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Where Service Level is Set

November 10, 2009 by sapplanningadmin

In this article we discussed service level being set in a way that drives planning.

http://spplan.wordpress.com/2008/04/05/service-level-planning/

However, what we do not discuss in that post, is where the service level is set. We will cover this topic this post.

Setting Service Level

Service level can be set at different intersections. The following intersections are commonly asked for:

  1. At the product location
  2. At the group location
  3. At the product location customer
  4. At the group location customer

These are the most frequently requests areas to set service level. This is how supply planning typically understands service level, however, it is not the way that contract development interprets service level, and it is not actually how service levels are pertinent to customers. Customers do not think of a service level at a product location, but rather think of a service level in two different ways:

  1. The service level provided to them at all the locations that they consume items from the contract provider (can apply to both finished goods and to service parts)
  2. The availability or “uptime” of their equipment (applies exclusively to service parts)

This is a service level that is not the same as the internal service level goals that the contract provider sets at locations in their supply network.  To being this analysis, let us look at how the vast majority of supply chains setup service levels.

Service Level 1

Who Is The Ultimate Consumer of Service Level?

It is important to consider that the ultimate consumer of the service level is not the internal supply network, but is – to borrow an overused cliche- “at the end of the day” the customer. This brings up the problem of how service level contracts can flow through the supply chain in a way that positions the supply chain to meet these contracts. What is actually desired is a way to set service levels per contract and then to have software that allows the planner to “close their eyes” and decide the appropriate service level per customer product location. The graphic below describes what is the actual desired state of a company which is aiming for the ability to perform supply planning in a way that matches differentiated service levels.

Service Level 2

Harmonizing Systems for Service Level Planning

To often contract development uses one software application, and supply chain planning uses another system. The problem is that this disconnects planning from contract development, which means that sales can end up signing into contracts that are either not competitive, or which under-price the contract they are not aware of the fully loaded costs that they are committing to. Secondly, deprived of the service level planning system, contracts lacks the insight into the incremental costs of new customers.  This is because a new customer can not be considered in isolation, but must be considered in light of the incremental costs to the supply network. Contract development can then decide how they want to price this new business (either allocating full costs, or allocation incremental costs to the contract), however they are in a far better position if they know what it is.

Service Level 3

Contract Development as Customer of Supply Chain Planning and Vice Versa

In this way, the contract development department is a customer of supply chain planning in that planning provides them with up to date parameters and costs, while planning is a customer of contract development in that contract development provides them with service levels per contract. Planning uses a system which is active or production, while contract development uses essentially a copy of the system which is off-line, and run in simulation mode. This way contract development does not interfere with production. However, it is important that periodically the production system data overwrite the contract development instance so that contract development is working with a recent copy of “reality.” Any capable inventory optimization software has the ability to easily perform this copy, and it is a normal part of system’s maintenance.

simulation

Simulation is what allows multiple instances of a database to be created, and to inter-operate flexibly with the application logic. It is one of the great advantages of planning systems, although the full capabilities of simulation are very rarely tapped into by companies.

Does the Present Solution Include this Capability?

Very few software vendors have this capability, so what many businesses are doing is using terminology such as inventory optimization and multi-echelon management, but selecting software which cannot support this terminology. Secondly, many executives have no idea that software exists that can do this, so they miss out completely on being able to enable their businesses to operate in this way.

planning-group-interaction

Conclusion

A lot of companies need to evaluate their business goals if they include inventory optimization or service level planning, and spend more energy in determining if their present solution can meet these lofty goals. These two terms are very specific and are not simply more advanced forms of inventory management.

Posted in Service Level Planning, Service Parts Networks, Service Parts Planning Basics | Leave a Comment »

MultiEchelon Inventory Optimization Defined

November 2, 2009 by sapplanningadmin

 

MultiEchelon

Background

We have been spending time recently investigating service level planning. Along with the often comes the term “multi-echelon inventory optimization.” We wanted to define the term here, and we found a very good definition, or at least explanation from a white paper on the topic from Manhattan Associates. We find these terms are thrown around a lot without proper explanation of what they are. This paper explains at a deep level what the topic is. It takes a while to digest, but once you do, you will understand fully what multi-echelon optimization is.

