Global Supply Chain

In the Logistics Management magazine issue of 05/19/2010 Michael Levins (editor) published parts of interviews he conducted with four (4) supply chain analysts on current trends in Supply Chain Execution.  While a vast majority of the respondents to the Logistics Management 2010 Software User Survey are using some variation of supply chain software, the analysts imply that there is still a way to go for Supply Chain Organizations to achieve synchronization across their supply chains.

Of the four interviews, the interview that resonated most profoundly with me was with Dwight Klappich, Analyst and Research Vice President at Gartner.  He puts forward the concept of Supply Chain Execution (SCE) Convergence as the next iteration for companies that are moving toward supply chain execution excellence.  In a nutshell SCE Convergence is the cross functional integration and synchronization of processes, sub-processes and activities within the organization.

Dwight acknowledges that although companies have been able to gain improvements within silos from their current SCE solutions, achieving greater levels of excellence and the resulting benefit require the orchestration of end-to-end processes like selling, buying, making -to which could be added – accounting, finance, inventory control, transportation management, and compliance.

However, in order to achieve SCE Convergence, companies will have to significantly stretch themselves beyond what their current SCE systems offer.  SCE Convergence is achievable through a multi-functional supply chain architecture that supports the company’s end-to-end supply chain processes (operations), manages supporting data and information, and provides a comprehensive 360 degree view of the entire operation in an on-demand environment.

SCE Convergence requires system(s) that are designed to integrate, orchestrate, and enable (all) the processes and sub-processes that make-up the Supply Chain.  SCE Convergence enables operators across the supply chain to access information (push or pull) that is critical to fulfilling their functional responsibilities, provides managers with a comprehensive and contextual view of their sphere of responsibility, and supports organizational decision making and action.  SCE Convergence provides senior management with command and control of their business by providing information that is meaningful and actionable.

SCE Convergence is not new in practice.  However, few in the supply chain have successfully implemented SCE Convergence solutions because the mainstream ERP applications and the newer SaaS solutions have not approached the supply chain in a holistic, integrated manner.

Few truly supply chain organizations have implemented comprehensive supply chain execution solutions.  Those companies that have been successful have what Dwight calls SCE Convergence solutions that enable operators to work within their silos and insure that the validated information required for management planning, decision making and action is available when needed.

True SCE Convergence solutions enable companies to manage the entire Cash-to-Cash cycles within the context of their ERP solutions or independent of them.  They enable the streamlining of processes, the optimization of fulfillment with inventory, the control of costs, and the increase in compliance within one orchestrating software application.  True SCE Convergence provides the framework for intercompany integration and extra-company synchronization.

The recent study  by American Shipper magazine and AAEI, “ISF Benchmark Study: Achieving Complaince – Against All Odds”, presents some revealing benchmarks when it comes to meeting ISF compliance requirements on January 26, 2010.

The benchmark study highlighted 5 key areas that separates winners from the general population of importers:

• Will be ISF compliant by the January 26, 2010 enforcement date.

• Have a high level of confidence that their ISF filings are timely, accurate and complete.

• Keep total cost of ISF compliance below $100K per year.

• Pay <$25 per filing.

• Make amendments to contracts and service agreements to incorporate ISF compliance.

The ability to meet CBP ISF compliance is predicated on several key elements:

1. Having a system in place that helps the importer assure the suppliers are providing the ISF information in a timely manner that does not delay shipment cycle time.  The survey highlighted that delay in shipment cycle time due to ISF information reporting was a major concern for importers with the implied additional cost associated with a delay.

2. Being able to capture ISF supplier information electronically or through an electronic facsimile.  The ability to easily validate information and where necessary request amendments or updated ISF information quickly.

3. Preparing the ISF filing without, or with minimal, manual intervention.

4. Submitting the filing electronically to Customs or a Customs Broker.

5. Monitoring ISF filings status to insure CBP compliance.

To be a winner requires the ability to manage the entire process efficiently and economically.  Winners have software  solutions that streamline process and integrate information flow to ensure   data flows from suppliers and is convertedto meaningful information without significant manual intervention.  The system is able to validate the information to insure that all required data elements are recieved.  The solutions provide alerts if there is incomplete information requiring attention.  Finally, the system should automate the conversion to the ISF details for electronic transmission to the defined filing system.

However, achieving winner status is not likely achievable without a supporting IT infrastructure that provides  supplier PO shipment planning and execution visibility and the ability to monitor ISF information submissions.

Blinco Systems has implemented 3 systems with clients that are considered large (and approaching mega) filers by CBP.  Each client had their ISF solution implemented within 60-90 days and have achieved >99% accuracy on their filings within the time constraints required to comply with CBP.  Furthermore, with full visibility into their suppliers’ shipment schedules and ISF filing performance, they have experienced virtually no degradation in shipment cycle time due to the information flow.  Finally, and most importantly our clients have been able to fully automate the ISF process and reduce costs dramatically (<$5.00 per entry).

