SCM and ERP trends for 2010 in United States

I keep on doing research with my limited resources and meet or electronically interact with people, who are at key decision positions at multiple organizations (yes, such is the power of linkedin, facebook etc.) and the last 90 days, I was focused to find out what are the focus areas for them in the next year in terms of technology investments. My interactions also had the purpose to find out their current pain areas and future strategy limited to next year as I do not think that in fast changing scenario of these days, anybody has visibility beyond 12 months span. Let me today share some of the insights with my readers as these are quite interesting and have the ability to influence our decisions. The key findings were:

• Starting with the most obvious, cost reduction or in-fact cost optimization as people prefer calling it, it is evident from their chalked out strategies that cost optimization is still on top of their agenda when they plan their technology investments specially in the area of Supply Chain Management and ERP. So they will continue to prioritize investments in new technology deployment in areas that will directly affect operational costs and process efficiency
• Focus industry for 2010 in terms of IT investments is Healthcare. The industry growth is best amongst all verticals in 2009 and will continue in 2010 with similar pace. This is the only industry vertical where SCM and ERP IT investments will not stop and thus this will remain a hot area in 2010. The other industry vertical that will be in focus next year is the federal government of United States that intends to carry out major IT investments in these areas in next 2 years

Since my focus was more towards the manufacturing industry, most of the trends I will talk about, will be related to this industry but since the group that interact to, has stakes in multiple industries so it will help other industries too. The key objectives or trends that I could make out for 2010 are:

• Improve efficiency of operations by using more real-time process analytics, such as business intelligence (BI) tools.
• Improve employee productivity by adopting BI analytics and automated process.
• Reduce operational costs with shared utilities such as utility and grid computing vs. the purchase of stand-alone products.
• Synchronize product life cycles with consumer demand cycles for maximum value capture by adopting collaborative planning, radio frequency identification (RFID) technology and product life cycle management (PLM)
  BPO and IT outsourcing (ITO) will allow manufacturers to increase their focus on core activities
• More adoption of Six Sigma and global data synchronization for achieving the best quality
• CRM and capable to promise (CTP) systems to keep up with clients' expectations

The market drivers for 2010 will be:

• Cost-reduction strategies
• Customer-centric strategies that build products around customer needs
• Globalization of operations for producing the best with the least
• Imported goods from non-European countries are becoming particularly aggressive and virulent on the market that is also foraged by the strong euro
  Quality is becoming the battleground where European products will fight against non-European imports (especially Chinese)
• "Green" production — The need to reduce gas emissions in the manufacturing process by adopting more-efficient and automated processes

he identified challenges came out to be:

• Decrease of competitiveness of European manufacturers with respect to Asian and North American manufacturers
• Oil prices that shrink operative margins as well as contract consume
• Speed-up of production technologies over the Hype Cycle as well as high acceleration of the life cycle of products
• Overall low industrial production growth rates
• Exceptionally strong euro that inhibits the exports outside of the eurozone

Hosted Application, ASP or SaaS - ERP's future

Even as it has helped to reinvigorate customer, supplier, and investor interest, the adoption of SaaS as an all-encompassing descriptor for software delivered as a hosted service has blurred the distinction between it and previous models including the ASP approach. ASPs, which include suppliers of hosted ERP solutions, have understandably tried to distance themselves from a term that describes what is still widely believed to be a failed business model. Yet their service offerings continue pretty much unchanged. The problem with widespread use of the term SaaS is that associated expectations might limit understanding of the drivers and realities of hosted ERP. Prospective customers should be mindful that despite imprecise and overlapping meanings there are important differences between ASP, hosted ERP, and SaaS .

• License relationships are still separate for most hosted ERP services at the enterprise level. Whereas SaaS solutions like Netsuite or Salesforce.com are typically priced on a true subscription basis, meaning that the license charge is built into service fees, the same is not yet true for ASP models and hosted ERP services for Oracle and SAP, for which license fees remain separate (outside of specific service offerings like HR BPO in the case of SAP). Despite mounting pressure in the hosted ERP segment, independent software vendors (ISVs) have yet to provide true pay-as-you go pricing, fearing a negative effect on their market valuation.
• Hosted ERP entails new functional requirements as well as ongoing management. Whereas SaaS tends to suggest in buyer’s minds new software purchases or implementations, hosted ERP can involve both acquisition of new functional requirements and outsourcing of existing applications.·
• Hosted ERP fails other tests of SaaS conformance. Whereas the ISVs that produce the software delivered in the ASP model typically include providers of ERP, eCommerce solutions, and other software with diverse architectural legacies including client/server, most “true” SaaS solutions are built for subscription-based Web delivery from the outset.

