The power of predictive analytics - apics

July/August 2011 Volume 21 | Number 4APICS MAGAZINE TRANSPORTATION MANAGEMENT SYSTEMS / SUPPLY CHAIN TRANSFORMATION July/august 2011APICSIdeas and innovations in operations and supply chain managementThe power ofpredictive analyticsSafety stock fundamentalsSupply and demand masterythrough online university modelsFinding the right transportationmanagement system

The Visibility toOUTPLANThe Collaboration toOUTPACEThe Velocity toOUTPERFORMIf you aim to be a top competitor, an optimized supply chain is a mandate.Logility Voyager Solutions can help you leave the competition behind.With Logility’s proven three-pronged strategy, OUTPLAN, OUTPACE,OUTPERFORM, companies can more profi tably satisfy customer demand—and stay in the winner’s circle—by getting the right products at the rightcost to the right place at the right time.Leading companies around the world rely on Logility to achieve dramaticimprovements in global supply chain effi ciencies, increased visibility andsubstantial bottom-line results in record time. Compete like never beforewith Logility Voyager Solutions.CV2 July/August 2011 | APICS magazinewww.logility.com

SAVE THE DATE:2011 APICS InternationalConference & ExpoJoin us in Pittsburgh, Pennsylvania, USA, October 23–25, 2011, to explore strategies forachieving sustainable productivity in today’s unpredictable business environment.When: October 23–25, 2011Where: Pittsburgh, Pennsylvania, USATo learn more: apicsconference.orgAchieving Sustainable Productivitymeeting customer demand in an unpredictable world2011 APICS International Conference & ExpoOctober 23–25, 2011, Pittsburgh, Pennsylvania, USAThe theme for this year’s conference isapicsconference.orgAchieving Sustainable Productivity: MeetingCustomer Demand in an Unpredictable World.As an operations and supply chain managementprofessional, you are expected to achievemaximum productivity, meet consumerdemand, and remain agile amid instability andunpredictability. Attend APICS 2011 to accessrelevant education, best practices, and thoughtleadership to help you lead your organization andenable these goals.This year, conference attendees will look at thechallenges companies face in the post-recessionenvironment. Educational sessions will connectthe APICS body of knowledge to strategies andtactics to meet and overcome current challenges,such as• volatile customer demand and complexdemand patterns• rising customer service expectations• pressure to reduce operations and logistics costs• complexity of supplier networks• risks related to fluctuations in commodity prices,geopolitical instability, and natural disasters• global competition• staying informed and in compliance with variousgovernments’ regulations• environmental concerns.Get news and information about registration discounts anddeals, and the educational program at apicsconference.org!Mark your calendars for APICS 2011 in Pittsburgh!Pittsburgh, Pennsylvania, USA, is an ideal location for the APICSInternational Conference & Expo—a vibrant and innovative communitythat exemplifies overcoming the challenges faced by operations andsupply chain management professionals in the global marketplace.Visit apicsconference.org to learn more.APICS magazine | July/August 2011 1

APICS magazineJuly/August 2011 Volume 21 | Number 428 32Features28 Commanders of the FleetBy Maha MuzumdarManage costs and create amore sustainable network withtransportation managementsystems.32 Crack the CodeBy Peter L. King, CSCPDetermine optimal safetystock levels using fundamentalequations.Cover STory38 Fueling Supply ChainTransformationBy Can A. Dogan, Frode HuseGjendem, and Jade RodysillDiscover how predictive analyticscan fuel effective supply chaintransformation.44 Scoring A-Plus Productsand ProcessesBy Rangarajan Parthasarathy,CPIM, and Judith KristanLearn how online universitiesimpart high-quality education andachieve business goals.2 July/August 2011 | APICS magazine

3844“Successful companies are managing costs while supporting initiatives that drive margins,lower inventories, and create a more sustainable and lean supply chain.” page 29Departments4 From the CEO5 From the Editor6 APICS Report8 Membership Matters9 Ask APICS10 Industry Watch12 Building Blocks13 Sales and OperationsPlanning14 Enterprise Insights15 Working Green16 Lean Culture18 Executive View20 Management Perspective21 Software Review24 Relevant Research54 Case Study56 Lessons LearnedResources48 Buyers’ Guide50 Product Showcase51 Index52 Supply Chain DirectoryAPICS magazine (ISSN 1056-0017) is published bimonthly by APICS The Association for Operations Management, 8430 West BrynMawr Ave., Suite 1000, Chicago, IL 60631-3439. Phone: (773) 867-1777. Canada Post International Publications Mail (Canadian Distribution)Sales Agreement No. 571423. Periodicals postage paid at Chicago, IL, and additional mailing offices. Subscriptions: $65 per year U.S., $77Canada/Mexico, $93 elsewhere. Copyright © 2011 by APICS. All rights reserved. Printed in the United States of America. POSTMASTER:Send address changes to: APICS, 8430 West Bryn Mawr Ave., Suite 1000, Chicago, IL 60631-3439.APICS magazine | July/August 2011 3

