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

New Information

In a previous post we wrote about the inefficiency of automotive service parts networks.

http://spplan.wordpress.com/2009/05/15/auto-service-part-networks-are-a-mess/

The line of reasoning of the article was that manufacturers were unnecessarily outsourcing the management of service parts too low in the supply chain – at the dealer level and the auto service parts could be greatly improved in their management through a national and regional system of service parts management. Furthermore, that dealers were incapable of creating effective service parts websites and that this function should be centralized as well.

Structure of Auto Industry

What we learned from the book Who Really Made Your Car, by Thomas H Klier and James Rubenstein, is the following:

• 70% of the parts of automobiles are made by suppliers
• Manufacturers are actually now primarily assemblers
• Much of the intellectual property and complex component manufacturing is owned and provided by the supplier / component manufacturers

Suppliers Actually “Make” the Car

Suppliers are producing most of the car and providing many different manufacturers with similar items. This is explained in the graphic below which provides a great insight into the many different places that the car’s major components are coming from. The sourcing pattern seems identical to, although far more complex than that of laptop manufacturers. (although laptop manufacturing is even more outsourced, with contract manufacturers producing HP and a number of other major brands out of the same factory and sometimes the same production line.

From Automotive Weekly

We took the example of one vendor called Dura. A visit to their website demonstrates that they make numerous automotive components, which they sell to many different manufacturers.

Dura’s Part Distribution Model

Dura does not sell parts directly to retail customers, but they do to dealers and independent shops. (however, dealers do have a stranglehold on the industry, and many parts are carried only by dealers) This is one of a number of areas where business are opposed to “free markets,” and instead select tying agreements and monopolistic competition.

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Why Doesn’t eBay Own the Auto Aftermarket?

eBay is the largest service parts database in the world. However, for some reason, eBay is not prominent in automotive service parts. The fact that automotive service parts are expensive, yet only a modest service part market has developed on eBay is an indication that there are significant restrictions to who can get access to parts, and that there are in all likely strong restrictions on part suppliers, as part of their agreements with manufacturers as to who they may sell parts to in the aftermarket. No such restriction exists for computer components, where anything can be found and purchased on eBay.

Even the most esoteric service parts for computers are available at low cost on eBay. For more on eBay and their success in service parts see the link below.

http://spplan.wordpress.com/2007/07/22/parts-databases-and-ebay/

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What This Means For Service Parts Network Design

What this means is that the dealer system for distribution is even less efficient then we originally thought. People are going to dealers to get parts they think are made by manufacturers (Honda, Toyota, etc.), that are actually made by suppliers. All of these middlemen could be eliminated from the system and actually should be. These suppliers are the creators of these components and they should not be controlled by manufacturers, much less have to go through dealers – so dealers or independent repair shops can add an extra markup with no value add – to service parts.

References

Who Really Made Your Car,Thomas H Klier and James Rubenstein, W. E. Upj0hn Institute, 2008

The first time we heard of Target Stocking Level was on an MCA project. This is the actual output of the Strategy module of MCA SPO. We have listed a short definition from MCA’s SPO Glossary.

“TSL is the quantity available to meet demand within the lead time and thus becomes the basis for computing the customer service levels. The TSL for each Location part is determined on the impact of what the TSL will have on the service level.” – MCA Glossary

TSL in Common Usage

A search through the web shows that this term is not very common. However, it is not hard to find it listed in books through Google Book Search.

We found a formula for it in the book Best Practices in Inventory Management by Tony Wild which we have listed below.

TSL in SAP

We had never run into the concept of TSLs in SAP until we did a search for it in SAP Help. We found it in the following area:

• SAP ERP SOP
• SAP ERP – The concept exists as a “range” within purchasing
• SAP SCM Forecasting and Replenishment
• SAP SCM SNP

TSL in Dead Modules or Functionality

Interestingly, of the four areas we found it, two of the areas – SOP and SAP Forecasting and Replenishment are “dead” areas within SAP, in that they are only extremely rarely implemented in companies (see our next post for more details). The range concept of TSL in purchasing is infrequently implemented and instead the vast majority of clients we would guess use the requirements plus lot size to drive replenishment.

