Sunday, September 28, 2014

Seven Characteristics of Supply Chains to Admire

upply chain excellence matters. As growth slows, it can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. The average manufacturing company has spent 1.7% of revenue on technology over the course of the past decade. Most of it has been focused on improving supply chain excellence.
While companies speak of supply chain ‘best practices’, and boast about improvements in operating margin, inventory levels and asset management—in speech after speech, in conference after conference—the results of these investments in supply chain excellence are hard to pinpoint in the analysis of balance sheet information for any industry. The reasons? There are three:
  1. Project-based Approach. A project-based approach is the implementation of multiple projects simultaneously.  For years, companies have believed that if each project had an ROI above an established threshold, that when implemented correctly, each would add value. Many companies have thousands of projects that are focused on admirable goals, but they are not aligned, thus creating slower progress.
  2. Focus on Vertical Excellence. A supply chain is composed of the functions of source, make and deliver. Deep within the back office of each company, they become strong vertical silos—almost a fortress—within the larger organization. Mistakenly, companies focus on vertical excellence not realizing that the best balance sheet performance happens when the functions are aligned cross-functionally. Knocking down the walls of the silos is an opportunity for all.  The strongest performance occurs when the functions are aligned together on total cost, customer service (order fill and on-time delivery) and inventory turns.
  3. A Lack of Corporate Understanding.  The supply chain is a complex system with tightly interwoven and nonlinear relationships. While corporate finance is backward-looking based on transactions, the supply chain is forward-looking based on business flows; like order flows, channel withdrawals, translation of demand into product availability, and sourcing strategies. Many companies mistakenly try to manage the supply chain based on historic transactions which limits the potential of the supply chain.
Full Article

Tuesday, June 24, 2014

Thinking Like a Consultant

Thinking Like a Consultant
Save time and money by structuring your business solutions  (Part 1 of 2)

Business men and women stand to benefit from thinking like a consultant.  Consultants use frameworks and business acumen to solve complex issues that aren’t readily apparent.  Fortunately there are simple ways to follow their logic that can save you time and grant you business insights.

First, It is important to understand how a consultant thinks.  Second, you should learn how to frame, analyze and communicate a business problem.  Third, you need to structure your solutions in the big picture and synthesize your recommendations to align with who you are speaking to.

Understanding how a consultant thinks is rather easy but hard to actually do without practice.  First, understand that the process of getting to the right business solution is more important than the actual answer.  Consultants often have little time to make a recommendation so they practice frameworks.  Consultants also think logically and use data to support and guide their solutions. Finally, after arriving to a solution, they synthesize information for their clients, show how they arrived to their conclusion, and make sure their recommendations are client friendly.  For Example, I have pitched advanced analytics without success because my client had no background on statical models. Therefore I structured my solutions in terms that didn’t require my client to dive into data. 

Just to reiterate, there are three parts to how a consultant thinks, one, they follow a process and use frameworks, two, they use data to drive their analysis, three, they structure their recommendations based on who they are speaking to.

Now that you have a basic idea how a consultant thinks, its time to learn how to begin solving an issue.  First, verify your understanding of the facts......
For the Full article visit Thinking like a consultant
Visit Operation Consulting Group’s website For more information on Management Consulting

