What's your mobility index? Mobile devices seem to be ubiquitous these days. So it's not surprising to hear all the talk about mobility in the supply chain. But what's the real potential of mobility in the key supply chain processes. And what's the best way to identify and tap that potential? Carefully determining your "Mobility Index" will go a long way toward answering these questions.
Yet as I read the material provided, it became less and less clear how the deployment would drive business value in the core or extended supply chain for users. Was the benefit derived from receiving the information on a device that you could carry at all times? Or was the value in being able to understand the information as you made another mad dash to the next customer? Maybe it was the ability to change your business processes in the supply chain to enable better execution? Or was this just an IT-driven exercise that would involve millions of dollars spent in delivering static old information on the go?
Despite my lack of clarity over the promised benefits, the CEO was certainly on to something. A recent study by ARC Advisory Group of supply chain executives showed that 69 percent were using smart phones as mobile technologies in their daily operations. Twenty-two percent said they were using their phones to scan bar codes and another 22 percent said they were using the devices to take pictures of receipts at the dock.
In fact, mobile devices, smart phones, iPads, "iEverythings" seem to have taken over our worlds. In the supply chain context, some of the promised benefits of mobility focus on potential reductions in freight and labor costs, better decision making via enhanced information sharing, and improved customer and consumer service levels thanks to the real-time responsiveness delivered via mobile capabilities. Mobility essentially enables the supply chain person to do his or her job anywhere or anytime
Yet we believe that not all companies will benefit from mobility in the same way. In this article, we offer an approach for determining the impact that mobility (or "M") will have on an organization. This approach is based on an analysis of business type and on the relative importance of mobility to the value chain "mega" processes--i.e., Plan, Buy, Make, Move, and Sell/Serve, which we derive from the Supply Chain Council's SCOR (Supply Chain Operations Reference) model. Readers can use the resulting framework to gauge their Mobility Index, which can be used to determine how beneficial mobility can be for their supply chain.
Four Steps to the M Calculation
We suggest the following four steps to help you derive the M index calculation that is relevant for your business:
1. Identify your business segment according to its main operating principles: Make to Stock; Build to Order; Assemble to Order; Grow to Market.
2. Determine the relative importance of the supply chain mega processes--Plan, Buy, Make, Move, Sell/ Serve--to your business.
3. Gauge the relative importance of mobility for each of these processes.
4. Derive the "M" (mobility) index for your business segment by analyzing the results of steps 2 and 3.
We discuss each step in detail below.
Step 1: Identify Your Business Segment
While thinking through the applicability of M to your business, you first need to examine the fundamentals of the business strategy that characterize your business/ industry. Most manufacturing industries and businesses can be segmented into one (or in some cases a hybrid) of the following four segments:
* Make to Stock (MTS)--typically associated with consumer products, electronics, chemicals, health care (pharmaceuticals), automotive.
* Build to Order (BTO)--industries include construction, heavy manufacturing, aerospace and defense.
* Assemble to Order (ATO)--associated with high technology (hardware) and semi-conductor.
* Grow to Market (G2M)--agriculture is the main industry here.
Every manufacturing-oriented business tends to fall into one of the above classifications in terms of getting product to market. In some cases, individual business units within an organization may fall into different segments. The degree of responsiveness required in the extended supply chain tends to vary by business segment. For instance, the faster the time-to-market and less stock buffer, the higher is the degree of responsiveness that can be absorbed/utilized in the business. Also, we find that the main business processes are fairly homogeneous across all segments--that is, Plan, Make, Move, etc., all tend to accomplish the same end objective. The main difference is the relative importance of each process, which is driven by the business model of the particular segment.
Steps 2: Determine Relative Importance of Mega Processes to Your Segment
Step 3: Determine Relative Importance of Mobility for Each Process
We discuss Steps 2 and 3 together because of the close linkage of the mega processes and the importance of each process to each business segment. To guide our discussion, we use the supply chain process framework shown in Exhibit 1. Identifying the relative importance of each process to your business segment and the relative importance of M to each process are the essential steps in determining your company's Mobility Index.
Plan: The planning function can be categorized into constructs around demand, supply, manufacturing, and distribution. This categorization of sub-processes requiring planning holds true regardless of the industry type, though the complexity will vary depending upon the business segment (MTS, BTO, and so on). We have found that in all of the segments there is an inherent process latency that is built into planning (one exception being real-time order promising). In many cases this latency varies between weekly and monthly (such as in the case of most MTS, ATO, and BTO environments). In some instances daily planning is necessary. However, the decisions made for that timeframe tend to be focused more on the rapid follow-through and execution of decisions made prior to the daily decision-making. Hence, the process latency should be used as a major indicator of the benefits that can be derived from utilizing and accessing data via mobile means.
