Supply Chain Vendor Morphs into SCEM with Response Management Vision
Written By: Michael Bittner
Published On: December 09 2005
The supply chain planning (SCP) applications market has cooled down dramatically from its high point of activity in the late 1990s. While SCP software vendors like i2 Technologies, Manugistics, Adexa, Synquest (now part of Viewlocity), and Logility pitched the benefits of integrated product suites, only a minority of tier one, leading edge companies bought into the concept and found successful results. Integrated SCP processes tries to match supply and demand across an enterprise's production and distribution operations. In a make-to-stock, assemble-to-order, and configure-to-order manufacturing environment, an application vendor's planning module is typically used to support integrated supply chain planning, usually in a centralized fashion. In other manufacturing environments, like make-to-order and build-to-order scenarios, integrated SCP is supported by a vendor's manufacturing planning and production scheduling modules.
SCP vendors have strived to develop applications to plan each functional area, and to synchronize planning, so that multiple plans across the enterprise could be simultaneously developed. At the same time, integration with legacy and enterprise resource planning (ERP) transactional systems has proven to be an advantage to ERP vendors like SAP and Oracle that built out their SCP suites. Despite the limited appetite for SCP applications, ERP vendors still find the market alluring because of the integration differentiation with supply chain execution (SCE), purchasing, and logistics functions across a platform architecture built around transaction processing.
However, even in today's business world most planning is done independently by each functional organization, resulting in separate and often inconsistent plans for manufacturing, purchasing, and distribution. For an integrated SCP, via a centralized planning approach, to be most effective, a company needs enterprise-wide plans; however, SCP vendors have found that centralized planning departments are rare, and most companies lack the existing processes or ability to adapt new planning processes to take full advantage of integrated supply chain planning.
Information Sharing and Collaborative Planning
A better approach to centralized, integrated planning is an intermediate path where planning is performed by entities owning particular inter- and intra- enterprise operations. However, a collaborative process and a collaborative plan is established when each organization shares its resource constraints and relevant planning information with others. In order to support this type of collaborative planning, SCP vendors are openning up their applications to a variety of users via intranets, extranets, and the Web. The information flow in a collaborative and information-sharing SCP environment is more in line with users' wants and real world enterprise organizational structures.
Now, SCP vendors have moved beyond enterprise planning to encompass the whole supply chain including external trading partners. SCP application vendors have developed functionality to extend applications beyond the enterprise by enabling trading partners to share information and collaborate. Examples of these capabilities were seen in developed SCP products like I2's RHYTHM Collaboration Planner, Logility's Voyager products, Paragon Management's iCollaborate Suite, and WebPlan's eSupply-Chain products.
These products were intended to allow companies to synchronize their supply chains among trading partners collaboratively, rather than through a central planning model.
Managing at the Moment Defines Ultimate Success
The "cooling" of the SCP market over the past few years is seen as a recognition of the imbalance between enterprise investment in long term technologies for strategic enterprise planning, product forecasting, strategic sourcing, and supply chain planning, versus and current business performance. In the foreseeable future, enterprises will still be dependent on Excel, fax, phone, and ad hoc performance metrics to drive day-to-day operations. In a world where business "runs like clockwork" with little volatility over intermediate to long term time horizons, integrated SCP can be effective.
Many would argue, however, that we don't live in a business world that runs like clockwork, and most companies lack a strategic solution to rapidly responding to real world volatilities. Managing supply and demand must be viewed with the reality of inevitable and unpredictable supply chain volatility. Supply disruptions and delays, order changes, forecast changes, new capacity constraints, dynamic price changes, and many other real world variables can result in customer erosion, inventory build-ups or short falls, and even margin erosion if operations are unable to respond to immediate real world point-of-action stimuli. Unfortunately, these events cannot be built into any master plan, nor addressed by any integrated and centralized SCP solution.
