to make sensible decisions, understanding how demand is going to be responded to but realizing what types of impacts you might make as a result in your own internal operations and upstream in your supply chain.
Q: You say the RapidResponse Control Tower is an historic shift. How so?
A: O'Marah: Through most of the 20th Century the effort was to remove variability in manufacturing, trying to just deliver steady flowing consistent product off the assembly line. Today, there is all of this volatility, this uncertainty, surging demand in emerging markets, and hyper-flexible pricing in the commodities that are going into your products. All of this forces us to ask, what if this or that happens, what if I'm short on a key component? What if the cost of shipping in a particular lane is suddenly doubled? How do you best make the call when something goes wrong, or the opposite, when an opportunity comes along and you'd like to be able to seize it? That's really critical to making your supply chain competitive.
Q: How important is this level of responsiveness?
A: O'Marah: It's vital. It's essential. If it's all about balancing supply and demand, all about dealing with those trade-offs, the last thing you want is to have the option of acting on something taken away by somebody acting more quickly.
Q: Joe, Jabil invested in RapidResponse. What were the needs that led to that?
A: McBeth: We have 12,000 active suppliers and 250 major accounts. To keep ahead of the curve, you need a data set that can help you do the planning and understand the risks. Understanding those risks around the master schedule and how we commit to customers on demand signals really drove us to look at a tool-set that was fast, easy to use and could do multiple scenarios so that we come out with better answers.
Q: Can you speak about some risk scenarios?
A: McBeth: As the supply chain gets longer and larger, you have some unknowns, in the number of suppliers. So, how do you manage the supply chain for the unknown supply base that in some cases can't be eliminated?
In addition, as we expand into different regions of the world, the whole supply chain needs to be reconfigured to support those manufacturing sites. Having a control tower that feeds the best information and does the modeling - that will allow us to be ahead of the game, lower our risk, lower our costs and produce greater value for the end customer.
Q: Let's talk about the capabilities you want to see.
A: McBeth: It starts with having a system that can process data. We can't spend our time doing the numbers. We have to have systems that look for exceptions, produce those for the folks that can make decisions, and in a faster manner. You need to have some flexibility in the way you create that. The value stream for an X-ray machine will be very different than for a cellphone, bu that's the kind of businesses that Jabil is in. So maximizing for one supply chain is probably not the right answer. Having a system that allows you to maximize for many would be much better suited to our business.
Q: Erwin, you say that supply chain management is the 'secret sauce' at Celestica. What does that mean?
A: Hermans: It makes Celestica successful in its own operations and in our delivery performance and in the use of our working capital.
Q: Has it made you world-class? If so, how?
A: Hermans: Think of it as inventory, visibility and decision making. It's having the visibility to inventory across the supply chain and the ability to make decisions based on scenario planning.
Q: Speaking of which, you invested in RapidResponse. What was the need?
A: Hermans: Supply-demand balancing is at the core of what we do and is ultimately what gives us the ability to respond to customer needs, to respond to customer orders and make intelligent decisions about the orders that we fulfill. Deciding when an order is clear to fulfill, but to do it at an optimized cost, getting all the data into one place - RapidResponse does that for us. And having the ability to run what-if scenarios, to test some of the constraints - the fact that all of that is in one system makes it indispensable.
Q: What's the significance of the control tower concept?
A: Hermans: For a long time the decision was to focus on either supply chain planning or demand planning. You got really good at demand planning and forecast accuracy, in which case your supply chain doesn't need to be quite as flexible. Or you flip it around and you don't count on accuracy in forecast or planning capabilities, you just manage through an efficient supply chain. What Kinaxis has done with the control tower is bring those two into one application where supply decisions and demand decisions can be made in one environment and made instantaneously. That's really the big value proposition that most customers will gladly accept.
Q: Tom, why do you say the top three challenges at Qualcomm are around responsiveness, flexibility and scalability?
