Many a supply chain manager has pulled his hair in frustration at the inability to establish the cause of a problem in the supply chain, creating an interconnected cycle of customer dissatisfaction and revenue losses. A missed shipment, the inability to fulfil an order due to raw material or stock shortages – all of these issues are familiar
Pinpointing the exact cause of the hitch is exacerbated by hundreds, perhaps thousands of interconnected components and contributors that all impact the health of the supply chain, writes David McWilliam, MD of Cognos SA.
To understand and identify barriers and their underlying causes – quickly, before the issue spirals into a crisis of catastrophic proportions – businesses need an insight into performance issues.
Barriers to high performance
The primary barriers to achieving a high-performance supply chain have long been identified in best practice scenarios.
Lack of visibility across operations means an incomplete picture is presented, making it difficult to establish whether the supply chain is running optimally or not and whether changes need to be made. A lack of integrated data sources is usually the result of legacy systems that were implemented in silos.
For example, integration of information from the buy side (purchasing, accounts payable, raw materials, semi-finished goods inventory and logistics) and sell side (sales, accounts receivable, fulfilment, finished goods inventory and logistics) of the operation is necessary to establish bottlenecks and potential problematic areas.
This lack of visibility creates a knock-on effect, resulting in a lack of predictability and ‘average’ supply chain operations. Synchronising the supply and demand sides of business then becomes a hit-and-miss effort dictated by gut feel rather than an understanding of real performance issues within key areas.
A lack of visibility results in plans that are ‘DOA’ as they are not based on current data.
Predictability delivers agility, allowing the supply chain to respond to probable shifts, either market- or externally related, such as the imminence of a new player in the same market, or internally driven, such as a potential lack of raw materials that affects the delivery of end product.
These shifts all require changes to the operation which must be planned for if they are not to cause a startling variation between expected and actual results.
Incomplete information also adds to the complexity of managing the supply chain effectively. To understand information in context, a drill down approach then becomes necessary as analysing information that is incomplete results in decisions made in isolation.
A complete view of operations and performance is also essential for better collaboration as the impact of a glitch often has a far reaching effect.
Globalisation is an issue that needs to be considered and factored into the overall efficiency of the supply chain, yet most companies focus on local optimisation – a blinkered approach.
This is aggravated by silo’d views of information that amplify the inability to manage the supply chain from a global perspective in real time.
Without a clear link to local and global strategies, managers are unable to predict the impact of their decisions further down the line.
The challenges facing the supply chain might seem insurmountable, yet there are a few significant capabilities delivered through performance management that ensure a smoother operation through quicker response to problem times and better decision making.
A smoother operation
It is a case of going back to a few basic questions: How are we doing? Why? What should we be doing? While this sounds simplistic, information must be interconnected to provide informative answers.
Enterprise resource planning (ERP) became the “holy grail”, yet the inflexible reporting outputs of these applications delivers fragments of information that are not connected to the myriad influences that impact performance issues.
A combination of proven technologies, including scorecards and dashboards, business event management, reporting and analysis, and planning and budgeting tools collectively make up a performance management solution. Although they deliver strategic functionality individually, when merged they become a significantly more powerful solution.
Scorecards are used to measure the performance of the supply chain. They deliver a view of global strategy and create a “check and balance” against forecasts and objectives and key performance indicators (KPI), providing a means to monitor actual performance against “the plan”.
True to the saying “if you can’t measure it you can’t manage it”, scorecards deliver the most critical insight into performance issues.
However, alerts to performance “actuals” that are not aligned or in accordance with defined metrics within KPI’s in the supply chain can mean the difference between a crisis and an impending crises that is averted through quick decision making.
Another pertinent saying is “a picture paints a thousand words”. Dashboard do just this. Dashboards represent a simpler and more readable form of complex reporting, highlighting only the important issues that can be drilled down into for more detail when necessary.
Providing a quick understanding of the situation, dashboards enhance fast decision-making.
Reporting and analysis is, however, the core component of performance management as without information we have nothing to measure against and act upon. Managers need up-to-the-minute views of all areas within the supply chain.
Ideally, these would be shared across portals and extranets, allowing managers to act on current information immediately, rather than make reactive realisations that lead to crisis management.
Reporting also delivers a far deeper insight into supply chain issues, putting suppliers, throughput and inventory into context, as well as allowing a response to ad hoc queries that delivers answers that aren’t immediately obvious.
Analysing information allows managers to better understand what led to the problem in the first place, as well as the factors that contribute to poor performance.
A continuous, dynamic process
Enterprise planning and forecasting delivers clarity to supply chain managers, enabling them to establish what they should be doing.
It provides the predictability component that is so necessary to respond to future shifts and environmental changes. It is prudent to ensure all business drivers are taken into consideration, ultimately allowing planning to become a continuous, dynamic process and allowing them to live – not be rendered DOA.
Planning and forecasting encourages collaboration, allowing cross-functional teams to work together towards a single, unified supply chain goal and ensuring operational effectiveness.