From theCEOTalent Supplyand DemandIn a speech at North Virginia CommunityCollege this June, President Obama demonstratedthe importance of training andeducation to manufacturing in the UnitedStates. “The irony is even though a lot offolks are looking for work, there are a lotof companies that are actually also lookingfor skilled workers,” he said. “There’s amismatch that we can close.”APICS is no stranger to this sentiment.Part of our mission is to enable the communityof operations and supply chainmanagement professionals to lead in theglobal marketplace. For more than 50years, we have been teaching our membersand customers the skills and knowledgethat are key to greater productivityand competitive success.Yet we continue to hear from economistsand career experts that there existsa talent gap among professionals—thathighly trained workers are hard to find—and, of course, this extends into our fieldof operations and supply chain management.This view is borne out in SupplyChain Management World’s “Chief SupplyChain Officer Report 2011.” In a survey ofmore than 750 senior level supply chainprofessionals worldwide, more than 90percent of respondents indicated that talentacquisition is an important challengeor one of their top challenges. Further, 85percent said this has always been a challengeor it has become more difficult inthe past three years.Filling the gapWhile no single answer can solve thetalent shortage, there are factors withinour power to influence and bring aboutchange. The report proposes that one suchpotential source is “external markers ofskill that could reliably be used to screenwider pools of recruitment,” includingdirect work experience, universitydegrees, and industry certifications fromBoth seasoned andnovice professionalscan benefit from careerdevelopment programsand certifications.organizations such as APICS, which leadsthe pack as the most preferred certificationassociation in the survey.It is true that there is no substitute foron-the-job experience, and this is the casein nearly all industries. But both seasonedand novice professionals can benefit fromcareer development programs and certifications—infact, according to the APICSresearch report, “Operations and SupplyChain Management Career Paths andPatterns,” the importance of training andcertification grows the longer an individualstays in the workforce. Among operationsmanagement professionals working for sixyears or more, training and certificationare the most critical to the advancement oftheir careers.Professional designations suchas APICS Certified in Productionand Inventory Management (CPIM)and APICS Certified Supply ChainProfessional (CSCP) foster knowledge andcontinuing education, and they build skillsand enhance the opportunities availableto those who seek these certifications andearn them. Companies looking to closetheir talent gaps need look no further thanthis rich pool of candidates who stand outfor their knowledge and innovation.Abe Eshkenazi, CSCP, CPA, CAEChief Executive OfficerAPICS magazine is published byAPICS The Association forOperations Management8430 West Bryn Mawr AvenueSuite 1000Chicago, IL 60631-3439Phone: (800) 444-2742 or (773) 867-1777Fax: (773) 409-5576Email: editorial@apics.orgapics.orgSharon L. RicePublisherEditorialJennifer ProctorEditor in ChiefChristopher JablonskiStaff EditorDesignEmma CastañedaArt DirectorLara KocabDesignerAdvertisingTom Laschtlasch@larichadv.com(440) 247-1060Elizabeth RennieManaging EditorJessi Lee GaylordAssociate EditorHwa KimDesignerEditorial Advisory BoardRichard E. Crandall, Ph.D., CFPIM,CIRM, CSCPAppalachian State UniversityPhilip E. Quigley, CFPIM, PMPComputer Science CorporationRandall Schaefer, CPIMRandall Schaefer ConsultingPublication in APICS magazine does not constitutean endorsement of any product, service, or materialreferred to, nor does publication of an advertisementrepresent an endorsement by APICS or the magazine.All articles represent the viewpoints of the authorsand are not necessarily those of the magazine or thepublisher. Letters to the editor will be published at thediscretion of the editor.Canada Post International Publications Mail Product(Canadian Distribution) Sales Agreement No. 1220055.Subscriptions: APICS magazine is circulated to allmembers of APICS as part of their membership fee.For all others, the subscription rate is $65 annually ($77in Canada and Mexico, $93 for other international oroverseas delivery). To subscribe, call APICS customerservice at (800) 444-2742 or (773) 867-1777.Single copies within the US are $8, outside the US,$12 (payable in U.S. currency). Contact APICSCustomer Service, (800) 444-2742 or (773) 867-1777.Printed in the United States of America.4 May/June 2011 | APICS magazine4 July/August 2011 | APICS magazine

