Machine learning and artificial intelligence for retail supply chains

How retailers can incorporate machine learning and artificial intelligence into their supply chain: A snapshot of the recent ASCI Networking Breakfast panel event

 

By Harsha Illindala, Vice President, Solutions Advisor – APAC at JDA Software

 

I was lucky enough to host a panel at a recent ASCI breakfast on new advances in machine learning and artificial intelligence and how they are helping retailers optimise their operations and supply chain. I was joined by Michelle Grujin, Managing Director, Retail Industry Lead ANZ at Accenture and Marcy Larsen, Industry Solution Executive, Retail and CPG at Microsoft.

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While these technologies are becoming increasingly important, we first discussed some of the macro trends influencing retail customers today, what makes them different to customers from 10 or 20 years ago to frame why investing in these technologies is so important:

  1. Hyper-personalisation

 

Retailers are now expected to customise the customer experience to the segment of one. Retailers need to cluster and segment more narrowly across all retail formats.

  1. Premiumisation

There is a growing interest in premium food, clothes and other merchandise. There has been growth in health, vegan and specialised foods. Customers are also concerned with ethical sourcing and fair trade. They want to believe in the product.

  1. Convenience

Convenience is the price of admission: customers expect retailers to be convenient to deal with. They prioritise this, often over price.

  1. Mobility

The ability to shop online from a Smartphone means customers are more mobile than ever before and can purchase from anywhere.

  1. Urbanisation and population

There is a changing population mix with more customers living in urban areas. Customers will favour retailers who prioritise inclusion and diversity and demonstrate authenticity.

  1. Talent

We then went on to discuss how talent in retail is changing. According to the 2019 Retail C-Suite Viewpoint surveyconducted by JDA Software and Microsoft, talent is a top three issue with the C-suite in retail.

The workforce is varied with more part-timers and a workforce with time constraints. The gig economy is mobilising millennials and the retired workforce. Employees now have the ability to achieve genuine flexibility and hold down several different styles of job which fits in with their lifestyle and personal constraints.

For retailers the focus is now less on workforce scheduling and more about engagement with employees. There is also a huge competition for skills so retailers need to create a dynamic environment which values their skills.

Engaging employees with technology that is as advanced, if not more advanced, than what they are able to access at home is important. Employees, just like customers, expect retailers to demonstrate inclusiveness, diversity and authenticity.

  1. Provenance in supply chain

Customers care about the claims made by brands and retailers about products. Smart looking packaging and brand advertising strategies are important. Environmental and societal influences, morality and accountability are priorities for the customer.

  1. Data

The influence of data is significant. Customer trust is established when the right data is provided. When there is transparency of data between suppliers – shipping through to store – it creates a better customer experience.

  1. Influence of digital

Customers expect the physical experience to be on par with the digital experience. Technology is transforming the customer: 75% of a customer’s visits to a store are influenced by digital and 58% of sales are impacted by digital, according to the 2019 Retail C-Suite Viewpoint survey.

Digital has changed the customer journey; digital is now the ‘front of store’. The customer journey has evolved to loyalty – discovery – research – purchase – fulfillment.

We then went on to discuss which technology, such as artificial intelligence (AI) and machine learning (ML), is emerging to help retailers meet the needs of the customer in light of these macro trends.

The Tech

We then covered technology that is playing increasing important role in the supply chain for retailers and why companies should be investing in them:

Technology for personalisation

36% of the C-suite in retail expect to undertake pilots using AI in personalised product recommendations, 20% for localised pricing and 29% for personalised product assortments.

AI helps retailers meet customer expectations around product availability and fulfillment choices – in-store, pick-up and delivery. Customers expect instant gratification when it comes to fulfillment.

AI also provides a flowing, single view of inventory and allows for dynamic allocation and fulfillment, predictive replenishment and a shorter product life cycle.

Technology for provenance in supply chain

AI and ML provide real-time visibility. Traditional systems such as ERP centric reports and dashboards are too slow, alternatively AI provides real-time and direct visualisation of supply chain data with ML identifying and weeding out data discrepancies.

Blockchain is becoming an increasingly common buzzword and is something that could old the answer to many provenance related issues. With Blockchain providing a method to manage forms of exchange, entities in a supply chain can with increased confidence know where each asset has originated

Technology for the workforce

Technology is changing rapidly and affecting supply chain practices. There are several workplace changes that will become more important to how supply chain operates.

