- Joan Magrette, Stop Competing to Be the Best, 30 Nov 2011

You know the phrase “marching to the beat of a different drummer” is a way of saying someone isn’t following the status quo and is standing out from the crowd. It’s generally not a positive statement. We disagree wholeheartedly.

We spent the last 10 years focusing on innovation which consequently has put us a bit out of sync with the rest of the software industry. Frankly, some potential customers have been put off by our marked differentiation – almost uncomfortable when they don’t see a hefty price tag nor hear talk of sending in an army of consultants to “optimize their process.”  We are not trying to be APO or Demantra, nor do we want to be.

The innovation we developed has allowed us to better serve our customers. By creating a forecasting engine that repeatedly produced the same results we were able to guarantee that our demand forecasting software would reduce execution level forecast error by 25%.

Turning to who matters most, it is the ability of our system to allow our customers to be unique that we also find separates us from the crowd. Customers are able to model their business in the way that works for them; with the process they determine fits their organization. They know their business far better than we do have thus we created a flexible system that works the way you need it as opposed to having a specific process users must follow.

Countless books/webinars/conferences exist touting industry best practices, all in pursuit of being the best. However, were all these best practices to be successfully executed by all, you would still find yourself lost amongst the crowd.  Our customers are people who wanted to do something differently to create more opportunities for excellence by leveraging their uniqueness. They aren’t trying to be like their competitors. Instead, they’re trying to be great at being themselves.

1)      Your forecast error is 50%*.

While 50/50 odds are great in Vegas, they are poor for critical business decisions. Imagine standing before a room of shareholders and telling them they have a 50% chance of making money. Forecast error of this caliber can be especially hard to swallow if monies have been spent on solutions that haven’t performed or lived up to expectations. Either way you spin it “throwing darts at a dartboard” or failing to forecast at all is a direct shirking of your fiduciary responsibility.

*Or even 10% error since once you get down to the execution-level  accuracy is drastically diminished.

2)      Your data has outgrown your homegrown system.

In the days of “Plan Source Make Deliver” information was siloed and unidirectional. However, now that technology accurately portrays supply chain complexity, the data your’re collecting adds up fast. It isn’t uncommon for POS, market information, etc., to sit in a database  never utilized. You spent time and energy enabling systems that could collect it so you should use it.  For as great as they once served your organization, the homegrown tools developed by Excel whizzes and data jockeys over the years can only do so much. There comes a point when the hours spent forcing they system to work aren’t worth the performance. Are you at that point?

3)      Your customers want to collaborate and shared visibility.

With these buzzwords flying around conferences and research documents you can expect that this will be request from your customers sooner rather than later. Your customers have customers and they want to have the best data available to know what’s coming down the pipe to set expectations. The benefits here are twofold. Laying the foundation for collaboration and investing in enabling technologies now will set you up for success when the time comes to execute.

4)      Your boss is haranguing you to reduce inventory.

According to a Gartner study, “better demand forecasters have 15% lower inventory.” Now is the time to get ahead being that Accenture found that companies who employ predictive analytics hold 50% less finished goods inventory than their competitors. These numbers speak for themselves. Inventory is the biggest and least productive asset on the balance sheet so accurately forecasting will make you your CFOs favorite colleague.

5)      Your competitors are investing in S&OP enabling technology.

They are becoming leaner, meaner and more agile. While you’re waiting for a spreadsheet to be updated and passed around between sales, production and finance – they are receiving alerts and have real-time data to make faster, better decisions. It’s a commoditized world and your customers have options. With the rate at which information flows it’s won’t be long before they hear from a colleague how much better they’re serviced by the other guys.

6)      You want to hit your bonus.

Be good at your job. Scratch that. Be GREAT at your job. If you own the forecast your compensation metrics are more than likely tied to accuracy. You’re going to have to be passionate about pursuing new technology for forecast as you will be asked to be the “champion” through the selection process. But when your personal finances are in the mix taking on the burden will be well worth your while.

We’d love to hear your thoughts. What are the reasons that get you thinking about new forecasting technology?

Depending on whether your company and team operates with a bullish or bearish outlook, the changes made to your forecast  based on information such as the above might do more damage than good. Just as the authors of these articles did, everyone from supply chain analysts all the way up the the executive team can put very differing spins on the same numbers.  Yet despite the many ways of interpreting the data there can only be one numerical outcome.

If not housing starts, which is the market data that impacts your forecast? From where are you gathering it? How are you integrating these externalities to improve your forecast?

Is it delivering results?

For New Belgium Brewing, Demand Foresight imported unemployment statistics. For Evenflo, it was birth rates. Realizing they weren’t operating in a vacuum and integrating market information these companies made production profitable and  edged the competition by saving in saved themselves costs still being incurred by their competitors.

