Over the course of 15 years I have grown FNZZS Inc. from a "geeky" little tech startup to a moderate-sized player in the telecom industry. We provide corporate wired and wireless communication systems for offices and field staff that incorporate voice with internet, email and social networking and blogging services. I started with two programmers, one tiny assembly facility, a handful of suppliers, and customers in a few states. FNZZS now produces for customers in 68 countries from eight global plants (six of our own facilities and two sites to which we have recently begun outsourcing subassembly) and works with hundreds of suppliers. Business has boomed, but so, too, has our supply chain management headaches.
The data we need to make literally any decision — mundane day-to-day actions to critical strategic planning — resides in different ERP systems, applications, and who knows how many spreadsheets (our own and that of customers, suppliers, and outsourcing firms). The timeliness and efficacy of our supply chain decision-making has suffered: we have repeatedly missed market opportunities, overlooked collaborative cost-savings with supply chain partners, and mismanaged regulatory adherence and customs/trade issues. It will only get worse as FNZZS continues to grow and rely on partners that hold key data outside of our direct control. My fear is that the patchwork of systems, applications, worksheets, and languages will grow and increasingly hide all kinds of data (manufacturing performance, design plans, customer orders, shipping schedules, etc.).
FNZZS is a cutting-edge technology company, and it must be able to swiftly make collaborative decisions with our supply chain partners to capitalize on lightning fast market changes. If we don't, we'll fail. I don't see how that can happen in our current enterprise setup.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
By Nari Viswanathan
The challenge that FNZZS faces is something that is all too common, even in large enterprises with relatively mature IT systems. Supply chain globalization, increased complexity, rising costs, and the need to respond rapidly to customer-demand changes and supply chain disruptions are forcing companies across industries to rethink their old approach to supply chain management. The evolution of today's multitiered supply and demand networks is driven by the need to reduce costs and achieve long-term competitive advantage. In the case of FNZZS, the company faces an additional challenge of a fragmented IT landscape, which leads to poor multitier visibility and lack of responsiveness.
As your business grew and scaled, the nature of supply chain functions required to achieve its changing business goals also changed significantly. In a more distributed operation, the company now has to more effectively collaborate with its trading partners since the extent of direct control of its processes has decreased. This requires exchanging and analyzing much larger amounts of data and collaborating with many more partners in different geographies. To succeed in this task, you will need to automate many of the regular SCM tasks that were previously executed manually.
With customers in 68 countries, FNZZS has a big challenge in front of it to effectively manage its demand network. Some of the missed market opportunities have possibly occurred due to the lack of visibility into your demand network. In addition to increasingly globalizing customer base, the multitiered nature of the supply chain imposes additional challenges: 71% of the participants in a recent Aberdeen study indicated that they were removed from their end customers by at least two tiers of the supplier chain.
FNZZS clearly faces significant challenges in integrating its disparate IT systems. In addition, solving the multienterprise business challenges listed cannot be enabled fully through traditional ERP or advanced planning and scheduling (APS) systems alone. There is a need for a comprehensive business process layer that ties existing ERP and APS systems with add-on business components that can fill gaps in capabilities. In today's tough economy, conducting a traditional multiyear, multicomponent ERP rollout is an expensive option for a midsize company like FNZZS. Considering this, the company should explore SaaS (software as a service or on-demand) solutions that target multienterprise collaboration. The multienterprise complexity of FNZZS' supply chain problems calls for highly flexible and collaborative IT capabilities, making SaaS solutions an attractive option.
A multitenant, on-demand application that enables collaboration across the networks of customers and suppliers is an example of a multienterprise supply chain management (SCM) solution. Many on demand providers come to the table with networks of preconnected suppliers and carriers, which helps to further reduce rollout times and increase trading partner acceptance. Enabling support for unique business processes by customer, product line, or channel, an on-demand technology platform can lay a foundation for richer data exchange and more flexible process collaboration.
Aberdeen's research on integrated demand-supply networks shows that the following five steps are critical for FNZZS to create a truly integrated supply chain:
- Look beyond the ERP: ERP systems were not architected to solve the multienterprise supply chain problem. FNZZS should look for solutions that would allow you to extend core ERP capabilities by enabling partner integration and collaboration in planning, execution, and performance management.