With more virtual and contingent workers, automation, increased connectivity through workplace social networks (e.g. instant messaging, communities) and more advanced communication tools (e.g. virtual meetings, webinars) will become increasingly important. Apps (e.g. personal organisers, goal setting, real-time feedback, team activities) will play a role, as will gamification (e.g. realistic training scenarios to stress test and develop supply chain strategies). Artificial Intelligence (e.g. advanced data mining) will help identify business trends and opportunities.

Challenges in adoption

We went on to discuss the major challenges facing retailers in adopting these technologies.

Some of the key observations included:

  • 55% of retailers don’t have single view of inventory
  • 78% of retailers don’t have real time view of inventory
  • 50% of retailers believe their technologies are lagging
  • Most retailers have CDTOs / CDOs and in-house AI teams, but tangible and scalable innovations have been far and few between
  • Many retailers have started off by trying to understand “what will my data show”, but need to transition to “what action needs to be taken” as a result of those insights

Is technology simplifying supply chain or adding to complexity?

We went on to question whether an increasingly complex supply chain is being simplified or further complicated by technology. We agreed that technology can minimise store effort in handling product and create flexibility in flow volumes and mechanisms.

We also discussed automation. There are increased and more affordable automation solutions in warehouses and in-store. Automation delivers productivity but also narrows variations. This means there is a greater need to manage the inventory flow to leverage the automation. Retailers need to manage coordination across inventory planning, transportation, yard, dock and warehouse operations.

A big thank you to the ASCI for inviting me along to host this excellent and insightful panel.

If you have questions about how AI and ML can improve your supply chain, you can contact me at Sriharsha.Illindala@jda.comor visit the JDA website.

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Be a Supply Chain Ambassador

Japanese Business Colleagues

Guest Blog: ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE

“In the first three months of 2019, employees got so much more work done that they smashed productivity forecasts,” writes Alexia Fernández Campbell for Vox Media. “That’s great for businesses (they earn more money) and for the economy (GDP grows faster). The problem is that companies aren’t rewarding their employees for the extra hard work.”

A recent Gallup World Poll bears out the author’s conclusions, finding that 85% of workers are displeased with their jobs.

As I read this article and considered that unfortunate statistic, I couldn’t help but reflect on ASCM’s brand new 2019 Supply Chain Salary and Career Survey Report. With so many people feeling underappreciated and underpaid — in fact, there were a record number of strikes in the United States last year — this survey reveals that supply chain salaries are on the rise and industry professionals truly love their jobs.

The median supply chain salary in 2018 was $80,000, a 3% increase over 2017. Even more importantly, an overwhelming majority of respondents say they are very or extremely satisfied in their jobs.

This report confirms what all of us at ASCM and every supply chain professional already know: Supply chain careers are rewarding, both professionally and personally. We at ASCM are also proud to discover that the median salary for people with at least one APICS certification is 25% higher than those without. And, in addition to the power of APICS education to advance careers, our initiatives related to women in supply chain are paying off: The gap between men’s and women’s salaries is narrowing, especially for professionals under 40, where the difference is less than $1,000.

Put the findings to work

As we continue to face a vast talent gap, this report highlights numerous opportunities to attract more people to the supply chain. But ASCM can’t do it alone; we need your help.

Begin by talking to the young people in your life about why you are passionate about what you do. Describe your job and how it has a positive influence on the entire business, the lives of your customers and the communities in which they live.

Explain why you look forward to staying in supply chain for years to come (93% of respondents believe they will stay in the field; 44% say they definitely will).

And tell them about the work-life balance you enjoy (nearly all respondents receive holiday pay, and the majority receive three weeks or more paid time off, as well as flexible work schedules).

Then, take a moment to download the survey and post it in your social channels. Share something that you’re especially excited about with the hashtag #lovemyjob. As more and more people outside the industry experience our enthusiasm, they will see that supply chain professionals are highly sought after by employers, make a difference at our organisations and have truly fulfilling careers.

To find out more about APICS certification, visit Australasian Supply Chain Institute – the Premier Channel Partner – for Australian Semester schedules and prices.

