Why best-of-breed matters: Imperial Sugar and Demand Foresight in CIO

Posted on March 19, 2010 by Gene Tanski

We’d like to offer our thanks to a great client, Imperial Sugar, and CIO for picking up on this tale of foresight and resilience. The Imperial Sugar team did an incredible job of facing down some very steep challenges to their business. We’re really proud to be a part of this story…

After the refinery catastrophe, Imperial Sugar needed immediate insight
into how many customers it could serve with its available inventory.
The software gave them that overview by product line, and its
“available to promise” functionality allowed everyone from production
to sales to see, in real time, what could be delivered.

Read the rest here…

Around the supply chain and demand planning blogosphere

Posted on March 15, 2010 by Gene Tanski

Combing through my RSS feeds, I found some SCM and demand planning-related blog posts from the last few months that got my wheels turning…

HP Supply Chain Management Blog: “Closing the Loop: Optimizing the Supply Chain”

In his “Closing the Loop” series on an HP Community blog, Christian Verstraete cites a resigned attitude toward forecasting error that drives me crazy and costs companies a lot of money:

Yesterday I was at a conference titled “Achieving Excellence in Capacity Planning”, and pointed out one of my favourites. “Forecasts are always wrong” and that is what we are starting from to manage our Supply Chain with the hope to have neither stock-outs nor excess stock.

He discusses how we can be sensitive to changes in the supply chain, all of which is just purely reactive if you’ve resigned yourself to getting the forecast wrong every time.

In all fairness, Mr. Verstraete penned a subsequent post in the same series that touches on proactive thinking. Yet his example showed that his conference presenter — and a lot of people in the space — begins by assuming that nobody should be on the hook for getting a forecast right. Whence comes this assumption? Why take that capability off the table at the outset? What would happen if you could reduce error by 25%?

Forecasting software has become way too good. Don’t handicap your company — and force you and everybody in your value chain into a reactive position — by not looking at new approaches to your forecast.

21st Century Supply Chain: “Three SCM table stake capabilities for the twenty-tens”
Luc Vezina of Kinaxis takes a poke at three big capabilities that will be critical for supply chain performance, and how ERP SCM has missed the mark. I don’t disagree, but this gave me some pause:

1. SPEED. When a customer calls you with a potential order, how long does it take you to get back to them with a promise date? Increasingly, customers will want feedback in a matter of minutes – not hours or days. If you’re saying to yourself “That’s impossible.” Well, it is possible.

I would say that it needs to be a matter of seconds, not minutes. I would also offer the perspective that Mr. Vezina’s three capabilities — speed, accountability and view — are not ERP modules. They’re the very definition of the things that drive good demand planning. A company that’s serious about demand planning will have groups that focus on it intensely, and be fanatical about supporting them. We just happen to know of a wonderful solution that supports the discrete and vital functions of demand planning, demand forecasting, and demand management.

CIO: “Can SAP get its supply chain mojo back?”
This headline implies that they had some to begin with. I kid, kind of. Thomas Wailgum of CIO writes about how SCM capability has suffered over at SAP. The Tohamy being quoted below is Noha Tohamy, vice president of supply chain research over at AMR:

Yet SAP has long relegated SCM to the status of RHSC (red-haired step-child), and the company has stumbled articulating its SCM and supply chain planning roadmaps, according to Tohamy.

“Overall,” she writes, “the software giant has been sluggish in bringing to market an SCM offering that makes SAP not just the largest SCM vendor in revenue, but an innovator and leader in meeting increasingly complex supply chain needs.”

To me, the true thrust of Mr. Wailgum’s piece is that the software business model is essentially broken: it’s OK to put junk out there; over-promise and under-deliver on functionality and ROI; and tie people to big contracts that make them commit to an under-performing supply chain.

In pursuit of a one-vendor, one-platform world, corporate officers are abrogating the responsibility to make sure that every one of their teams has the best possible tools they need to compete. I covered the competitive dangers of IT standardization in my open letter to the C-suite.

Head in the Cloud? Keep your feet on the ground.

Posted on March 9, 2010 by Gene Tanski

Cloud computing/SaaS ascendancy — used as interchangeable terms in some conversations — picked up lots of media steam last year and continues to be the hot topic of 2010. While this entry is not intended to be an exhaustive dissertation, there are couple of points that resonate with me – what do you think?

BI in the cloud could be the next killer application. That word — “next” — is important. Because we must look at the cloud not only for its current limitations and capabilities, but through the filter of what technology means to your business strategy, your identity, and those capabilities that make your company different and special and competitive. Because cloud or no, ultimately you need technological solutions that enable your business success. Altering your business model to fit the platform might fundamentally damage your ability to compete.

