Dated : Aug 22, 2022
You have been in the business world for many years, or maybe you just graduated – either way, you are now an expert with all the “rules” that will help you put together the perfect Supply Chain.
Enter the year 2022. Suddenly, your business is in trouble. Your raw materials are not arriving on time. Your production has come to a stop due to missing components. Your work force is frustrated by production delays. But you have not changed your rules of engagement. Is that the problem?
The most over-used, but continuously applicable, term heard over the past few years is “Supply Chain Disruption”.
Factors including geopolitical issues related to global warming, political turbulence throughout the world, the Covid-19 pandemic, and the Ukraine-Russia war, have resulted in Supply Chain turmoil going into high gear.
Supply Chain disruptions are changing the rules of Supply Chain Planning (SCP). Many of our manufacturing and process improvements over the last few decades have greatly reduced our lead times, costs, and efficiencies. Are they still effective in today’s world? They certainly deserve a second look. We have selected three different SC concepts that have been successfully used over the past several years and discuss some of the changes that may need to be considered.
Traditionally, the concepts of JIT are quite simple (although not always easy to implement).
Although the cost, efficiency and cash flow benefits are certainly huge benefits of JIT, we also introduced many risks in the process.
The recent SC disruptions have augmented the risk factors due to the impact of both the demand and supply components of the supply chain. JIT inventory policies rely on optimistic levels of demand and supply variations. Demand in many cases has either hit unprecedented levels (cleaning and health supplies) or dropped over the cliff (restaurant and travel industries). Labor and material shortages have caused a serious impact on supply. The shortage of even one component could shut down a production facility. This steady stream of JIT supply, production and demand has virtually ceased to be reliable. Standard risk management methods were not enough to prepare for the extreme volatility that we have seen in the past two years.
Can we now afford to be “too lean”? Is JIT doomed? Or does it simply need to be transformed? Cost is an incredibly powerful driver; therefore, JIT inventory will not go away. Some of the inventory rules will however need to be relaxed. We need to consider a shift from JIT inventory to “Just-in-case” inventory, for example, especially for our critical components. We also need to revisit our key performance indicators. If your main objective is to minimize inventory, and you are measured on this objective, you run the risk of unprecedented levels of unpreparedness. A pandemic-type of occurrence will be virtually impossible to navigate through.
What are some of the transformations we need to consider to better prepare for the next disruption? Consider some of the following ideas:
To be continued
Part 2: Revisiting our Global Sourcing Rules
Part 3: A new approach to Vendor Selection and Supplier Performance Measurements
Dated : July 6, 2020
As Bill Gates had foreseen, and rightly so, a certain Microbes are the cause for the global catastrophe we are in now ! And in the frontline of this battle is our Healthcare Sector. Now more than ever, we feel the need to empower our Healthcare system to be prepared for such catastrophes !
Let’s zoom out and take a look at what we have got …
THE PERSONNEL & RESOURCES AT STAKE
Healthcare supply chains are made up of patients, providers, payers, and suppliers. Different products these supply chains support are
Covid-19 has put Global Healthcare Supply Chains under pressure. To list down a few challenges…
THE SCARCITY & DEPENDENCIES
THE BIG QUESTION!
Commonly, the health care supply chain takes a fragmented & “fire-fighting” approach and the hospitals work in silos. How do we better equip ourselves for future disruptions such as this ?
In the Covid-19 outbreak, these Healthcare supply chains are on a mission. They are supporting clinicians in diagnosis, treatment, and prevention. However, as the crisis is still looming large, healthcare supply chains need to answer following question –
“How to sustain global supply of critical diagnostic kits, drugs, medical supplies, and equipment to treat patients in the wake of supply chain disruption?”
The answer to this question is further complicated by the actions taken to protect the interest of a region / nation such as restrictions on export of PPE. In future, this will force supply chains to build local suppliers to mitigate the risks. However, given the current situation, only short-term reactive measures can answer this question.
Apart from this, to improve the current situation of Healthcare supply chains, it is important to build resilience to mitigate the supply chain disruption created by the Covid 19 event, which is hard to anticipate and has high impact risk. Supply chains can be prepared with a set of Proactive and Reactive measures.
