In Supply Chain Planning, One Size Does Not Fit All

Supply Chain leaders recognize that their planning processes need to be tailored to the attributes or characteristics of specific items.  However, many manufacturing and distribution companies still use"one-size-fits-all" approaches to Demand and Supply Planning.  This often results in too much inventory on some items, and not enough inventory on others which can cause shortages and stock-outs.

A number of years ago, at Arrow Electronics, we implemented a Categorization approach that applied different forecasting and inventory policies to each item based on the item's demand characteristics, e.g., sales volume, variability of demand and risk profile (mainly, how much of the demand was concentrated with one or a few customers).  This allowed planners to focus on the right items to ensure we had the right amount of inventory in the right place at the right time.  It was a key element of an inventory strategy that improved inventory turns from 3.5 to 6 while improving customer service levels.

Ask yourself these questions:

• Do you use the same forecasting process for all items?  Or do you vary the process based on an item's demand characteristics such as volume, variability or risk?  How about life-cycle stage, i.e., do you forecast new items differently from mature or end-of-life items?

• Do you set your inventory targets or reorder points based on consistent rules-of-thumb, e.g., 30 days coverage ?  Or do you set them based on each item's demand variability, lead time and variability of lead time?

• Do you set lot sizes or MOQ's for production or purchasing based on "gut feel"?  Or do you employ some sort of Economic Order Quantity or Total Cost of Ownership approach to minimize total supply chain costs?

For a good example of what I'm talking about, check out this video from SupplyChainBrain, featuring Tim Conrad of Gates Corporation.  Gates implemented a process called "Plan for Every Part" or PFEP, which tailors Supply Chain and inventory strategies based on each item's unique DNA.   Click here to watch the video.

How well does your company align its Supply Chain Planning processes with the unique characteristics of each item?  Have you thought about the inventory, service and cost benefits of a more tailored approach?

Until next time…

Rob

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Rob Ende is Founder and President of REanalyze Inc., a Supply Chain, Inventory Management and Analytics consultancy based on Long Island, New York.  Rob can be reached at 631-807-2339 or rende@reanalyzeinc.com.

© 2011 REanalyze.Inc.. All Rights Reserved.

Talking to Students About Supply Chain Careers

Last week I was invited to speak to the APICS student chapter at Farmingdale State College.  It’s always great to talk to an audience of budding supply chain professionals, and I let them know they are entering a great field.   Even in these challenging economic times, they have skills that are in demand and they have bright futures ahead of them.  Manufacturing and Distribution companies hire a lot of supply chain talent – even in tough times.

As I typically do with an audience like this, I described my career journey in Supply Chain Management, Inventory Management and Analytics, peppered with some real-life examples.  I also shared some lessons-learned for career-management.  This is certainly not an exhaustive list, but a few things to remind yourself of periodically…

1. You have a long career ahead of you.  Try different things.  Do what you enjoy.  Don’t chase money.   If you do what you enjoy and are good at, the rewards will come.
   
   
2. Make an impact.  Apply what you learn in school and on the job.  Tie ideas back to a business case – how will you make the company more profitable?
   
   
3. Look out for #1.  Don’t expect someone else to manage your career.  Nobody cares about it more than you do.  Keep developing and learning.

Nothing earth-shattering here, but it’s amazing how often people (myself included!) don’t consistently adhere to these relatively simple concepts. 

I have posted the entire presentation at on the Resources page at REanalyzeinc.com - click here.  It includes a bunch of project examples and some lessons-learned that are more functionally-oriented (as opposed to career-oriented).

What are your most important career-management lessons? 

Until next time…

Rob

_________________________________________________________________

Rob Ende is Founder and President of REanalyze Inc., a Supply Chain, Inventory Management and Analytics consultancy based on Long Island, New York.  Rob can be reached at 631-807-2339 or rende@reanalyzeinc.com.

© 2011 REanalyze.Inc.. All Rights Reserved.

Highlights from Llamasoft Conference on Supply Chain Design

Last week I attended Llamasoft’s first annual Summer Conference on Supply Chain Design in Ann Arbor, Michigan, along with a couple of days training on their Supply Chain Guru applications.  I met some great people, gained a lot of insight about Llamasoft and their product roadmap, and enjoyed some spectacular early-summer weather in Ann Arbor.

Llamasoft is growing fast, and they are now the only major independent Supply Chain Design software vendor, since the acquisition of LogicTools/LogicNet by ILOG and then IBM, and Optiant's acquisition by Logility. 

Founder, President and CEO Don Hicks talked about (OK, I’ll say it…) changing the paradigm for Supply Chain software.  Instead of the traditional “Planning versus Execution” framework, Don talks about “Design versus Planning versus Execution”.  Planning applications will become increasingly automated and IT driven, cutting across the usual distinctions between strategic, tactical and operational planning.  Meanwhile, Llamasoft is squarely targeting the Design space, which will continue to require human input and creativity.  To that point, late this year they will add Transportation Optimization to their existing capabilities in Network Optimization & Simulation and Inventory Optimization.

The conference featured some interesting keynote speakers:

• Dr. John Gattorna of Australia highlighted his Dynamic Alignment Model, emphasizing  the need to develop multiple Supply Chains – with distinct strategies -- that align with different customer behavior models.  His book Dynamic Supply Chains is available  on Amazon. 
• Astronaut Buzz Aldrin shared some great stories, images and video from the Apollo program and the 1969 moon landing -- and his strong opinions on how we can and must regain the initiative in space exploration.
• Developmental Cognitive Neuroscientist Dr. Bruce Hood talked about how the decision-biases that are hard-wired into our brains can lead people to cling to incorrect beliefs and make decisions counter to all available evidence – something to keep in mind the next time someone questions the “obvious” recommendations from your analysis!

A question for my readers:  What are the pros & cons of building your Supply Chain Design capabilities around software, services and solutions from:

• …a small but fast growing, independent software company focused exclusively on SC Design (Llamasoft)?
• …an established Supply Chain Planning software company integrating an acquired SC Design solution (Logility/Optiant)?
• …a huge global conglomerate integrating a SC Design Solution (itself part of a larger acquisition) with extensive software and consulting resources as part of an aggressive Supply Chain Analytics strategy (IBM / ILOG / LogicNet)? 

What do you think?  I'd love to hear what you have to say!

OK, that’s all for now.  Please visit our web site at www.reanalyzeinc.com.  Until next time…

Rob

_________________________________________________________________

Rob Ende is Founder and President of REanalyze Inc., a Supply Chain, Inventory Management and Analytics consultancy based on Long Island, New York.  Rob can be reached at 631-807-2339 or rende@reanalyzeinc.com.

© 2011 REanalyze.Inc.. All Rights Reserved.