Friday, January 27, 2012
Every part has a story
Early in my career I was a material planner in the field service logistics organization of a large manufacturer and distributor of computers. I was responsible for planning for field returns, demand, supply (purchases and repairs) and inventory balances at the international logistics operations (ILO) facility, which was the central distribution center (DC) in the spare parts supply network. In those days the planning was mostly manual, with the assistance of spreadsheets. We knew the history of demand, but not much else. We didn't know the rate of consumption of the parts by service engineers and we didn't know the inventory levels in the supply locations below the central DC level. As you can imagine, managing the balance between service levels and inventory investment was quite the challenge given the lack of completeness, accuracy and timeliness of information.
In the years since the capabilities of Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) applications have improved dramatically. Today's material planners can see the history of consumption, demand and returns. They can see inventory balances across the supply network and have tools to enable planning distribution and re-distribution as needed. They employ sophisticated forecasting algorithms and incorporate additional information, such as the size of the installed base of equipment being supported, into the development of plans. The planner can even identify non-recurring demands, such as pipeline fill or trade show requirements, so they can be excluded from the demand history.
Even with all this information, material planning is still very much more of an art than a science. As one of my colleagues used to say – "Every part has a story". What has been missing is access to that story. Why is the failure rate of a part increasing - have the usage conditions changed or is it being put to a new and different use? Why are we seeing so many returns for a part – are the stocking level strategies being changed out in the field or is another part being used in its place? The list of questions is endless.
Until very recently the planner had no means to conduct a dialogue with other interested and informed people, such as the branch logisticians or field service engineers, to learn that part's story. The increasing use of social business collaboration (SBC) platforms in the enterprise, and the integration of those SBC tools with existing ERP and SCM applications will enable the planner to fundamentally change how they perform their work. They will start their day reviewing the comments in their activity stream before they open their planning workbooks. Instead of reacting to events after-the-fact, they will be able to anticipate and plan for them in advance. By connecting the planner with their customers in the field the behaviors that stem from uncertainty and exacerbate problems, such as increasing local safety stock level in response to a (temporary) disruption in supply from an external supplier, can be avoided.
The role of the material planner will begin to resemble that of the conductor of an orchestra. They will lead and manage the discussions via the SBC platform and coordinate the adjustment of plans in the ERP / SCM accordingly. They will be able to improve customer service levels while simultaneously reducing inventory investment.
The ability to access previously inaccessible information is fundamentally changing the nature of work. A key resource constraint is being removed. I believe that there is a compelling business case for incorporating social business collaboration tools into enterprise business processes.
What do you think? Is this happening in your enterprise? Your thoughts are very much appreciated.