A: Tael: Qualcomm has had explosive growth over the last 25 years. We continue to be challenged with the need to support newer products, faster. The demand volatility has increased dramatically and so our ability to support customers on ramp-ups has had to grow as well. Our supply network must be capable of meeting these rapid ramps.
We were using another planning solution, and while we were pleased with it, we were really challenged in those areas - responsiveness, flexibility and scalability. We found that RapidResponse helped us meet all three of those requirements.
Q: How are you enabling or integrating demand and supply planning at Qualcomm?
A: Tael: In 2007, we went live with RapidResponse on the demand side. Around 2010 we went live with supply side integration. We're fully integrated to provide a response back to the demand planning organization with our supply commits, so they can schedule and respond to our customer's needs.
Q: Do you do much modeling?
A: Tael: We're actually using a lot of what-if planning today. It's one of the key elements of our business process, both with our customer partners as well as with our supplier partners. We use what-if planning on a daily basis to be able to respond to unplanned supply issues and demand requests. We think it's consistent with where awe want to be tomorrow.
Q: Lalit, D&M Holdings is a collection of 12 different high-end audio companies. The disparate nature of your business model must be challenging in itself.
A: Panda: We have about 12 ERPs, so there was a lot of disconnected processes around sales and operations planning. We saw a challenge in executing a global S&OP process without a single source of data and a single version of the truth. What we wanted to do was integrate into one single system that everybody could access for evaluating supply chain trade-offs. Because we are in a very competitive business and have to respond quickly, we needed that capability.
Q: You say there are three priorities any company needs if it is to evolve its S&OP. What are they?
A: Panda: Consistency of process across the geographies and business units is one of the first steps in developing that S&OP maturity curve. Once you have that, then you must focus on key metrics that drive value in the supply chain. Then tying the front and back ends of the organization together so they all speak the same language is critical.
Q: You implemented the Kinaxis solution because you wanted to integrate demand planning processes from end to end. You see that as consistent with Kinaxis's control tower vision?
A: Panda: You can't overemphasize the importance. Consider that electronics have short product lifecycles and there's a lot of variability in demand and supply lead times are long, so to be responsive and quick to changes in market demand and be able to go back in the supply chain and assess if you have the capability to deliver and prioritize between different choices - this is critical. There is no way you can survive in this business without being flexible and responsive.
Q: Thomas, what's the balancing act you're most concerned with at Varian?
A: LeBlanc: Our customers are requiring shorter and shorter lead times for their products. And on the other side, our suppliers are trying to get as lean as possible. So while our customers require lead times of eight weeks or less, we're getting extended lead times from our suppliers, sometimes greater than 20 weeks, for their parts. Trying to balance these and have the right parts available when needed, when the orders do come in from customers is the most challenging aspect.
Q: How do you achieve the balance you want to have?
A: LeBlanc: We've entered into agreements with almost 50 suppliers, covering over 700 of the most critical components. They allow us to shorten lead times of those parts, which then allows us to be more responsive to our end customers.
Q: What's the tool that's enabling that?
A: LeBlanc: We chose RapidResponse to help us manage those agreements. It's useful in a number of other areas as well. Now it has 20 different applications at Varian, and it touches seven different functional groups. The latest is managing our contractual liabilities.
Q: Mike, you said visibility at Lockheed Martin Aeronautics is as important as ERP or MRP systems. Tell us more.
A: Keltz: A world-class supply chain needs enterprise resource planning and manufacturing resource planning systems to actually keep the business going. But they don't give you the view into fluctuations and challenges, nor do they allow you to do what-if analysis.
Q: How important is that kind of simulation?
A: Keltz: With that, you can actually see what the effect will be of making changes before you invest some very expensive dollars.
Keywords: Forecasting & Demand Planning, Business Intelligence & Analytics, Sales & Operations Planning, Supply Chain Visibility, Technology, Business Strategy Alignment, Supply Chain Analysis & Consulting, Global Supply Chain Management, Dashboards, Demand Variability, Demand Volatility, Pricing Volatility, Real-Time Information, End-To-End Visibility
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