Climate Change Disruptors on the Rise

By ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE

As I write this, the National Weather Service (NWS) is warning of severe cold here in Chicago, with wind chill temperatures expected to reach an excruciating 55 below zero. The NWS has even urged us to protect our lungs by minimizing talking and not taking deep breaths. Meanwhile, on the other side of the world, people in South Australia’s coastal capital of Adelaide are facing a different kind of lung injury — from dangerous air quality and ozone exposure. Adelaide recently reached 46.2 Celsius (nearly 116 degrees Fahrenheit), breaking a 130-year record.

When we talk about extreme weather statistics such as these, they are typically followed by warnings of disastrous sea levels, catastrophic Arctic ice decline, and life-threatening floods or hurricanes. “Not enough water to make Coke” and “sweltering Disney theme parks” do seem to pale in comparison. However, a recent Bloomberg article suggests that climate change will have a business impact that is devastating in its own way.

“Climate change is expected to cascade through the economy — disrupting supply chains, disabling operations and driving away customers,” author Christopher Flavelle writes, adding that numerous executives see “inherent climate-related risks with the potential to have a substantial financial or strategic impact on their business.”

Visit ASCI’s previous blog form Corporate Member – Nufarm – who utilises specific advanced analytics for predicting and planning for weather patterns.

One of the most commonly cited issues by company leaders is draught. Specifically, in addition to Coca-Cola fearing water shortages will threaten its bottling operations, Intel is concerned about escalating costs for the water-intensive process of semiconductor manufacturing.

Other professionals are kept up at night worrying about damage to their networks from hurricanes and wildfires (AT&T), global pandemics dissuading people from travel (VISA), and increased flooding and flood insurance premiums forcing mortgage holders to default on payments (Bank of America).

Interestingly, some organizations have identified opportunities amid the chaos, as climate change can “bolster demand for their products.” With more people facing illness, Merck & Co. sees the potential for “expanded markets for products for tropical and weather-related diseases,” Apple predicts disasters will make its iPhone “even more vital to people’s lives,” and Home Depot expects higher air conditioner and ceiling fan sales.

Sustainable supply chains

No matter where your company falls on the threat-versus-opportunity spectrum, climate change is altering the global economy immensely, and supply chains must transform to survive. At this time of both challenge and potential, ASCM is collaborating with a network of world-class organizations — including The Bill & Melinda Gates Foundation, Accenture, Deloitte and PwC — to create opportunities for the kind of supply chain innovation that will be mandatory in the coming years.

In addition, our new SCOR-Enterprise (SCOR-E) designation features an ecological dimension, which focuses on the circular economy, climate strategy, energy, water and waste, material usage, and product life-cycle stewardship. SCOR-E is the industry’s first and only corporate supply chain designation.

I hope you will make the most of these valuable member benefits. ASCM mission-driven strategic initiatives such as these draw on the power of supply chains to address pressing global issues and achieve the brightest futures for individuals, companies and communities.

For more information, please visit the ASCI website and select ASCI Plus Membership which include your local and global membership with ASCM.

Nufarm site visit generates sharing

As part of the ASCI Site Visit Series, ASCI arranged for 14 ASCI Members to visit the Nufarm Raymond Rd manufacturing facility on Friday 25 January 2019.

Both nbn Co and Nufarm are ASCI Corporate Members, and within the ASCI Corporate Membership package, comes the benefit of sharing and learning within the network.

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Site Manager, George Fletcher gave the group an introduction to Nufarm and the site, see picture.

According to Angus Borland, Supply Chain Planning Manager – ANZ, Nufarm, the group enjoyed the balmy 44 degrees for a walk through a number of the production lines, followed by a planning discussion he led alongside two site planners (Michael Buttigieg-Raymond Rd and Matt Calabro-Pipe Rd).

“This was a good 2-way discussion between Nufarm and nbn Co,” Angus recalls.

Ryan Jones, Manager Integrated Demand Planning, nbn Co agrees. “The two organisations couldn’t be further apart in terms of industry. However, there were so many similarities both in forecasting and planning systems; S&OP processes; safety; and challenges such as demand accuracy and the management of inventory,” he said.

“In addition, we could really appreciate the weather challenges faced by the organisation and were impressed with Nufarm’s long term strategies and predictive analysis.”