Manh

Managing inventory in a multi-echelon network vs. a single echelon network presents major pitfalls. One is the failure to achieve true network inventory optimization because replenishment strategies are applied to one echelon without regard to its impact on the other echelons. A network view of inventory usage up and down the demand chain is absent when you are only dealing with a single echelon of locations.
The complexities of managing inventory increase significantly for a multi-echelon distribution network with multiple tiers of locations (i.e., a network comprising
a central warehouse and downstream customer-facing locations). All locations are under the internal control of a single enterprise. Instead of simply replenishing the
warehouse or the DCs that sit between your supplier and your end customers, as in the single-echelon situation, you also need to contend with the problems of replenishing another distribution point between your supplier and your DCs. For the purposes of this paper, we will refer to this additional distribution point as an RDC.
The objective of multi-echelon inventory management is to deliver the desired end customer service levels at minimum network inventory, with the inventory divided
among the various echelons.
Note: We use the terms “RDC” and “DC” to distinguish the entities in the separate echelons. For a manufacturer or wholesaler, the terms “hub” and “spoke” could be
equally applicable. For a retailer, the terms “central warehouse” and “store” might be relevant. For clarity, we will focus on the interaction between two echelons.
The logic is easily extended to more than two echelons through recursion. In addition, we will use the term “enterprise” to refer to the distribution entity as a single,
cohesive organization.

Managing inventory in a multi-echelon network vs. a single echelon network presents major pitfalls. One is the failure to achieve true network inventory optimization because replenishment strategies are applied to one echelon without regard to its impact on the other echelons. A network view of inventory usage up and down the demand chain is absent when you are only dealing with a single echelon of locations.

The complexities of managing inventory increase significantly for a multi-echelon distribution network with multiple tiers of locations (i.e., a network comprising

a central warehouse and downstream customer-facing locations). All locations are under the internal control of a single enterprise. Instead of simply replenishing the

warehouse or the DCs that sit between your supplier and your end customers, as in the single-echelon situation, you also need to contend with the problems of replenishing another distribution point between your supplier and your DCs. For the purposes of this paper, we will refer to this additional distribution point as an RDC.

The objective of multi-echelon inventory management is to deliver the desired end customer service levels at minimum network inventory, with the inventory divided among the various echelons.

Note: We use the terms “RDC” and “DC” to distinguish the entities in the separate echelons. For a manufacturer or wholesaler, the terms “hub” and “spoke” could be equally applicable. For a retailer, the terms “central warehouse” and “store” might be relevant. For clarity, we will focus on the interaction between two echelons. The logic is easily extended to more than two echelons through recursion. In addition, we will use the term “enterprise” to refer to the distribution entity as a single, cohesive organization. – Manhattan Associates

The Drivers for New and Moved Stock

Manhattan Associates sets up the following drivers in its example of what determines the decision to being in new stock at a product location.

  1. Demand
  2. Demand Variation
  3. Replenishment Frequency
  4. Order Supply Strategy
  5. Service Level Goas
  6. Inventory Position

Now Manhattan compares a non-multi echelon decision, with a multi-echelon decision, and notes that the multi-echelon decision is much more complex.

In this single-echelon situation, the lead times are between the DC and its external supplier. The enterprise’s order supply strategies depend on its internal cost factors—such as those associated with handling and carrying inventory—and the external supplier’s ordering constraints and bracket discounts. For this reason, the  replenishment quantities depend on a combination of  internal and external factors Managing Inventory in Multi-Echelon Networks Now consider the same product in a multi-echelon  network that includes an RDC between the suppliers and  the DCs. The same inventory drivers described in the preceding section apply for the SKU at the RDC location. However, some significant issues emerge: What is the proper measure of demand to the RDC, and how should this demand be forecasted?

  • How do you measure the demand variation into the RDC?
  • How does the trend toward larger orders from the RDC to the supplier affect the order supply strategy  for the RDC SKU?
  • What is the optimal service level goal between the  RDC and its “customers,” which are the DCs?
  • How do you factor the individual DCs’ inventory positions into the RDC replenishment decisions? – Manhattan and Associates

Aside from gaining a fuller understanding of the multi-echelon problem, this paper also focused our attention on the relationship between the RC and the DC.