TSL in SNC

The one area where TSL is both used and used in a module that is actually alive is in Supply Network Collaboration or SNC. Interestingly, it is not called a TSL but instead is called minimum and maximum stock levels. We quote from the book Supplier Collaboration with SAP SNC..

“The projected stock and actual stock on hand are compared with the minimum and maximum stock levels agreed upon by customer and supplier for a location product. If the threshold values are not reached, or are exceeded, alerts are generated.” – Mohamed Hamedy and Antia Leitz

SNC is not a planning engine like SAP SNP or MCA SPO. Instead it is a collaborative software add-on to SAP SCM that communicates, in this case, inventory information between SAP SNC (in most cases) and suppliers or customers. Most likely SNP (Supply Network Planning) is producing the TSL range, while SNC is gathering actual inventory levels, and then comparing the two to send our requests for bringing in more inventory on specific dates.

Conclusion

Target stocking level is not yet a common term in industry, but does have a number books which both cover it and work with the concept. The concept is a powerful one in that is manifests all of the complex inputs of stock determination into a single number, or a number range. This number(s) can be then compared to actual stock values, in order to develop stock transfers, unserviceable item repairs (for service parts) or can be communicated to suppliers or customers using a collaboration tool like SAP SNC.

It is always amazing to come upon a technology that is so amazingly underutilized. This would be the case for service parts online databases.

The Story

We needed a door handle assembly part for a 1997 Honda Accord. First we started with eBay, which really had a pretty small inventory. We could only find the door handle assembly for a four door, not for a two door. This was a dealer only item. The trouble began when we started looking through dealer websites for the item. The experience began to get us thinking that the dealer value-add is seriously in question. Dealers are not necessary to buy cars (they could be bought online, but tested at a manufacturer sponsored center in a mall that had just a few models). The care could then be either transshipped from a different location, or simply build to order. However, instead of this we have this medieval auto dealer system that holds massive amounts of inventory so buyers will make impulse purchases “that day.”

Service Databases

When looking through the websites of dealers, it was absolutely maddening to try to navigate them. Most the sites are caught in a time warp and exhibit the worst of web navigation and design. Some of them ask for contact information so they can treat the desire to purchase parts as a “lead.”

San Francisco Honda, like 99% of the dealerships, seem to seriously misunderstand what the web can do, and how it can help automate transactions. Now we will be calling to the dealer, just like we would have back in 1940.

Why Has Online Parts Supply Demand Matching Been Decentralized to Dealers?

Why does Honda allow dealers, who lack the interest or size to develop competent transactional websites to sell auto-parts on-line? Why are Honda, and other major manufacturers, not managing this with a single website and a national network. It appears as if the dealer network (a way for manufacturers to sell franchises and not have to worry about retail, is interfering with the new realities and efficiencies of the web. Automobiles may have to be serviced locally, but there is no reason, with our fast shipping network, for parts to be managed at dealer locations. And especially when a customer wants to order a part, there is absolutely no reason they should have to a dealer to do so.

Its does not have to be this way. The fulfillment could be performed by dealers, but Honda could manage the front-end, much like Amazon.com.

Learning from Amazon.com

The lesson from Amazon is that the web based supply demand matching no longer needs to be performed by the same organization that performs fulfillment. See this article on Amazon.com and how they serve as a supply demand matcher.

http://sapplanning.wordpress.com/2009/05/07/gatp-atp-trees-and-amazon-com/

IT and Monitoring Competence and Fourth Party Logistics Providers

The concept of multi-partner coordination enabled by monitoring tools is a concept in logistics called fourth party logistics and is covered in this post.

http://fourthpartylogistics.wordpress.com/2009/05/23/fourth-party-logistics-providers/

It’s a sad fact that there is simply not a lot of thinking going on in the management of service parts.