Constantly Redefining the Low Hanging Fruit

When we have the opportunity to help and engage with new clients we look for what appears to be the most obvious and accretive process improvements we can find, or the “low hanging fruit”, and work on those. For a very long time I’ve called this: “Why do anything”? In other words, if I work on something it would great if there was a reason – some expectation of a return on my energy.

I have had a lot of conversations with customers lately about the next steps now that they have matured with our products. The reality is while the first low hanging fruit have been picked there are always more to be discovered. New areas of improvement are being found because they are no longer masked by the inefficiencies of the past.

This low hanging fruit is constantly redefined. As processes are improved, the new low hanging fruit just exposes itself as the next most obvious thing to work on. Let me give you an example. We have a customer that ships thousands of samples out to potential clients as they consider our customer’s products for their projects. As they were going live we worked on the automation of the inbound sample request to generate the pick-ticket for the warehouse, the pack-slip for the customer, and print the shipping labels for FedEx and UPS. The required information to process a sample request used to be manually entered multiple times in multiple systems. This was time-consuming and expensive, so we had our “why do anything” and found the low hanging fruit.

Here’s what was uncovered… When the sample goes out the shipping department adds a business card of the territory representative that would help the customer if they had questions or wanted to place an order. This makes perfect sense of course. So here’s the process: the shipping department looks up what representative would cover the prospect . If they are not sure, they call sales to find out. They put the business card in with the samples and then ship it. Here’s the low hanging fruit: What if the correct sales representative just printed on the packing slip?
This would eliminate looking it up or calling the sales department. This was a simple change that improved the efficiency of sample fulfillment and took just minutes to implement. The key is the organization was looking for the next low hanging fruit.

You’ve seen this labeled as continuous improvement or lean process, but I would say it’s just common sense more than anything else. The science is great mind you, but maybe just paying a little attention to the details, maybe even watching and writing it down, will bear some fruit. There is fruit in your physical processing (Air Breathers) as well as your systems processing (non Air Breathers). One other benefit, if you can make someone’s task easier to perform, it shows you care. Just by chasing efficiency you are recognizing the value of someone’s time and energy as a person and that makes it worth doing.

I can guarantee you, no matter the size of your organization or where your processes are in their maturity, there is low hanging fruit out there. So go pick some.

SaaS Levels the Playing Field for Supply Chain

From a historical perspective most disruptive technologies are adopted by those who cannot afford the current mainstream offering. Expensive mainframe computers were largely displaced by Mini-Computers which were displaced by lower cost Personal Computers. More recently we have seen PBX offerings give way to Voice over the Internet (VoIP) solutions. These technological shifts occur due to huge underserved markets requiring more affordable and less complex solutions. These underserved markets have spoken again…introducing Software as a Service.

SaaS, Cloud Computing, Hosted Solutions. There are plenty of buzzwords and marketing spin out there. So, let’s try to break it down. Software as a Service provides sophisticated capabilities for the masses.

What are the Characteristics of SaaS:

• Services are offered in a Subscription model  – No high startup cost and no long term commitments
• Scalability is possible due to Multi-Tenancy which allows for shared resources and shared infrastructure
• Upgrades and  support are included in your subscription fee – No maintenance or support contracts
• Accessible from anywhere  with a browser and an Internet connection -No special hardware or software required
• Allows for  Customization even when running in a multi-tenant environment
• Integrates with other applications (on-premise and cloud) through open Application Programming Interfaces (API’s)

So what makes SaaS the right fit for supply chain organizations?

When Electronic Data Interchange (EDI) was introduced it showed promise of enabling the supply chain to more effectively communicate and operate. Large organizations reaped the benefits of EDI but for small to medium businesses it is still a promise unfulfilled. The Order Fulfillment side has not been able to leverage the benefits of EDI. Yet these very same businesses have been forced to adopt EDI because their customers mandated compliance… a cost of doing business. The dirty little secret is that large populations of small to medium businesses are simply going to EDI translator sites and printing Purchase Order messages and manually typing them into Order Entry, Shipping and Finance systems. This is a prime example of new technology not reaching the entire supply chain.

The Procurement side also benefits  in SaaS models.  When a SaaS application has the proper architecture it enables EDI adoption through straightforward web-service connections.  The order fulfillment side of the business can quickly utilize EDI as it was originally intended and mitigate risks in the Supply Chain.

Perhaps the most significant benefit of SaaS in the Supply Chain would be the ability to collaborate and communicate more effectively.  Today the most prevalent forms of communication between procurement and fulfillment organizations  are email, phone and fax.  All manual processes.  Only the largest firms can afford to build highly complex exchange models making it impossible for all members of the supply chain to participate.