Healthy Reserves –
To be resilient, on a short-term basis – as a reactive measure, supply chains can build healthy reserves of parts with high recovery time.
Wherever Healthcare supply chains are competing against other supply chains for supplies, the supply may be ensured prioritization. To give an example, the production of N95 masks is hampered by the availability of melt-blown, nonwoven fabric. It is important to note that the healthcare products community competes with the consumer goods industry for this melt-blown non-woven fabric, as it is a key input into products such as diapers and sanitary napkins. In the case of shortage of fabric, based on N95 mask demand and rationing principle of inventory allocation, suppliers can act in favor of the medical product supply chain. This is also a short-term reactive measure.
Adding Redundancies –
In the long term, the supply chain can consider adding redundancy in the process. Redundancy can be in the form of stockpiling of inventory, implementing multi-sourcing strategies, and/or maintaining a contingency workforce.
Alternate Sourcing for Modular Products –
Apart from this, in the long term, supply chain resilience can be increased by introducing modularity in product design. Though Integrated products are very efficient but creating an alternate source for Integrated products is difficult. Whereas creating an alternate source for modular products is comparatively easy. This modularity can be used to increase the resilience of supply chains in the healthcare industry.
TECHNOLOGY TO THE RESCUE
While many healthcare supply chains have been able to meet demand from existing inventory, it is critical that companies use enabler IT applications like Supplier Segmentation and Scenario Modelling to fully understand their supply chains and identify their top products facing potential supply issues, with a perspective on next few months, taking into account potential, more aggressive scenarios. This involves,
Real-time Inventory Levels – Understanding inventory levels in full supply chain and adjusting to new reality
What-if Scenarios in minutes and not days! – Pressure testing supply chains with aggressive downside supply chain scenarios
Immediate Alternatives – Ramping up production at alternate source that are already in place
Allocations – Implementing an allocation process for affected products (for example – rationing)
Faster Initiatives – Initiating search for additional / alternate suppliers for critical APIs, raw materials or components.
Present day IT Applications enable real-time collaborations among departments, ensuring data update across the organization and keeping everyone aligned. This in turn, fast-tracks approvals, consents and decision making in Organisations. Decision making becomes easier when we have real-time data and analysis on hand.
A Supplier Segmentation and Network Optimization Apps, built using Enterprise Performance Management solutions can help Healthcare supply chains to become more resilient.
Supply chains across the globe have been disrupted. World economies are shrinking as nature gives out a stern message to mankind! Did any forecasting models pickup this unprecedented turbulence we are facing today(#COVID19)?
While the information flows within Supply chains are intact, money and material flows are severely impacted. Certain products have a sudden spike in demand while others have a sudden fall. It is a similar situation on the supply side; excess inventory of certain goods while we have severe shortages for others.
Most people started questioning the much talked about concepts of supply chain management like Lean, JIT, Outsourced manufacturing, etc. which were considered innovations at some point. There is this debate about whether Supply chains should be lean or agile or both. Demand and Supply variations are headwinds for any organization’s supply chain and most of it could be beyond their control. Many large enterprises have failed due to supply chain issues.
Having worked on many supply chain implementations across the globe, we have learned a lot from our experiences. We have seen what had worked and what did not. So, How do we build efficient supply chains that can be resilient? How do you vaccinate your supply chains so that they can withstand disruptions due to such pandemics or natural calamities?
Our prescription is simple.. it is a three-stage booster dose:
Booster 1: Create End to End visibility & Enhance collaboration.
All departments within your organization should have a unified view of all the plans within your organization.
There should be a seamless, reliable and transparent collaboration between all the stakeholders including your distributors and suppliers.
Regular cadence meetings to review market dynamics and internal constraints.
Booster 2: Implement Early Warning & Control Systems (EWACS) within your supply chains.
Large volumes of data are being generated every single day. This needs to be put to use for building prediction and prescription analytical models.
Setup standard KPIs across business departments and track anomalies in real-time. Run what-if scenarios to constantly evaluate the expected outcome.
Whenever anomalies are detected, quickly constitute task forces, empower them to make smart decisions like strategic sourcing, demand realignment, etc. that can minimize business impact.