Sunday, April 20, 2014

Companies Are Failing to Detect Financial Fraud in Supply Chains: Deloitte

A surprising number of business executives are leaving their supply chains vulnerable to financial fraud, according to a new study by Deloitte Financial Advisory Services.
Polling more than 2,600 executives, the study found that fewer than a third of respondents were deploying the kind of data-analytics tools that can detect fraud or waste by vendors. Another 13% had the necessary tools but were still learning to use them, while 22% had no data analytics of any kind.
Many managers, lacking sufficient knowledge of information technology, do not understand “the power of analytics,” said Deloitte principal Mark Pearson. As a result, they are failing to submit their invoices and contracts to the necessary level of scrutiny.
In addition, Pearson said, many companies harbor an attitude of “it can’t happen here.” Yet “folks who do fraud investigations every day recognize that it exists in most organizations.”
Part of the problem lies with the nature of “big data” — the existence of so many inputs that companies are having a tough time sorting through the noise and deriving information of value. Pearson said companies are doing a better job of identifying high-level trends in invoice characteristics than they are scrutinizing individual line items. But the latter is where most of the fraud resides.
Financial fraud among vendors and their subcontractors can take many forms. The worst, in terms of potential dollar impact, involves collusion between a company employee, usually in a procurement role, and an outside party. The buyer might be getting kickbacks or other financial incentives in exchange for using the vendor’s services. Another possibility is an employee creating a false vendor and submitting invoices on its behalf.
Perhaps most difficult to detect is misconduct by the vendor, often in the form of falsified labor and inflated bills. Then there’s the familiar pumping up of expense accounts and other kinds of allocated charges.
At the very least, one might assume that companies are carefully monitoring the expenses of their own employees. Often that isn’t even the case, said Deloitte partner Larry Kivett. “In our experience, labor-related charges, per diems and hotel, travel and expense charges tend to be pretty problematic.”
The typical invoice can be opaque, boiling down all labor costs into a single number. “It doesn’t contain the information a forensic accountant would want to see,” said Pearson. “Cost-plus” contracts are especially vulnerable to the imposition of illegitimate charges.
Fraud becomes even more of a possibility where multiple tiers of suppliers are involved. “Everybody knows who they contract directly with,” said Pearson. “But is that tier-one vendor actually creating the process itself? Or is it leveraging a supply chain that might contain entities that don’t have the client’s interest at heart?”
Kivett said there’s frequently a disconnect between the care that a company takes in sorting through bids and contracting with the chosen vendor, and the negligence it shows in following up to make sure that the contract terms are being met.
“On the back end, when you get to billing, you could have very summarized data that’s difficult to tie back to a contract,” he said. Unfortunately, those two tasks are often performed by different departments in “siloed” organizations.
Even up front, companies could be doing a better job of policing their supply-chain vendors. Kivett recommended more intensive background checks than most managers are currently conducting. “The best way to prevent fraud,” he said, “is to eliminate your bad apples before they’ve had access to your organization.”
It’s a piece of advice that many companies are failing to take. In the Deloitte survey, 12%of respondents said they monitor third parties for fraud, waste and abuse on a quarterly basis, while 13% said they do it annually.
Pearson said procurement managers need to exercise their right to audit vendors’ bills and activities. At the very least, companies need to have internal auditors in place, “to help them get smart about what it is they’re spending money on.”
As for the vendor, it’s less likely to engage in financial misconduct with a buyer that demonstrates diligence on a constant basis, Pearson said.

Analytics can go a long way toward smoking out the miscreants. Kivett says available tools for parsing the numbers are more sophisticated than ever. “There’s a proliferation of data that didn’t exist five to 10 years ago.” What’s more, “as fraud investigators, we’ve gotten smarter about fraud schemes.”
That assumes, of course, that companies are willing to make use of the available tools and expertise that can help to wipe out fraud in supply-chain relationships. But there’s some evidence that they’re waking up.
Deloitte sees financial fraud as a “hot area,” Pearson said. ”It’s a regular topic of conversation that we’re having now with clients. There’s reason for optimism — a heightened awareness.”
Robert Bowman Contributor on forbes

Tuesday, April 8, 2014

Resource Revolution: What Every Supply Chain Manager Needs to Know

Are You Ready?

Meeting global resource demand means dramatically enhancing resource productivity however new technology gives companies an exceptional opportunity to meet that challenge with the next industrial revolution.
What Productivity Improvements are needed to meet global demand
Materials 1.3%              Food 1.5%
Energy 3.2%                  Water 3.7%

Inefficient use of Resources: Automobile Example

Most automobiles spend over 95 percent of their life sitting idle. Even when used, the average occupancy per vehicle is far less than two and much below the standard capacity of five. Roads are also notoriously inefficient. Freeways rarely operate at optimal throughput (around 2,000 cars a lane per hour). Furthermore, congestion reduces throughput.
What does this all add up to?  Major Costs for governments, individuals and businesses.  Governments need to develop and maintain infrastructures.  Individuals pay billions for gas at the pump and businesses endure transportation and logistical costs to move their products from one place to the other.
Underutilization is a difficult problem to solve and cannot be helped by outsourcing or engineering.  This problem is an amazing opportunity to create value for governments businesses, and individuals.  With innovation to use resources far more imaginatively and efficiently and push for change, business will be revolutionized.

Checklist for Resource Innovation

  • Combine information technology, nanoscale-materials science, and biology with industrial technology  to yield substantial productivity increases.
  • Achieve high-productivity and economic growth though the middle class, the best opportunity for wealth-creation.
  • Capturing these opportunities will require management approaches to change.

Productivity Improvements by 50% or More

Historic resource-productivity improvement rates of one to two percentage points a year are over. Operation leaders must deliver productivity gains of 50 percent or more every few years.