According to Tenneco Packaging Corporation Master Scheduler Teri Metzer,“[Demand Foresight] understands my business and its needs. The programming is built to support the business, rather than changing the business to fit a pre-established computer model.” Demand Foresight provides personalized solutions that are relevant to its users, now. Clients only buy modules that serve their needs instead of being forced to purchase a license for an entire suite and then pay a second time to implement the individual modules.

Available modules for forecasting and planning that comprise the S&OP software platform are:

- Demand Forecasting

- Inventory Planning

- Materials Requirements Planning (MRP)

- Distribution Requirements Planning (DRP)

- Freight Reporting

- Purchase Planning

- Deployment Planning

- Load Building

- Market Plan Tracker

- Capacity to Promise

- Pricing

About Demand Foresight Software

Based on the premise that reducing forecasting error is the single most important investment to improve supply chain performance, Demand Foresight’s Demand forecasting and planning software sets new standards in reducing errors and increasing profitability for manufacturers and distributors. Demand Foresight’s advanced, next-generation forecasting engine works within existing IT environments, and has saved clients billions of dollars through improved and measurable business decision-making. Product performance is backed by the strongest guarantee in the software industry: clients will achieve at least 25% reduction in forecasting error and be completely satisfied or get their money back. For more information, please visit www.demandforesight.com.

Or at least, that’s the goal, right?  Supply Chain 101 says whether you’re growing organically, by entering new markets,  releasing new products or acquiring new companies, you must accurately predict demand in order to create a supply chain that will support your strategy and organization . The last thing you need in such a critical period is an inventory shortage and then having to deal with the ensuing customer service and PR nightmare.

Being ROI dependent, midsize companies understand that the results from most forecasting tools are not worth their price tags.  You know demand planning and accurate forecasting is critical for successful growth, yet many midsize companies don’t forecast nor demand plan in a way that is appropriate for their growth or revenue goals.  This is due much in part because there hasn’t yet been a tool that supports the needs of a growing company and an overall belief that forecasting can never be accurate so really, why bother?

You need a tool that you can grow into. Purchasing an entire sales and operations planning suite but only utilizing a few of the modules is a waste of budget and IT’s time.  Let’s focus first on getting your forecasting and demand planning right. Now when you further invest in inventory optimization, DRP, MRP, etc., you’ll be giving these additional modules the right data and fully leveraging the capability of the individual tools thereby maturing you sales and operations planning process.

You need a tool with flexible architecture and support. With growing data from POS, VMI, etc. and ever-maturing process, the technological requirements to run your business will change and become greater.  As data requirements expand you need to be able to readily and cost effectively switch your systems onto a more robust ERP or add users without incurring additional fees. Otherwise, you are being penalized for growing. You are being penalized for success.

You need a tool that guarantees results.  Cash is king and time is money. Committing your capital (and human capital) to investments and projects that don’t move you towards your revenue and growth goal are a waste of budget and leaves you open to haranguing by board members and shareholders about your ability to fulfill your fiduciary responsibility.

Demand Foresight guarantees your forecast error will be reduced by 25% or we give you your money back. We’re able to guarantee results based on the advanced capabilities of our proprietary Interactive Neural Computing, but we provide it because we want to share the risk to create a true partnership. We’ve been a platform for growth for companies by focusing on demand planning and forecasting, (do we want to add – prepping them for S&OP) helping them further refine their planning when they were ready, and delivering measurable results they couldn’t have counted on from another vendor.

 More about our forecasting and planning software.

by Derek Singleton

ERP Analyst, Software Advice
December 16, 2011

http://blog.softwareadvice.com/articles/manufacturing/how-manufacturing-software-should-adapt-to-support-lean-principles-1121511/.
Nice position article; we appreciate thoughtful discussion on issues critical to optimizing value chain effectiveness and profitability. I think productivity is even critical today given current competitive and regulatory environments.  That said, I am not sure I agree entirely with your point of view: I think you miss the other side of the equation which, together with your position, would actually create the cohesion you espouse.

So a couple of two or three points to consider.

First, one consistent between the two philosophies is the need for production requirements i.e. demand; it goes without arguing that the more accurate the production requirements, the better both will perform. So one way to bridge the gap between the two is to agree that both approaches are made better through improved demand planning and specifically improved forecast accuracy at the execution level.  It does no good to plan production, in either approach, to 4 decimal places only to have the forecast or production requirement end up being off by 30 or 40 or 50% at the execution level.  I am sure this point does not surprise you coming from me.