From theEditorAPICS Board of DirectorsChairEric Schaudt, CPIM, CSCPChair-ElectMarc Harris, CPIM, CSCPSecretary-TreasurerStanley KramerDirectorsMondher Ben-Hamida, CPIM, CSCPDirector-at-LargePreston W. Blevins, CFPIM, CIRM, CSCPDirector Southwest DistrictRick Donahoue, CPIM, CSCPDirector Mid Atlantic DistrictPaul HowattDirector Canadian DistrictJerry Kilty, CFPIM, CIRM, CSCPDirector Southeast DistrictRichard Leach, CPIM, CSCPDirector Pacific Western DistrictWilliam Lee, Ph.D., CFPIMDirector-at-LargeChris MoyeDirector-at-LargePeter Murray, CIRMDirector-at-LargeDavid Rivers, CFPIM, CIRM, CSCPDirector Northeast DistrictJoe Schriever, CIRM, CSCPDirector Terra Grande DistrictRobert Trent, Ph.D.Director-at-LargeJason Wheeler, CPIMDirector Great Lakes DistrictTammy Williams, CPIM, CIRM, CSCPDirector Heartland DistrictAPICS CorporateChief Executive OfficerAbe Eshkenazi, CSCP, CPA, CAEMagazine ContactJennifer ProctorAPICS The Association forOperations Management8430 West Bryn Mawr AvenueSuite 1000Chicago, IL 60631-3439Phone: (800) 444-2742 or (773) 867-1777Fax: (773) 409-5576Email: editorial@apics.orgapics.orgMaking Plansfor the FutureIn mid-June, I attended theMassachusetts Institute of Technology’sCrossroads 2011, a conference thatexplored “disruptive innovations thatwill shape the future of supply chains.”The one-day event was packed withconcepts—from independently operatedforklifts based on the design of cars thatdrive themselves to using tribal patternsto predict buyer behavior.To me, the most hard-hitting researchcame from Joseph Coughlin, Ph.D., thefounder and director of the MIT AgeLab.He gave attendees a glimpse of whatfuture consumers and demand will looklike, and the changes he predicts hadmany supply chain experts squirming intheir seats. “Old age is new and global,”Coughlin said in his presentation. “Theaging marketplace [buyers older than 85]is important to businesses.”Coughlin says that stores are practicingJust-in-Time stocking of their shelvesto keep inventory down. In the future,older consumers, who will live in smallerhouses, will practice the same thing.Therefore, they will want smaller packages.These same consumers also willwant home delivery for their groceries,medical care, and whatever else theyneed. And if they go to the store, theywill want the store to be smaller andmore manageable, putting what theywant within reach and sight, not 20 aislespast the toys, electronics, and housewaressections. These older consumers are willingto pay a premium for their goods.Are the big-box stores ready for thischange? Coughlin says “no.” Store layoutswill have to change, packaging andpallets will have to change, and distributionwill have to evolve to meet theseconsumer needs. “In sum, the future isgray, small, and female,” he says.Maybe Best Buy is listening tothis type of research when its leadersconsider the future of the busi-ness. According to a June 23, 2011, LosAngeles Times story, the electronics storeis downsizing its footprint. “The giantretailer, with 1,300 stores nationwide, islaunching plans to wall off parts of itscavernous stores and sublease the spaceto smaller retailers, such as grocers,beauty supply stores, home furnishingoutlets, and others,” write Shan Li andRoger Vincent.Best Buy’s new stores will averageabout 36,000 square feet, while itscurrent average space is 45,000 squarefeet. “Weak sales, online competition,and changing consumer habits havebig-box chains looking to downsize,” Liand Vincent write. It seems the futureCoughlin predicts may come even fasterthan he can imagine.Preparing for next year andthe next decadeThis month’s cover story also examinespreparing businesses for the future.However, in “Fueling Supply ChainTransformation,” the authors stressthe use of data to anticipate the future.“Supply chain predictive analytics—using an integrated framework thatemploys quantitative methods to deriveinsights from data—could be the keydifferentiator in rapidly building andsustaining a high-performing supplychain in the decade ahead.”In this environment, operations andsupply chain management professionalscan’t afford to ignore anything that canprovide a competitive advantage. Turn topage 38 to find out more.Jennifer ProctorEditor in ChiefAPICS magazine | July/August | May/June 2011 5