Transportation Revolution

Imaging never having to drive your children to school in the morning. Imaging never having to look for parking.  Imaging not having to ever go to the gas station. Imagine reading a book or working on your computer while on a lengthy trip, by yourself.  Once this was just a vision stemming from science fiction, can now be a reality.  The individual benefits of self driving cars are evident but what about how this would effect our transportation ecosystem.  How can such a technology improve the productivity of our society?  What will our world look like?
Currently the extremely low utilization of our transportation system is a metric worth exploring. Trillions of dollars can be saved by improving this metric but how is this really going to be accomplished.  Technology is answer, but also we must take concepts from supply chain management and queuing theory to effect the greater whole.
First, The technology needed to accomplish a transportation revolution already exists. Nissan, Mercedes-Benz and Renault all have announced plans to sell cars by 2020 that can drive themselves at least part of the time.  In an announcement at the Frankfurt Auto show in September of 2013. Nissan mentioned the timetable on self-driving cars will be a release date in 2020. Nissan’s chairman Carlos Ghosn commented on self driving automobiles.
“We’re going to get there even sooner than we think,” Ghosn said. “What’s going to be left is the reliability of the system… 2020 is going to be the latest because we’re going to be under pressure from a lot of competition. The pressure is now on us to be sure we are bringing the first cars on the market.”

Orginal Article and videos at Supply Chain Consultants

Thursday, March 27, 2014

Demand Variability

Why Analyze Variability?

Logistics Consulting ServicesThe impact of demand variability has large implications on how to properly manage operations.  Significant profit increases can be achieved by preparing for variability.  Supply chain managers have listed demand variability as the top challenge to efficiently and effectively managing supply chains and there are mathematical ways to create the most value.
Variability can determine influence supply chain strategy, production schedules, and inventory requirements, capacity requirements, and various other aspects of your supply chain.

What is demand variability?

Demand variability is the changes in demand from period to period. Each period can be defined by its appropriateness. Demand variability is also the result of trend, seasonality, events, and noise.

How do you compensate for variability?

  • Drive the supply chain from real demand
  • Consider different demand outcomes using probability and scenario analyses as part of planning processes, starting with the S&OP process.
  • Incorporate automated segmentation and classification capabilities along with dynamic demand response capabilities into the forecasting process.
  • Continuously evaluate response buffer strategies to ensure they are aligned with customer segmentation and associated demand variability.
  • Provide end-to-end and linked demand-supply visibility to deal with demand volatility as plans are executed.
  • Synchronize demand management processes with supply management processes.
  • Use the synchronization described above to employ demand shaping strategies.
  • Incorporate a learning framework to gain insights into variability and volatility.
  • Close the loop between variability management and volatility management.
  • Continuously improve processes to reduce lead times and process variability.

Factors that Effect Demand Variability

  • New Product Launch
  • Product Proliferation
  • increase in specialize retail programs
  • increased competition
  • Rapidly changing customer preferences
  • Promotions

Thursday, March 6, 2014

Green Operations

Focusing on the cost of energy and materials , the role of sustainable suppliers, and the integration into production processes, is often overlooked by companies.  Green operations can help build a sustainable future while improving a company’s brand image. We help clients grow revenue and reduce costs while meeting the challenges of today’s global economy.  We can redesign operations from end to end in a value chain while improving profitability.  Often, positive outcomes can be achieved by collecting, repurposing, and reusing discarded products and materials.

Corporate social responsibility

Corporate social responsibility is mainly self-regulated.  It’s up to each business to define their own corporate social responsibility (CSR).  CSR is also known as corporate responsibility, corporate citizenship and corporate social performance.   Businesses who create their own CSR measure their impact to the natural environment and social environment.  Companies who participate in CSR programs often earn creditability and brand awareness.  This can lead to increases in revenue and improvements in other financial metrics.

Thursday, February 13, 2014

3-D Printing, Conventional Manufacturing at Risk

3dprinterpartsThe capabilities of 3-D printing hardware are evolving rapidly. These machines the begin by printing simple plastic items can now handle a range of materials from titanium to organic materials like human cartilage. Not only does this technology allow for a spectrum of materials but allow  for production of fully functional components including LED’s and other electronics.  The ability to create complex items with mechanical and electronic components will make 3-D printers a viable alternative to standard manufacturing.
The technology is rapidly improving and costs are decreasing. Larger and more complex components, increased precision , and higher speeds is just the tip of this iceberg ready to sink the manufacturing economy. In my opinion it is not a matter of if 3-D printers will become a staple in every house but when. Just like how the personal computer invaded in the 1990’s, 3-D printers will rock the foundation of business.

Expect 3-D printing to:

  1. Change the design, production and logistics of products
  2. Influence manufacturing strategies
  3. Become highly profitable
  4. Change business models to maximize product design revenue
  5. Quickly and continuously improve capabilities
  6. Make many manufacturing facilities obsolete
3-D printers still have many markets to profit from before entering our homes. From a historical perspective, 3-D printing has a clear path through corporate America.  Just as computers made their way from research to business, 3-D printing will replace many conventional manufacturing processes.  They will eliminate the need for specialized machinery, they will reduce development time, and reduce the waste of raw materials.  Research suggests that 3-D printing, also known as additive manufacturing could reach $1/2 Trillion by 2025.