Calvin B Lee PhD

In Calvin Lee’s paper Multi-Echelon Inventory Optimization he points out the following;  Managing inventory in a multi-echelon network vs. a single-echelon network presents major pitfalls. One is the failure to achieve true network inventory optimization, because replenishment strategies are applied to one echelon without regard to its impact on the other echelons. A network view of inventory usage up and down the demand chain is absent when you are only dealing with a single echelon of locations. Another pitfall is to base upper-echelon replenishment decisions on specious demand forecasts. These pitfalls can create substantial negative consequences, including the following: – Calvin B Lee PhD

What this Means and the Tests for True Multi-Echelon Optimization

Again and again what becomes apparent to us when evaluating this topic is that there are certain tests for whether software is actually approaching the multi-echelon problem in a multi-echelon way. Here are some of the tests:

  • Plan locations at different service level
  • Locations are tied together dynamically
  • Avoid forecasts at a location. Rather the top level forecast drives the inventory for all the locations
  • Order frequency is synchronized between the RDC(s) and DCs

Thus if the software is not doing this while it may face a multi-echelon problem, it is not solving it with multi-echelon capability. Instead they are solving the multi-echelon problem sequentially; solving the problem at one level in the network, then moving on to determine inventory levels at the next level. The levels in the supply network are treated as islands from one another.

Chain

The vast majority of planning software is treating the different levels, or echelons, in the supply network as independent islands from one another. However, this is not in fact representative of the reality of supply chains, and in this way software that models in this way is not realistic. Instead the locations should be managed as an integrated whole. Software that works in the old non-multi-echelon way is so common, and the author has worked in software that works in this limited way for so long, that he did not see the missing component regarding multi-echelon capability until just recently.

RDC to DC Lead Times

One of the giveaways whether the software is treating the lead times. That is the lead times between the DC and RDC need to change depending upon the stocking quantity, or the service level, at the RDC. Software that is not truly multi-echelon keeps the same static lead time no matter what the inventory held at the RDC.

MultiEchelon 2

One reason why this is important is that without adjusting this lead time, the RDC and DC are not actually pooling inventory, and autoadjusting for each other’s inventory positions. Furthermore, this creates a natural inclination to position inventory “closer to the customer,” or at the DC. Thus too much inventory ends up too far forward. This is the problem in many service supply chains such as automotive. It is a problem of particular concern for service supply chains, which need to make sure they keep expensive and or less frequently repaired items at the RDC, however, it is also a problem for finished goods supply chains. There is no supply chain which employs an intermediate storage facility (i.e. RDC) that can not benefit from multi-echelon capability.

Grouped Purchasing Also Poses a Multi-echelon Problem

Companies can still have multi-echelon problems even if there are no regional DCs. This is because of grouped purchasing which is performed in order to meet a quantity discount.

Multiechelon 3

Conclusion

So the question is who actually performs multi-echelon inventory optimization? That will be the topic of a future post.

References

Steve Wedel, MCA Solutions

Posted in Inventory Optimization, Manhattan Associates | Leave a Comment »

The Saturn Service Parts System

November 2, 2009 by sapplanningadmin


In the article Why Auto Service Parts Networks are a Mess,

http://spplan.org/2009/05/16/auto-service-part-networks-are-a-mess/

..we describe why automotive service parts networks are in such a terrible state. However, we recently were forwarded an article that described one service part network that appeared to be functional. It is with an auto company that was willing to try new ways of business, something that many other auto manufacturers and dealers have not been willing to do. As described in the article at Knowledge at Wharton..

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2366

GM dealers have always had to compete not just with other brands like Ford or Toyota, but also with one another. The competition created a boiler-room environment of price-haggling, which turned off many customers but thrilled others. Saturn, on the other hand, had a “no haggling” policy that it backed up with what may have been its most significant innovation: exclusive market areas for dealers. “That was the huge difference,” says Lokey. In a Saturn store, the sticker price was the final price. And Saturn retailers could confidently adhere to the policy because they knew the customer wasn’t going to find the same new car for $100 less a few blocks or miles away.
The exclusive market areas combined with the efficient parts supply chain also allowed Saturn dealers to pay the same price for repair parts. Other GM dealers had to compete with one another to keep their supply bins full, and they often had to buy parts from their rivals. At Saturn, the bins were almost always stocked thanks to a computerized system that automatically sent orders to a distribution center.