- B2B integration: Enabling B2B integration with supply chain partners is the first essential step that needs to be taken. As the number of trading partners increases, it becomes more challenging and time-consuming to collaborate with them. In order not to lose any valuable information, the company needs to bolster its supply chain partner connectivity capabilities.
- Data management: One of the two highest barriers to improved partner collaboration (reported by 55% of respondents) is late or missing and inaccurate data from partners. Hence the technology solutions that are adopted in a multienterprise supply chain should be strongly focused on data management.
- Process collaboration: Companies that have moved to process collaboration report that they have been able to speed up their planning and execution cycles, and they can reshape and react to demand much faster than before. By exchanging richer information more quickly with trading partners, you will be able to make more accurate plans and enable midcourse corrections.
- Network intelligence: There is a need for organizations to evolve from traditional enterprise-focused business intelligence toward using intelligence tools that capture network wide inputs and help unite performance management with the execution cycle. In other words, the analytics and reporting capabilities should be coupled with workflow management and event management to allow the users executing the business processes to respond rapidly to market events.
Nari Viswanathan is Vice President and Principal Analyst for the Aberdeen Group's Supply Chain Management Practice (www.aberdeen.com), Nari heads up the supply chain planning practice, and counsels enterprises on their supply chain planning strategies in areas such as sales and operations planning, demand management, inventory management, network design, and customer/ supplier collaboration with specific emphasis on financial performance. Nari can be reached at nari.viswanathan@aberdeen.com
By John Westerveld
The issues you have identified at FNZZS are typical of companies whose growth has outpaced the growth of the company's enterprise systems and management structures. At some point, the realization dawns that more advanced enterprise systems and structures are needed to make the company successful. Often this realization occurs following a very painful financial hit when existing systems have let the company down.
So how does a company in this position transition to the next level of supply chain maturity? There are two key elements:
-
Achieve visibility to all your data sources. And once you do that,
leverage your new-found visibility to uncover opportunities and actions, and to
make better decisions, faster. This is not something that can be developed
internally and then evolved. Instead, you need a tool that will:
- Take data from the multiple data sources (both internal and external) and present the data in a single system that can model the ERP behavior of each unique data source. External data sources can sometimes be a challenge due to reluctance of the contract manufacturer to part with that data, but with persistence and a common understanding success can be achieved.
- Provide a view to the data that allows visibility at multiple levels and across each vertical of the business. Information needs to be as high-level or as detailed as needed. You must have the ability to drill from the high-level to the details when investigating issues and opportunities.
- Provide an alerting capability that informs when a particular metric is out of tolerance or when a specific event (or more importantly, the impact of the event) has occurred.
- Improve decision-making capabilities by leveraging what-if, collaboration, and comparative scorecards. You must be able to simulate a given problem, and try out various solutions. Then you must be able to compare the solutions to determine the best response. This decision-making cycle must be executed in minutes or hours, not days.
- The tool must be flexible enough to quickly adapt to changes to your supply chain strategies and relationships. The tool must grow with your company, otherwise you will need to replace it as your strategies change to meet new demands.
- Implement sales and operations planning. How many opportunities have been lost because the sales and marketing team is working to one set of assumptions while the operations and finance team is working to another? Sales and operations planning, when well-executed, ensures that the various teams are working to the same plan. In today's market, sales and operations must be more than just a static plan that is set at the beginning of the month then reviewed at the beginning of the next month. Business moves faster than that. Performance to the sales and operations plan must be continually monitored and, if significant changes have occurred, the plan re-cast.
With these elements in place, FNZZS will be able to make better decisions faster and will be able to communicate and execute those decisions more effectively. More importantly, the company will move as a unit toward its goals, with the sales and operations plan setting the route.
John Westerveld is a product manager at Kinaxis (www.kinaxis.com), and is responsible for supply management, supply chain risk management, application interface and framework, integration management, and server. He joined Kinaxis more than eight years ago, bringing with him 16 years of manufacturing experience, including 10 years in the information technology field. John is a qualified APICS instructor and is certified APICS CPIM. John can be reached at jwesterveld@kinaxis.com
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