Hosted ERP makes sense in certain customer environments that correlate, to a degree, with customer size. Historically, most ASPs targeted mid-range enterprises (as opposed to SMB customers), but units of larger enterprises and even some large enterprises have adopted hosted ERP. The decision to purchase hosted ERP solutions correlates with the following, among other, specific customer circumstances:

• New enterprises seeking rapid ERP enablement. As it was during the emergence of the earliest ASPs, new company formation continues to be a driver of hosted ERP implementation. Events such as acquisitions, divestitures, mergers, and corporate spin-offs are attended by significant time pressures and resource constraints that make conventional, on-site implementation too slow and cumbersome.
• Customers lacking access to qualified staff. Enterprises that lack ready access to qualified ERP resources, whether due to geography or other structural factors, are candidates for the hosted ERP model. This resource issue can manifest itself during initial implementation or ongoing management.
• Enterprises seeking regulatory compliance. Compliance is increasingly cited by customers and suppliers alike as a driver of hosted ERP implementation. Some enterprise customers, particularly buying units of larger enterprises, can come by regulatory compliance more easily by purchasing packaged ERP services from qualified suppliers than by acquiring the resources to pursue it themselves.
• Customers seeking to outsource existing ERP implementations. Hosted ERP services can also be an attractive alternative for customers seeking to outsource existing ERP implementations, particularly as a way to avoid capital outlays associated with significant hardware or software upgrades. But it can be difficult to retrofit existing customizations and infrastructure diversity to fit neatly with the packaged approach

Quick News: Online sales forecast cut

The forecast for retail growth has been cut from 15 per cent to 12 per cent for the second half of the year by IMRG Capgemini which produces the e-Retail Sales Index.

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Latest figures show that UK shoppers spent £22.9 billion online in the first six months of 2009. Online spending has proven to be more resilient than spending on the high street, with year on year sales for the month of June rising by 12.3 per cent.

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However, the Index reveals that there is a slowing rate of growth as sales in June fell by 1.3 per cent compared to May. Although the predicted slower rate of growth in the second half of 2009 is in line with the longer term historical trend, IMRG said this should not mask the fact that online continues to be the driver of growth in the retail sector.

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“For only one month in the first half of 2009 has there been positive year on year growth in high street sales – compared to an average of 14 per cent year on year growth in the IMRG Capgemini E-Retail Sales Index.”

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It is seen that the recession has considerably degraded the reliability of demand and supply forecasts beyond a three-month window and the supply chain flexibility today is even more critical than just six months ago.

Complete Logistics Solution - Will it work?

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I conceptualized a complete Logistics SaaS based solution that I think should work in today's world when investment in capex has taken a back seat and organizations are looking at economical yet complete solutions.
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The research is still under progress.... so keep visiting for the final product

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Drive your Supply Chain Efficiency with efficient Warehouse Systems

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Off late, warehouse management systems deployments have gained good pace and all ERP and SCM products companies have started investing into their solutions to fine tune to map to industry specific solutions. It has been a proven fact now that this is one of those controllable areas which can really make an impact in improving supply chain of organizations.
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When it comes to taking the necessary steps to create a more flexible and agile warehouse that can adapt and change to the ebb and flow of the market conditions, the goal is to ultimately minimize the time product or inventory stays in your warehouse – ultimately creating a near real-time inbound / outbound activity that matches all inventory to orders intended to turn revenue as quickly as possible.
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The metrics that are required to be tracked to improve the warehouse system and process efficiency are:

• First time sales order line picking accuracy
• On time shipment
• Back order percentage
• Turn around time for converting an order into sale
• Labor cost in warehouse

The reason why I added labor cost in warehouse as one of the metric to measure is that while increase in number of pickers can improve the picking accuracy and turn around time but at the same time it will drive the labor costs in warehouse up, so this will not be an optimum solution. The best solution will be to study the whole process first and find out the areas where there is a room of improvement. Then we need to implement processes that create more warehouse efficiency in addition of bringing down the operating costs with no sacrifice of service levels.
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To create more flexibility and agility in the warehouse, organizations need to leverage technology that can bring automation and visibility. Visibility here, means that the picker knows the contents of every bin in the warehouse in real-time and is also able to track inventory attributes like lot number, size, serial number or date etc. in real time. This visibility needs to be blended with automation like:

• Automated receiving or put away with the help of Radio Frequency Identification device (RFID) or bar coding
• Automation in replenishment process
• Ability to send advance shipping notices
• Managing containers with the order lines they contain etc.

