It sounds simple, but how well a manufacturing company moves products from the shop floor to the customer’s front door is not only a sign of a healthy supply chain, but also a critical indicator as to how efficiently planners and managers mitigate several aspects of global supply chain management. But in one of the more interesting paradoxes in today’s manufacturing landscape, integrated transport logistics, while extremely valuable, is one of the more overlooked elements of how manufacturing companies work their production cycles.
We’ve talked in a great length on this blog about the elements of effective global supply chain management and the implications thereof. But while these are important discussions to have as manufacturing companies work to expand their footprint and growth their customer base, at the end of the day the developments in supply chain management only really matter insofar as they add business value for these manufacturing companies. Advancements in procurement, production planning, job allocation, and transportation management must equal enhanced business value for each partner stage in a production network or else these aspects are simply window dressing designed to give the appearance of lean production principles.
One of the most valuable assets manufacturing companies can utilize to increase business value is the idea of sales and operations execution (S&OE). Though something of a recent concept in global supply chain logistics, S&OE is a powerful piece of planning capability planners and managers can deploy to increase the efficacy of their planning and production programs, as well as enhance a number of other critical functions across the value stream such as resource and material procurement, optimized inventory management, and even job shop scheduling and job allocation.
It’s a big concept both in terms of importance and how many elements of global supply chain management under which it encompasses. We’re talking about risk and the factors manufacturing companies must address and combat to ensure stability and reduce the amount of uncertainty in a globally-competitive, variant-rich landscape. No matter how diligently planners and managers work to curtail this uncertainty, risk in a variety of forms can plague companies across the entire value chain, everything from planning and procurement to production and transport logistics.
All this being said, there are a number of strategies, solutions, and principles manufacturing companies can deploy and integrate to reduce the level of risk in a cross-organizational manner that also helps to increase productivity and enhance efficiencies.
Today’s blog entry features a fascinating conversation with flexis AG Vice President of Manufacturing and Logistics Robert Recknagel. As a thought-leader in the supply chain landscape with more than 10 years of experience in operational supply chain management, software concepts and optimization design, Recknagel provided us a glimpse into the key conversations, discussions, and concerns manufacturing companies are addressing in today’s global manufacturing landscape. Recknagel’s work with flexis has largely focussed on helping companies administer their supply networks as efficiently and productivity as possible, which uniquely positions him to shed light on the challenges and opportunities today’s manufacturers see each and every day.
Nick Ostdick: There’s a lot of information in today’s supply chain about Industry 4.0. Can you clarify a little bit about what Industry 4.0 means for the manufacturing supply chain and how companies should be looking to implement this technology platform?
If there’s one fear shared by nearly all manufacturing supply chain planners and managers, it’s disruption. Small or large-scale breakdowns in the movement and flow of products or component parts from Point A to Point B. Every year, manufacturing companies dedicate thousands of man hours and resources to avoiding supply chain disruptions in an effort to maintain productivity, reliability, and on-time delivery for customers. But even with the amount of time and effort manufacturers put into combating the potential for disruptions, the nature of a global supply chain is that disruptions will happen at some point along a company’s value chain, and what will determine a company’s resiliency is how said company responds and adjusts to these disruptions.
No matter the size or impact of the disruption, the ability to react and correct disruptions at the production, inventory, or transportation level depends largely on understanding the kinds of disruptions and how at-risk a manufacturing company is to experiencing each type. Given the interconnected nature of today’s global supply chain and expansive network of production facilities, warehouses, and transportation hubs, it would appear there is more opportunity than ever before for manufacturing companies to encounter disruptions or breakdowns at more touch points across their supply network.
Understanding the relationship between S&OP and S&OE is akin to the novel versus the short story. With the novel, an author more often than not takes the long view of the narrative, spanning large swatches of time with a multitude of characters in order to tell a fully-realized, fleshed-out, and satisfying story. On the other hand, a short story is a much more compressed form of narrative where the author focuses on one, two, or maybe three characters in a more narrow window of time with a specific set of themes, tropes, or conceits in order to give the reader a mere glimpse into the lives of those inhabiting the story.
Both of these narrative modes rely on similar principles of storytelling, but they deploy those principles in slightly different ways for a desired impact - the novel a more long-term, wide-ranging look at a world, and the short story a more compact, micro view of characters, situations, and contexts. The similarities and differences between the novel and the short story mirrors essentially the relationship between S&OP and S&OE in today’s global manufacturing and supply chain. S&OP allows manufacturing companies to create integrated demand planning between sales and production teams for the short to mid-term (the novel game) while S&OE gives planners and managers the capacity to examine their supply situation on a more micro level (the short story).
Consider this question: Is simply doing enough actually enough? Should the status quo be an appropriate goal? Or, in the sphere of today’s global manufacturing pipeline, is merely administering an adequate supply stream sufficient enough to compete in a complex, variant-rich marketplace? In each of these questions, the answer is no, and manufacturing companies are quickly realizing their supply streams have to do more than simply move products from the production floor to the customer’s door. Instead, supply logistics have to be drivers of growth at each touch point of a company’s value chain.
A 2014 survey released by professional services group Deloitte showed 79 percent of companies with high-performing supply chains achieved revenue growth greater than other companies within their same industry. If nothing else, this clearly illustrates the connection between a well-structured, highly-functioning supply chain and business growth and profitability.
What’s one of the most undervalued elements in creating E2E supply chain visibility? It might surprise you, but this overlooked aspect of supply chain management is perhaps one of the most critical ingredients in how companies successfully move material supply to the production floor and finished products to the customer’s door. Of course, we’re talking about transportation.
That’s right, transport logistics, while perhaps underutilized, is a significant driver in how manufacturing companies administer, oversee, and evaluate the overall health, sustainability, and efficiency of their supply situation. It’s somewhat difficult to understand why transport logistics often gets lost in the fray of global supply chain management. Perhaps it’s because more emphasis is placed on operations at earlier stages in the value chain such as planning and procurement. Or perhaps it’s because the facilitating of effective production programs is often at the forefront of the minds of planners and managers. Either way, transport logistics, though often neglected, can either be a significant boon or detriment to how effective a manufacturing company conducts itself.
Planning. Replanning. Forecasting. What-if scenarios. Data gathering and analysis.
These are the tools, strategies, and methods modern manufacturing companies have at their disposal to ensure production facilities optimize their inventory, allocate jobs efficiently, pull component parts from containers, and move finished products from the production floor to the customer’s door on-time and within delivery windows. But while these safeguards in demand planning give manufacturing companies some level of insight and maneuverability in responding to alterations in rules or restraints in production programs, many of the most significant events or occurrences in today’s global manufacturing supply chain happen in the moment and without much warning or advance notice.
Competition. More so than ever before, today’s manufacturing companies are facing increasingly intense competition in an ever-expanding global marketplace. With new and emerging markets coming online in disparate parts of the globe, today’s manufacturing and supply network is growing more diverse, complex, and intertwined, and manufacturing companies need more powerful, integrated, and intelligent solutions to cut this complexity and maintain the efficacy of their planning and production programs.
Enter advanced analytics and its ability to give manufacturing companies the insight and visibility into their overall supply and production platforms. With an endgame of helping manufacturing companies analyze and sort data, streamline processes, and increase the efficiency of planning and production programs, advanced analytics is a critical value proposition in a variant-rich industry where network partners operate at numerous disparate points across the globe. Because advanced analytics relies in large part on the adoption of intelligent technologies or solutions like Industry 4.0, Big Data, and The Internet of Things (IOT), planners and managers have the ability to put large amounts of data and reporting to work to leverage lean manufacturing principles for greater derived value.