Booster 3: Simplify your processes
Entangled business processes mean so much bureaucracy and so much more delay in decision making. Always stick to simplified/standard business processes and remove any unwanted process overheads.
Automation of all possible repetitive tasks so that focus can be qualitative actions
Periodically evaluate and refresh your core processes like new product introductions, network optimizations, planning, etc. for any further improvements based on industry best practices.
IT applications have a major role to play in keeping your supply chains nimble and resilient. They act as enablers helping in your preparedness. New generation Enterprise Performance Management solutions like Jedox have many great features and when implemented can truly help organisations be prepared for such disruptions.
When we start any new business, it is logical to set up different departments so that there is enough focus on the respective business functions. As the organization grows, the manpower and processes in each department increase manifold. To support the specific needs of these departments, specialized IT tools are being developed. Over time, a lot of complexity is built into integrating these systems so that they can exchange data.
In order to compete in an ever-changing fast-paced business environment, We must eliminate the inefficiencies that come when different departments in an organization don’t talk to each other. Sometimes, translating business strategy to a feasible operating plan becomes a challenge without efficient collaboration.
IT applications were meant to improve process efficiency and significantly reduce costs. But, talking to many business users across various organizations, the feedback is :
I believe it is time to re-evaluate the whole thought process around Enterprise business applications. The processes across departments are more interconnected/interdependent and the enterprise data should flow seamlessly across all these departments.
What if we build an Enterprise Business Management Platform that works as an operating system for the whole organization? Think of a system that can provide:
Data definition & management, Intelligent scheduling & data routing capabilities, Micro services that are specific to each business function and yet give flexibility to the end-user to determine the usability aspects in the presentation layer
By taking out the complexity around integrating current application silos, multiple software licenses, and outdated technology stacks, the focus can be on:
Do you see a business case for such a big IT transformation?
Dated : October 3, 2018
In September 2016, we were at Chagantipadu village, about 30 miles from the city of Vijayawada in Krishna District of Andhra Pradesh in India. It was about noon and we were noticing farmers lining up cartloads of banana bunches at the local auction market. There were bananas of different varieties, Grand Naine, Chakrakeli, Amruthapani being brought. The staff at the auction yard were grading the bananas at the auction gate and writing down details like which farmer brought in this produce, how many bunches were there of which variety and their respective grades. These bunches were then lined up on the yard for auction. When the clock struck one in the afternoon, the auction yard was almost full with bananas and beginning to buzz with local banana traders who came to the market to buy bananas. There were about ten thousand bunches to be auctioned and we were wondering how long it might take to auction so many bunches.
To our surprise, when the auction actually started, we noticed the speed at which the bids were made, finalized and recorded on paper. It was hardly 40 minutes before the auction was over! Now came the time to reconcile the transactions for each trader and farmer, calculate the payables and receivables, issue receipts and settle cash. Unlike the super quick auction, this process looked painfully slow and often chaotic. Traders lined up for settlements often were disputing the transactions and calculations, farmers coming and asking about what was the value of their sales and the managers of the auction market having a very difficult time to manage all this activity. It was about 9 PM in the evening when the last truck carrying bananas left the auction yard, leaving behind the auction market managers tired and hungry.
Chandra Mohan Reddy, who is a progressive farmer and the main man behind this auction market told us later that though it was a good feeling that farmers were benefited from the auction market since they were getting better prices for their produces, it was challenging for him to sustain the Farmer Producer Organization (FPO) that ran this auction market. The workload was hectic and the profits did not seem to come by. He said, “we know something is not right, we must be earning higher profits from the volumes we see but somehow the money is not realized and we don’t know what is going wrong”. Being an educated farmer and very foresighted, he was open to our proposal to study his auction market and deploy our digital platform for his business.