There were some key areas identified where a visit to non Co could benefit the Nufarm demand planners. Hence, the sharing and learning process is in motion!

Look out for more events within the ASCI Site Visit Series, held all over the country in 2019!

 

Embracing the IOT

By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE

We keep hearing about the potential of the Internet of Things (IOT), but how will it help supply chain professionals specifically? Last week, Industrial Distribution ran “Improving Process Flows in the Delivery System through the Internet of Things,” which outlines the practical applications of IOT.

“As the development and deployment of the IOT capabilities continues to expand, [transportation and logistics] companies could eventually have visibility into every operation across the entire supply chain, from the source of the raw materials to the end use of the product,” writes Thomas Schied, vice president and director of asset management for TD Band Equipment Finance.

IOT connects devices to the internet and collects data, but Schied stresses the value is in knowing how, when and where to use the data. Predictive analytics enables business leaders to make calculations that will increase efficiencies, reduce spending and improve overall processes. For example, data from sensors can be combined with historical data to establish when assets need to be replaced. Likewise, transportation and logistics companies can use sensor data and geographic and environmental information to customize truck maintenance plans.

Further, IOT data and analytics supports organizational decision making, as experts alter routes to prevent bottlenecks at loading docks and changing inventory locations. This information improves on-time delivery and reduces fuel and labor costs.

With all the promises of IOT, Schied does mention likely challenges. These include the potential of security breaches, a reallocation of current jobs and business disruption.

“Additionally, the IOT is expensive and time consuming to implement, and the more parts of a business that are integrated into an IOT system, the more disruptions that business could face,” Schied writes. “However, integration can be conducted in stages over the course of several years.”

He adds, “As we see logistics and supply chains become more complex, implementation of IOT is necessary.”

We’ve transformed our business to help transform yours

IOT is one example of how the world of supply chain is rapidly evolving. Technological advances combined with a renewed focus on sustainability and more, make staying ahead of the curve a challenge for corporations. That’s where we come in. In January 2019, we are officially launching the Association for Supply Chain Management (ASCM). This is more than a new name or a rebrand, this is an entirely new association. With ASCM, we expand our reach and broaden our impact, becoming the leader on all things supply chain. Plus, we’ll still do what we’ve always done — give your supply chain team the tools they need to advance their careers and create value for your company.

Abe Eshkenazi
APICS CEO

Top five supply chain podcasts of 2018

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Australasian Supply Chain Institute has reviewed podcasts interviews all over the globe to bring you the very best for your listening pleasure over the holiday break:

1.The Future of Work

Jacqui Canney, is EVP and Chief People Officer at Walmart and Clay Johnson, is EVP and Chief Information Officer at Walmart.

Jacqui is focused on the development, the retention and the rewarding of their 2 million employees. Clay is charged with putting ICT and HR together to create more productivity and automation. Walmart is the world’s largest employer with 5000 stores in the U.S and 10,000 globally.

Duration: 1 hour

ASCI review: An unbeatable interview on how Walmart is evolving and using tech to train and up skill their workforce; how they are using Blockchain to track food; what the future of Walmart looks like 5-10 years out. An interview just darn worth your time. 

2. ASCI Lounge

Daniel Kohut, Director, Solutions Advisor at JDA, shares his sales and operations planning expertise starting from his Australian career pathway, to the present day and the importance of professional development for supply chain experts in the midst of an era of digitisation transformation.

Duration: 20 minutes

ASCI review: So great to hear the Aussie accent and someone so passionate about the future of supply chain careers. Some good advice for professional development. 

3. Talking Logistics

Scroll straight to Episode 6: Angie Freeman, Chief Human Resources Officer, CH Robinson shares insights and ideas on the importance of recruitment and talent in the supply chain industry.

Duration: 29 mins

ASCI review: Best take on articulating the challenges in a succinct interview.

4. Supply Chain Now

Sandra MacQuillan serves as the Senior Director of Supply Chain Strategy & Transformation for Kimberly-Clark, where she leads company’s global supply chain, with responsibility for procurement, logistics, manufacturing, quality, safety, and sustainability.

Amy Gray serves as HR Director for Global Supply Chain at Kimberly-Clark. Amy has served in a variety of HR-related roles at K-C over the last 12 years, to include HR Business Partner and HR Project Leader.

