BAEP’s Beaumont on understanding the economics of innovation

1515326886990by Julian Beaumont

For all the interest in self-driving vehicles, blockchain, 3D printing and the like, very little time is spent by investors in understanding the economics of new innovation and who might actually benefit.

Most investors in these hot industries can’t fathom anything other than a bright future. With the benefit of hindsight, however, investing in the latest hi-tech industry isn’t necessarily the easy path to riches most might presume.

Looking out from the 1920s when air travel was just taking off and the commercial airline industry was attracting much excitement, few would have been disappointed by its subsequent growth or importance to society. Investors in airlines, however, have been losing money ever since. Indeed, many airlines have gone bankrupt, including Ansett and Compass, and most have at some time required bailouts.

Consumers, however, have benefited, especially through lower flight prices over time. And to prove innovation isn’t the key to success, the supersonic Concorde stopped its super-fast flights in 2003.

Similarly, automobiles, plastics, personal computers and dot-coms were all once new-age industries that have caused carnage for investors. Picking the few winners that will emerge from the hype is often difficult.

From the dot-com bubble, Amazon is obviously one. Other big tech winners, such as Facebook, Google and Netflix, weren’t even listed at the time.

To date at least, Amazon has won with profitless prosperity, with arguably little profits to show for its success. Online retailing has been a tough place to invest.

Here, the value of the innovation accrues to customers rather than shareholders, as those in Surfstitch and Temple & Webster can attest.

Improved range, searchability, price transparency and convenience all clearly benefit the customer, but come at a cost to retailers – particularly due to increased price competition and expensive delivery costs.

Interestingly, it has been bricks-and-mortar retailers like Zara and H&M whose fast fashion and express supply chains have been among the most profitable innovations in retail in recent years.

Right now, investors are enthusiastic about lithium stocks, disruptive tech names, pre-profit concept stocks and bitcoin. Of course, that which is new and lacks much historical track record allows this optimism, with little in the way of disproof.

The key for investors is not to focus exclusively on the importance, societal value or seemingly exponential growth of the innovation, but to understand the economics behind it.

For example, if lithium is ultimately plentiful, it won’t be lithium miners that will prosper from the electric vehicle revolution. Nor will it necessarily be Tesla, as incumbent auto manufacturers can just as easily go electric.

Ultimately, whether any one company truly benefits from innovation comes down to whether they have something unique – a competitive advantage – that limits the extent to which the value of the innovation is competed away or otherwise passed on to the customer.

A common example is where the innovation makes for a unique product or service. Often forgotten as innovators are a number of world class Australian-based healthcare companies that include Cochlear, Resmed, Sirtex and CSL.

They spend big on researching and developing new and better medicines and medical devices.

Their products are protected by intellectual property rights such as product registrations and patents, allowing them to reap the profits of their innovation. Interestingly, investors don’t seem to attribute much value to R&D spend, perhaps because it usually represents an expense and subtracts for profits.

For example, CSL’s pre-tax profits would be almost 40 percent higher but for its R&D investment, which is rarely raised by those focused on its apparently lofty earnings multiple.

Other examples on the ASX include Aristocrat, which is spending more than $300 million annually on developing new market-leading slot machines and online social games; Reliance Worldwide with its Sharkbite push-to-connect plumbing fittings that offer ease and time saving in installation, and which are taking share by disrupting the market; and Costa Group, with its intellectual property in blueberries that improves quality and all-year-round availability.

As these cases attest, seemingly boring innovation can produce exciting profits.

Another less risky way to play innovation is by understanding where it can augment a company’s competitive advantage.

For example, the stock exchange ASX Limited is soon to replace its CHESS settlement system with blockchain technology that is expected to reduce costs and provide added functionality.

Another good example is Domino’s Pizza Enterprises, which operates a franchise of pizza stores. The company has very profitably leveraged new innovation to improve the efficiency of its operations and the cost, convenience and appeal of its customer offer.

For example, new ovens cook pizzas in less than four minutes, its GPS tracker helps speed up deliveries and grows the appeal of using its online ordering app, and DRU (Domino’s Robotics Unit) delivery robots save on costs and are fun for customers.

Of course, it is hard to get ahead using innovation that is readily available – all supermarkets now get the labour savings of self-service checkouts, for example – but Domino’s has been ahead of the curve in integrating new technologies into its customer proposition and thereby advancing its competitive advantages.