So what if you could friend a supplier? -A FACEBOOK for supplier relationship management.

SaaS creates The  Social Enterprise for Supplier Collaboration. Imagine if your company had its own secure collaboration space, a Collaboration Cloud if you will. All stakeholders could participate, share content, garner status and subscribe to relevant feeds.  SaaS applications make it easy for suppliers to work together with procurement organizations regarding purchase commitment dates, progress steps, issues and concerns. Collaboration would fuel better and faster business decisions.

The disruptive technologies that power true SaaS applications surpass the existing exclusionary exchange models allowing everyone to utilize the internet for the democratization of information and accessibility.  All stakeholders can easily contribute and consume relevant information in a ubiquitous environment where everyone is more productive. Access from anywhere can make any company a true global economic power. A true SaaS application levels the playing field.

Need another reason? Panorama Consulting Group conducted a survey for their 2010 ERP Report .   They surveyed 1,600 organizations that have implemented a new ERP solution in the past four years and compared on-premise deployment implementations side-by-side with SaaS deployments.   One of the results they found was on-premise implementations take an average of 6.8 months longer.

Technologies will continue developing to support innovative solutions and companies will develop new disruptive solutions.  Each time the adopting underserved community that desires more capabilities will flourish based on the fact that there is a less complex, more affordable solution.  Who buys the new disruptive technologies? A market that can’t afford the current technology and history repeats itself… Thoughts?

The Internet is Catching On..

A good friend once told me “this internet thing might just catch on”. Last week it was confirmed that not only did it catch on but it has grown into something no one could have imagined 20 years ago. I spent the day at “Cloudforce” in San Francisco on Thursday along with 10,000+ attendees who utilize or want to utilize Salesforce for their business.  Long gone are the days where you had to drive to a local store to find something you wanted to buy or to just check it out.  Also gone are the days of handwriting (gasp!) a complaint when you were dissatisfied. Companies are moving into an era of what Salesforce calls “The Social Enterprise”, where companies buy and sell over the internet and even handle customer service using the internet to monitor sites such as Facebook, and Twitter.  Even the supply chain is being affected. The good ole days of maintaining and selling inventory from a spreadsheet are slowly slipping away.

Companies need to be flexible and good citizens among a variety of systems (ecommerce engines, VAR EDI connections and customer relationship systems) and all of them need to be accessible at any time. In today’s global economy there is never a time when a customer is not awake.  Distributors want more information around delivery time and cost from their suppliers. Sales organizations want more visibility into available inventory, margins and resources.  The internet is the fastest and most effective way to satisfy everyone’s data needs.

The internet is just not for email. It is now a place to build relationships with customers, suppliers and sales organizations. I guess my friend was right… this internet thing is catching on.

-JT

The Evolution of Margin Management in Multi-channel B2Bs

You know when you hear something all the time, how it can become commonplace. Then you hear a new twist on it that you have never heard before and it sounds interesting but you are not sure how relevant it is. Then you hear it over and over and you think, there has to be something to this. Well that happened to me this week.

When you have the opportunity to talk to as many different businesses as we do, it is always interesting to discover new revenue models and learn about what channels feed the revenue of the businesses. In almost every case they are generating revenue from new channels from where they have been historically selling and looking to expand that strategy.  Following the revenue makes sense. This also leads to interesting and evolving compensation models for businesses.

Take a firm that compensates sales teams on deal margin, not revenue.  Sounds like a rare model, doesn’t it? I thought it was when I first heard it. Then this week I heard about the same model multiple times. Businesses are asking their Sales organizations to bring more profitable business and paying them more to do it, a classic win – win.

There is a catch to this strategy. As the sales team prepares the proposal / quotation, they need to clearly and quickly have access to cost. To complete the model effectively, the construct of the deal needs to be maintained throughout the order fulfillment process so the gross profit calculated on the quote is actually produced and the expected gross margin realized.

This really strains an order fulfillment operation when you consider stocking and non-stocking (drop ship) business models for Value Added Resellers (VARs) and Distributors.

We continue to see more of this evolving business model and strive to keep our Quote to Cash process ready to completely track the margin sold with the margin realized.

With a global marketplace, unique supplier relationships and order fulfillment models, I see margin management evolving into a natural compensation model, which makes sense.

-MF

There is Lot Control and then there is Lot Control within Order Fulfillment… way different

We have a customer that sells yarn and related products. It is a nice business, a straightforward business. They sell direct in a B2B model and through an e-Commerce website.  As I said, it is a straightforward and common model.

The interesting thing about selling yarn and, as it turns out, a lot of other products is the tricky little process of order fulfillment.  The process is not the standard FIFO (first in/ first out) model. It is a little more complicated.