Duration: 1 hour

ASCI review: Jump to 18 minutes in..the first part is just chatter. Interesting take on diversity to better represent customer profiles and global reach.

5. ASCI Lounge

Indrasen Naidoo, Director, Supply Chain System Transformation, Roy Hill (a 55 mega tonne per annum iron ore producer in Western Australia), joins us on the ASCI Lounge to reflect on Roy Hill’s roadmap for Intelligent Supply Chain for Assets, highlighting the need for leadership capacity; rethinking flows; and applying expert technology.

Duration: 20 minutes

ASCI review: Some salient points on how supply chain in Australia is stuck in traditional programs and what Roy Hill has done to move the dial. 

Enjoy your holiday podcast listening!

ASCI Lounge is Australasia’s supply chain podcast channel with over 3,500 downloads since 2016. To book an interview, or to join a panel discussion on a particular topic, email the ASCI National Office at enquiries@asci.org.au

ASCI National Office is closed from Friday 21 December however, you can purchase Guided Learning registration right up until 6 January 2019. For more information, visit: www.asci.org.au/education 

Monique Fenech is the host of the ASCI Lounge podcast channel.

 

 

 

Five reasons why the APICS Certified Supply Chain Professional (CSCP) could be your most audacious career move yet

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More than 25,000 supply chain practitioners have studied the APICS Certified Supply Chain Professional (CSCP) to master the essential technology, concepts, and strategies related to end-to-end supply chain operations. Here’s how it can benefit your career in 2019:

  1. Get promoted by developing unique solutions for the end-to-end supply chain like Arsalan Hussain who after studying CSCP, designed a management dashboard with end-to-end data and KPI visibility which was used by management for reporting. Arsalan was transferred to Procurement and Analytics and within two years promoted to Manager of Supply Chain. On average CSCP designees see a 12% pay increase and improve their hiring potential by 65%.
  2. Gain new ways to collaborate with partners like Maria Petrochenkova who after CSCP, developed the skills to effectively couple strategic buyers with product managers to drive innovation.
  3. Grow prospects for general management roles like Kuban Chetty whose finance background and CSCP study honed his skills to implement productivity initiatives around total supply chain, incorporating planning and operations management. He became confident in running financial scenarios around total supply chain activities and implement productivity initiatives focused on factory planning and highlighting capacity usages.
  4. Lead initiatives where supply chain is the business enabler like Nate Joliff who  after studying CSCP applied it to capture key data on extended database processes for racks and container design which helped minimise transportation and storage costs by 15%, saving US$2.3M to the bottom line.
  5. Bolster evidence for Practitioner Registration eligibility. ASCI’s newly launched Practitioner Registrations for Procurement, Logistics and Operations Management require eligibility through evidence of relevant certifications, qualifications and work experience. According to Dr Pieter Nagel, ASCI’s CEO-Professionalisation, the APICS CSCP is a favourable component for eligibility for registration and furthermore provides a significant knowledge base for examination preparation for the Professional Registration to be made available in 2019.
What’s more, you can now tap into accessible and affordable study options via self study and ASCI Guided Learning two hourly weekly sessions online either within the weekday or week evening as part of ASCI’s online pilot program with APICS! Register to 2019 classes before December 2018 and you’ll receive $100 savings. For more information, please contact us via enquiries@asci.org.au

Five reasons why APICS CPIM is a must for every ERP user and consultant

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For the most part of my career, I have been known to be an active member of the APICS community. This means that, quite frequently, I interact with SCM practitioners and ERP consultants from different industries and with different professional backgrounds. During discussions, I am often asked what ways are best to acquire more in-depth-knowledge of the SCM/ERP domains.

Drawing from my 9 years of extensive, hands-on experience in the fields of Supply Chain Management and SAP ECC ERP implementation/support within the Pharmaceutical and FMCG industries, and a unique techno-functional skill set in SCM enabling technologies and Domain Expertise in the SAP PP/PP-PI module, I have compiled some advice for others.

