SCM & Manufacturing Transformation( Part 5/5)

Supply Chain Rainbow & Multicoloured Manufacturing: (Part 5 of 5)

 Transformation SCM/Manufacturing: Proposals dwells on means and not an end.

1. Concentrate on End and not on the Means

 Stylish and glossy presentations with tools and techniques is what we come across in proposals submitted to the customers and clients. Digital, AI, ML and inhouse tools & Methodology often dominate the space in the proposals. The Practice heads and solution architects always fail to address the end and concentrate only on means. Means without a defined and tangible end, often results in “so called” successful projects without any real business benefit, except that you have a Realtime, online transactional system, is in place. This is the real scenario in 90 % of the transformation or reengineering cases. The technology employed may be from best in class, available currently (ERP. Cloud applications or Custom made), but as mentioned above technology is a mean and not an end.

Customer RFP/RFQ have become smarter over the years with an aim to get best in class service from IT/consulting service providers but sadly it also concentrates mainly on technology, tools and capabilities. The RFP/RFQ, barring few, fails to get the end benefits (Return on investment, Top and bottom-line growth), quantified from the participating vendors.

The Problem also lies with customer. The Business function and purchasing department aim to put each and everything in the RFQ/RFP, with “Best in Class resources “and 90% of time fixed price quote with open clauses to add. This reflects a bad acumen from customer – Business and purchase side. The Business /Purchasing from customer must be clear on –

·        What is the business outcome * End” they are looking for?

·        What are the performance measures considered, which will affect the business outcome?

·        Is the business clear, what is important: Mean or End?

·        If the Business RFQ/RFP is aligned to company’s overall vision and Goal?

·        Is the Lowest price being the selection criterion?

·        Is the business/company being aware of the common proverb: “If you pay peanuts. you will get monkeys … if you pay almonds. You will get drunkards (no offense meant). In short, for talent, you must pay otherwise, you will get people, who will be just able to keep the lights on.

·        The RFP/RFQ often fails to mention the performance parameters. Please note common SLA and KPI are not necessarily linked to ROI, Top and bottom-line growth. They are more “Business as usual’ parameters “.

·        Art of Reengineering /Transformations which essentially helped organizations over the world (Hammer & Champy) is gone into oblivion and now the SI vendors are presenting only the new technologies, applications and inhouse applications in their proposals for transformations (Means)

·        The main drawback is that the proposals or solutions are drafted by architects who are IT specialists and not domain specialist. Without deep domain expertise, it is impossible to give a proposal which will really help the customer to achieve the stated business benefits.

·        Theme and end based proposals in last 5 years are replaced with technology-based proposals, which often looks attractive to customers but at the end fails to get any tangible business benefits.

·        In Manufacturing space also, based on my study, proposals are tending to highlight industry 4.0 /IOT/Big data/Analytics (They are important), but missing what the business is asking for.

2. If you cannot measure. You cannot improve.

       (The digital transformation /Reengineering/Transformation).

     Let us admit, we cannot measure each and everything (intangible and Human aspects). Having said so, in Manufacturing and SCM, 90 % of the parameters are measurable. In such case, why digital transformations, reengineering or business transformations are purely tagged to performance indicators, these days? (It was the case during last decade but with digital technology/industry 4.0, focus has shifted more to technology(means), than ends).

Success of any transformation initiave (You call it “E-transformation, Digital transformation, Reengineering or business transformation) can be measured purely on measurable parameters which directly affects the Top and Bottom line of the business. Intangible benefits are added on and not necessarily adding to profitability. However Intangible benefits are also important.

SCM and Manufacturing needs to follow the proven path of “Measure and Prove”.

In this context, I will like to bring to the focus some of the key measurement indices related to SCM and Manufacturing. While the literature is full of thousands of such parameters based on research and studies carried all over the globe, not all necessary to be measured and monitored,

Any transformation proposal (E.D, I. And so on), needs to have current bassline measurable indicators for SCM and Manufacturing and needs to tell customer, how their solution is going to improve these parameters, over next few years, to give them competitive advantage. Otherwise it remains just an IT project proposal.

Reality of the world is “Profit and dividends’ and not an overt statement that we have transformed.

While there are more than 30 measurables, parameters for Supply chain management efficiency, I am reproducing the ones, which have direct impact on Top and bottom line.

Key SCM Measurable parameters

·        Perfect Order Rate

·        Inventory Turnover

·        Inventory Velocity (IV)

·        Cash-to-cash Time Cycle

·        On-time Shipping & Delivery

·        Days Sales Outstanding (DSO)

·        Inventory Days of Supply

·        Return costs/Reverse logistics costs

·        Freight Bill Accuracy

·        Green distribution channels (%)

·        Recycling & Reuse of materials (%)

·        Percentage of low carbon vendors

·        Overall % of carbon footprint of organization

Kindly note, whether your supplier is of materials or services, most of these parameters are applicable including IT vendors.

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Key Manufacturing Measurable parameters

Any transformation program/project in Manufacturing needs to assure the customer that it will result in significant improvement in its measurable parameters, related to production, quality and maintenance,

Given below is the list of few top parameters. Several research and review studies across the globes have listed out vast number of parameters. however, for this article, we are limiting to vital few.

·        On-Time Delivery to Commit 

·        Manufacturing Cycle Time 

·        Time to Make Changeovers 

·        Yield 

·        Customer rejects

·        Supplier’s Quality.

·        Throughput Time 

·        Capacity Utilization 

·        Overall Equipment Effectiveness  

·        WIP Inventory

·        Reportable Health and Safety Incidents 

·        Reportable Environmental Incidents.

·        Number of Non-Compliance Events / Year  

·        Percentage Planned vs. Emergency Maintenance Work  

·        Downtime in Proportion to Operating Time  

·       New product introduction rate

·        Engineering Change Order Cycle Time  

·        Total Manufacturing Cost per Unit Excluding  

·        Manufacturing Cost as a Percentage of Revenue   unit.

·        Productivity in Revenue per Employee  

·        Energy Cost per Unit  

3. What is new you are telling? It is known.

I believe in following three-pronged strategy

·      It is necessary to introspect and improve

·        It is also necessary to sharpen the saw every few years.

·        It is also necessary to change with market dynamics.

I find currently too much focus is on means – Industry 4.0. IOT, Machine learning, Artificial intelligence, Digital transformation, Big Data, analytics and cloud among other technofixes. While these technological advances are a boon, but business needs to adopt these technologies with clear end in mind.

Its new technology adoption/Digital transformation/ E-initiatives/Transformation/Reengineering needs to be aligned to the business vision and objectives. These initiatives should help business to get a competitive edge over others and clearly measurables.

With explosion of new technological advances, companies are finding themselves surrounded by new options, every day and every quarter. The Business leaders in SCM and Manufacturing needs to have a clear vision and roadmap for next few years ahead so that they adopt right technologies to meet the e=measurable result.  

P.S: These are personal opinions of the author and not related to his current employment and organization.