The venue was “Petruzzello’s Banquet & Conference Center”.

You may find some pictures from the event on the right hand side.

Happy New Year again!

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What a year 2011 turned out to be for Cogent!

2011 is now our second best growth year so far. We would like to thank all Cogenters, their families, our business partners & general well-wishers all around the globe for making 2011 a successful year.

Here is looking forward to keeping up the momentum in 2012 as well.

Cheers!

Ganpy.

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What are you planning tomorrow… shipments, deliveries, receipts, production of a certain high-demand product, truck breakdown, train derailment, warehouse equipment failure, a computer disaster that prevents delivery processing and stacks up carriers’ vehicles? … the former, most certainly; the latter, probably not.

In October, 2000, I had the opportunity to support SAP’s introduction of Supply Chain Event Management (SCEM) at Sapphire. Our demo scenario was a truck carrying a load of goods; we had a telephone connected to the SCEM system. The truck broke down and the demonstrator, playing the role of the truck driver, phoned the connection, advising that he would be delayed by two hours while the truck was repaired. The expected time of arrival of the delivery was updated by the delay time enabling the planners to adjust accordingly.

SCEM is essentially a “track and trace” application; a monitor of the completion of any task related to the procurement, production, transportation, and delivery of product. SAP EM (SAP’s implementation of SCEM) is one of the applications that SAP has developed to bridge the gap between planning and execution and, as such, ultimately to support customer service and cost containment.

Strictly speaking, SAP EM – as so many of the subject matter experts continually re-iterate – is not a work flow tool, but a monitoring tool for exceptions and status changes. As such, it will not automatically fix a critical situation, like firemen arriving to put out a fire. But it will help to locate the fire. It is the person who dials 911 to report the fire so that the responders can go into action.

It’s not the jack that you use to fix a flat tire – or even the spare tire itself; it’s more like a dashboard warning indicator that the tire is underinflated and going flat so that you can take steps to avoid a road side flat.

Planning business processes gives a road map that works backward from customer requirements through production and inventory planning to procurement and supplier management. The goal of planning is to balance demand and supply, to “have the right product in the right place at the right time,” throughout the supply chain, and to do so in minimums of time and cost. In today’s supply chain many of the partners are geographically located far outside our borders, but they still play a major part in the supply chain balancing act. Receiving information on the events that they perform is a critical part of the puzzle that enables full visibility into what’s happening in your dispersed supply chain.

Planning is, like a roadmap, static; a snapshot of circumstances at one point in time. Actually getting the product to the right place at the right time is the execution part of the process. What happens when – en route – there is a road block, a detour, a traffic jam, a flat tire, or any of a number of other hazards that is unexpectedly encountered? Now, for our personal vehicles, there are OnStar® and similar products for automatic notification and contact for emergency services, vehicle diagnostics, and directions. Some of these products can transmit speed and location alerts on vehicles while another family member is behind the wheel.

But, what can we do about our businesses?

SAP EM adds a new dimension to the concept of planning: planning for the un-planned or anticipating what can interrupt completion of the plan. Good planning takes historical performance into account; it includes, for example, in forecasting, the mean average deviation of past forecasts compared to the actual demand. But

a) It is still a backward looking method taking past performance into account to plan the future. As we all know from the disclaimer: past performance is not indicative of future returns. And

b) Best practices imply continuous improvement, so replenishment reliability should be constantly improving Plan B – safety stock levels – should take this improvement trend into account, but will still always lag and will not be reflected in the near term..

The old adage, “failing to prepare is preparing to fail,” applies here. Not many businesses in this age of modern management theories and techniques fail to plan but, in my own personal experience, most businesses fail to prepare. Anticipation of obstacles, unreliability, undependability, and disappointment is typically not part of planning, and so it is a failure to prepare. And having a “Plan B” is not adequate preparation if we don’t know we need it until after the fact.

Besides, how much are companies prepared to invest in Plan B’s – especially in today’s environment of Lean Business Practices? With today’s systems technology, for example, a purchase order is scheduled to arrive not only on a particular date, but at a specific time of day – down to the second. It is scheduled to arrive then, but are we prepared to make a delivery promise to our customer based on the schedule information? If we can’t rely on it, then we’re essentially passing our uncertainty along to our customer.

SAP EM provides the ability to anticipate breakdowns in the supply chain, elevate them in near real time (if and when they occur), and act in time to recover from them.

The gaps between planning and execution include failures, breakdowns, and delays in

          •    Customer order volumes and processing
          •    Production,
          •    Delivery schedules from suppliers,
          •    Shipping and transportation,
          •    Storage and material handling,
          •    Systems failures and integration points,
          •    Communication – loss or miss-handling of documents in processing.,

Both ends of the supply chain – customer delivery and supplier delivery are affected by transportation delays. Every product today is highly transportation dependent.

