The Ultimate Value from Supply Chain Visibility

Richard Sharpe Analytics & Big Data

 

Blog031_SupplyChain2

Ask any supply chain executive if they would like to have better, more insightful, supply chain visibility and I can guarantee the answer will be YES.  Visibility initiatives can be focused on any aspect of the supply chain from supplier compliance to customer demand sensing.  Many companies are investing in “end to end” supply chain visibility capabilities using Control Tower applications to monitor and control specific operational movements and activities.  Clearly, these investments can yield huge benefits in increasing efficiencies, reducing costs, mitigating risks and ultimately ensuring the ability to fulfill customer orders.

However, there is another form of visibility that can add “disruptive” competitive advantage.  This visibility is associated with the performance of every supply chain asset in contributing to the generation of profit. Naturally, the goal of any visibility investment is to ultimately support improvements measured on a P&L statement. But how many companies do not recognize that there are deeper layers of visibility that can provide far more detailed insights with regard to profit performance contributions?

Let me give you an example.  A specific company has 110,000 customer delivery locations selling through wholesalers, distributors and directly to the customer.  Historically, the company has managed customer product offerings using standard cost and revenue calculations.  However, they found it difficult to get to actionable insights that could improve on the “one size fits all” order fulfillment strategy by channel.  The company undertook an initiative to gain accurate profit performance information for every product sold to every customer.  The end result, just under 3,000 customer locations provided over 80% of their operating profit.  Empowered with this type of clear, strategic and actionable visibility, the executives immediately pursued answers regarding the root cause for such a dramatic performance variance.  Once the drivers for poor profit performance were understood, smart segmentation strategies were developed and implemented to significantly improve margin contributions.

Bottom line, supply chain operating visibility is a game changer. More insightful, actionable and timely information on supplier performance, movements of containers, multiple postions of inventory, etc. allow for a more proactive management of all supply chain operations. However, operating visibility can drive competitive and “disruptive” improvements in profit at a level that creates actionable insights answering the profit performance questions of “how, what, when, where and why”.

I would love to hear your comments.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Maximizing Your S&OP – IBP Profit Contributions

Richard Sharpe Analytics & Big Data
 

Maximizing Your S&OP – IBP Profit Contributions

There is a lot of discussion in the market about Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP). One line of thought is that companies with mature S&OP programs will naturally evolve to include enhanced IBP capabilities. I have a separate view and believe these two important business activities serve different but complimentary purposes. Regardless of where you are on this issue, the question is “How do I get the maximum value out of S&OP and IBP activities that will continue to positively impact the bottom line?”

What does that have to do with analytics and big data? Well just about everything. Regardless of how you are addressing your S&OP and IBP business requirements, they both require the support of user driven analytics that utilize cross-functionally validated data. Getting this right provides tremendous synergy not only in supporting both of these critical business needs, but in growing sales, cutting costs, expanding market share and therefore increasing the profit of the enterprise.

Let’s start by looking at a simple definition for each:

  • Sales & Operations Planning – a single operating plan that has executive commitment that allocates critical resources to most effectively satisfy customer demands in a profitable way.
  • Integrated Business Planning – planning, implementation and monitoring activities that focus on the identification of specific improvement opportunities (strategic or operational) related to a product(s), customer(s), channel(s) or an operating region to continually improve financial performance and/or gain market share.
IPB_S&OP

To be most effective, both S&OP and IBP require strong collaborative and cross-functional decision making processes. Decisions that are based on accurate insights regarding historical performance (descriptive and diagnostic analytics) as well as anticipated customer and business requirements (predictive and prescriptive analytics).

As I have commented in earlier postings (earlier posts here) descriptive, diagnostics, predictive and prescriptive analytics must be based on accurate and validated data. Many companies are struggling with how to turn their data from a liability into an asset. For those companies, this issue will only grow as more and more sources of data are made available to support various forms of decision making activities. If you are not proactively addressing this issue, it will significantly impact the capability of your S&OP and IBP activities to drive the value that you should expect from these business activities.

How many times have you been involved in an S&OP meeting where everyone brings in their laptop and sits down to start the meeting? The discussion focuses on the fact that there were large variances in the plan developed in the last S&OP meeting versus what actually occurred operationally. For the first half of the meeting, people offer different explanations and opinions on the variances based on their analysis using the disparate data available to them. Alternatively, everyone could have had advanced information with regard to exactly what happened and the “root cause” of why it happened. The focus at the start of the meeting would then be to discuss these facts and decide on a course of action.