APICSReportReview Your Professional Goalswith APICS ResourcesDid you set goals for 2011? Did the business of doing businessget in the way of taking APICS review courses, attendingwebinars, and keeping up-to-date with APICS publications?Midyear is the perfect time to review your goals and plan theremainder of 2011. Start your journey by using the tools atapics.org/2011goals.2011 APICS International Conference & ExpoAPICS 2011, Achieving Sustainable Productivity: MeetingCustomer Demand in an Unpredictable World, will take placeOctober 23–25, 2011, in Pittsburgh, Pennsylvania, USA. The eventwill focus on strengthening the skills you need to enable sustainableproductivity. Attendees will learn techniques for bringingfinancial rewards to their companies in an unstable marketplaceand ensuring long-term industry viability—while advancing intheir own careers.Attend sessions in any of seven learning paths:• Productivity: In the wake of the global recession, productivityhas taken center stage at organizations worldwide.Productivity improvement is essential to progress.• Sustainability: Real sustainability is driven by creativity,not compliance. Learn to achieve an effective sustainabilitystrategy.• Supply Chain Strategy: Many professionals neglect thefact that supply chain strategy is broader than supply chainmanagement. Strategy defines how the supply chain shouldoperate in order to achieve superior competitiveness.• Production and Inventory Management: In the face ofever-increasing competition, companies value employeeswith superior skill in demand management, procurement,scheduling, continuous improvement, supplier relationships,quality control, and more.• Organizational Change and Risk Management: Fromnatural disasters to political and economic volatility, eachday can bring rapid change. Create stability and value foryour company by understanding organizational change andrisk management.• Perspectives in Supply Chain and OperationsManagement: Obtain sharply focused views on global businessstrategy, daily operations, cost management, quality,competitiveness, and continuous advancement.• Professional Advancement: Learn how to examine thesignificant forces affecting your professional progress andharness them to your advantage.For information or to register for APICS 2011, visitapicsconference.org.Take the APICS CSCP examThe APICS Certified Supply Chain Professional (CSCP)program is the most widely recognized educational experiencefor operations and supply chain management professionals.There’s still time in 2011 to earn your APICS CSCP designation.Reservations open October 19, 2011. The exam window isfrom December 3, 2011, through January 14, 2012. Visit apics.org/cscp to learn more.Ask APICS: Find Answers toYour Most Pressing QuestionsDo you have questions about bestpractices or specific issues youface at work? APICS can help. AskAPICS. This APICS member benefitis available to help you find answersto topics from where to look for leanopportunities in your organization toways to improve your organization’sS&OP process and more.Ask APICS.E-mail your questions ororganizational challengesto askapics@apics.org, andAPICS director of researchJonathan Thatcher will answer.Be sure to read “Ask APICS”in each issue of APICSmagazine to find practicalanswers to your questions andorganizational challenges.6 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.Provide supply chain training to supporting professionalsCustomer-Focused Supply Chain Management is a one-day course for those infunctions that support the supply chain, including those in sales and marketing,accounting, information technology, and senior leadership. Attendees will learn thebasic terminology used in supply chain management to more effectively communicatewith supply chain management teams. Sign up now to be notified when classesbecome available in your area at apics.org/cfscm.Learn the principles of the fieldThe Fundamentals program is now APICS Principles of Operations Management.The first of five courses, Principles of Inventory Management, was released in March2011, replacing Fundamentals of Inventory Management. Each session is selfcontainedand can be taken as a stand-alone course or combined with other sessionsfrom the series. For an overview of the program, visit apics.org/principles.APICS CPIM exam study optionsAPICS Certified in Production and Inventory Management (CPIM) candidates can choosethe option that best matches their preferred learning method. With instructor-led courses,students connect directly with other students and the instructor in a