In most cases of planning, we believe that mobility usage would focus largely on accessing data across platforms and locations as opposed to using the data to drive further responsiveness in the value chain. The exception to this rule would be in the order promising constructs in which the utilization of mobility (in terms of data accessibility and portability) would make the supply chain more agile while potentially lessening the latency in the value chain for that date-promising process. However, we should also note that data accessibility and portability will always come at an additional cost for IT infrastructure. Accordingly, the added cost should always be traded off against the purported benefit (more on that in a later section).
Buy: This function in every supply chain deals with the sub-processes involved in procuring the goods and services required for a company to perform its core business. For the purpose of this article, we can partition the function into its major processes of strategic sourcing, P2P (procure to pay) transactional support, and monitoring for compliance.
Strategic sourcing is the Buy sub-process in which a company balances its spend management for key products and services so as to continually improve baseline price and performance. This is often done via vendor rationalization or a material source shifts--i.e., moving closer to the source of material especially if it is a byproduct of another. As with the planning function, we posit that utilization of the M index would center on the accessibility of data across platforms and locations as opposed to using the data to drive any further responsiveness. You can always find exceptions to the rule, of course. One that comes readily to mind is using strategic sourcing as well as other parts of the supply chain mega processes in times of disasters and supply chain disruptions. (The recent events in Japan are testimony to that.)
Many corporations around the globe have optimized the sub-process of P2P transaction processing. Payment processing, for example, tends to be largely a non-strategic back office function in most companies. For this activity, using aspects of M would likely add unnecessary costs to a function that is already burdened with costs and tightly controlled.
Make: For many years now, academics and practitioners have been seeking to optimize the make (manufacturing) mega process. It is quite amusing to note that research on the job shop model with its billion variations still keeps academics up at night. I often wonder why the work on operational optimization continues to be U.S.-centric, given that most manufacturing has migrated to the Asia/Pacific region. For the purposes of understanding the M index, we focus on the following Make sub-processes: shift scheduling; labor scheduling and management; traceability; and shop floor control.
Shift scheduling continues to be crucial for the stabilization of supply chain triggers and utilizing real-time data accessibility to manage around downtimes and unforeseen outages. Mobility in this sub-process will add to the continuous improvement processes that tend to be in place in large corporations.
Labor scheduling and management within the operations center or plant is a large cost driver with enormous impact on COGS. Utilizing M constructs around data analytics to solve labor balancing problems in real time has the potential to add economic value in operations. Additionally, many plant operations have attached warehouses in which the same labor balancing construct can be applied (oftentimes that part of the cost tends to be classified under the distribution cost).
Product /Lot traceability has gained more prominence in recent years because of the myriad recalls that have occurred in the manufacturing and agricultural sectors. Traceability that is often mandated by Federal agencies has added cost to the affected companies while driving the use of remote sensing and monitoring technology that needs multiple sites for data collection and submission. In the agricultural industry, it is commonplace to find machines being used that are enabled with mobile printing and tracking technology for tagging and labeling produce as it is harvested from the farms. This data can then be remotely sent for analysis and logging to track field packaging at the lot levels; it also can be used to perform quality assurance and productivity analysis. This capability can further support the reverse logistics processes that may be required in given industries.
Shop floor control is one sub-process that has to operate in real time or near real time. This area has been managed quite well in automated facilities that utilize PLCs and end-of-line monitoring, optimization, or simulation capabilities. There are benefits to be gained by collecting and analyzing that data in real time. Yet the cost of deploying that across the portable platform in a ubiquitous manner far outweighs the potential benefits.
Move: The process of transporting and storing the physical goods to either the end consumer or to an intermediary channel partner has become more critical as fuel prices rise, carrier capacity tightens, and imports of manufactured products increase. For our discussion purposes, the major sub-processes of this Move function that are relevant to the M index include goods routing, labor management, dock and yard management, and inventory visibility.
The sub-process of goods routing covers the movement within an organization's network (including within a warehouse) as well as routing to a channel partner. The real-time capabilities of mobile processes and technology could be very beneficial for routing, tracking and placements as well as for load balancing inbound and outbound hauls. These capabilities are often overlooked by manufacturing/assembly companies but are well recognized by services providers such as 3PLs.
Labor Management is a large cost driver in Move, just as it is in Make. And as in Make, mobile capabilities and analytics could be employed to further drive productivity. (Note that our analysis assumes non-union environments since unionized environments in many cases may have agreements in place that would impede the use of some of the process analytics).
Dock and Yard Management sub-processes tend to be very labor intensive and static even in today's agile supply chains. We have found that companies tend to treat these activities as necessary evils that have to be managed to get goods flowing. However, inefficiencies in dock and yard management can often be causes for customer service problems because of longer- than-necessary dwell times or even missing assets (yes, even something as big as a trailer can sometimes go missing for a few hours or even days in crowded locations). The ability to provide traffic flow based on dock schedules and yard placements can be a supply chain throughput advantage.