To gain the most value in your S&OP and IBP activities business users must be empowered by having access to meaningful analytics that rely on one source of consistent, validated data and that support cross-functional planning, execution and monitoring activities. Get it right, and you won’t start your meetings trying to ‘convince’ others why variances happened. You will walk into your meeting understanding specific performance details. Get it right and your meetings will be based on fact based discussions leading to the adjustments that you should make to drive positive impact. Impact that is measured by ongoing contributions to financial performance, i.e. shareholder value. Value that drives competitive advantage!

I would appreciate hearing your thoughts and comments.

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Sustainable Profit Growth

Richard Sharpe Analytics & Big Data

Sustainable Profit Growth

If you have been following this blog you know that the emphasis is to encourage companies to work smarter in their mission to drive shareholder value through a sustainable growth in profit performance.

I know that this seems like a no brainer but the reality is that companies are often trying to achieve this mission with limited visibility to the real drivers and inhibitors of profit performance.  Everyone has the P&L.  However, I find that most companies today cannot easily peel back that onion to have very specific and actionable insights for a specific customer or product that can make an immediate and measurable profit impact.  Instead, by default, strategies are often developed using a “one size fits all” approach.  The common mantras are “cut costs” and “increase sales” to increase overall margins.

  One Size Fits Most  

However, there is a growing level of need to tackle this problem.  And while it is rarely articulated, the real solution is to increase profits by truly understanding the product and customer profit “winners” and “losers” and to group or segment them in order to create specific strategies that increase their profit contributions.

Customer and product segmentation activities are a very hot topic in the industry today.  What successful companies are doing differently is developing the capability to better understand how customers and products differ in their profit performance.  Intelligent segmentation activities support the fundamental need for companies to work smarter, not necessarily harder, to increase their quarterly earnings and shareholder value, and quickly.

How do I approach customer and product segmentation activities?  Let me offer three straight forward questions that I hope will be helpful.  Empowering the organization to be able to answer these questions will lead to smart decisions to create sustainable growth in profits:

  • Where do I specifically make and lose money with my customer transactions and what is causing the specific profit performance spectrum (selling price, discounts, cost to serve, etc.) by individual customer, channel and region?
  • What specific actions can I take right now to increase the profit contributions by product and/or by customer?
  • Once specific actions have been implemented, are these specific strategies for a customer, product, channel, and/or region working and having a direct positive impact on their profit performance?

Product and customer segmentation activities are critical areas of focus for effective Integrated Business Planning (IBP) solutions.  Developing this organizational capability provides immediate and sustainable value.  Value that drives competitive advantage!

I would appreciate hearing your thoughts and comments.

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

How Can Big Data Drive Better Decisions?

Richard Sharpe Analytics & Big Data
 

How Can Big Data Drive Better Decisions?

analytics

I just recently returned from the CSCMP Global Conference. While at the event, I had a number of Big Data conversations were people were asking questions like;

“Is it possible today to use Big Data to support meaningful business decisions?”

I walked away from the conference thinking that my next blog posting needed to further address this question.

You probably have heard of Big Data being used with the four following terms; Descriptive, Prescriptive, Predictive and Cognitive Analytics. The terms can be a little confusing. Each of these forms of analytics have been around for a long time but with the incorporation of Big Data, they each offer tremendous new opportunities to drive significant value to making better informed business decisions. Let’s explore each in the context of Big Data and improved decision support.

Descriptive Analytics – as the name implies, the focus is on describing historical performance. Nothing new about this you might say. But with Big Data, the level of performance information can be very specific by product, customer, channel, supplier and other key operational areas of focus. What is an example of this? At the Gartner Supply Chain Conference in Phoenix this spring, it was offered that companies will need to evolve from using a “standard cost to serve model” to a “total cost to serve model”. To accomplish this, a company must take a far more comprehensive approach that includes all direct and indirect costs associated with fulfilling each customer order. This requires validated data to be organized and applied in a repeatable process in order for the organization to have confidence in the information and to make it actionable. There are many more examples of how Descriptive Analytics, using Big Data, has the opportunity to identify immediate revenue and cost opportunities that are not visible with aggregated or disconnected information.