What this indicates is that beyond creating a multi-echelon system (where stocking decisions are shared using true multi-echelon software) a number of other factors such as how dealers are placed into competition with one another is also important. However, the system relied upon inventory pooling between dealers and the automotive company regional warehouse. This lead to a service part turn-over of on average more than 7 times year (which is quite high for service parts).

The design of the system is explained below from the article in the Sloan Management Review Saturn’s Supply Chain Innovation: High Value in After Sales Service:

Retailers review Saturn target level recommendations at the end of each day, then Saturn automatically replenishes to the agreed on target level. Replenishment orders are received at the central distribution center and are shipped out according to the delivery schedule, leading to a three a shorter response time if the ordered part is in stock at the DC. Otherwise the part is either put on back order or sourced from the production inventory stock. Note that a pull system such as Saturn’s is based on target levels. Using one for one replenishment means that Saturn does not position inventory in advance based upon forecast consumption. The shipped part also is replaced automatically within 3 days (assuming avilability at the DC). Saturn essentially tells retailers what to stock. If a part does not sell after nine months, Saturn takes it bac kdn repays the retailer. Each retailer (dealer) inventory system is linked directly to Saturn management system.

What is happening here is what few automotive companies use, a centralized service parts planning system. However as described by this article from Sloan Management.

Although central inventory resources can be shared, companies often make planning decisions for retail locations independently, looking at forecasts of local demand and lead times from the central depot or suppliers.

Unfortunately, this parts system, which was recommended by Morris Cohen and Hau Lee, is at risk as Saturn is looking for a buyer, and their possible arrangement with Penske has fallen through. Saturn owners will now be serviced by GM dealerships, which is definitely not what Saturn owners bargained for when they purchased a Saturn. They will now have to work with a considerably lower capability service network.

It unfortunate because the Saturn system, if it persisted, could be extensively studied and perhaps copied. Currently, this is not very much written on the Saturn system, and if Saturn dies or dissipates, there will be less opportunity to gain insight into what they did that made them so different.

References

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2366

http://sloanreview.mit.edu/the-magazine/articles/2000/summer/4147/saturns-supplychain-innovation-high-value-in-aftersales-service/


Posted in Service Level Planning, Service Parts Networks | Leave a Comment »

Why Is Optiant So Secretive?

October 24, 2009 by sapplanningadmin



The vast majority of software companies that say they can do inventory optimization, can not. Recently inventory optimization has become a hot buzzword (or buzzterm as the case would be), however many software companies have been quicker to update their sales literature than their application functionality. Second, inventory optimization is different for a program that is simply designed for inventory management because the basic design of the software must be altered.

Optiant

We have become interested in finding which vendors are actually capable of inventory optimization. We know that SAP SCM cannot, and we know that MCA can. However, other companies such as SmartOps and Optiant we are not sure about. The first place we visited with the Optiant website, however, aside from a high level paper on inventory optimization, there is nothing specific about the software, how it works, in fact nothing more than its name. So we contacted Optiant, and the response we got was disconcerting. Essentially, they refused to share any information about their solution unless we gave them the name of a “specific client,” and we signed an NDA. We responded that we were willing to sign an NDA, and then, we never received a response to our first query and had to send a follow up. As as an independent consultant, this puts a person in a difficult situation. You only want to share vendors with your client that you understand how their software works, meanwhile, a company like Optiant takes the strange position that they have not interest in sharing any information — even basic high level information, about how their solution works unless you first give them the client name. Furthermore, they have not placed any documents on their website that explains how their solution works (note: their high level documents, do not go beyond high level theoretical concepts.”

Where Is the Evidence?

The only evidence we have that Optiant has a working solution is from some press releases regarding some clients such as Hershey, however, press releases don’t replace explanatory documentation, much less screen shots and other documented explanations of how a solution works. Another source we were recommended to seek out was AMR, the company that has an abysmal history of figuring out which technology is for real, and which isn’t (AMR missed on i2 TradeMatrix, promoted the “marketplace” bubble in late 90’s, and got behind SAP Netweaver, a technology which many years after its introduction, seems not to exist outside of marketing literature.)