classroom-basedenvironment. Online certification review courses are ideal for professionals who needmore flexibility. APICS offers instructor-led,online courses through Fox Valley TechnicalCollege. Candidates also can use CPIMexam content manuals, practice questions,and study notes to supplement theireducation. Visit apics.org/certification formore information.James Greathouse APICSCertification ProfessionalScholarshipThe James Greathouse APICSCertification Professional Scholarshipsupports individuals seeking APICSCPIM or CSCP designations.Applications are due September 1, 2011.To download the application and reviewthe requirements, visitapics.org/education/greathouse.htm.Renew Your APICS MembershipAPICS Membership√ Exclusive benefits√ Certification savings√ Career resources√ and moreAPICS members receiveexclusive benefits. Besure you don’t miss anyof the education, localconnections, events, andmore, including• Valuable savings on APICScertification preparationand exams• Industry news, information,and best practices• Connections to yourcommunity through yourlocal APICS affiliate• Opportunities to maintainyour APICS certification• Career resourcesand job searches• and moreLog in to apics.org to ensure your information is up-to-date and you knowwhen your APICS membership expires.APICS magazine | July/August 2011 7

MembershipMattersBy Elizabeth RennieWe encourage you to share your APICS stories.Visit apics.org/membershipmatters today.Achieving PeakPerformanceAPICS offerings help professionals fulfill their potentialWalter T. Atkinson, CSCP, C.P.M., spent 35 years in the airline and freightforwardingindustry as a logistics and transportation senior executive.Before that, he was in the cockpit for 10 years and always aimed to be asuperior pilot. “Many people ask me why I don’t fly airplanes anymore,”he says. “But if you want to be the best, you have to concentrate on itevery day. Flying can have disastrous effects if you do not maintain yourprofessionalism.”Walter T. Atkinson, CSCP, C.P.M.Partner, LGE ExecsAPICS Austin ChapterToday, he feels the same way abouthis role as a supply chain management(SCM) consultant, explaining that, ifyou don’t make the very most of yourcareer potential, you significantly limitfuture opportunities and earnings.Thus, Atkinson uses APICS resourcesto make sure he stays at the top of hisgame.He joined APICS in 2004 mainlybecause of the Certified SupplyChain Professional (CSCP) program.“With my many years in operationsmanagement, APICS fit well inmy plans for success in the SCMconsulting business,” he says. “Evenwith 35-plus years of operationalexperience and two master’s degrees,I felt it was important to belong to anorganization that would help me keepcurrent on technologies, processes,and terminologies.”When Atkinson studied for theCSCP exam, his attitude at first was“I already know everything aboutsupply chain operations—after all, I’vebeen at it a long time.” But he soondiscovered that the APICS materialsserved to fortify his years of practicalexperience with up-to-date theoriesand processes he could use to helpother organizations.For example, Atkinson worked ona project for a paper and packagingcompany that had 53 locations, eachof which were run like independentbusiness units. The company neededto reduce overall operations costsassociated with the supply chain, specificallyin the areas of transportationspend and warehousing. “Although mypractical knowledge and experiencewere the basis for my success on thisproject,” Atkinson says, “I can honestlysay that applications in the CSCPstudy guide allowed me to view severalsolutions from a different viewpoint.The APICS materials stimulated mythought process to think outside of thebox in solving those task assignments.”He also tells the story of a largeutility company that brought him in totrain, mentor, and coach an employeewho was taking over as leader of thecompany’s new SCM group. Eightweeks into the project, the employeeresigned, taking a higher-payingposition elsewhere. As the only personon site with extensive SCM experience,Atkinson was asked to step in as theinterim director and to oversee theprocess of finding a new candidate forthe position. “The scope of the projectchanged significantly, but I eventuallytrained a long-term employee with noSCM experience to head the group,”he says. “My APICS knowledge reallypaid off.”Atkinson attended his first APICSconference last year in Las Vegas andsays it was “worth every dime.” Hewas happily surprised by the body ofknowledge available to him there andby the organization of the event. “Theconference was very informative,” hesays. “With many years in the business,you become a little tainted about theconference