When reflecting on numerous SAP ERP implementation/improvement projects, I keep falling back on the certainty and solidarity of the APICS certification: Certified in Production and Inventory Management (CPIM) which I believe was one of the main factors that led to my implementation success. Here are five reasons why I believe the APICS CPIM is a must for every ERP user and consultant:

  1. It harnesses your talents: It is widely believed that a lack in SCM talent is the reason behind many ERP implementation failures or less than optimal ERP performances – both the user/consultant sides. And while there is no one-size-fits-all kind of advice, the APICS CPIM certification has so many benefits to both users/consultants that I almost always advise people to pursue APICS CPIM because it is more about getting the best ROI of an ERP implementation.
  2. It follows a process-orientated approach: ERP commercial packages are all built to computerise the classical value chain activities of a company. These value chain activities are resembled in the modular structure that all commercial ERP packages follow. For example, business processes relating to Supply Chain Planning including, Sales and Operations Planning, Demand Management, Production Planning/Scheduling would be found under the Production Planning “PP/PP-PI” module in SAP ECC ERP. Likewise, other business process compromising a company’s value chain would be found as “canned” business processes across different modules of an ERP solution. The CPIM follows a process orientated approach to Supply Chain planning in a fashion that’s is almost identical to what is found in a SCM/Manufacturing Modules of and ERP package. This strategic fit between how ERP systems are structured and the process-oriented structure of the CPIM courseware is what makes CPIM the most powerful framework for SCM/ERP professionals in both user/consultant roles.

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    Australasian Supply Chain Institute offers the CPIM Learning System for self study or together with Guided Learning sessions, available right across Australia

  3. It mirrors the same language as your ERP: The concepts and terminology of an SCM/Manufacturing module of an ERP system, such as MPS/MRP, BOM, phantom assemblies, time fences and forecast consumption techniques, just to name a few, that prove tricky for most users/consultants to grasp are explored in-depth in the CPIM courseware in an a clear and easy to follow approach with plenty of real life examples. This helps to better utilise system functionalities/features that are likely to be ignored due to the lack of underrating of such concepts.
  4. It builds confidence to apply a configuration effort: CPIM equips designees with knowledge that proves critical to guide system configuration efforts in the SCM area.
  5. It results in better, more streamlined implementations and a higher ROI for digital transformation efforts: Many companies the likes of BASF, DuPont and Intel have adopted APICS frameworks which helped them achieve organisational goals and increase the efficiency of their systems and people. It’s why over 110,000 other SCM practitioners around the world have attained the CPIM. Now it’s up to you. https://www.apics.org/apics-for-business/customer-stories

By Hatem Abu Nusair, M.Sc. Engineering, CPIM-F, CSCP-F, SAP Certified Application Associate, APICS Master Instructor

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Hatem is a Global Supply Chain Management & ERP Expert. He is currently the Production Planner at Tip Top, one of GWF’s divisions in Sydney, having moved from Jordan where he worked for a blue-chip international company that grew rapidly. Here, Hatem founded the Regional Middle East & North Africa (MENA) Supply Chain Department with the purpose of optimising Supply Chain performance across 13 subsidiaries through demand management and forecasting, capacity management, inventory control, and special projects, which entails: IT initiatives, ERP implementation, re-engineering of Supply Chain processes and other relevant matters.

Hatem is a qualified Industrial Engineer and a Master of Manufacturing Engineering candidate at UNSW. He is a Certified Fellow in Production and Inventory Management (CPIM-F) by APICS, a Certified Fellow Supply Chain Professional (CSCP-F) by APICS and a Certified Application Associate by SAP SE.

Hatem will be facilitator for Term 4 CPIM Part 2 Guided Learning for Australasian Supply Chain Institute where will be share his passion of streamlining supply chain processes, eliminating redundancies and utilising enabling technology to achieve operational goals with CPIM Part 2 students.

 

 

The Two Levers of Inventory Optimisation

By Henry Canitz, Director of Product Marketing & Business Development , Logility

When I hear the term “Lever” my mechanical engineering side comes out and I think of the Physics and Mechanical Design courses I took some 30+ years ago. Although I didn’t appreciate it at the time, my engineering education laid a strong foundation that has helped me be as successful as possible in whatever I did. More than anything, I learned how to analyse and solve problems. So when I think of a lever I think of a rigid bar resting on a pivot or fulcrum, used to help move a heavy or a firmly fixed load with one end when pressure is applied to the other.