History of Secrecy

We can’t speak to Optiant’s solution, because we can’t get any information about it. We find it hypocritical because Optiant’s solution is based upon no doubt published academic research. It seems with a number of companies information sharing is just a one way street, they are perfectly happy to take from the public domain, but then after they incorporate it into software, they declare it “proprietary” and like to pretend they invented it. This is similar to pharmaceutical companies that take billions in pharma research for free from the NIH, but then claim all the financial benefits from discoveries. See this post for details on this topic.

http://counterecon.com/2009/08/24/efficiency-of-pharmaceutical-industry/

If I followed Optiant’s approach, I would share no knowledge, and not publish any of my blogs, under the concept that only those who can pay deserved any knowledge. This perspective, and what is doing to the US’s ability to product intellectual property is clearly explained by the excellent book Gridlock Economy.

Gridlock Economy

This book describes a tendency to section off the public domain which if unchecked in the coming decades is going to undermine an information sharing culture (of which the university research publication is an exemplar) in the US that took decades to develop.

Secrecy is a bad practice. As an aside, an investigation was done into decades of items that were “classified,” by the US government. The results of the research is that less than 10% of the time were the items classified actually related to national security. The rest, and vast majority of the time, the classified status what simply a way to cover up information that protected those in the administration, that is illegally restricting the public’s right to know.

So yes, we are skeptical whenever we see unnecessary secrecy in any area, and software is no different.


Posted in Inventory Optimization, Service Level Planning | Leave a Comment »

Inventory Optimization or Service Level Planning?

October 2, 2009 by sapplanningadmin

Terminology

Terminology and the shared understanding of it is quite important. We were once told by an individual that they did not want to “quibble” between the concept of a forward stocking location vs. a service parts planned location. Of course the issue is these are two different things. This article is about the confusion we see with respect to the term “inventory optimization.”

What is Inventory Optimization?

Inventory optimization has a very specific term with a specific meaning.  We quote Peter Clarke,  Chief Technology Officer for IBS Asia Pacific:

This is a complex procedure. You will need a system that will accurately and quickly produce exception reports for review and auto-adjust for variances across a large number of products. It should calculate proper safety stock levels, determine economic order and best discount quantities. It will automatically get the right products to maximise line buy minimums. And, importantly, it should provide complete visibility of changes throughout the supply chain, from manufacturing through to end consumer.
This will allow you to make quick reactions to changes in the supply and demand, service your customers in pre-determined priority sequences, set service levels based on sound financial judgment, invest in inventory that will maximise returns and analyse and react to exceptions and reduce dead inventory.
The result is a fully – or at the very least largely – automated system that reacts to changes in the operating environment using pre-set priorities and data. This will help you make clear decisions rather than confuse you with complexity.

This is a complex procedure. You will need a system that will accurately and quickly produce exception reports for review and auto-adjust for variances across a large number of products. It should calculate proper safety stock levels, determine economic order and best discount quantities. It will automatically get the right products to maximise line buy minimums. And, importantly, it should provide complete visibility of changes throughout the supply chain, from manufacturing through to end consumer.

This will allow you to make quick reactions to changes in the supply and demand, service your customers in pre-determined priority sequences, set service levels based on sound financial judgment, invest in inventory that will maximise returns and analyse and react to exceptions and reduce dead inventory.

The result is a fully – or at the very least largely – automated system that reacts to changes in the operating environment using pre-set priorities and data. This will help you make clear decisions rather than confuse you with complexity. - This is a complex procedure. You will need a system that will accurately and quickly produce exception reports for review and auto-adjust for variances across a large number of products. It should calculate proper safety stock levels, determine economic order and best discount quantities. It will automatically get the right products to maximise line buy minimums. And, importantly, it should provide complete visibility of changes throughout the supply chain, from manufacturing through to end consumer. - Peter Clarke

Why Use the Term Service Level Planning?

As we discuss in this post, the term inventory optimization has been “generalized” to mean basically any inventory method which improves inventory.

http://spplan.wordpress.com/2008/04/05/service-level-planning/

One open question, to us at least, is what is “inventory optimization” generally going to be accepted to mean. If inventory optimization is, as the SAP Press book Inventory Optimization with SAP, going to simply mean using techniques such as safety stock or optimal lot sizing, then perhaps a more approachable term might be “service level planning.” This is a term we have begun to use with frequency, and which we think is less prone to misinterpretation than “inventory optimization.” Software vendors have done as much to dilute the term as management consultants in that many have re-branded old fashioned inventory management functionality as “inventory optimization.” In a way no one wants to be in the “inventory management” solution business anymore, (its so 90s) rather inventory optimization is that much more exciting. Whether the functionality is actually capable of performing optimization, is somewhat of an afterthought to a number of supply chain vendors.