Can the cloud do heavy lifting?
I have no doubt that magnificent things are possible in the cloud, but many of the current advances seem more suitable to CRM and the like: collaborative applications like Salesforce let companies offload the cost of ownership of hosting the app, and everybody knows who talked to which customer, about what, and when.

But what happens when a company needs to know what a 10% reduction in their product price during Christmas would mean in terms of increased demand, impact on other products, and their industry as a whole? Heavy demand planning and forecasting/modelling functions like this can’t be easily or reliably done in the cloud right now.

Could all this change in the next few years? Absolutely. But computationally demanding, mission-critical practices that require rapid response on massive amounts of data are on the other side of the wall, as it currently stands. So as we rhapsodize over the cloud, it’s important to remember that the cloud can’t solve everything, at least not yet.

Getting your feet off the ground: the leap of trust required to get over the cultural barrier
One of the biggest pros for the cloud is the power of intra-enterprise collaboration — bring enterprises and professionals together to help improve all participants of the value chain. But what we face here is a cultural obstacle rather than a technological one: companies have the technology right now to collaborate across company boundaries. But can we come to grips with security issues and not owning our data? Can we trust our informational lifeblood to other companies, even our customers?

In order for the cloud to reach its potential, these are the cultural questions that every company will have to solve. We have to trust that the information is secure, and that customers or channel partners won’t take advantage of the information. The real power of SaaS is almost beside the point: the real issues are culture, trust and acceptance.

When Marco Polo and the Italians began opening up new trade routes, cultural differences had to be overcome, new relationships built. Now companies and the professionals who give them voice are standing in front of another huge opportunity, with only mistrust and fear of the unknown in between them and the new possibilities. Seems like the world’s repeating itself all over again.

The dangers of fitting your company to a platform
There are subtle but profound dangers in trying to apply the cloud correctly for your company. Human nature leans towards the comforts of standardization, and it’s no less true in the technology strategy of most companies. Having uniform processes and knowing what to expect every time eases our minds. But there’s an ironic downside to this: the more you standardize, the easier it is for your tech department to be outsourced. And the more you standardize, the less you focus on competitive advantage. Too many companies fit themselves to the tool, and not vice versa.

You want the power of the Cloud for when it’s appropriate, but be sure not to limit your enterprise in how you can compete and build on your strengths. The ones who stand out over time are the ones who agree their vision and ensure that everything in the enterprise, including technology,focuses on achieving that vision. At this particular point in time, with the advent of the Cloud, SaaS 1.0 and the legacy of ERP, what your company needs more than ever is a clear vision of what your competitive advantage is: decide what makes your company better, and find the right mix of technology (and ongoing adaptation/evolution) that’s going to preserve and enhance that advantage.

Demand planning vs. forecasting vs. management: an agreement on terms (Pt. 3)

Posted on November 20, 2009 by Gene Tanski

There are a number of terms that are used when discussing demand forecasting, demand planning and demand management — all of which appear to be used interchangeably. Just what are we talking about here? I thought it would make sense to share the terms I use on this blog and at Demand Foresight, and articulate the difference between each.

In my previous two posts, I delineated what demand planning and demand forecasting mean to our industry. Lastly, there’s demand management. We’re hearing this term a lot these days as it relates to the current economic environment. In economics, demand management is defined as the art or science of controlling demand to avoid a recession. For our purposes, demand management is the art and/or science of matching product supply to demand. If a huge snowstorm is forecasted to hit the Northeast, do the Home Depot stores in the region have ample supplies of snow shovels? It is within demand management that total demand (open orders plus forecast) is matched against capacity to ensure an efficient and profitable approach. Getting this right requires cross-functional senior leadership as this is where revenue and margin meet.

It is important for an organization to understand the distinctions between demand planning, demand forecasting and demand management so that it can determine where it needs to focus in order to achieve substantial and measureable improvements in bottom-line performance.

Demand planning vs. forecasting vs. management: an agreement on terms (Pt. 1)

Posted on November 13, 2009 by Gene Tanski

Procedurally and philosophically, we start with demand planning. Demand planning is articulating what a company is going to do to create and shape demand. Typically, this is driven and owned by sales and marketing within guidelines provided by the C-suite. This can include everything from special ads that run in the Sunday circulars to in-store promotions with specific retailers. This discipline focuses on where to meet your customer and other go-to-market strategies.