And in every supply chain, links break. It’s inevitable. SAP EM can track expected completion of every task linking suppliers and customers, as well as internal tasks relating to production, material handling, storage, and data processing.

But wait – like they say in the TV infomercials – there’s more! SAP EM can continue to add value long after supply chain processes are completed. It is tightly integrated with Business Warehouse (BW, SAP’s information warehousing, intelligence, and reporting system). SAP EM can push data to BW so that tough questions can be asked and answered – questions like

          •    How well did our supply chain perform?
          •    Which partners are not performing at their agreed service levels?
          •    Where are breakdowns in our processes occurring?
          •    Did the change we made in our process last month have a positive – or any – effect?
          •    What’s our order processing cycle time?
          •    What percentage of orders went through without incident?

We all love it when a plan comes together, but – often – making a plan “come together” requires the ability to improvise, modify, adapt, and overcome when it begins to fall apart. And the ability to overcome depends on being alert to delays and breakdowns in a timely enough fashion to react and recover.

At Sapphire, 2000, I felt that SAP EM was cool; since then, I have come to feel that it’s something that no supply chain should be without.

And it’s still cool.

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The absolute measure of forecast accuracy is, simply, whether or not your product is on the shelf – where and when the customer wants it – and not before.  Everyone – including your sales people who live by the availability rule that “You can’t sell from an empty cart” – knows that it’s impossible to forecast demand that precisely at that level. 

Isaac Asimov’s famous Foundation series illustrates this in a true, science-based science fiction story.  In it, Asimov presents the concept of “psychohistory,” a set of mathematical formulae that can predict the future of a society.  However, the developer of “psychohistory” emphasizes that it only works for large social segments – it cannot predict the behavior of any individual. 

Similarly, formal, mathematical forecasting of product demand is more accurate at higher levels of aggregation – even with collaboration.  It cannot predict the behavior of any individual customer.

So, what do we do for insurance against the inevitable inaccuracy of any forecast?

One of the things we can do is employ global available-to-promise (GATP). 

Spreading product across many shelves increases the likelihood of it being on some shelf, somewhere in our supply chain, when our customer wants it.  And GATP, simply put, provides visibility into where it is through a feature called location substitution.

Providing products that are acceptable substitutes is another way that we can increase the likelihood of satisfying our customer’s need.  GATP provides another feature called product substitution: if our customer’s first choice isn’t available anywhere in our supply chain, GATP gives us other, similar products that are acceptable to him.  Location substitution and product substitution can work in conjunction with each other and can substantially improve our customer service level and overcome the uncertainty and imprecision of our forecasts.

Finally, at any point in time, the next best thing to giving our customer what he wants when he wants it, is to give him accurate information about when he can get it.  GATP has precise information not only about a product’s stock level and location, but also about its total supply and demand picture.  The APO system – through its real-time integration with the transaction system – knows exactly what purchase requisitions, purchase orders, stock transfer requisitions and orders, planned and actual in-process production orders, and any other factors constituting supply.  So, by including this information in its scope of check functionality, GATP can give our service representatives and our customer precise information about when his requirement can be filled.

So, GATP relies on actual, up-to-the-minute – up-to-the-second, really – transactions that are fed by input from all the supply side departments in the organization.  While this data may not be perfectly accurate itself, it is still closer to reality than intuition, insight, and mathematical formulae.  It is the best reflection of collaboration.

So, what I’ve talked about here are the key elements of GATP:

• Location substitution
• Product substitution
• Scope of check, and
• Real-time integration.

Naturally, GATP is going to work most effectively for companies that can make use of these organizational and business process circumstances, such as distributing their inventory across multiple warehouses.  But there are a couple of other key considerations that any company considering implementing GATP must take into account.  The first is that the company’s policy elevates customer service above the cost of doing business.  Simply, delivering product from a more remote location will affect transportation cost.  Secondly, products must be stocked commonly in at least several, if not most of its distributed warehouses.

Thirdly, as we’ve come to know from decades of computer-based MRP systems, not only inventory accuracy, but indeed the accuracy of all transactions recorded in “The System,” is critical.  A customer’s tolerance of variances in on-time delivery will be tested if you’re off because of sloppy house-keeping about your purchase orders’ expected receipt dates.

Obviously, we need forecasting more than ever in today’s global business environment.  But my whole point is: let’s make the best of both worlds – aggregate, long range planning, and insuring the best possible on-the-shelf availability.

In Asimov’s day it was science fiction; in today’s business, it’s survival.

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HRT 2010 is here and once again, Cogent will be participating in this event along with Ingentis. Our booth number is 1041.

If you have any HR technology or process related questions, do stop by. We will be showcasing the new versions of org.manager (org charting tool) and easy.pes (the assessment center software tool)

Cheers!

Ganpy.

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