There are two takeaways. Firstly, to profitably invest in innovation often means looking beyond the latest sexy sector, including to second derivative beneficiaries. And two, looked at this way, the Australian market is full of innovative companies that are worthy of investment. After all, miners like Rio Tinto have already started using driverless trucks and trains, well ahead of Silicon Valley.

Julian Beaumont is the investment director at Bennelong Australian Equity Partners.

Source: Australian Financial Review


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Supply Chain Planning & Optimisation Projections for 2018 – Back to the Future

By Henry Canitz, Director of Product Marketing and Business DevelopmentPicture1

I get a kick reading “prediction” articles both prior to the year start and then again after the year is complete. When it comes to predicting the very dynamic supply chain management industry, those after year reviews can be quite amusing. For even more fun look back 10 or more years to see where we all thought the industry would be. Therefore, it is with a bit of trepidation that I toss my hat in the arena and make my 2018 supply chain planning and optimization predictions.

From all indications, 2018 should be a very interesting year for supply chains and supply chain practitioners. I think there are a few advanced capabilities that will grow in importance but I also believe there is a growing awareness that to benefit from advanced planning and optimization capabilities a company needs to build a firm foundation. Companies need a robust integrated and highly functional supply chain platform that is operated by highly trained supply chain professionals. In a way, we need to go back to fundamentals to move forward to the future.

The Rise of Cloud Deployment and Heightened Security

The large number of major data breaches in 2017 has been the focus of many C-level meetings. In an interesting reversal, SaaS (software-as-a-service) solutions are now viewed by most as the least risky deployment option and this will increase in the year ahead. 2018 will bring a renewed emphasis on security for supply chain facilities due to the growing awareness that data breaches can originate through almost any type of connected system and the fact that more facilities are being opened in unstable geographies.

The Shift to Continuous Planning

The pace of the supply chain is increasingly driven by ever-growing customer expectations (Amazon Effect) making end of the day, week, or month periodic planning processes, while still important, no longer sufficient for today’s operations. The concept of continuous planning where planners address opportunities and disruptions as they happen will continue to gain ground in 2018. These efforts could be part of a Sales and Operations Execution (S&OE) process or tightly tied to building more robust digital planning and optimization capabilities. To facilitate continuous planning process companies will start to move towards cross-functional teams working in a control-room type environment to address global disruptions and opportunities using advanced planning and optimization capabilities.

Digitisation

You can’t open a recent supply chain periodical today without seeing something about artificial intelligence (AI). Advanced analytics, machine learning, algorithmic planning, and AI will all continue to capture a significant slice of attention in 2018. In the year ahead, this will require supply chains to shift how they operate. With digitization of the supply chain, the role of the planner will become one of solving problems using advanced analytics to make business decisions not just supply chain decisions.

The Internet of Things (IoT) will continue to drive supply chain execution innovation as companies find new opportunities in the wealth of data available. For many, the current state includes difficulties interfacing IoT data in a high quality, repeatable fashion. Most companies just aren’t at the point where consuming this firehose of data is feasible.

Supply Chain Data Quality and Ownership

Supply Chain Master Data Management (MDM) is quickly becoming a critical foundational requirement and I expect to see more interest in this area in 2018. Much of the data used for supply chain planning and execution comes from outside of a company’s ERP systems. Ask yourself, where is supply chain data maintained at your company today? The answer might surprise you. Effective supply chain planning and optimization requires high quality and consistent data and the ability to easily and quickly maintain and update that data. Inconsistent and poor quality data will degrade confidence in recommendations. One of my mentors once told me that, “One awe S#?* wipes out 1000 Attaboys (or Girls)”. One piece of bad data that tarnishes a recommendation will be difficult to overcome. To take full advantage of IoT data, supply chain organizations will need to invest in their Supply Chain Master Data Management capabilities and platforms.

Talent GapPicture12

You continually hear from hiring managers that there is a “War for Talent” driving increased salaries, benefits, and turnover rates for supply chain professionals. This will not change anytime soon. Actually, with a shrinking baby-boomer workforce the war for talent is only going to heat up in 2018 (read more here: The Talent Gap and here: Imagine 2030: Supply Chain Talent). Companies will need to find additional ways to attract and retain talent like rotational programs, clear-cut career paths, advanced degree support, and support for professional training. Another way is to provide advanced supply chain platforms that allow team members to work on more value-added activities. Yes, the ability to hire and retain talent could be another way to justify an investment in new supply chain planning and optimization capabilities.