A New Paradigm for Solving Supply Chain Problems
One supply chain vendor, Kinaxis, realized that managing events and responses as they occurred and aligning results at the point-of-action were paramount to successful SCE. For this reason, Kinaxis, which was founded in1984 as Cadence Computer Corporation and the re-launched in 1995 as Webplan, made the bold decision to re-brand its company name and products away from its legacy as a SCP vendor. Kinaxis' current transformation is a direct result of its belief in enterprise response management as a means to drive manufacturing performance at the point-of-action. This transformation is geared towards a clearer positioning of the company's strengths, coupled with the SCP market trend toward the synchronization of extended supply chain entities via rapid and intelligent response.
Kinaxis now delivers response management software, branded RapidResponse, to drive operations performance by rapidly responding to constant volatility at the point-of-action, where variances in demand, supply, capacity, and daily operations collide.
Kinaxis' RapidResponse solution focuses on lean manufacturing operations where response to volatile customer demands and global supply chain flows interact. The RapidResponse Server is typically connected to an ERP system, and the applications suite is composed of
- Active Spreadsheets—a user-friendly interface with synchronized data feeds from extracted ERP data and tools designed to empower action teams including schedulers, planners, buyers, customer service representatives (CSR), mangers, suppliers, etc. by providing a single view of AlwaysOn Analytics information
- Resolution Engine—the engine that runs real time background and leverages the alwaysOn Analytics information in order to drive collaborative action teams
- Live ScoreCard—provides immediate shared comparative results to simulation scenarios in order to understand the implications of change, such as, a configuration change on a customer order and the implications to inventory, production, capacity, margin, etc.
Through RapidResponse, supply chain tools are available to many participants across the enterprise and the extended supply chain, as opposed to the very few participants of a master centralized planning exercise.
Embracing of Supply Chain Visibility and Supply Chain Event Management
By definition, supply chain event management encompasses capabilities and attributes to monitor, notify, simulate, control, and measure events throughout the supply chain.
These applications helped users answer questions such as the following:
- Is my supply chain performing as anticipated? If not, what should I do about it?
- Where is specific inventory in my supply chain? Where are the assets in my supply chain at this moment?
- What is the true status of an order? Shipment? Container? Pallet? Item? Serial number?
- How is my supplier performing? Are contracts being honored?
- What's in transit, and when will it be delivered? Will it be on time?
SCM applications that answer these types of questions in real time include a broad class of applications that supports response-oriented business processes. They
- Monitor to provide ongoing information about supply chain objects and events, including the current status of inventories, orders, shipments, production, and supply, even down to the item level
- Notify to support real time exception management through alert messaging that proactively warns a decision maker if an action must be taken
- Simulate to support the decision-making process by assessing what will happen if specific actions occur or by recommending that an action be taken, based on optimization methods
- Control lets a decision maker proactively change a previous decision, such as diverting a shipment or expediting an order
- Measure to provide decision makers with measurements, often key performance indicators (KPI) and metrics, to assess how well the supply chain is performing and has performed historically
Within the execution window, Kinaxis' RapidResponse product suite is well positioned as a visibility tool and event management agent for intelligent response to volatile stimuli along the supply chain. Interesting case studies and adopters of the technology include Casio, Jabil Circuit, Honeywell, Raytheon, and ViaSystems. Kinaxis' "sweet spot" seems to be electronics original equipment manufacturers (OEM) and electronics manufacturing services (EMS) providers with volatility in supply and demand. The company is also seeing traction in automotive, industrial, aerospace, and medical devices.
Vendors that successfully re-invent and re-brand their products and services for the "long haul" are not commonplace. This is especially true among legacy SCP vendors. At present, Kinaxis appears to be an exception as it continues down its new path toward supporting enterprises to drive their manufacturing performance at the point-of-action. A steady and consistent growth stream of successful client implementations should propel Kinaxis as a viable vendor of supply chain products that are of good value for companies seeking short term return on investment (ROI). Case study clients that are willing to talk to other enterprises about the merits of SCV and SCEM solutions for improved manufacturing performance are the ultimate indicator of success.