The Six Ps of the Extended Supply Chain #3

In this series, we've begun to describe the six P's that make up the modern extended supply chain and highlight how we leverage the Reveal oVo® Methodology to help companies using SAP to run their supply chains to transform them in the most optimal manner. In the first part of this three-part article series, we discussed the Produce and the Procure processes. In the second part, we looked at the Provide and Product return processes, and in this article, we will proceed to describe the details on Perform and Process.

What are the Six P's of the Supply Chain?

1. Procure: Procure-to-Pay for produced or stocked product
2. Produce: Make-to-Order, Make-to-Stock
3. Provide: Quote, Order-to-Cash. Third-party warehouse, warehouse or drop-ship fulfillment
4. Product Return: Return to vendor, warehouse, store
5. Perform: Execute the supply chain process -- people, process and technology
6. Process: Cross-process visibility and exception management

As mentioned, this article will focus on Perform and Process as it relates to extended supply chain management.

Perform

Perform covers the process of "execution." It brings requirements, regulations, and risks together, merging them with people and technology to make the supply chain work. This is a critical part of the whole supply chain process because it is where the rubber hits the road. This is the area where you ensure that all the other processes are performed according to their plan. This is the area that maintains a supply chain that is moving forward toward achieving the business goals set out by the company.

The key sub-process for the Perform process can be described as follows:

• Establish a Perform plan, based on prioritized requirements and resources.
• How will issues be uncovered and resolved? (Including maintenance schedules)
• Who do we need to run the various processes? (The people)
• How will we manage our assets?
• How do we manage our contracts? Do we have a process in place to evaluate performance against those contracts?
• Have we established the optimal Supply Chain Network through various modeling and simulation techniques?
• Have we adequately addressed compliance management in order to ensure regulatory compliance?
• How have we addressed risk mitigation?

When executing the Perform plan, we leverage People, Process, and Technology to drive the most effective execution possible.

• Issue Resolution: Ensure that the people across the entire process are able to raise issues and that they are then captured and carried out. Leverage the system to ensure that timely responses are being made.
• Maintenance: Follow the maintenance schedule, capture the details of the maintenance request in the system, and verify that the work has been executed accordingly.

• HR: Hiring the right people for the job is key to the success of the supply chain. Don't focus on "order takers;" focus on analysts who can research and find issues. Focus on people who can follow the process. Focus on people who are willing to leverage the system to capture, store and provide the needed data to make decisions against.

• Assets: Any supply chain involves many types of critical assets (e.g. machinery), and we need to make sure that these assets are leveraged to their full potential over the supply chain's lifespan. Ensuring a proper cleaning and maintenance schedule will help overall up-time for each piece of machinery. Ensure that you follow the proper process (done in the system) to decommission and dispose of assets that are no longer useful.

• Contracts: They play a vital role in ensuring a stable supply chain process and also play a key role in the overall profitability of the company. Negotiating the best contracts for the company is one thing, but ensuring that the suppliers adhere to those contracts are another thing. Storing and managing each contract in the system will allow the system to enforce the terms of each contract.

• Compliance and Risk: If you are unsure as to whether your supply chain is compliant or to what level it has risks, then it's time for an exercise to assess these two factors. Each company needs to stay on top with the ever-changing regulatory landscape pertaining to their particular industry. When it comes to risk management, you need to consider which events along the supply chain expose the company to a fair amount of risk, and then to quantify and evaluate them accordingly. Lastly, what will you do to mitigate these risks?

In accordance with our oVo® Methodology, and with reference to the Perform process diagram shown above, you can see that the process has three distinct major sub-processes:

1. Plan: If you fail to plan, you plan to fail. This covers all aspects of what is covered by "Perform," namely HR, assets, contracts, compliance, issues, etc.
2. Execute: According to the plan. Key master data elements here include the vendor master, lead times (transportation, staging, material availability). Let the system store contracts, assets, maintenance requests, HR, compliance for you, and you monitor and manage the exceptions.
3. Measure: Monitor the process to get the current status. Trigger an exception management process if a process deviation or opportunity has been uncovered. The exception management process helps to ensure improved total customer satisfaction because it minimizes an inability to execute according to our promise.

Process

The sixth and final P looks across all five P's that physically make up the supply chain.

Procure <-> Produce <-> Provide <-> Product Return <-> Perform</-></-></-></->

When looking at the supply chain, and especially an extended supply chain, the following key elements are needed to ensure that we have what it takes to manage it effectively:

• End-to-End Process Visibility
• Each individual process should have its own internal process-monitoring tools so that the folks working the process are aware of any issues that have arisen.
• Over and above these process-specific monitoring tools, there should also be end-to-end process visibility so that folks up-stream and down-stream of product flowing through the process can have visibility to its status.

• Having early visibility into potential issues in the supply chain goes a long way toward providing a good customer service experience. Think of each step in the supply chain as a transaction between a vendor and a customer. The customer will always appreciate any visibility into the status of his "order," regardless of what stage it is in. When combined with cross-function exception management, this becomes a game-changer.
• Cross-Function Exception Management
• When an issue in one process affects the ability to deliver according to the plan in another process, we need to manage this appropriately and effectively.
• SAP has the ability to associate issues from one process with other related processes. There are no "black holes" where someone was not aware of an issue that was affecting their order.

• Time-to-Insight is a measure between when an issue arises and when someone in the company is made aware of that issue. The idea is to reduce this time to as close to zero as possible. By leveraging the system, this is possible.

• Time-to-Action is a measure between when an issue is known and when it can be resolved. All issues take time to resolve, but the idea is to be able to provide all the needed information and resources to solving the issue as soon as the issue is found.

• When you are operating "Time-to-Insight" and "Time-to-Action" as efficiently as possible across the extended supply chain, then you have effectively gone a long way down "collapsing" the supply chain.

oVo® Methodology

• Analyze: Let the master data and the system drive the execution, leaving you to analyze the results to see if there are opportunities to improve.

• Adapt: Once you recognize areas of improvement, make the change.

• Sustain: Make sure the change is "sticky" -- Don't just put a check in the check-box, make sure that the adapted process is actually executed.

• Measure: Was the change effective? It's no good making a change if it didn't work, but how would you know if it didn't work if you didn't measure its impact? Put measurements in place before the change and measure before and after. Executives should be held accountable by measurements driven directly from the system (SAP).

Summary

To sum up, in order to effectively execute your SAP-based supply chain, you will need the following to work together:

1. People: The workforce needs to be educated/empowered to execute the needed supply chain process. Its focus needs to be on maintaining master data, business rules and ensuring that transactional "clutter" is not affecting the process.
2. Process: The process needs to be streamlined, while also ensuring that all the needed transactions and partner collaboration are in play. If the process has a "black hole," then the supply chain is susceptible to increased disruption. Zone in on tightening up that process.
3. Technology: Let your SAP system do the heavy lifting. People feed in the master data and set the rules, and SAP generates the needed orders at the right time, for the right quantity at the right location.