materials being presented,especially if they are rehashing thesame old things. I found APICS 2010to be refreshing … I picked up somenew thought processes to pass on tomy clients, and the guest speakerspresented topics that—althoughnot directly related to my area ofexpertise—provided stimulatingthoughts that helped me view some ofthe operational issues I run into with amore complete vision.”In this “new normal” age, Atkinsonnotes that APICS’s many offeringshave provided him with continuouslearning and up-to-date thoughtprocesses, which keep him currenteven as the environment shifts. Hesays, “APICS gives everyone who wantsto succeed in this field an opportunityto be the best they can be.”Elizabeth Rennie is managing editor forAPICS magazine. She may be contactedat editorial@apics.org.8 July/August 2011 | APICS magazine

Send APICS your operations or supply chainmanagement questions at askapics@apics.org.By Jonathan Thatcher, CSCPAskAPICSAdventures inDemand ForecastingOn a quest to continuous improvementReader F.S. writes, “My company receives different forecasts from our enterpriseresources planning (ERP) system, the sales department, and suppliers—andnone are very accurate. How can we improve our demand forecasting?”Nothing can provide a perfect demandforecast. All tools contain a certain degreeof error. However, reducing forecast errorover time is possible if you learn fromyour numbers and your people and applycontinuous improvement methodologies.Begin by examining some pre-forecastconsiderations every organization shouldmake.The Pareto principle. Assign all itemsto be forecastinto one of threecategories. The 20percent of itemsthat reflect 80 percentof demandare known as theA items, while those that comprise the restof demand are the B and C items. As Aitems have the greatest impact, devote moreeffort to improving their forecast accuracy.Group versus individual forecasting.Forecast accuracy generally is higher forgroups of items than for individual items.Random forecast errors tend to canceleach other out when averaged across thegroup, and the same effect applies to otheractivities, including inventory pooling andinsurance.Dependent versus independentdemand. Dependent-demand items neednot be forecast; their demands can be calculatedbased on a bill of material or otherknown quantities.In contrast, independent-demand itemsdo require demand forecasts. Typical itemswith independent demand are finishedgoods. Note that some items fall into bothcategories.While these tasks do not create ademand forecast on their own, theyhelp focus on using a variety of demandforecast techniques. Consider also the followingstrategies, which involve both yournumbers and your people.Intrinsic forecasting (moving averages).Moving averages belong to afamily of forecastingmethods calledintrinsic forecasting.These methodsexpect that data frompast demand predictfuture demand,after allowing for some error. Start with asimple, even naive, forecast. For example,500 units of suntan lotion sold in April,so 500 will sell in May. Then, determinethe average demand for the most recentmonths, creating a three-month movingaverage (so-called because the averagemoves as time passes). Forecasting usingmoving averages can be further improvedby weighting periods differently or applyingexponential smoothing.Extrinsic forecasting (economicindicators). Changes in national spendingor income, capacity utilization levels, andindustrial production all are common economicindicators and usually move in longcycles, falling and rising over several years.Because of this, they can help refine orvalidate demand forecasts. Look for one ormore economic indicators that correlate toyour item’s historical demand, and determinehow sensitive your item’s demandlevel is to changes in these indicators.(To see a variety of current economicindicators, visit apics.org/research.)The Delphi method. The Delphimethod is a sophisticated way to gatherand refine the opinions of stakeholdersand experts on a particular item,whereby rounds of questionnaires arecirculated to participants to obtain anonymousresponses. Eventually, througha process of commentary and revision,differences among participants resolveinto an increasingly accurate forecast.The Delphi method is most useful whenthere are few data with which to work(experience and professional insight helpmake up the difference). However, thistool can overlook unexpected or unconventionalfactors, driving forecast error.Collaborative planning, forecasting,and replenishment (CPFR). CPFR triesto eliminate the error that creeps intoforecasts due to unanticipated activitiesin certain portions of the supplychain. Ensure ongoing collaboration inplanning, supply