Inventory visibility and associated timeliness within the network is largely based on the company's supply chain operating model, lifespan of its products, and cost of the inventory. We find that real-time tracking and tracing is not a necessity in all business environments. A general rule of thumb is that the higher the value of inventory/the shorter the product lifespan, the greater the potential of mobility in improving inventory visibility. Note that there are some industries in which government mandates for product visibility dictate the business process and information needed to support the mandate.
Sell/Serve: For our discussion, the sub-processes under Sell/Serve include order transaction management; tracking, and service visibility and associated analytics.
Order transaction management can be viewed as the ability to take orders anywhere, anytime and be able to submit them for processing in the same fashion. This capability can be used quite effectively, especially in businesses that can use remote order processing to influence sales. The capability also is useful is establishing promised deliver dates or presenting customers with options (intelligent shopping) while they are browsing in their location of choice. While mobile will never supplant the traditional order receipt processes, it can effectively add a layer of customer intimacy and intelligence to a largely back-office function.
Tracking is probably the most easily understood subprocess post order entry. We are all familiar with the process of tracking a FedEx or UPS package. Automotive manufacturers, particularly in the luxury brand segment, also have developed this capability on static devices (mainly PCs), but could hugely move the needle on customer intimacy if they could accomplish the same with M. While some may debate the direct benefit of the portable process overall, most do recognize the huge value of mobility in enabling customer intimacy. This is especially important for the luxury brands that cater to a segment of buyers that have become more tech savvy and are quite demanding in the face of competing alternatives.
The service visibility and analytics sub-process is an essential part of channel partner and consumer intimacy programs that alert us to potential problems before we get the dreaded customer calls. And when a problem does arise, M enables a more rapid response. This is particularly important in the B2B arena since customers tend to be large and their concern with and visibility into issues more intense. Given the non-centralized nature of the human resources and processes that typically govern our supply chains, it is important to be able to view, analyze and act on service resolution issues based on approval levels from disparate locations and by utilizing smart device capabilities (similar to issue escalation processes within IT). The processes surrounding the appropriate resolution mechanisms must be carefully designed. In any case, the ability to mobilize this sub-process can be a competitive advantage in many industry segments.
Step 4: Calculate the M index for the Industry Type
With an understanding of the importance of the supply chain mega processes to your business segment and the relationship of mobility to each process, you can begin to calculate the M index for your company. We recommend a three-stage process.
First, assign a degree of mobility reliance to each of the supply chain mega process based on the industry's segment. For example, the commodity nature of in the Grow to Market (G2M) environment (agriculture and produce), gives the planning function a relatively low level of importance. So the Plan component would be assigned a rating of low/medium (L/M), which translates to a score of 2 as shown below. Similarly, Buy would receive a low/medium score as the input materials tend to be relatively static and well managed, and the associated supply base mostly local. The Make--or in this case, really the Grow--component is highly relevant for this industry segment. Therefore, Make is given a high (H) rating as is Sell/Service because of the daily customer-intensive nature of this segment. Move gets an inbetween rating of medium/high (M/H), given the perishable nature and short shelf life of many of the products. The table below shows the ratings for Grow-to-market as well as sample rating for the other industry segments.
The second stage shown in Table 2 uses the same scoring construct as the one above but applies it in terms of mobility's relative applicability to each of the mega processes--regardless of industry type. As discussed earlier in the article, the Plan, Buy and Make processes are lower on the mobility applicability scale than are the Move and Sell processes. Therefore, Plan, Buy and Make are given a L/M score (2 points); Move and Sell/Service receive a M/H rating, or 4 points.
The final stage takes the scoring in the first two steps to derive the composite score for each segment. The composite score is the industry segment mega process (Table 1) times the Mobility importance score (Table 2). The example below is for the MTS segment.
Finally, to derive the Mobility index, divide the composite score by the maximum possible score of 125 (ratings of 5 across all processes and a 5 rating on mobility importance) to derive the mobility index for the industry segment. Table 4 shows the M Index for each segment type:
The M scores in general are not very high. Make to Stock, which scored highest on the M Index, came in at a little under 0.5. The findings suggest that while opportunities exist to gain cost and service benefits from mobility, the case for adoption needs to be carefully considered. The findings further suggest that the adoption curve will tend to be fairly slow. Adoption likely will not proceed in a single sweep across all processes, but will follow a sequential approach--for example, distribution first, followed by transportation, and so on. Importantly, we are not asserting that mobility in the supply chain processes is in any way unnecessary or undesirable. Rather, we believe that the use of mobility will continue to be spot based and sporadic across the industry segments and will not necessarily be a candidate for massive adoption and rollouts.