Back to present day and the supply chain. Two powerful levers a company can use to optimise inventory are “Working Capital” and “Customer Service Levels.” Through the effective use of these levers, you can free trapped working capital while improving service levels.

Your company’s inventory efficient frontier is a tradeoff curve between working capital and service level and represents the currently achievable service level at any corresponding inventory investment. At its most basic, start with a piece of graph paper and plot your current service level on the x-axis and current inventory level on the y-axis. Chances are you are not on the inventory efficiency curve that is theoretically possible given your current operating capabilities. When you remove inefficiencies, failures, etc. and estimate how much your service level will go up and down with changes in inventory investment you end up with a curve – your current inventory efficient frontier curve. Organisations can slide up and down along this curve by manipulating the service and inventory levers (see Figure 1).

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However to create real value you have to be able to shift the inventory efficient frontier so that higher service levels can be achieved without increasing inventory or the same service levels can be achieved with less inventory. Multi-echelon Inventory Optimisation (MEIO) allows you to truly optimise your inventory across the entire supply chain and enables you to shift to a new efficient frontier for your entire supply chain (Read the eBook: The Inventory Optimization Handbook).

By modeling the end-to-end supply chain, MEIO determines not only the optimal inventory to carry at each location but also at which locations each item should be carried. MEIO looks across sales channels, distribution tiers, and even types of inventory (raw, WIP, FG) to understand how best to minimise total inventory while still providing the desired customer service levels. MEIO can take you into unexplored territory providing reductions in working capital of up to 30 percent or more. For most companies that amounts to millions of dollars in savings annually. That is an impressive use of levers.

What is important to understand is that the supply chain is a living, breathing and constantly changing organism. Your optimal inventory strategy for this month might be suboptimal next month due to changes in demand or supply, changes in competition or market health, or a variety of other factors. Modeling your end-to-end supply chain inventory is not a “one and done” activity and therefore there is always opportunity to shift that efficient frontier into new and undiscovered territory.

Do you understand your company’s service level – working capital tradeoff? Can you model your end-to-end supply chain to determine your optimal inventory locations and levels?

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Henry Canitz, Director of Product Marketing & Business Development, Logility

 

 

ASCI members enjoy lessons in surviving and thriving in Australia’s manufacturing industry

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Site Visit Report by Geoff Palm
When Sten Campbell, Director, designtech, and his wife bought the business 25 years ago they had no idea about making furniture. Thanks to the help from a mentor and competitor in Sydney, they began the journey to where they are today; one of the leading manufacturers of MTS and MTO furniture manufacturers in Australia.
They have both local and national customers and compete effectively with imported products. One of designtec’s advantage is in quality, with a 10 year guarantee on all their products. They have not had a single claim against their product since this warranty was put in place. Another advantage is their speed to market; being able to deliver orders within 2 weeks. In fact, they recently helped out a Fitout company that was in trouble due to a delayed overseas shipment and late completion penalties approaching.
designtec has invested in state of the art German machinery, which is in part, one of the reasons they are so competitive. We watched one machine in action that cut, trimmed and edged a tabletop in minutes. This used to take 2 tradespeople up to 3 hours each to complete in the past. It was fascinating watching the journey of the product from raw material to finished product; created by a combination of people and machine. Staff skill levels range from tradespeople to semi-skilled; with a strong focus on cross-training. This ensures that most people in the business can operate a range of equipment; allowing for flexibility when demand dictates.
Safety is another important factor in designtec’s success; with no LTIs in the last 5 years.
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Most of there employees are now long term; with some coming up to 20 years. This was not the case during the mining boom when Western Australia struggled to find qualified people and it was the same with designtec; growing at 30% a year. That all changed in 2008 with the GFC and then the end of the mining boom, which saw demand for their product diminish rapidly. It is to the owners credit that not only did they survive, met the challenge they faced and have prospered since the downturn.
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The visit was hosted by Sten and Hannah Witherick, General Manager, on the afternoon of July 24, ASCI and associates learned the commercial, technical, industry and logistics issues around the designtec business.
ASCI WA thanks designtec, Sten Campbell, Hannah Witherick and other staff for hosting this visit and openly sharing their stories with our members. We must also not forget the office dog, who shared her love with all in a quiet and dignified manner. – end