and demand management,execution, and analysis. Set upand improve your CPFR teams. Crossfunctionalteams also can establishinvaluable bridges among departmentsand organizations. If you find there isresistance to data sharing, refer to thebest practices offered by the VoluntaryInterindustry Commerce SolutionsAssociation at vics.org.There are many additional models andtechniques for forecasting demand, suchas prediction markets, data mining, andgame theory. A future edition of “AskAPICS” will examine how to measureforecast error and address the problemof bias in demand forecasting.Jonathan Thatcher, CSCP, is directorof research for the APICS professionaldevelopment division. He may becontacted at askapics@apics.org.APICS magazine | July/August 2011 9

IndustryWatchAutomated storage and retrievalSapient Automation unveils the Hornet horizontal carousel, an automated storage andretrieval machine for smaller parts and items. Features include horizontally rotatingbins, flexible construction with multiple bin sizes, and both push-button and bar codescan activation. The machine enables the automatic delivery of items to the operator infunctions such as order picking, parts servicing, kitting, buffer storage, and work-inprocessinventory.EnterpriseAgentrics has launched ezMarket Express, a web-based sourcing software suite forsupply chain managers. The suite enables communication with vendors, bidding ongoods and services, and other procurement processes. Features include automatedrequests for information, quotations, and proposals; a template library for workingwith various event formats; event reporting; messaging; and online tutorials.JustEnough Software introduces Markdown Planning, a product life cycle planningand inventory management software suite. The tool includes modules for markdownstructure planning, with the ability to view current inventory, price elasticity, and salesrates; product phaseout management; and financial evaluation, which compares targetrevenues with calculated revenue.Silvon Software has released Stratum 6.0, a software suite for business performanceanalysis and reporting in the manufacturing and wholesale distribution industries.Features include real-time definition of time ranges; integration with multiple products,including Microsoft Office; and modules for measuring the performance of customers,inventory, marketing, manufacturing, finance, sales, and suppliers.Label printingSATO America announces GY412, a double-sided, direct thermal printer for creatinglabels and bar codes. Features include a reflective sensor for preprinted marks; a seethroughsensor for die-cut labels; linear and two-dimensional bar code compatibility;and a variety of interfaces. The printer is suitable for purposes such as transportationand logistics, e-commerce, order forms, and shipping labels.PickingDematic introduces RapidPick, a highcapacityorder fulfillment workstation.RapidPick is specialized for goods-to-personfulfillment, which means it brings case itemsdirectly to the operator by integrating withan inventory-staging buffer. Features includean interface screen with large fonts and coloricons, adjustable platform and screen, precisesequencing, and ergonomic design.Material handlingCrown Equipment has released the SC 5200 series of sit-down,counterbalanced forklifts. Features include integrated traction andhydraulic systems, low-noise steering, full-motor braking, heavy-duty steelplate frame, seat cushion with suspension and flexible back, and forwardseating for enhanced visibility. The forklifts are designed for staging,transporting, and putting away loads in trailers, docks, ramps, and more.10 July/August 2011 | APICS magazine

News items may be submitted to editorial@apics.org.High-resolution, color photographs are encouraged.RFIDSupply chain traceability solutions provider Neopost ID has partnered with TAGSYSto create radio frequency identification (RFID)-based tracking products for supplychain and retail applications, including an item-level RFID tracking system for thefashion and apparel industries. The companies also will develop solutions for fieldssuch as transportation, logistics, manufacturing, and distribution.Shop floorAdvantech announces ARK-1503, a compact, fanless industrial personal computer.Features include a graphics processor, a memory controller, both direct-docking andcable support for touch screens, and low power draw. The computer is designed for usein kiosks and factory and machine automation.Datalogic unveils Gryphon GFS4100, a bar code scanner for the self-service kiosk, transportation,and biomedical markets. The fixed-mount, linear imager features compatibility with all commonone-dimensional bar