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Kinaxis™ RapidResponse™ represents a new paradigm in supply chain management critical in this new era. Unlike disparate legacy supply chain planning systems built around black-box optimization technologies and used by a small number of highly trained experts, RapidResponse is a single on-demand service used by tens or hundreds of users to solve multiple supply chain challenges."
Source : Kinaxis
Response Management: Enabling a Demand-driven Supply Network
Response Management is also known as :
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demand response devices.
THE DEMAND-DRIVEN WORLD
Historic changes are radically altering the competitive landscape
for all manufacturers. As Thomas Friedman describes in The
World Is Flat, "if you want to grow and lourish in a lat world,
you better learn how to change and align yourself with it." A
wide range of factors is fundamentally changing supply chain
management, and the result is a new basis of competition.
Today, the customer is king. Many electronics products are driven
more by consumer than commercial purchases, which is making
them susceptible to the rapidly changing preferences and short
lived trends of the market. Walk into a consumer electronics store
and look at RIM's BlackBerry or Apple's iPod. Color, form factor,
and styling are more important to many consumers than the
features and functions. And, consumers expect "what they want,
when they want it," placing mounting hurdles to achieving and
maintaining brand loyalty. If a consumer is ready to buy and a
brand owner's product is not on the shelf, they will buy something
else, increasing the pressure for companies to unfailingly meet
aggressive demands.
Of course, commercial products are not immune to these same
trends. Expectations for customization, last-minute changes,
and aggressive pricing are not restricted to consumer purchases,
but also impact behaviors of individuals purchasing for business
needs. And the pressures faced get passed on to suppliers, creating
a vicious cycle that feeds on itself to further exacerbate the
consequence of these trends
BUSINESS IMPLICATIONS AND CHALLENGES
Velocity-based competition, shortened product lifecycles,
increased demand variability, globalization and global sourcing,
leaner supply chains, more mass customization, cost volatility, and
competitive pressures have altered the supply chain management
requirements in fundamental ways, causing organizations to
rethink how they operate or risk being left behind.
Responding to change has quickly become an imperative for
today's manufacturer. While planning remains a core part of
any business, the faster pace of change multiplies the problems
that planning can't prevent. The inancial impact to a company
unable to respond to change can be crippling. Poor response can
affect both the top line (e.g., inability to win new business, loss of
customers to competitors) and bottom line (e.g., negative impact
on margins, write-off of excess and obsolete inventories) of a
company. Short of a strategic solution to responding to change,
many companies have institutionalized costly "just-in-case"
measures such as buffer inventories, expediting, and overtime in
an attempt to compete.
As companies establish a more global footprint, the execution
challenges to meeting changing demand escalate rapidly.
Understanding and anticipating consumer behavior is no longer
a local issue, but is now global. And while the lat world ushers
in a new era of global competition that drives rapid innovation
and pricing pressure, demand sensing and responding become
critical to the eficient operations of a supply network'yet but are
challenged by geographic dispersion.
Likewise, despite all the intended beneits of outsourcing
manufacturing operations, brand owners have found themselves
signiicantly challenged by the lack of supply network visibility
and the inability to respond to constant changes. This results from
the fact that most essential supply chain information now resides
with third parties.
Brand owners have become "virtual companies" with global
supply networks comprising contract manufacturers (including
work-in-progress, raw materials, providing a inished goods
buffer, and consigned materials), suppliers (raw materials),
third-party logistics providers (maintaining a inished goods
buffer and providing eficient logistics) and, ultimately,
the customer. Brand owners remain directly accountable
for customer satisfaction, delivery performance, their
own inancial results, and regulatory compliance, but are
increasingly vulnerable to mishaps in meeting customer and
shareholder expectations because they no longer have direct
control over manufacturing and supply chain operations. As a
result, proactive supply chain risk management via Response
Management strategies is required to effectively respond to
unexpected changes as they occur. Response Management
empowers people to respond rapidly to constant supply network
changes and deliver superior operations performance.
It's clear that manufacturers need to make fundamental changes
in the way they think about their supply chains (now supply
networks). To effectively manage the volatility in demand,
companies need to become more demand-driven. AMR Research
has deined a demand-driven supply network (DDSN) as "a
system of technologies and processes that senses and reacts to
real-time demand across a network of customers, suppliers, and
employees."