After two weeks of intense groundwork, Keansa implemented Farmore, a digital solution for Farmer Producer Organizations at the auction yard. We traveled several times to set up their internet and computer systems, digitize all existing data, and then prepared them to have their first digital auction. Truth be told, it was not an easy exercise. The auction process was very quick and the user interface of the solution was not coping too well. We had to redesign the User Interface next week. Despite this hiccup, the benefits were seen. The computerized auction made calculations and receipts very simple and quick. Four weeks later, when the system was totally fine-tuned, the auction manager was able to operate the system on a tablet PC and keep up the pace with the auction process. The reconciliation, billing and printing process was super quick and painless. By 4 PM in the evening, the last truckload carrying the fruits left the auction yard. Chandra Mohan Reddy and his staff were happy that it saved them so much effort and about 5 hours of the day. They were looking forward to the next auction. The results of the first day were evidently positive but the real benefits could only be seen when we tracked progress over time for a year. After a year, when we compared business data, there were remarkable improvements in the key performance metrics of this auction yard.
The FPO managers told them they believed there used to be financial leakages, untracked receivables, missing payments data which affected the financial performance of the FPO. These were prevented when data was digitized, organized and reported. The FPO had far more visibility of their business data and thus greater control over their business. With the data issues sorted out, they could spend their time and energy to service the farmers and traders better. During September 2017, a year after digitization, the market had 6 times more farmers registered with the FPO and 3 times more traders participating in the auctions. Data also showed that the Average Sales Volumes on auction days went up from INR 60,000 to INR 160,000. Units traded touched a peak of 14 thousand bunches a day and has been consistently above 10 thousand bunches a day. Average prices earned by farmers increased by 38%. The FPO was also able to use their time better and grow beyond auction sales of bananas and move into retail sales of vegetables and input marketing.
To summarize, faster auctions, accurate and prompt settlement of payments, availability of good quality and higher volume of stock, instant SMS messages to farmers on transactions, healthy accounting practices made a very significant difference in this business. And, not to forget that the FPO is able to use the software solution independently with minimal support from the Keansa team, was a welcome change.
Last September, we were at Ethiopia and Uganda for an interesting assignment. We were helping the CGIAR scientists and staff to plan seed productions for new varieties of seeds that were developed specifically for African countries. African farmers grow various types of crops and each have numerous varieties suitable for different types of soil, water and weather conditions. African farmers predominantly engage in subsistence farming, meaning, they consume most of what they grow for their living. This means, a good harvest is necessary to alleviate their hunger. What the CGIAR team was working on was to ensure improved seed varieties were available to farmers that provided good yield in their local conditions. We understood that it was a very important exercise that we were part of.
As mentioned before, there is a need for different varieties of seeds for different regions based on soil, weather and other biological characteristics. The primary crops that were being promoted in these countries were Chickpea, Common Beans, Cow Pea, Groundnut, Finger Millet, Pearl Millet and Shorghum. The number of varieties for each ranged from 10 to 51. The goal of the team was to roll out new and improved varieties of seeds that gave higher yields, greater pest resistance, and better nutrition to the growers. The right varieties of seeds needed to be available at each location, at the right place and at the right time. This needed a lot of planning.
Those familiar with seed production are familiar with the process of how a laboratory tested Breeder seed is used to create Foundation seeds and these Foundation seeds are used to grow Certified seeds that are used by farmers. This means, Certified seeds are available to farmers after two cycles of Foundation and Certified seeds production. To ensure farmers get the right quantity of seeds at the right time, these seed production cycles also needs to be planned carefully a few years in advance. To make matters more complex, new and improved varieties of seeds often replace existing inferior varieties of seeds and older seeds need not be produced any more as new ones take their place. This “ramp up and ramp down” needs to be planned too a few years in advance and is often a constant process.
Keansa helped ICRISAT build a Seed Roadmap Solution for this purpose. This solution helped the teams to calculate region wise need of each new seed variety, plan target production volumes of breeder, foundation and certified seeds and phase out plan for old varieties. The planning solution made it simpler to review the plan using graphical interfaces, interactive scenario modelling and generating production schedule.
During the workshops at Addis Ababa and Kampala, we trained the seed planners on the solution. The feedback received from users revealed that application was easy to learn and operate and will be useful for them to plan their seed roadmaps for coming years. The users also thought such system will improve predictability in seed production and help them measure actual progress on timely seed supply. What was deeply satisfying to us was, the solution had a direct impact on achieving food security for thousands of farmer families in Africa.