Taking S&OP to the Next Level

I have personally seen the significant benefits of a well-run S&OP process and I know other practitioners have as well. I may be going out on a limb here but I think 2018 will be the year of renewed efforts around putting advanced S&OP capabilities in place including the ability to;

  • Optimize the end-to-end supply chain based on constraints and business objectives (minimize cost, maximize profits, meet customer service levels, etc.)
  • Analyze the impacts of product-lifecycle decisions, especially new product introductions
  • Align and synchronise strategic, tactical and operational planning
  • Collaboratively plan with partners and customers

A year from now I am sure we will all get a good laugh by revisiting this piece, but I am hopeful that a least of few of my predictions will hold true. Here’s to a happy and successful 2018.

About the author 

Hank Canitz PictureHenry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.

Machine Learning in Supply Chain Planning

Machine Learning in Supply Chain Planning - square

Machine Learning in Supply Chain Planning

Are we ready? And if so what’s involved?

The evolution to using artificial intelligence and machines that learn in supply chain planning is inevitable. In fact, there are early examples of the potential of AI to improve both supply chain planner efficiencies and provide better or optimized supply chain decisions. The question is, are we, as a profession, ready to embrace Machine Learning? If so, what does that mean and how do we get there?

Machine learning is a type of artificial intelligence (AI) that gives computers the ability to learn without being explicitly programmed. Machine learning computer programs teach themselves to grow and change when exposed to new data.

The latest Gartner Hype Cycle, published in July 2016, shows Machine Learning approaching the Peak of Inflated Expectations. Gartner predicts that mainstream adoption of Machine Learning is at least five years away, potentially ten. Still typing “Machine Learning AND Supply Chain Planning” into Google delivers more 16,000 results in less than half a second. This is a topic that supply chain planning people are thinking, talking, and writing about. In reality, the supply chain planning mindshare spent on Machine Learning is miniscule compared to that spent on reducing costs, improving customer service, and driving new revenue. Type “Cost Savings AND Supply Chain Planning” into Google and you get 2.5 million results.  One could argue that Machine Learning could contribute to meeting cost, revenue and customer service goals, but clearly there’s more focus today on basic supply chain planning capabilities like Demand Planning, Inventory Optimization, Sales & Operations Planning, and Supply Planning and Optimization.

One way to get started with Machine Learning is to look at your Demand Planning capabilities. For example, a “Best-Fit” forecasting algorithm automatically switches to the most appropriate forecasting method based on the latest demand information, ensuring you create the best forecast for every product at every stage of its life cycle. The algorithm evaluates forecast error each forecasting cycle and recommends or automatically selects the forecasting method that will produce the best forecast. “Best-Fit” forecasting is a basic form of Machine Learning.

Another example of today’s Machine Learning capabilities is found in software solutions that use algorithms to continually analyze the state of your supply chain and recommend or automatically execute plans to meet customer requirements. Optimization driven by algorithmic planning is an early form of machine learning that relies on a set of provided information (supply chain facilities and capacities, transportation lanes and capacities, customer service requirements, profit requirements, etc.) to automatically make optimal decisions.

One powerful example is the use of Multi-Echelon Inventory Optimization (MEIO) to automatically adjust inventory positions. The current inventory-to-sales ratio in the United States sits at 1.41, higher than any time since 2009 (right after the 2008 downturn). One cause of this glut of inventory is the emergence of omni-channel retailing. The “Amazon effect” of free and fast shipping, easy returns, and everyday low prices has changed customer expectations and the way products get into the hands of the consumer. It’s a struggle to keep up with the mind-bending rate of change that prevents companies from having the right inventory positioned at the right location to service customers. Companies that respond by increasing buffer inventory based on outdated information fail to attack the underlying issue of stock-outs, a fundamental shift in fulfillment. MEIO automatically seeks the optimal balance of inventory at the right locations, and provides optimal inventory parameters and positions by stocking location to establish optimal buffer locations and quantities. Embracing MEIO can reduce total inventories by upwards of 30% while maintaining or improving customer fill rates. MEIO is an example of basic Machine Learning that is available today.

Attaining the full benefits of Machine Learning will be an evolutionary process. We must learn to crawl, then walk, then run. The introduction of Machine Learning into most supply chain organizations will take years, but that shouldn’t stop supply chain professionals from planning for the future or taking advantage of some of the Machine Learning solutions available today. Implementing algorithmic planning and optimization technologies today builds the kind of expertise and experience that will ease the adoption of advanced Machine Learning solutions in the future.