Second, this is an important discussion because it focuses on execution which is important to us.  No matter how accurate a forecast, it is worthless unless used to improve specific supply chain activities within the flow that you rightly highlight in your discussion.

Lastly, the core hypothesis is that software can and should work to accommodate “lean” and you highlight three areas within which to do so.  And, coming from the perspective of lean, these are solid focus points that I would agree should be address; I would go so far as to say they are being addressed by certain S&OP and manufacturing software vendors.

However, I would argue that lean also needs to grow and adjust to accommodate the principles of MRP.  Lean  There are some who argue that lean was developed in the vacuum of driving an accurate forecast and demand plan – hence the revival of demand driven supply chains by the people you mentioned as well as Gartner/AMR and others.  in general is a reactive dynamic; given a specific production requirement, what do we need to make and then how do we do so most efficiently.  And in a perfect world that is great.  However, what if the needed production requirements change?  What if they change by 40% (up or down) in a 2 week window?  What if the vendor does not show up with the needed WIP until 7 days later?  Not everything goes perfectly and this is where MRP and it related and perhaps even more important cousin DRP come into play.

When done well, DRP/MRP take into account variables such as forecast error, vendor performance, inventory costs (full costs), order fill rates and consumption patterns (to name a few) in order to help anticipate issues and drive supply chain operating decisions not only in optimizing performance for today but also for various time frames into the future based on lead times and customer promises etc. and in so doing, help minimize the risks of disruption.  Practically, this helps drive decisions such as what specific inventory to carry and who much which would actually work to make lean perform that much better in a more flexible manger.

There is no question that software can always look to improve ease of use, flexibility and value add.  But it should do so within a framework that takes advantage of what technology can do while supporting operational philosophies such as lean so that both sides can progress.  This is true for expansive ERP systems as well as useful spreadsheets.  And, if they are expected to execute based on a forecast with measurably decreasing forecast error, there is no need for these two approaches to be mutually exclusive.

This optimism stands in stark juxtaposition to what we hear from prospective clients when we tell them we can lower their forecast error by 25%. We touched on this skepticism in previous blog post discussing now being time to raise the bar for demand planning and forecasting outcomes. It very well might be the high rate of IT implementation failures alone that create disbelief but their reasons (dare I say, excuses?) for not moving forward, span from a company process that doesn’t align with individual goals for their position to the simple fact that there are only 24 hours in a day and 36 hours of work. Having dealt with the realities of their roles they seem willing to simply meet the minimum requirements.  In these conversations they initially cast aside what they consider to be “impossible” because of a limited perspective of what could be.  And that is bad for them and that is bad for their company.

Have you stopped believing in POSSIBILITY and settled for mediocrity?

You would never purport that someone who has resolved to lose 10lbs in the New Year would be successful without a scale because you know it’s a critical component of measuring progress towards their goal. You also know that weight is not the only component for good health and because muscle weighs more than fat, you could actually gain weight while improving overall health.  You need the right tools in to set yourself up for success in a complicated environment characterized by huge amounts of data, fast moving market dynamics and a changing customer environment.   Accordingly, without specific improvements, you cannot expect that your ERP will lower your inventory or increase perfect order performance. Nor will traditional statistics based modeling drive a significant, measurable decrease in forecast error as effectively as modeling based on global optimization. Run your antiquated forecasting tool as many times as you want but old fashioned, static and linear models that everyone else uses and incorrect forecasting models will most likely leave you with the same inaccurate and profit reducing, customer infuriating  forecasts.

There are better tools than the one you are using today that will get you to your 2012 goals.  You can have an accurate forecast. You can blow your metrics out of the water. You can get out of the office earlier because you had more accurate data and made smart and informed decisions.  When a prospective client accepts that a 25% reduction in forecast error is possible based solely on our proprietary Interactive Neural Computing, the doors open to the opportunities they can create for themselves.  Our clients achieve 3-8% improvement in pre-tax profitability because they believe in the possibilities.

More about our forecasting and planning software.

Demand Driven? Demand Driven Value Net? Customer Driven Value Network?

The jargon is constantly changing with new theories and practices unveiled yearly at conferences throughout the country. We understand that these organizations and bodies of expertise are profit reliant and must continually refresh and repackage their message to remain relevant.

But what are they really talking about?

Matching supply and demand – in a way where you and your customers and your vendors mutually benefit (improving the value chain). While easy to say, it’s not necessarily easy to execute with accuracy and discipline, thus the over-complication of supply chain terminology.

Listen to the conversations you’re having with your colleagues. Are you discussing the true business problem? Or skirting the issue by giving each other the run around trying to impress with multi-syllabic words and semantics? If it’s the latter, try looking at what’s at the root of these lengthy discussions.