The Broadest View of Service Level Planning

No term is perfect. For instance, when we discuss service level planning, the next question to arise is “service level according to whom?” In our view the only way service level planning makes sense is if the service level is driven directly back from the contract development organization, and that the service level has buy-in, literally, from the customer base. The planning organization needs to drive to the service level that the customer is willing to pay for. Please excuse us while we reuse a graphic from an earlier post on the relationship between the planning and contract development organization.

Planning Group Interaction

Meeting the Service Level the Customer is Willing to Pay For

One of the questions that is often raised within planning organizations is:

How should we be measuring our service levels…should it be at the line item level or at the order level?

In a way these discussions are not that relevant. The question should be:

What are our customer’s expections on service level and how would they measure them, and or (if the company has moved to service based contracts) what do our contracts stipulate?

The planning, and by extension the planning organization, should not over or under invest in the ability to deliver in a way that does not match the customer contract. Too many companies promise high, and deliver low, because this essential connection between sales and operations is simply not there, and they do not both speak in the language of the contract with the customer. The concept of S&OP has around for some time and almost universally lauded as the right thing to do. However, if the outward facing portion of the company is still so disconnected from the operations and delivery side, then how well can S&OP really be being done? At many if not most US companies rather than equal partners, sales simply tells operations what to do. If operations does not like it……well there is always the opportunity to post one’s resume on Monster on HotJobs. Its hard to have an integrated planning process when the delivery and customer facing organizations have completely different organizational incentives, and are simply not political equals.

Gaining Alignment

Part of the solution to this is technological. Not enough companies know exactly, (or even roughly) what providing different levels of customer service means in terms of costs, and thus can not present a “menu of options” to their customers which allow them to intelligently pick the service level they like, depending upon their willingness to pay. That is the technology part, and not enough companies seem to understand that solutions exist out there to do precisely that (as well as drive the contractual service obligations all the way through the planning process). The second part is cultural and organizational in nature, and that must be addressed through other methods.


Posted in Inventory Optimization, Service Level Planning | Leave a Comment »

Service Level Planning, SOP and Planning Group Interactions

September 22, 2009 by sapplanningadmin

SOP vs. Global Service Level Planning

The most commonly discussed method of trading off inventory and or manufacturing investments has been S&OP or Sales and Operations Planning. There are many forms of SOP as the technique is not well standardized and actually lightly implemented. The real SOP in American firms consists of sales and finance simply telling operations and planning what to do as they are politically more powerful. Japan on the other hand tends to have a more functional relationship between operations, finance and sales.

Whither SOP vs. Strategic Planning?

SOP is the type of function that tends be unbounded. For instance if making a decision to in response to a closing factory is part of the SOP process, then is making the adjustments to the demand plan, or to the supply constraints (through adding more capacity or inventory dollars) part of SOP? If it is then when does it begin to become strategic planning?

Incorporating Service Level Planning

However, SOP can be viewed as a much less mathematical, and higher level attempt to deploy financial resources to support operations. Here a technique designed for service contracts, service level planning simulation can be incorporated, however, it is often not. The question should be asked, why can not service level planning be incorporated into the SOP process? One of the necessary, or at least highly beneficial features is to have a data exchange relationship between the contract and pricing group (and possibly SOP) and the planning group. The planning group passes inventory costs and the supply network master data to the contract and pricing group, and the contract and pricing group passes service levels at a product location back to the planning group.

Planning Group Interaction

As a general statement, if service level planning is desired, then similar tools need to migrate to the groups that create contracts and a strong interaction must be built between planning groups (and systems) and contract development groups.

Several questions arise from this:

  1. Why is global service level planning not more broadly applied to finished goods planning?
  2. Why is global service level planning not better understood in terms of its elegance as a solution and its implications, outside of service parts planning?