Are you considering Machine Learning solutions?  If so, what steps are you taking to get there?

 

About the author 

Hank Canitz PictureHenry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.

Is Your Supply Chain Planning System in the Cloud?

Supply Chain in the Cloud - 310 x 175My job requires a fair bit of air travel so I literally spend a good deal of my time with my head in the clouds. At 6’5” most airline seats are less than comfortable and provide very little leg, arm and shoulder room, so I often find the most practical activity during a flight is critical thinking. Yes, I might look like I am taking a nap but really I am deeply contemplating things like the current state of deploying Supply Chain Planning Technology in the cloud.

With the explosive growth in supply chain complexity and data volumes, a growing number of manufacturers, retailers and distributors of all sizes are all looking for more agile, easily implemented paths to better supply chain performance. Some have found it possible to enact powerful supply chain optimisations almost immediately, while saving substantial amounts of working capital and ensuring timely support for growth and collaboration over the long term.

They have chosen to deploy supply chain planning solutions in the Cloud.

Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort.

Today, the range of implementation options for supply chain planning solutions stretches far beyond traditional on-premises hardware and software. Some competitive-minded organizations question the advisability of lengthy and complex infrastructure projects. These supply chain teams harness the full potential of the internet by taking advantage of deployment models with names like Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS), and managed services.

Cloud-based deployment alternatives remove IT obstacles and accelerate the launching of supply chain initiatives. However, are the advantages of cloud deployments for supply chain solutions real and worthwhile? I think so, and I have provided a few of the biggest benefit areas for having your supply chain planning software in the cloud.

Benefit #1: Affordability and Savings

  • Lower upfront costs – Initial capital equipment expenses are reduced and total cost of ownership shifts to a highly predictable annual expense line item.
  • Optimal licensing, hosting and services options – The wide variety of options provide a solution delivery profile that fits just about any organisation’s software procurement model and budget process.
  • Ability to reallocate valuable IT resources – Cloud-based deployments free up enterprise IT resources to focus on strategic initiatives and meet mission-critical demands rather than installing software updates and performing system administration.
  • Scalability to handle supply chain growth – It’s a significant competitive advantage to be able to activate capabilities as requirements grow and flex over time.

Benefit #2: Tangible Business Benefits

  • Accelerated ROI – Cloud deployments often deliver better cash flow and create a positive bottom-line impact much quicker than traditional models.
  • Greater agility to react to change – Because “the infrastructure is on the internet,” there is no hardware to implement and no software to install. Users can access the system from any location through web-connected laptops, tablets and smart phones.

Benefit #3: Reliability and Security

  • Less risk of unscheduled downtime – Resiliency and high availability are characteristics of a well-designed cloud-based deployment.
  • Robust security – The fear that storing business data on a cloud server could make it vulnerable to unauthorised access has been assuaged by the great security track record of hosting providers in securing and ensuring data privacy.
  • Expert administrative services – No one knows the ins and outs of system administration better than the solution provider organisation itself. The provider’s technical personnel are an essential resource for installing software updates, hot fixes, service packs and version updates in an optimum computer environment.

According to Gartner, cloud computing has reached a sufficient level of maturity to be in its “productive phase.” In fact, cloud-based solutions have proven enormously successful in a broad range of commercial applications, revolutionising the affordability and “adoptability” of solutions for a much wider range of companies. It is time for Supply Chain Planning solutions to join in this success?

As you consider the benefits of a cloud-based supply chain planning solution, conduct a self-evaluation by asking these questions:

  1. Does your current supply chain planning technology infrastructure fall short of the task of providing the supply chain planning capabilities you need?
  2. Is it difficult in your organisation to drive new capital investments for updated equipment and systems?
  3. Is your IT staff overwhelmed with user support issues and other system administration tasks?

If the answer to any of these questions is “yes,” then it’s time to find out how a cloud-based solution can accelerate one of the most rewarding business improvement initiatives your organisation can undertake: Optimising your Supply Chain.

Related Content:

 

About the author

Hank Canitz PictureHenry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.

Overall view of event logistics is crucial for Melbourne Cup Carnival

The Melbourne Cup is the race that stops a nation but, behind the scenes, supply chain management experts are far from stopping.