Forecast error is a constant theme through these long winded phrases. Forecast more accurately and you’ll have an easier time with the rest of your supply chain process. Whether you’re referring to Gartner research circa 1999 or 2009, you’ll be told to improve forecast accuracy for measurably better supply chain performance.

Not only will 25% less error simplify your conversations, it’s also the shortest route to the shortest word your company cares about. Profit.

So for the record, we are forecasting a great 2012.  Happy New Year!

Great work Barry. We look forward to continuing our proud partnership in creating future profits with Andrews.
Full article here:

http://www.caller.com/news/2011/nov/15/andrews-local-beer-distributor-ceo-is-2011-texas/

When approached without a clear understanding of the technological possibilities and a relevant examination of the organizational structure and policies (i.e pay)  supporting it, Business Process Redesign is a complete waste of time.

In fact, I will go so far as to argue it is a destruction of shareholder value to invest time, human resources and actual cash in pursuit of improvements that will be minimized and/or never realized.

So what are the risks of the so-called “People, Process, Technology” approach?

1. You can only contribute your process requirements based on what you know, but you can’t know the possibilities inherent in technology platforms until you’ve explored them
2. You might design a process that only stays relevant for a year rather than 5 years and/or necessitates expensive upgrades, training and consulting fees with every step
3. You might end up paying people to perform the old process, not the new process
4. Your technology may require costly customizations or “work-arounds” to manipulate data outside of system support in order to support the new process

Say your current process involved 4 or 5 steps – it begins with a query to get historical data, extracting that data to a forecasting engine – something like excel or Demantra (no real difference), then running the model, then organizing the output into a useable format, running a series of reality meetings with Sales, Marketing & Operations and then finalizing the execution forecast.

Now, given that background and experience, in a typical process redesign, you would enter a room with big whiteboards or brown paper sheeting taped up and most likely a consultant (internal or external) standing at the front of the room saying – please – give me your requirements so we can design a process.  What are you going to pull from in order to provide requirements?  Your experience – what you know.  Which means in effect you will be paving over cow paths – which might be charming in Verona but not the basis for delivering competitive differentiation for your company.

Perhaps even more frustrating is say that you are able to think out of the box and come up with a truly radical process that cuts out 4 of the 6 steps and if properly executed would increase accuracy by 10% and reduce cycle time by 75% and help improve order fill rates from 90 to 99%?  And then you go out and look for a technical platform only to find there is no technology to support your process? Can you say frustrating loud enough?

So what is the right way?

Technology – Process – People

A comprehensive, holistic approach based on the principle that Technology should support Business Process, and Business Process should exploit the capabilities Technology can provide – Davenport & Short dubbed this recursive view of Technology & Process Redesign “the New Industrial Engineering” — Rather than lay out a step by step detailed process (proscriptive process design) you outline specific outcomes for the project (outcome based process design). 

This would include:

1. Identifying what is wrong with the current process,
2. Creating a general vision as to where you think the current process could improve,
3. Setting specific measurable goals for improvement – including areas to focus investment and amount or degree of improvement desired.
4. Considering your pathway toward maturity – how much will it cost to improve down the line?

Within this framework, you can then invite technology providers in for conversations and focus on finding a partner with a technology that can provide measurable performance improvements as well as a platform that is flexible so that it can stay relevant for this process as well as future required changes as your business continues to grow and evolve.

Once you have a partner chosen based on technological prowess, flexibility, industry knowledge and compatibility, you can then engage in detailed process design in tight partnership with the technical platform you have chosen. You can then also do a review of compensation structures and organizational design to ensure these will be flexible in supporting new process and performance expectations.

[Quick word of warning:  This does fly in the face of the normal RFP process where a company says, “Hey, we want to do something but we are not going to share the specific details or outcomes we are going to measure nor any of our criteria for success.” What ensues within the responders  is a process of guesswork, misdirection, outrageous claims and leverage which, in many cases isn’t entirely dissimilar from a season of “Survivor.” And yet, after it all, many executives end up choosing based on faulty assumptions about long-term cost savings and NOT business outcomes.]

There has been specific research done on this by a few groups and the statistics are frightening:

70% of process redesign projects fail to deliver on the business case and the budget. Only 30% actually hit the minimum marks!!

The holistic approach, however, produced strikingly different results.

1. 50% reduction in total project time,
2. 35% reduction in total project cost,
3. 70% improvement in technology uptake
4. 60% improvement in attaining business case

This really seems like a no-brainer but yet, as noted at the start, people are still approaching corporate performance improvement like it’s 1985.

How can we evolve this conversation beyond old paradigms? What can be done to help drive efforts to improve corporate performance such that our companies not only survive but thrive?

More about our forecasting and planning software.