Here’s why: Let’s say you wanted to make a sweater and you wanted it to be French Blue.  When selecting the yarn to use, you couldn’t just pick any French Blue yarn. All French Blue yarn should be the same, but that isn’t the case. During the manufacturing process the yarn was made against a specific dye-lot. Each run of French Blue yarn is very close to the same, but not exactly the same.  So, if you make a French Blue sweater from different dye lots, it will have different shades of French Blue.

There are many products, and therefore businesses, that share this problem. Paint, wallpaper and textiles all come to mind.

Inventory systems have had lot control features in them for as long as I can remember and from a macro perspective they seem to solve this problem.  When the warehouse personnel pick the products they just need to make sure they pick from the same lot. Seems easy enough, right?  But let’s peel the onion on this problem a little.

Let’s start in sales, seeing as though that is where we see the problem first. A customer calls and wants a specific quantity of product, but it needs to be from the same lot because of color, date of manufacture, etc.  Do you have the quantity to fulfill the order within the same lot number?

Say you have the inventory all in one lot number.  Great… now how do you book the order? The first step is to ensure the inventory is properly allocated and the available-to-promise information is updated accurately. But you can’t allocate based on FIFO, you need to allocate by the lot number and the quantity to cover the order.  Then you need to pick the customer’s order by lot number and then, of course, relieve the inventory exactly the way you picked it.

Sounds like there are a lot of people dependent processes required to get everything perfect. The order fulfillment process has to be perfect for customer satisfaction, to ensure the accuracy of your inventory and for the accounting of cost of goods sold.  Makes you nervous doesn’t it?

In other words, you are overriding a typical FIFO rule with an Allocate by Lot Number rule. ABLN? Ok, let’s not create another acronym but if ABLN catches on it started here.  For fun I Google’d ABLN… turns out to be a Brazilian consulting company. So this may not get legs and run.

In our quest to simplify supply chain operations we have added the ABLN ( Allocate by Lot Number) functionality across the entire application, to ensure perfect allocation, picking, inventory relief and cost of goods sold. We have even added that lot number to the invoice.  Our customers are using this and their customers now have perfectly colored French Blue sweaters.

-MF

Sustainability in the Supply Chain

Interesting week this week for some reason (stars aligning, who knows) the word sustainability came up a lot this week culminating in a nice meeting with a very cool non-profit. Typically when I hear about sustainability in the supply chain it’s about by-products, or product content, reusable packaging etc… All great for all of us and our planet no doubt, and so it’s a shame that we have to legislate some level of compliance, but that is another rant.My week this week included a meeting with a very nice woman who works at a Non-Profit organization. Their mission is to keep as much building supplies out of land-fills as possible.  They send deconstruction crews out to harvest building supplies then they sell these products. Their vision is to be able to sell through an e-commerce site (I knew the Internet was going to catch on) and through a walk-in warehouse. They work with some at-risk people and all in all it was just nice to understand their mission and the operating model they execute. It is a model they would like to replicate.Because they are a non-profit they wanted a Cloud Computing solution because they simply do not have the skill sets and funds to keep an information system up and running. They have 136,000 square feet of inventory but let’s think about the model – everything is reclaimed. There is no common inventory product SKU’s. Everything is different. Traditional inventory or warehouse management systems really don’t like this. They prefer common product SKU’s with standard logistics information. Geez, even all our inventory systems are built to support buying new stuff, warehousing new stuff and then replacing the consumed new stuff with more new stuff.

I’m not really sure how they found us, whether looking for Cloud computing, Inventory Management or e-Commerce order fulfillment, just glad they did.

So what’s the secret to a solution? Think about serial number tracking… tracking a unique unit of one.  Yes, so we can manage a  set of reclaimed interior french doors with full glass doors in varnished wood.  They need to be categorized and cataloged but they are not a standard SKU. When we built our application we deployed a condition code (i.e. New, Used, etc) to help define inventory to support customers that have the same product in stock with the same SKU but different condition codes.  Then they could answer a pretty basic question… how much of a certain product did they have in stock by entering one SKU.

We are thinking we can use these in combination to solve the problem – to generate a smart serial number / product ID and share this as a common ID to the rest of the business systems. This is critical, especially when you consider the model…

Sell on the Internet  = e-Commerce solution
Walk in Sales (retail) = Point of Sales solution
Customer Management = Customer Relationship Management CRM
Warehouse, Order Management, Procurement = Well that would be us of course

All sharing units of one.  All the applications working together in a simple contiguous business model which should be straight forward but it’s not. I’m looking forward to working on this problem.

If you have any ideas or comments I’d love to hear from you. We should help these people with their mission.

-MF