Perfect ExecutionThe gap between supply chain planning and execution is often a wide one. Fortunately, event management can help you close it
by Michael Brown Continued from Page 1 Business complexity and dynamics. The most significant reason planning and execution systems are not aligned is business complexity. Most organizations haven't formally defined and aligned their IT systems and processes unless they've undertaken a large-scale IT strategy or business transformation program. Few people in any one organization have a comprehensive understanding of the interdependence of their supply chain and other corresponding business processes. Typically, businesses lack a process to manage the evolution and alignment of processes and systems throughout an organization. Being all things to all customers. Most sales organizations are highly motivated to maintain a revenue stream through both new and existing customers. It's quite common for sales to gain revenue through new, frequently marginal customers. To gain these new customers, the sales team is encouraged to offer tier-one value-added services. Offering the same prices, service levels, and cycle times for strategic customers and marginal new customers demonstrates a process that doesn't enforce and integrate business strategies and policies across planning and execution systems. IT governance. Within a typical organization, the budget and capital allocation process doesn't support project-program spending across functional departments. Often, capital approval processes award funds within a business unit. The unit receives incentives if it scopes out efforts to optimize benefits for its specific unit vs. the corporation. For example, if one business unit funds a forecasting project, the work is scoped solely as it applies to the specific unit and geography. The scope is focused on integration with that business unit's execution systems, without considering design into other legacy transaction systems and functional areas of other business units. Unaligned external dependencies. Effective alignment of planning and execution systems requires integration with key trading partners (suppliers, customers, and third-party logistics providers). For example, efforts to implement vendor managed inventory programs with strategic suppliers will be constrained by a suppliers' priorities, investment, resources and IT capabilities. Rapid systems infrastructure evolution. IT architectures (connectivity, data structures, operating systems, and platforms) have evolved quickly in a short period of time. This rapid evolution requires that integration be supported for mainframe, client/server, and Web-based architectures. A Solution FrameworkNow that we understand the challenges involved, let's take a look at a framework to better align and integrate planning and execution systems. 1. Align operational strategies with customer segments. Although most organizations have segmented their customer base, very few have implemented business policies into their planning systems that reflect these tiers of customers. The guiding premise is for your organization to have different order-fulfillment cycle times based on tier of customer. For example, the order-fulfillment cycle time for a tier-one customer may be 48 hours, while the order-fulfillment cycle time would be 72 hours for a tier-two customer. And all other customers (tier-three) would have an order fulfillment cycle time of five days. It's critical to define the customer segments, determine the operational capabilities by segment, and then link the customers to segments with the operational capabilities. An example of the operational capabilities for a tier-one segment could be order cycle times of 72 hours, holding inventory for 20 types of finished goods, a dedicated team for developing new products, additional volume price breaks, and Web-based self-service capability. 2. Configure business policies across customer classifications. In this step, decisions made in the first step of the framework (business policies) are incorporated into the rules of the planning and execution systems. A simple example could reflect inventory allocated to a specific stocking location. As a policy, you may have decided to maintain shorter cycle times for specific products for tier-one customers. To do that, you must maintain component inventory at one inventory location, and planning systems must recognize this location. The execution system must be configured to accurately indicate inventory levels, as well as the shorter cycle times for these products by tier-one customers. 3. Map business events across systems. This step defines the aggregate business events and maps the implications and corresponding transactions across applications and data structures. Successful ERP implementation methodologies were driven by managing design through the use of process reengineering and defining and applying business events. Process reengineering was significant because it allowed the design of a solution to cross functional and system boundaries. Managing design through business events was significant because events helped define the scope, boundaries, and implications for a successful outcome. The same philosophy applies to managing the scope and cross-organizational boundaries across systems. To scope out the integration effort, you must define a comprehensive set of business events across all execution systems. Then each business event is mapped to each planning and execution system, and business events are in turn mapped as they relate to each event. The result defines the data requirements and information flow for integrating planning and execution systems. 4. Integrate disparate information through application networks. In most organizations, information is constrained. This certainly applies to the lack of integration between planning and execution systems. Typically, information has been constrained by:
The impact of the constrained information is very costly. In fact, in developing the business case for new IT infrastructure, it's important to put the business case in the context your organization's costs to conduct business today using the same infrastructure. Current and future IT decisions need to focus on understanding the information and infrastructure limitations. Based on this understanding, you can migrate traditional spoke and hub information networks to a distributed architecture. The future for distributed architectures is to allow application modules to exchange data, functions, and messaging with common, open standards across a distributed bus. This technology blends application/business capabilities with an intelligent infrastructure, creating an application network. Application networks connect devices, information, applications, business processes, people, and organizations, creating a dynamic environment that makes it simpler and more affordable for businesses to work together. Understanding what the application network architecture means and how it applies to an organization can enable data and applications to be shared. Application networks become the enabling infrastructure to most effectively integrate the disparate planning and execution systems. 5. Measure performance and align incentives. Not surprisingly, to ensure successful alignment between planning and execution systems, you have to monitor key measures. Also, incentives must be aligned with key performance measures to influence behaviors. An example is measuring customer service levels by tier of customer. Prior to an initiative to align planning and execution systems, customer service levels may have been measured with disregard to promise date or 100 percent order completion. After realignment, customer service levels would be measured accurately by 100 percent order completion and on-time delivery vs. promised delivery dates. In addition to enabling the right measures, incentives must be adequately aligned across functional organizations to ensure appropriate behaviors. Some organizations provide group bonuses based on service levels and perfect order performance on a quarterly basis. Don't Forget IT-Business AlignmentMost organizations have either an IT or business focus to address the key information pain points of an organization. It's critical to the success of any organization that both a business and IT focus jointly address the key information needs. Organizations that structure equal representation and scope initiatives with both business processes and technology together are the organizations that achieve optimal business impact through alignment of supply chain planning and execution systems. Integrating planning and execution systems is hard work; too many organizations incur unnecessary costs for linking them by using a common set of business policies applied to the customer base. To maximize an organization's goals for enhancing revenues and driving cost out of the business, you must align operational strategies and capabilities with customer segments. Using the framework I've described, you can then leverage operational alignment to drive the implementation strategy and priority for deploying solutions to customers. Michael Brown [michael.brown@us.didata.com] is global managing director, supply chain practice for Dimension Data. He has more than 14 years of experience working in the energy, government, high tech, media, entertainment, communications, consumer durable, and nondurable industries. RESOURCESVisit the Supply Chain Information Center at IntelligentEnterprise.com for focused content and resources on the subject of supply chain management.
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