This combination will help in improving the overall efficiency of the warehouse system definitely with lower costs in the longer run. One thing that we need to note here is that while we have talked about the visibility, it has to be real time or near real time visibility. If the employee has access to data that is month old then still the issues will not be resolved and in fact it can increase the amount of re-work and hence will impact the picking accuracy negatively.
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Another factor that has weightage here is that what is the age or version of the warehouse system that the organization is using. While most of the industry leader organizations were early adopters of WMS system but they are the ones which are facing bigger pressures today as the WMS solutions have evolved over time and much better and efficient solutions are available today against what they are using. The organizations that kept pace with this change and kept on upgrading their solution, were in much better position today.
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While almost all major ERP providers are offering these solutions but there are a few best of breed solution providers also available in market and companies are divided in their approach towards who they want to talk for getting the solution deployed.
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While assessing the improvement areas in existing warehouse system or going to deploy a new solution, the organizations need to make sure that:

• They break the processes into smaller pieces and then focus at all potential areas instead of trying to address just the most glaring issues
• They spend quality time to measure the important warehouse processes like Labor management, Yard management and Dock management
• They need to keep looking at warehouse as the enabler for improving the end to end supply chain process rather than a standalone system

The team identifies the future growth areas in this and adequate budget is guaranteed towards these areas. Remember that even in this times of recession, investments will not stop but every organization will become wiser to invest in right areas

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Few other metrics that can provide the warehouse system readiness index to an organization are:

• Capability to process warehouse activities without paper – Yes, it is possible to avoid paper pick slip too
• Ability to confirm transactions and communicate with automatic data capture in real time
• Advanced picking and replenishment process practicing
• Distributed order management usage
• Cross docking practices
• Reverse logistics handling capabilities
• Event management handling ability

The remaining year of 2009, as many experts have put it, is a year of transition where the organizations need to take this as an opportunity to dust-off existing issues in the WMS side of the Supply Chain and ensure that they have the best of solutions available that have the potential of reducing their cost of carrying inventory and its potential obsolescence, the cost of warehouse labor and the potential inefficiencies of processes.

Supply Chain Trends are identifiable

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Recently, I was reading a magazine on supply chain and saw that the whole world wants to know the trends in supply chain and in-fact the larger players are experimenting with newer practices to either start a trend in their favor or trying to gauge if those can be game changes for them. Well, if we follow a scientific approach, it is highly likely that we can go close to identifying the trends and their impact. In fact, there is some project going on in MIT on "Future focused Supply Chains" that is using an approach that is used the new product development experts in supply chain to identify trends.
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One of the methods which is used to make a roadmap of possible dominant technologies and trends in innovation area is Scenario Planning. The method was originally invented by the oil company Shell (I believe around 30 years ago) and now is used extensively by innovation managers in global companies. In the scenario planning process, companies try to identify the possible trends in the market and new product (e.g. Children are spending more time working and playing with PC), the impact of such trends (They do less physical exercise and become fat) and the associated opportunities (Gym market will be booming, there will be a need for healthy products & related medicines); the innovation and technology planners do this for various scenarios and then allocate new product budget based on the output of such exercise.
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Their approach consists of three main steps:

• Scenario Thinking: where they create various scenarios and simulate possible outcomes through scenario planning. The main output of this phase will be the identification of trends and market developments that the company should be monitoring.
• Strategy Alignment: In this phase, the focus is on aligning the responses derived from the scenario thinking exercise with the company's strategic goals.
• Implementation and Development: An at the end, Supply Chain Managers look at the nuts and bolts of implementing the strategies they have decided to follow as a result of the previous two steps.

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The important consideration which is derived from new initiatives like this one is that supply chain professionals have to change the way they approach uncertainty. No company can be in complete control of its commercial destiny, but with a future-focused mindset that can become more adept at navigating change.

Welcome to the SCM-ERP world

Just started this site to discuss on various supply chain and ERP related issues, best practices, solutions and trends. Keep visiting for some exciting stuff here.