THE 21ST CENTURY SUPPLY CHAIN
In DDSN: 21st-Century Supply on Demand, AMR deines the 21st-century
supply chain. Unlike the left-to-right linear chain based on
hard assets, DDSN looks more like a self-renewing interaction between
three strategic business domains: demand, supply, and product.
Visibility and freedom to act in all three domains at once deines the
demand-driven business of the 21st century.
In Regaining Control & Managing Risk: The Electronics Outsourced
Model Evolves, Industry Directions outlines various trends relevant
to this shift, including:
- Supply chains extend far beyond the core enterprise.
To survive in today's highly outsourced environment, companies must
follow an "outsourced competency model" in which they focus on business
functions that truly give them competitive advantage and
ofload the rest as much as possible. As a result, enterprises have
evolved into "business ecosystems" comprising myriad specialized
trading partners working towards sets of common goals. The success or
failure of this network of highly interdependent companies
relies on how effectively trading partners, suppliers, and others up
and down the supply chain work together.
- Traditional SCM tools are not very effective in the new environment.
Companies frequently struggle to effectively manage
their supply chain relationships, particularly those with non-strategic
customers and suppliers (partly since most resources are focused
on irst-tier, strategic trading partners and customers). Dificulties in
creating and sharing scorecards, managing to the contract, and
agreeing on results are common.
Many companies say that increased outsourcing has resulted in a loss of
control over a wide range of key inbound and outbound supply
processes such as inventory liability, warranty and returns
reconciliation, analyzing and managing risk with customers, order
processing,
sharing forecasts/order changes, and more. The most commonly used
collaborative tools include email, EDI, fax, phone, and face-to-face
meetings, yet none of these have proven effective in helping companies
to gain visibility and respond to change across complex supply
chain ecosystems.
- Visibility into demand signals is more important, yet also harder to obtain signals.
Forecasting has long been an SCM
challenge, and despite the emphasis on enhancing it after the inventory
crisis of 2001, improvements are still needed. Research shows
that accurate forecasting remains problematic for the electronics
industry, particularly for companies that depend on outsource
forecasts to drive production and inventory management planning and
activities. As the authors note, "most information lows
upstream and downstream in a cascading fashion, one element,
department, or tier at a time. This cascading model all but ensures
partners will make decisions based on outdated information and
different versions of ‘the truth'." The results of this are dire:
"delays
and ineffectiveness at best; wrong decisions, lost opportunity, and
product or market failure at worst."
In the 20th century, most manufacturers deployed enterprise resource planning (ERP) systems designed to support a push-driven, build-toorder
supply chain and help the business run like clockwork. In addition, supply chain planning (SCP)
applications were built in a manner
consistent with the way these supply chains were organized'i.e., as
batch, sequential planning systems designed to run cycles in days
and weeks, not minutes and hours. The very strength of SCP systems and
their design approach towards planning to run the business like
clockwork resulted in some tradeoffs. Their batch, sequential process
is inherently dificult to change. And, in accordance with the internal
nature of manufacturing operations and business needs at that time,
these systems lack both visibility to external information and broad
collaboration capabilities.
There comes a point when increasing the complexity and frequency of
the planning process in response to frequent business change
is no longer the best approach to improving performance. For example,
the military is highly regarded for its planning processes,
including precise training, fuel and weapons planning, intelligence
gathering and brieings, and similar activities before any mission.
Yet the military has also invested in a strategic approach to Response
Management in the form of heads-up displays for pilots to give
them real-time information and the ability to rapidly course correct
when things don't go according to plan. The military practices
excellence in planning and Response Management.
Brand owner visibility plays a crucial role as well'yet a variety of
trends make gaining clear supply chain visibility more dificult now
than ever before. For example, the vast majority of outsourcers still
manage critical components either fully or jointly with contract
manufacturers, and more processes are being outsourced outside
the enterprise. This diminishes companies' control over these
processes, reduces visibility into critical operations, and makes
the supply network less responsive to volatility. Meanwhile, few
outsourcers believe they are doing an adequate job of forecasting,
and a signiicant portion of companies don't even know whether
they've lost control over processes or not. All this is occurring at a
time when the need to comply with Sarbanes-Oxley and changing
environmental regulations'along with the need to respond quickly
and eficiently to daily shifts in supply, demand, capacity, and
product'make better visibility imperative.