How SOP Works in Practice

In over 28 clients, we have never seen a company that actually performed S&OP in any way that we have seen described in books. You can see more on our discussion on S&OP here.

http://spplan.wordpress.com/2009/05/16/apics-is-not-reality-based/

Posted in Service Level Planning | 1 Comment »

Using Box.net for Service Information

July 31, 2009 by sapplanningadmin

Information Management

We maintain a separate blog dedicated to information management. On this blog we have written about a service that is set to change file management as currently practiced.

http://infoknowledge.wordpress.com/2009/06/15/data-management-easier-on-the-web/

There are many implications to file management for Box.net, however the one we want to discuss here is the capability with respect to service parts information.

Box.net

Box.net allows you to easily keep documents, and then to link these documents to web pages and to send these links through email. Service parts have many files such as specifications or user manuals. The question is how to best manage these documents. Our previous idea was to simply integrate the documents into the actual web page. See an example at our Service Parts Portal website.

http://www.servicepartsportal.com/?page_id=255

However, now we are not so sure that this is the best approach. A better approach may be to host the files at Box.net and then simply profile links to the page that lead to Box.net. Box.net has an excellent interface for managing large numbers of files, in fact we think it currently the best on the web. Systems like SAP and others are trying to maintain the content in a central repository, the fact is ERP systems are not very good at this.

Posted in Service Parts Database | Leave a Comment »

Service Parts Management by Haliburton in Iraq Beyond Belief

July 25, 2009 by sapplanningadmin

IOS

A License to Steal

The behavior of Haliburton regarding service management and planning, as documented in the move Iraq for Sale, in Iraq is shocking.

This movie shows Haliburton and KBR deliberately not repairing items in order to charge the government for purchasing new items. This is because of how the contract with the government is structured. It is cost plus, and therefore, Haliburton and KBR have every incentive to increase the cost, as their profits increase in a linear fashion. Secondly, neither Haliburton nor KBR appear to have any business ethics, and therefore, they are doing what they can to increase the costs as much as possible. There are many examples, but one that really resonates is the fact that Haliburton will have semi-tractor trucks that break down on the side of the road in Iraq because they either do not change the oil, or check the tires, or even order or stock spare tires. When this happens, Haliburton sets fire to the truck, destroying them (so the insurgents can’t use it.) They then charge the government for a new truck, plus their cost plus margin. That Halibutron is simply destroying large capital equipment items is amazing, but it is supported by multiple sources. Another form of fraud is related to how equipment is leased, but that gets into a divergent area of malfeasance.

Service Parts and Maintenance: Making the Effort Service

Organizations and service parts management are in a poor state in the US. The official explanation for this is the philosophy of neglect. The standard The line of reasoning goes something like this:

“Companies want to improve in service parts planning because its good for their customers, the only issue is an issue of education.”

For some time, we personally believed this. However, the Haliburton example demonstrates this is not always the case. Other examples of service incapability are stretching the credibility of the lack of education argument. If Haliburton can charge the government $90,000 + its cost plus contract for a new truck, they would rather do that then charge the government for a new tire. When will this change? No time soon. The Pentagon is now highly dependent upon Haliburton and KBR for all types of essential functions. Secondly, they continue to contribute mighty to the political process and have hired a number of influential ex-Pentagon officials, that mean Haliburton will continue to get contracts into the foreseeable future. This is an example of two companies that operate in this manner. However, there are more. The assumption that every company cares about service parts needs to questioned in light of their institutional incentives. if a company can make more forcing a customer to buy a new product, they may prefer this over servicing an old item. More than likely some company representatives will read this post and question whether its anti-business and whether a blog like this should just focus on “the positives” of service parts and maintenance. That opinion is simply doctrinal and does not have much validity outside of the confines of a corporate PR meeting. If service management is to be understood then its underlying assumptions must be questioned. It also helps determine what companies and areas to focus upon. For instance, if I were a consulting or service software company I would not bother offering consulting or software services to Haliburton in Iraq. Lets just say, they prefer to buy new….or in fact for the taxpayer to buy new. The whole movie may be seen here. Its a few years old now, but not much has changed, so it is still quite valid.

http://video.google.com/videoplay?docid=-6621486727392146155

References

http://www.publicintegrity.org/projects/entry/297/bio.aspx

Posted in Bad Service Maintenance Companies | Tagged | Leave a Comment »

Accenture Writes a Horrible Paper on Service Management

July 9, 2009 by sapplanningadmin


Who is writing Accenture’s white papers?

