Companies build buffers into their supply chain to avoid missing deadlines and delivery schedules. Can business intelligence tools help you compare actual capabilities vs. predicted capabilities, so you can see where to tighten the supply chain, improve resource utilization and meet customer demands (which may, after all, be a form of compliance)? Michael Hugos thinks so.
A former CIO and the author of Essentials of Supply Chain Management (Wiley, 2006), Hugos notes that there are really two kinds of buffers: time and inventory. The key is mastering them through information. In his book, Hugos cites four major supply chain drivers:
- Production (what, how and when material is produced)
- Inventory (how much to make, how much to stock)
- Transportation (how and when to move it)
- Location (where best to do what activity)
Keep It Simple. Set up automated data collection using as simplified a system as possible, in order to accommodate the lowest common denominator. "You don't need a fancy EDI/XML connection, because a lot of people in the supply chain may not be big companies and they may not have a big technical staff," Hugos says. "You can automate data collection with a simple batch file transmitted via FTP to a central database."
"Set up the information to display as a spreadsheet, because everyone knows how to use that," he adds. With a tab for manufacturing, one for production, one for distribution centers and one for stores, he says, "You can easily hit a button and show trends graphically. If sales are building in Atlanta and decreasing in New York, but the inventory is in New York, you can start transferring inventory by truck rather than by overnight delivery."
Make It Accessible. Hugos spent eight years as CIO of Network Services, a $15 billion global sales cooperative for manufacturers of janitorial, food service, printing and packaging suppliers - your basic low-margin commodities. As an adjunct to its transaction processing system, Hugos built a data warehouse that any member of the cooperative - manufacturer, distributor, customer - could access. That information turned out to be increasingly valuable, he notes. "We were selling brown paper napkins, but we were giving manufacturers enough supply chain visibility about overstocks and inventory that we were able to charge them more for our services."
Be Flexible. In aggregate, Hugos believes, when it's simple to upload and download data that's also easily accessible to all points in the supply chain, you end up having not only more information, but more accurate information that is easier to analyze.
"The world is changing like never before," he insists. "Three years ago, we were sourcing plastic bags in China and hauling them across the sea. That's not such a great idea anymore with the cost of fuel oil what it is." If you have an information structure that gives you the flexibility to see those changes, he says, you can reconfigure your supply chain to your advantage.
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