In this environment, companies would beneit from utilizing
collaborative technology that lets them not only anticipate and
respond to events as they occur, but also share a synchronized
view of information they must act upon.
RESPONSE MANAGEMENT: ENABLING A DDSN
Responding rapidly to change in today's complex, multienterprise
supply networks requires the organization to quickly
make tradeoffs and compromises to resolve problems. The best
people to spot and act on these issues in a timely fashion are the
ones directly involved and intimately familiar with the situation
at hand. As such, the Response Management process, given the
intrinsic nature of its function, must be very decentralized.
Dealing with a last-minute order change or drop-in, an
unexpected hiccup in supply availability, or the need to manage
engineering revisions in the midst of rapidly shifting demand
requires human intervention. Key decision-makers throughout
the supply chain network must have ready access to both the
information and tools to quickly understand the impact of these
changes and determine the right course of action'one that will
proactively drive Key Performance Indicators (KPIs) to meet
the businesses objectives. Too many companies have failed to
strategically address this Response Management challenge.
A demand-driven supply network requires the proper use of
appropriate technology to be successful, but as AMR Research
clearly states, technology alone is insuficient. A combination
of tools and technologies must be put in the hands of the right
people. To optimize the response to change, users throughout the
organization and supply chain need tools that provide three key
capabilities: 1) global visibility to actionable data, 2) the ability to
rapidly and collaboratively assess many "what-if " alternatives,
and 3) a comprehensive scoring mechanism that accurately
predicts the impact of proposed responses and weighs alternatives
against company goals and customer requirements so the best
option can be implemented.
GLOBAL VISIBILITY
Global access to current, live data from multiple, disparate ERP,
SCP, and legacy systems across internal and external supply
chains combined with proactive alerting allows action teams to
accurately align all supply and demand considerations based on
exceptions. The ability to instantly and continuously capture new
changes and agreements as they are made gives all participants
a single view of the truth, empowering individuals across the
organization to make intelligent, reality-based decisions and
respond at the moment.
COLLABORATIVE ASSESSMENT OF "WHAT-IF" MULTIPLE
ALTERNATIVES
A web-based client interface that enables key players and
suppliers both inside and outside the enterprise to rapidly
propose, detail, and share potential results of myriad action
alternatives facilitates the true collaboration crucial to identifying
the best options.
COMPREHENSIVE SCORING MECHANISM
By enabling groups to immediately evaluate multiple scenarios
in terms of how well they meet speciic metrics and objectives,
the scoring mechanism ensures that decisions are aligned with
corporate goals and proit targets, rather than being based
on personal opinions or guesswork'allowing companies to
understand the impact of their choices before they make them.
Response Management solutions integrate these capabilities to
empower front-line decision-makers throughout a supply network
with the information and tools to rapidly respond to changes in
demand, supply, and product. With such a solution, brand owners
are able to manage supply/demand alignment, respond to demand
changes, proactively managing inventory and supply exposure as
well as material costs across their supply networks.
ABOUT KINAXIS
Kinaxis delivers an on-demand Response Management
service that enables customer-focused companies to achieve
breakthroughs in operations performance and customer
satisfaction by rapidly and more proitably responding to constant
changes in demand, supply and product. Kinaxis RapidResponse
combines personal alerting, multi-enterprise visibility,
collaborative "what-if" analysis and rapid decision support to
empower front-line supply chain staff with tools for risk tradeoff
and response to daily changes inside the Sales and Operations
Planning horizon. Global leaders such as Casio, Honeywell,
Qualcomm, Raytheon and Toshiba use Kinaxis RapidResponse
to establish superior responsiveness within their fulillment
networks and supply chains and gain competitive advantage. For
more information, visit the Kinaxis web site at www.kinaxis.com
or the company's blog at blog.kinaxis.com.