Articles can be motivated by inspiration, or frustration. Neither motivation is more or less valid than the other. This post is definitely motivated by the later. We thought we might learn something by reading a white paper on service management that was produced by Accenture back in 2003. Guess again. Nine pages of content free PDF later, and what felt like the equivalent of a literary Diet Pepsi, we learned the following:

  1. Accenture is focused on service management
  2. Saturn is focused on service parts
  3. There are software companies that focus on service parts
  4. Accenture has a nice graphics department

Any Information in That White Paper Partner?

 

Is there an interest in actually communicating any information in white papers or are they purely promotional items to Accenture? This phenomena is not restricted to Accenture, there is simply too much promotional literature that is disguised as white papers. The promotional white paper format goes something like this:

  1. Come up with white paper title
  2. Create a beautiful cover page
  3. List two partners on the second page
  4. Come up with a few examples of companies that are doing something similar to what the white paper is discussing
  5. Talk about how technology is important (when isn’t it?)
  6. Put a few graphics in the white paper, the simple the better (three circles is apparently white paper nirvana)
  7. List the obligatory 30% improvement in whatever (30% seems to be the magic number — all improvements return 30%)
  8. List contact details

Material for Retarded Executives?

Really, how simple minded are executives that would contact a consulting or software firm that publishes such brochure ware? For instance, what we learned from Accenture’s white paper is that Accenture either knows extremely little about service parts, or did not leverage any of its external expertise on the topic. If I were an executive I would not be overly interested in having Accenture come and visit my service organization, since a quality white paper on the topic is apparently beyond them.

Sell Sell Sell

Everyone wants to sell business, but the implied agreement is that white papers are actually going to contain information. Accurate information is even better.  For those consulting companies looking to learn how to write a white paper, check out the Ciber website and see how its done. (BTW, we have no affiliation with Ciber, we just like their documentation.) Here is Accenture’s promotional brochure…err, we mean white paper. http://www.accenture.com/NR/rdonlyres/6BBEC529-3EE0-491F-B6BF-A19F2750E6EB/0/profit_after_sales.pdf

Posted in Basic Supply Chain Concepts | Tagged | Leave a Comment »

Showing Parts Connections Online

July 5, 2009 by sapplanningadmin

Dell’s Website and Intel Linkage

Something we found interesting while writing an article on assembly to order in SAP SCM and Dell.

http://sapplanning.wordpress.com/2009/07/04/assemble-to-order-and-dell-and-apple/

We were on the Dell website, when we noticed they have a link to the right that states:

“Compare processors to find what’s the best for you.”

Here is the site, notice the orange circle to the right under livechat.

Dell Intel 1

Where the Link Goes

What we found interesting about this was that the link takes you to Intel’s site, where an explanation is laid out for the consumer between the different microprocessors Intel offers in Dell models.

Intel

Who Benefits?

What is even more interesting about this is how Dell benefits. First, they provide valuable information to their consumers. Second, they no longer have to maintain information on their own site about a product that they do not make. We could see links like this for all the components. What this does is demonstrate and make transparent the contribution of suppliers to the end manufactured product.

Extending the Concept to Service Management

This concept can be extended to service parts management. For instance, if a hard drive needs to be repaired, or a microprocessor needs to be switched out, it is the supplier, not the assembly firm (in this case Dell) that has the intellectual property and knowledge of the components. Too often the main brand that performs final assembly has attempted to both present the concept that they “manufactured” the entire item, and that they were the specialists in servicing subcompontents that they did not manufacturer. The web provides the ability to show the interconnections with suppliers that made the sub-components and to integrate product and service information in a way that has not been done before. Manuals in the future would be both on-line and integrated. Thus the overall guide to say…the Dell Inspiron 14 could be partially on Dell’s website, but then integrated with Intel’s and Western Digital’s and Corsair’s (etc..) websites. This is all accomplished through linking. Furthermore, each supplier only need write the manual and guide for its components once, and this can be linked to by Apple, Dell, and any other manufacturer that uses that component in their products. This both reduces the costs of maintaining this information, and improves its quality.

Posted in Service Parts Database | Tagged , | Leave a Comment »

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