In a just-in-time economy, manufacturers can’t afford lackluster performance. They have to get the job done faster, better and cheaper. Problems like downtime, process bottlenecks or delivery delays can mean missed opportunities and big costs.
Globalization adds to the challenge, from offshore plants and labor to outsourcing and political unrest. Supply chains, too, are more complex to manage. Companies not only buy more of their raw materials, components and design services from far-off third parties; they also rely on contractors to coordinate the movement of their goods.
Maintaining competitiveness and sustaining profits isn’t easy. When timing and quality control are paramount, manufacturers have to be able to plan, analyze and measure results across the enterprise.
Business intelligence and enterprise planning — the core capabilities of performance management — can help manufacturing organizations monitor operations, optimize processes and stay on top of market changes and opportunities, so they’re in a better position to manage both supply and demand.
Managing Internal and External Risk
In the interest of cost and competitive pressures, companies now depend on lean and highly outsourced supply chains to feed their operations. But have efficiency gains also brought higher risks? Many experts think so.
Organizations are still vulnerable to events or disruptions that impact their supply chains — everything from cross-border issues and labor unrest to natural disasters and fires, even bankruptcy. Soaring fuel prices today have had significant impact on manufacturers whose global supply chains are dependent on transporting goods across wide expanses in the quickest and most cost-effective manner. For those that depend on a single supplier, one disaster can bring business to a halt. On the other hand, having too many suppliers doesn’t guarantee immunity, either. Markets, too, punish companies that are hit by supply chain disruptions. In the short term, share prices can drop, and the effects may last longer.
Thankfully, there are ways to manage supply chain risks. One of the best strategies is gaining complete visibility across the chain, so you know where and when problems occur and can take informed action.
Connecting the Data
Transaction systems can help companies achieve this kind of visibility. But the trick here is integrating all the data sources up and down the line — from internal applications to data systems operated by each supplier, often dispersed across the globe.
ERP systems can’t provide this level of functionality. But business intelligence (BI) can. The scalable software leverages all the data and presents it consistently to highlight key issues, wherever they occur. And it provides answers while there is still time to act on them.
Business intelligence offers four core capabilities that help organizations more effectively manage supply chain risk:
- Dashboards and scorecards: These "single window" views provide highly visual information for monitoring supply chain operations. If performance falls into the red or exceeds a threshold, managers can access detailed information through supporting reports and analysis.
- Business event management: Supply chain managers receive e-mail alerts when a predetermined disruption or unusual event occurs, such as parts shortages or shipments at risk.
- Analysis: This capability allows managers to explore current issues or problems in the supply chain to understand what led to the results.
- Reporting: This capability provides up-to-the minute views on key supply chain areas that can be shared across portals and extranets.
With an effective BI system in place, manufacturers gain the information they need to focus on optimizing the supply chain, rather than worrying about when the next red flag will pop up. Consider how manufacturers are equipped to:
- Consolidate data from sales, inventory, purchasing and production systems to improve production planning, scheduling and delivery.
- Gain insight into key operational metrics from scorecards and dashboards.
- Monitor daily reports on under-performing departments, employees, machines and operations.
- Implement supplier scorecards and analyses.
- Identify sources of quality issues and take corrective action, prompted by defect analysis.
- Spot delivery variances as they emerge and find their causes and impact.
- Take immediate action when notified of late deliveries, demand changes, production stoppages and other important events.
The Next Step — Planning and Modeling
While business intelligence gives companies the information to take immediate action when something happens, enterprise planning lets organizations look ahead so they can be more proactive. In this case, it’s the value of what-if planning. Managers and suppliers use a collaborative platform to forecast and model the effects of different business scenarios. They can analyze things like operational trends or supplier performance and project them forward. If a worst-case event happens, people have the flexibility and contingency plans in place to reduce the impact of shortages or stoppages.
This is where the real value of performance management is felt. Capitalizing on the performance insights generated from their BI systems, manufacturers take the next step to optimizing the supply chain, generating accurate and effective supply and production plans that meet changing customer demand and business conditions. Then, by combining these plans with revenue, demand, promotion and supply metrics, management gains a complete view of the factors that can affect supply chain performance, making the necessary tweaks along the way to maximize operational efficiencies and keep costs in check.
The Safety Net for Supply Chains
When events happen, it pays to be prepared. Business intelligence and enterprise planning provide a complete view of supply chain indicators across all transaction systems. They help companies plan and respond effectively to keep the business on track no matter what happens up the line — a critical ability in the high-risk world of supply chain dynamics.
About the Author: Paul Hoy is global manufacturing industry director at Cognos, an IBM company. On the Web at www.cognos.com.