Prescriptive Analytics – this type of analysis focuses on defining different ways that you may operate your supply chain given certain assumptions, business rules and anticipated customer demands. A very common form of Prescriptive Analytics is in the use of network or inventory optimization applications. However, as we all know, any form of analysis is only as good as the quality of the data that is being used. Big Data’s contribution to putting Prescriptive Analytics on steroids is that companies no longer have to settle on what data they can assemble to support the work. By mastering Big Data, organizations can now have complete and accurate data to be creative in intelligently organizing information to meet the exact needs of the analysis. This, in turn, provides a more robust and accurate prescriptive business solution.

Predictive Analytics – this one is easy. Everyone has some form of forecast for the future. For most companies, forecasted customer demands play a primary role in their S&OP meetings. So how does Big Data support Predictive capabilities? The answer can be found in three ways. First, as noted above, getting everyone on the same page with regard to exactly what did happen provides for a “fact” versus “opinion based conversation. This has an obvious and very positive impact on discussing the future. Second, Big Data can also provide insights regarding more accurate trending and patterns because it is more specific and accurate than higher level or “silos” of operational data. Third, utilizing this information in predictive analytical tools like simulation applications provides a more accurate way to analyze the impact of specific decisions on future operating performance.

Cognitive Analytics – this fourth area of decision support also offers amazing new opportunities to positively impact financial performance. Having one source of data that has been created from all relevant structured and unstructured data sources provides a detailed picture consisting of operational patterns , trends and informational facts that can be linked together to provide valuable insights. But with advances in Cognitive Analytic capabilities, machine driven learnings that get smarter over time, this form of analytics has the potential to further drive innovation and competitive advantage. Blending the intelligence of the people who know the operation with the power of increased machine driven operational insights will be a big part of how companies will take additional advantage of Big Data. Although early in its development, Cognitive Analytics will be quickly adopted by those companies who have mastered the use of Big Data in their Descriptive, Prescriptive and Predictive analysis activities.

So, in order to circle back to the original question posed at the beginning of this posting;

“Is it possible today to use Big Data to support meaningful business decisions?”

The answer is yes. Big Data’s contributions to informed business decisions will only exponentially increase as we learn how to harness the insights to be gained. The real question is “How can your company incrementally use Big Data in your decision support processes?” Let me offer the following quote:

“I never guess. It is a capital mistake to theorize before one has the data. Insensibly one begins to twist the facts to suit theories instead of theories to suit facts.”

-Sir Arthur Conan Doyle, Author of Sherlock Holmes stories

We would appreciate hearing your thoughts and comments. All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Why is Big Data so important?

Richard Sharpe Analytics & Big Data
 

Why is Big Data so important?

data

In my last posting, I suggested that establishing the capability to “harness” Big Data directly impacts a company’s ability to increase the generation and protection of operating profits and competitive advantage.  You could say; what’s new about a focus on profit, we do that every day?  Let’s explore linking Big Data and corporate profitability a little more.

In a recent on-line video, I was asked, “Why is Big Data such a big deal?”  I answered the question using the following scenario:

A consumer walks into a store to buy a coffee maker for his wife as an anniversary gift.  He scans the barcode for the model she wants and enters it into an app on his mobile device to see if he can buy it cheaper through another retailer.  The consumer sees that just a half mile away he can purchase the same item for 5 dollars less than the price he sees in this store.  Now, one of the retailers has set the price of the product based on a corporate margin calculation.  The second retailer knows the exact margin of that product for that store which takes into account all of that SKU’s transactional costs including the change in their fuel surcharges that were incurred two weeks ago.

Which retailer is going to win?

Companies are beginning to focus on harnessing Big Data but there is a lot of confusion regarding the “WHY”.  The attached article offers information from a Gartner survey on that very point: https://readwrite.com/2013/09/18/gartner-on-big-data-everyones-doing-it-no-one-knows-why#awesm=~ohUJBlny4JeJN4 

In my opinion, learning how to repurpose fragmented data (data that is captured within and outside of your supply chain operation) into actionable insights will be the key to innovation and future success.  Success measured by increasing revenue growth and operational efficiencies and therefore sustained increases in profit and market share.  This is further emphasized by the following quote:

“Innovation is the ability to convert ideas into invoices.” - L. Duncan

Companies that take Big Data seriously will maintain significant market advantage.  In fact, it has been suggested that the processing power of the cloud coupled with Big Data best practices will create “Disruptive” solutions to the status quo.  This is much bigger than just adding technical capabilities to process large amounts of data or to connect two different data sources together to conduct data mining.  Big Data has the power to transform the way companies will succeed in meeting shareholders’ expectations.

We would appreciate hearing your thoughts and comments.  All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.