An overall view of the entire end-to-end supply chain with control over the entire management of the process for large scale events is imperative otherwise chaos erupts. We saw this unfold during an Olympic Games where there was no clear management of processes. Most supply chains are managed in an ongoing, sustainable way, however, supply chain management for large scale events operate entirely differently with rapid ramp up and ramp down phases, detailed master delivery schedules, ample availability for consumable goods, and lastly a rigorous plan for waste removal. The Melbourne Cup Carnival is no exception.

Lexian has developed proprietary event management software to manage the logistics for major sporting events.

Infographic

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The Australasian Supply Chain Institute (ASCI) and myself wish to invite those working in supply chain and logistics to a breakfast where Bruce Craig, from Llamasoft and myself will offer you the opportunity to:

·       Learn how these best practice companies are achieving competitive advantage by significantly improving in the areas of; cost, margin, customer service and risk.

·       Understand how they are implementing analytical centres of excellence to perform; network, product flow, production, cost-to-serve, multi echelon inventory optimisation and simulation.

·       Join a discussion on common supply chain problems

·       Run through the “Supply Chain Matrix Scorecard”

Imagine if you had a living, digital model of the end-to-end supply chain, enabling continuous improvement and innovation to rapidly and accurately answer the toughest ‘What-if’ questions and generate effective and clear data driven recommendations. The principles of Supply Chain Design are applicable to most businesses that have a supply chain. This presentation will provide members with sufficient information about Supply Chain Design so that they can determine the “fit” within their own business as well as the foundations of building a business case for action.

ASCI Networking Breakfast: An Overview of Supply Chain Design

When: 7.30am, 30 November 2017

Where: Michael Page offices, Level 19, 600 Bourke St, Melbourne

Cost: Free to ASCI members and their guests

RSVP: via EventBrite: https://www.eventbrite.com.au/e/a-brief-overview-of-supply-chain-design-tickets-38645845765

Guest Blogger

Shaun Gates (Managing Director, Lexian Solutions)

shaun-461

Removing the Two Barriers to Optimising Inventory

Removing the Two Barriers to Optimizing Inventory

Removing the Two Barriers to Optimising Inventory
Caught Between a Rock and a Hard Place

Henry Canitz – Product Marketing & Business Development Director, Logility

Supply chain leaders often find themselves in a difficult situation when it comes to the conflicting goals of improving customer service and minimising inventory. The omni-channel world we live in has driven customer service to new heights. Companies that don’t prioritise providing what the customer wants when they want it will soon find themselves losing market-share. On the other hand, product lifecycles continue to accelerate and the penalty for carrying too much of the wrong items leads to high levels of obsolescence. This isn’t a new dilemma, the balancing act between inventory and service has been going on since the earliest days of commerce. However, the penalties for bad service and/or high inventory are growing more severe and the space “between a rock and a hard place” is continuing to shrink.

Because of variability in demand and supply, increasing customer service levels can lead to higher levels of safety stock. Improving cash flow by indiscriminately reducing working capital dollars can result in slashing the wrong inventory, resulting in lower customer service levels.

While some supply chain teams have conducted inventory optimisation (IO) initiatives to raise service levels while lowering inventory cost, others worry that they won’t be successful in the effort.

There are two common barriers that can prevent an organisation from reaping the benefits of inventory optimisation efforts:

  • IO success can be undermined by reliance on:
    • Limited tools (such as modules built into, or bolted onto, existing ERP systems)
    • Inadequate solutions (e.g. error-prone, hard-to maintain spreadsheets)
    • Black-box systems (where calculations are difficult or impossible to validate)
  • An internal perception that understanding and implementing proven mathematical tools and business processes in order to streamline the creation of optimal inventory policies and targets is too difficult for the team to take on.

Overcoming these barriers is easier than you think and the benefits are too good to ignore. Companies that embrace Multi-echelon Inventory Optimisation (MEIO) achieve, on average, a 28% increase in inventory turns.

A simple three-step approach can remove barriers to achieving a successful MEIO initiative.

  1. Understand your current state and lay the foundation for a solid business case. Assess your organisation’s capabilities from the perspectives of:
    • Inventory performance
    • Business process and inventory management expertise
    • Technology and organisational readiness.
  2. Create a future state inventory optimisation capability—process, technology, organisation—that provides your supply chain team with a roadmap to success.
  3. Continue to drive fundamental strategic changes that create greater resiliency and agility throughout the supply chain and establish a cycle of continuous improvement.