Narendra Mulani who heads up the Accenture Supply Chain Management service line wrote in the August edition of Logistics Management on Operational and Technical Excellence in the supply chain.   He highlighted six (6) areas where supply chain masters excel:

• Order Capture enabling a fulfillment team to view the status of available inventory (on the floor and incoming) to support order scheduling and fulfillment
• Inventory Management which provides insight into inventory availability and supports the allocation and reallocation of inventory to optimize order fulfillment and customer relations
• Warehouse and Transportation Management that automates warehouse processes and supports automated management of rate quoting, equipment constraints and lead-times with carriers
• Reverse logistics and Returns management to improve faulty products and services
• Technology and Data Integration to leverage information across the entire fulfillment system, and
• Analytic tools that support sophisticated collection and analysis of information and improve decision-making.

Today, with the available technologies there is little excuse for companies not achieving operational and technical excellence.  There are small, medium and large software providers of sophisticated integrated fulfillment solutions at solutions at almost all price points that bring supply chain excellence capability to virtually any organization that wants to see their business excel.  The benefits to achieving excellence can be readily supported with a return on investment analysis.

The journey to achieve operational and technical excellence in the supply chain might appear daunting but with the right partner and commitment to the outcome the results are very achievable and the rewards exceptional.

Scenario 1: A large global 2000 company (it really doesn’t matter which industry) views itself primarily as a manufacturer. It has owned manufacturing facilities on several continents that manufacture most of the company’s products. It views its competitive advantage as being able to streamline its manufacturing facilities. However, because of competitive pressures for lower prices and the need for flexibility it has started to outsource some of its products to 3rd party contractors. It distributes its products in over 30 markets around the globe.

Scenario 2: A large global 2000 company views itself as a marketer of branded consumer goods product. It contracts out almost all its products to contract manufacturers that are located around the globe. It sees its competitive advantage in its research and design. Its brand is distributed in over 50 countries around the globe through a combination of owned distribution centers and direct sales forces and 3rd party logistics providers and independent sales channels.

These company profiles are caricatures of two business paradigms. They have defined themselves in old world business models that will shape the way they execute their business strategies. The company in scenario 2 reflects a more contemporary view of the world. By decoupling itself from its manufacturing component it has opted for flexibility over control. The company in scenario 1 is more representative of an industrial age company that focuses on manufacturing as its competitive advantage and sees control of its manufacturing environment more important than flexibility over its business model.

The traditional ERP systems (SAP, Oracle, QAD, Axapta) are more geared to the companies in scenario 1 than 2. However, when you are seen to be the only game in town you will still be the dominant player with the scenario 2 players.

There are many companies on the continuum from pure manufacturer to pure product/brand distributor. The companies in these 2 scenarios are simplistic in their nature. The reality is that there are no pure business models or best business models. What is important is that companies recognize that they play a role in the supply chain from the raw material to the end-consumer and managing their supply chains effectively and efficiently will provide real competitive advantage opportunities.

The Supply Chain Council definition of the supply chain applies to every company that exists, whether product or service centric. The SCC defines a company’s supply chain as everything from its supplier’s supplier to its customer’s customer. Indeed the product supply chain is a series of these company links, with each company of the chain managing “stuff” from its suppliers to its customers.

ERP systems inherently look at a company from within the four walls. Basically the ERP solutions are enterprise resource planning tools for each independent location with global accounting and financial capability, localized distribution management, and some inventory control tools. ERP systems primary orientation is to most effectively support the physical, human and financial resources within the manufacturing facility.

Supply chain focused companies are designed to look at how product moves to the customer from the supply side most efficiently and effectively. Supply chain focused companies strive to manage the flow of product from their suppliers (raw material, semi-finished, or finished goods) through their facilities (manufacturing plants or distribution centers) to meet the demand requirements of their customers.

ERP solutions weren’t developed and still don’t look a company from a holistic supply chain perspective and therefore fail to deliver a comprehensive global supply chain approach for companies to manage their business. While the major ERP solutions have significantly enhanced their customer and supplier focused capabilities there fundamental orientation and design has always been from that of a manufacturer.

Globalization has fundamentally changed the way the world functions. With globalization and the outsourcing of much manufacturing and many services, global companies must take a global supply view to excel. Success will not be defined by how well a company controls the flow of product into and within its four walls. Success will be determined by how well a company designs its supply chain to “flex” to the ever-changing competitive environment in which it exists.

Obviously no two companies are exactly alike. They have differing leadership styles, physical structures, goals and objectives, and values. However, what they all have in common is the need to buy products and services from suppliers, add value to them, and sell them to customers. This has not changed over time. However, as the world becomes more “globalized” the way companies construct and manage their supply chains to support their unique buy/sell environments will determine their competitive position.

I can hear the pragmatists screaming – What are the tangible benefits we will get from a global supply chain approach to our business? Show me the money! If I believe what you say what do I need to do to get a solution that supports my current and future plans as we continue to go global?

I can hear the realists screaming – I have a major investment in my ERP solution (we are talking $10’s of millions) and getting rid of it is not an option. What are my options if I want to transform my company into a global supply chain capable organization while still protecting my investment in my ERP solution?

In my next few blogs I will lay out:
1. the value proposition that almost every company can achieve by managing their organization with a powerful global supply chain orientation
2. the secret ingredients needed to build great global supply chain excellence
3. the reason that global supply chains are different and much more complex than domestic supply chain
4. the high level blue print as to what is needed to achieve best-in-class global supply chain excellence.