Structured Implementation Approach
If a decision is made to move forward on a mobility initiative, we recommend the following structured approach. It consists of four activities--define, select, implement, and monitor. (See Exhibit 2.) Following this methodology will enhance the potential of capturing the benefits of M.
Define. The first step is to define the process and associated sub-processes that are proposed candidates for mobility. We suggest utilizing some variation of the SCOR (Supply Chain Operations Reference) model or a derivative that accurately describes the company's supply chain operating model. It is important to carefully define the candidate processes and sub-processes since we have seen the variation in results and applicability even within the mega process. We also suggest mobilizing the implementation team--which should include the business process owner, IT, and data security professionals--at this stage. Finally, a key output of this step is creation of a value generation and delivery model that will enable a reasonable ROI. (Reasonableness of ROI's would be determined based on the company's internal hurdle rates for financial investments.)
Select. The next step is to select the technology enablers. These can be classified in three categories: devices, back-end infrastructure, and rendering platform.
Regarding the first category, a wide selection of devices now is available from companies like Apple, Samsung, HP, RIM, and more. The choice of device can often be coupled with selection of back-end operating and storage technology (MS/Mac/CE) as well as the integration technology required to connect the devices to the infrastructure. The market has yet to shake out and it will likely be at least four to five years before clear winners and losers emerge. The final piece of the puzzle is the rendering and business process analytics layer. This platform is used to deliver the M capability and receive the results back from any process/data manipulation that may have been done by the front-line users. (We note here that mobility without interactivity and analytics is really useless.) Once again, there are many platforms available from business intelligence providers as well as providers of analytic capabilities. The main output of this step is the creation of a technology roadmap that supports results of the "Define" step.
Implement. The third step in the process is to implement the enablers selected above. Before any large scale employment across the processes and sub-processes, however, we encourage the use of pilot launches and tests. This will enable the company and the front-line users to adapt and adopt the changes in the business process and technology enablers for optimal benefit. Remember, for people using the M technology, there's big shift in operating model and mindset from a "batch" to "real time." So there are change management issues that need to be dealt with.
Monitor and Refine. The fourth and last step is often forgotten in many technology-centric business process transformations. Yet, it's crucial to monitor and refine the sub process and associated usage since the adopting of mobility typically is a learning experience in and of itself--that is, users learn more as they work with the technology and become more adept in utilizing analytics and applying the results to drive decisions. Hence, we recommend a bimonthly review-and-refine process for at least six months after initial implementation.
A company's M index is defined largely by its supply chain operating philosophy as well as the particular industry segment to which belongs. From our vantage point, the use of mobility in the supply chain is still in its early stages and the M index scores we posited demonstrate why widespread adoption has not already occurred. There are, however, a number of ways in which the early adopters can gain significant advantage. As the value proposition becomes clearer going forward, expect to see more and more companies embracing M.
Author's note: A good source on mobility that I have relied on for this article is "Mobile Supply Chain Is on the Move," by Bob Trebilcock, Executive Editor, Modern Materials Handling, March 2011
Sumantra Sengupta is a Managing Director with EVM Partners, a business advisory and strategic systems integration firm focused on the manufacturing and retail sectors. He can be reached at email@example.com.
Table 1: Mega Process Ratings for Segments SegmentDegree of Sell/ Reliance Plan Buy Make Move Serve MTS H (5) M/H (4) M/H (4) M/H (4) M/H (4) ATO M/H (4) M/H (4) M (3) M (3) H (5) BTO L/M (2) M/H (4) M/H (4) M (3) H (5) G2M L/M (2) L/M (2) H (5) M/H (4) H (5) Assume that High (H) = 5 points; Medium (M) = 3 points and Low (L) = 1 point. M/H is 4 points and L/M is 2 points. Table 2: Importance of M to Mega Processes Supply Chain Mobility Process Importance Plan L/M (2) Buy L/M (2) Make L/M (2) Move M/H (4) Sell/ Serve M/H (4) Table 3: Computing the Composite Score SCM Process/ Sell/ Segment Plan Buy Make Move Serve Total MTS 5 x 2 4 x 2 4 x 2 4 x 4 4 x 4 58 Table 4: M Index by Segment Segment M Index Sample Industry Association Type (total score/ 125) MTS 0.47 Consumer Products, Electronics, Chemicals, Pharmaceuticals), Automotive ATO 0.43 High Technology (hardware), Semiconductor BTO 0.42 Engineering and Construction, Heavy Manufacturing, Aerospace and Defense G2M 0.43 Agriculture
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|Publication:||Supply Chain Management Review|
|Date:||Sep 1, 2011|
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