Can you overcome the two common barriers to implementing inventory optimisation capabilities and get out of being Between a Rock and a Hard Place? Of course. We work with companies around the world who are driving significant value from their MEIO process.

Learn More:

 

About the author

Hank Canitz Picture

Henry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.

Food & Beverage: Five Ways SYSPRO can Alleviate Your Headaches (Part 2)

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Part 2 – view part 1 here

SYSPRO’s association with process manufacturers is longstanding, and we continue to enjoy significant growth in our food and beverage customer base. I tend to think that we attract food and beverage customers with our industry-specific functionalities, our service, and the modular, cost-effective nature of our offering. SYSPRO’s enviable track record of retaining customers through periods of growth I credit to the scalability of our solutions, and to the dedication of our service representatives.

In my last blog, I discussed ways that food and beverage companies use SYSPRO to optimise traceability and trade promotions. Today I’m going to move on to cost control and inventory optimisation, and finish up with a short discussion of the Cloud.

Cost Control

It’s easy for costs to skyrocket, and the reasons are not always obvious. SYSPRO, integrated across an entire food and beverage company, provides 360-degree visibility into every facet of accounting, distribution and operations, unveiling important insights into metrics such as job cost performance, margins and pricing. Process manufacturers often utilise LEAN methodologies, and SYSPRO’s 360-degree visibility gives manufacturers the power to go LEAN, further their LEAN aspirations, or simply streamline and optimise their value chain.

End-to-end costing analysis allows manufacturers to assign more accurate production and overhead costs, and creates opportunities to eliminate redundancies, initiate improvement plans, and minimise non-value-add activities. SYSPRO can also facilitate the automation of processes that used to eat up surprising amounts of time, labour and resources, such as reconciliations, communications, paper-based documentation, etc. With an accurate picture of costs, it becomes easier to maximise profitability, even in a low margin environment.

SYSPRO’s bill of materials (BOM) provides detailed costing and an expected cost at each level of a production run. The Work in Progress (WIP) module, used in conjunction with the BOM, allows for the comparison of expected versus actual costs, often revealing realistic targets for cost savings.

One of my favourite SYSPRO tools is the Executive Dashboard. Dashboards are highly configurable, and give executives an ‘at-a-glance’ summary of complex information. In the office, at home, or on the road, dashboards allow managers to monitor key performance indicators (KPI) in real time. In addition, our ‘what-if’ costing features make it easy to compare the cost effects of different raw materials, production routes and labour rates. In a business environment as fast-paced and constantly changing as food and beverage, dashboards can shorten reaction time and decision making, heightening agility and giving the company a competitive edge.

Inventory Optimisation

One of the biggest balancing acts in manufacturing is inventory management, with some companies carrying as much as 50% of their capital in inventory. Those making proper use of SYSPRO, however, are usually able to minimise their inventory investment, while still maintaining appropriate levels of stock for demand management capability.

The inventory managers I know appreciate the fact that SYSPRO helps to determine optimum levels for basic, seasonal and safety stock, by factoring in metrics such as target service levels, depletion rate, order lead time and standard demand deviation. By connecting the inventory system to Order Entry, book inventory becomes an exact image of real inventory, providing unprecedented control over inventory and its associated costs. In addition, SYSPRO is an enormous help in enforcing a FIFO (first in-first-out) methodology, and in tracking expired product.

SYSPRO Inventory Forecasting predicts future sales based on historic demand. With Forecasting, managers can identify important products based on factors such as sales value, gross profit, quantity sold and cost of sales. In my experience, Pareto analysis – the famous https://en.wikipedia.org/wiki/Pareto_analysis – 80/20 rule – can really help clear the cobwebs from an outmoded view of a company’s inventory management.

Transformation on the Cloud

By now, you are probably aware that the Cloud can save money on capital expenditures. Not needing a server room, servers, and a high-paid IT department can be a major relief to the old P&L. There is also no doubt that the Cloud provides food and beverage companies with efficiencies that help them to scale. Efficiency and cost reduction, however, are only part of the picture when it comes to Cloud services.

We’ve all read articles, some of them verging on science fiction, about the oncoming ‘Fourth Industrial Revolution’. Whether you buy into the vision or not, there’s absolutely no doubt that manufacturing is changing to embrace new technologies, including automation, artificial intelligence, robots, blockchain (or blockchain-type technologies) and the Internet of Things. It is time, I think, to talk about the Cloud as an enabler of business transformation.

In the last few decades of the 20th century, companies made the choice to stick with their old, manual methodologies, or to join the IT revolution. Those that chose to transform were more likely to thrive. Of those companies that chose not to transform, very few are still around. In my opinion, we are now sailing similar seas – most companies cannot afford to ignore the advantages that accrue on the Cloud. Fortunately, SYSPRO ERP Cloud Services have been designed to provide a seamless, painless and profitable transition into the new manufacturing paradigm.

RAAF Site Visit

Green Light Day 2017

Our August site visit was one of the most interesting and insightful we have had to date. This is ASCI’s first step as we change the format of our site visits and ramp up the learning experience to new heights and what better way to start this take off than with the RAAF Base Richmond.

The day started off with ASCI staff and members meeting up on a crisp Richmond morning at 8:30, where we were lead into the base and given our safety briefing. The first session provided an outline of the Australian Defence Organisation’s supply chain, including the role of Capability Acquisition and Sustainment Group (CASG) in supporting the C130J and C27J aircraft based at RAAF Richmond.

Now we come to the exciting part, we got to go inside the C27J Spartan , a battlefield airlift transport aircraft operated by Number 35 Squadron. This particular aircraft is able to move people, equipment and supplies in Australia and the surrounding area. Inside, we got to see how everything is packed in and all the different facilities they have to get their goods from point A to point B. The aircraft is able to take a wide variety of tasks including being able to support humanitarian missions in remote areas, delivering ammunition to front line troops and also undertake aero-medical evacuation of casualties. This aircraft is able to carry a significant amount of weight and land on airstrips that are not suited to some of their other aircraft, providing additional capability especially on humanitarian disaster relief missions.

Some of the C27J’s missions include air drops, this means they cannot land due to the damage or limited capacity of an airstrip however supplies are still able to be delivered.  Our next stop was 176 Air Dispatch Squadron, where the parachutes used for the air drops are cleaned, repairs, packed and stored.  These parachutes go through a whole production line to make sure they are suitable for both trained personnel and supplies which can include supplies as large as tractors.

Our day ended with a chat about the storage of inventory in the Australian Defence Force including the use of a national network of warehouses and storage sites. This allowed for question time, where members were able to better understand concepts used at the RAAF Base Richmond and take these notes back to their own daily job.

The whole experience was interesting and shows the steps ASCI is taking to make these experiences more exciting and intriguing for members to benefit.  One member stated, it was a “great lifetime experience… thanks for organising it.” We are eager to see what our next site visit will entail!

Food & Beverage: Five Ways SYSPRO can Alleviate Your Headaches

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(Part 1)

Last weekend a group of colleagues, most of us in the ERP field, broke out the barbies and commandeered a stretch of shady beachfront. The group shares a passion: we are all in one way or another obsessed with manufacturing, which is why we began analysing the value chains that brought us the food and drink we were consuming. As we cleaned up our rubbish, we offered a silent and non-denominational prayer of thanks to the companies that bring us our modern cornucopia of beverages and food.

Back at work on Monday, I found myself brain-storming a blog topic. My mind, still half in weekend mode, turned gratefully to our food-manufacturing conversation. SYSPRO, after all, is the ERP of choice for hundreds of food and beverage companies. Our industry-specific functions are designed to ease the rigours of an extremely competitive industry, by managing financial complexities, optimising operations, guaranteeing quality, and offering precise control over every aspect of the supply chain.

Food Safety & Compliance

If you want to avoid giving a food manufacturer a nightmare, don’t mention Salmonella, E.coli, SARS, melamine, mad cow disease or bio-terrorism. All food production, in-home or in-factory, carries the potential for risk, but for manufacturers, the responsibility is vastly multiplied. Food and beverage companies need to ensure complete food security, as specified by government-mandated, industry-required food safety programs.

Food safety regulations begin with expiration dates and packaging, but extend to traceability of product throughout the entire supply chain. With SYSPRO’s Lot Traceability module, both tracking (farm-to-fork) and tracing (fork-to-farm) per product, lot and supplier ingredient is automatic and easily retrieved. For raw materials, products, packaging materials and processing equipment, a wealth of information is preserved at every point along the value chain, including incoming materials, manufacturing operations, inventory management and customer shipments. For every action that can impact food, at any point in the supply chain, SYSPRO enables a food processor to trace all ingredients back to their source, and all finished products to their retail, wholesale or food-service destinations.

Of course, all that information needs to be made actionable in the event of an emergency, both for consumer safety, and for brand protection. Government-mandated audits are bad enough, but there’s usually a grace period if procedures aren’t quite up to snuff. Mock recalls aren’t always as forgiving. Many processors that supply retail chains are now conducting mock recalls on a quarterly basis, and the cost of failure can be catastrophic, immediate, and final. With SYSPRO’s Lot Traceability, mock recalls are fully automated. Many of our customers can conduct a flawless mock recall in thirty minutes or less.

Of course, SYSPRO is, at root, accounting software, and discussions of functionality inevitably return to ROI. There’s even a value-add to our compliance measures. Lot traceability increases visibility along the supply chain, which can be leveraged to ensure food freshness and quality, improve customer service, streamline schedules and generally reduce the costs of business. In the warehouse, for example, traceability allows pickers to easily adhere to FIFO (first-in, first-out), while fulfilling longer-distance orders from lots that are in no danger of becoming outdated.

Trade Promotion Management

Trade promotions are an enormous element of the Sales & Marketing mix for most consumer goods companies, and food manufacturers are no exception. In fact, many of our customers cite trade promotions as a key component of growth. Promotions campaigns increase sales and provide companies with valuable information on consumer trends and changes – how well these campaigns are managed can be critical to success.

In years gone by, promotions were generally managed by sales team, but these days the prevalence, variety and importance of promotions necessitate the use of ERP. Fortunately for our customers, SYSPRO Trade Promotion Management makes it simple to negotiate the complexities of contract pricing, volume discounts, trade promotions, rebates, multitier credit checking and comprehensive reporting. SYSPRO TPM tracks off-invoice allowances and promotion deductions, and provides efficient reconciliations that result in increased collections. And of course, TPM is integrated into SYSPRO General Ledger, Accounts Receivable, Inventory Control, Sales Order & Invoicing modules. The bottom line? Reduction of confusion and complexity, huge savings in time, better information, better customer relationships, and (the pièce de résistance!) improved cash-flow and profitability.

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In Part 2 of this blog, We will go deeper into SYSPRO’s industry-specific offerings for the food and beverage industry, and how all of these functionalities can be utilised – with lower capital costs – on the Cloud.

ASCI2018 Save the Date

Here at ASCI, it has been a pipeline dream of mine to run our own conference for the many members of ours in the community.  I am fortunate enough to announce, that this has become a reality and our very own conference ‘ASCI2018‘ is underway to be brought to you on 23 & 24 May 2018.

We have been working and will continue to be working hard in the lead up to ASCI2018. I am aware of the rapidly changing environment of the supply chain industry and the ASCI team have implemented this into the theme and program of the conference. ASCI2018, will allow for supply chain managers to receive some clarity around the latest industry developments admit a rapidly changing supply chain landscape due to e-Commerce disruptions.  This is why we have named the conference ASCI2018: e-Commerece: Driving Supply Chains into the Future.

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The world is experiencing major disruptions. CEOs see more threats today versus three years ago, up 78% according to a recent study.* As e-Commerce turns the spotlight onto the supply chain, Operations, Logistics and Supply practitioners have a huge responsibility to offset these threats, leverage new technologies and build faster, better global supply chains. More than ever, these practitioners need to be at the top of their game, working together across functions within the organisation, and building the capability to respond to e-Commerce. Equally important is that this theme is addressed in relation to the technical best practice knowledge on which ASCI has laid its foundations.

Attending ASCI2018 will be a unique opportunity to engage your organisation’s entire supply chain, logistics and procurement teams in a professional learning experience. At ASCI, we’re passionate about helping members re-position themselves for sustainability in light of major disruptions. These major disruptions are coming thick and fast. We need to protect and educate our members so they can respond to such change.

Finally, I have to mention that we have selected our strategic endorsement partner, Akolade to help run our conference. We are very impressed with the quality and relevance of Akolade’s leading-edge, well researched events which we have been participating as the Endorsement Partner. Akolade has demonstrated the expertise and professional approach we require to run ASCI2018 and we look forward to collaborating yet again on our very own conference.

I am so proud of this achievement and milestone the ASCI team have accomplished. Looking back at all the hard work the team have done to make this conference happen shows how dedicated they are to bring the best of the best to our member base. I look forward to seeing you all at our conference.

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*PwC CEO Insights, 2017: http://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2017/au/key-findings.html

 

Pieter Nagel
CEO
Australasian Supply Chain Institute (ASCI)