codes; 320 scan-per-second reading speed; visual indicators for alignmentand scan results; and a sealed, plastic construction that is resistant to solvents, particles, andmoisture.Netherlocks unveils the NL-H, a locking system for handwheel and lever-operated valves. Featuresinclude corrosion-resistant, stainless steel construction; an included padlock; easy installationwith no mounting parts required; flexible steel cable; and universal valve compatibility. The NL-His designed for production and maintenance processes in corrosive and harsh environments,including those in offshore and chemical applications.Opto 22 has released SNAP-AIPM-3 and SNAP-AIPM-3V power monitors. Both models canmonitor 480 volt, alternating current, three-phase electrical equipment without the need fora potential transformer. Features include 14 channels of data output, six input channels, andoptical and transformer isolation. The power monitors are intended to help users identifypower problems and with the design of energy cost reduction initiatives.Revware introduces MobiGage and MobiGage PC, metrology software applications for Applemobile devices and PCs. The software gathers measurement data through a wireless connectionfor areas such as parts inspection, machine alignment, reverse engineering, and fitting.Transportation and logisticsCargo and load-handling equipment and services companyCargotec has partnered with terminal operating systemsprovider Navis to produce software and equipment formanaging the flow of materials. The offerings are designedto be used in areas such as container and cargo terminals,intermodal rail, shipping lines, and yard management, and forrunning multiple operations from a single location.IQMS has released VIN Generator, a software application forcreating vehicle identification numbers. The software calculatesvehicle attributes to generate VINs, meeting the standards ofthe National Traffic Highway Safety Administration and statemotor vehicle departments. The solution also integrates withexisting enterprise resources planning products.StormSource Software has released Appointment-Plus,an online dock-scheduling software suite. Features includeself-scheduling, which enables drivers and carriers to viewavailable delivery times from a web page; automated emailand text message reminders; and a centralized, secure modulefor record keeping and reporting, delivery notes, and contactinformation.Transplace has acquired SCO Logistics, a logistics companyfocused on the chemical industry, in order to providetransportation management, lean six sigma, and third-partylogistics solutions for industries such as manufacturing,packaged goods, and retail. The partnership will focuson transportation outsourcing, carrier contracting andnegotiation, and freight brokerage.APICS magazine | July/August 2011 11

BuildingBlocksTo comment on this article, senda message to feedback@apics.org.By John P. Collins, CFPIM, CSCP, and Eric P. Jack, Ph.D., CFPIM, CSCPContemplating MassCustomizationBuild-to-order from an operations strategyperspectiveThe recent strategic decision by Dell to streamline and segment itssupply chain gives us reason to pause and reflect on whether or not masscustomization is operationally doable. Certainly, over the past severalyears, proponents of mass customization have pointed to Dell, with itsbuild-to-order (BTO) model, as a prime example of success. Now, thingsseem to be changing.Dell may be demonstrating that itsonce-vaunted BTO model is unscalablein the declining North Americanand European personal computer (PC)markets. Furthermore, the model maynot work in a growing, commoditizedPC market, such as that in Asia, wherecustomers must first have a PC and acredit card in order to buy a Dell.Tough questionsDo customers want customizedproducts? More importantly, are peoplewilling to pay competitive prices forcustomization? Dell took a serious lookat its own data and discovered only asmall percentage of the possible PCconfigurations actually were demandedby customers. Consequently, companyleaders elected to streamline productofferings as a first step toward reducingsupply chain complexity. Interestingly,other manufacturers in this industryhave limited front-end choices andoptions in order to ensure that theback end of the supply chain canefficiently deliver products via contractmanufacturing arrangements.The second major operationaldecision Dell made was to aggressivelysell more of its products throughnormal distribution channels,such as Best Buy and Walmart.Understandably, this choice wasinfluenced by the commoditizationof PCs. But history demonstrates thatthere are consequences and tradeoffsto competing successfully in acommodity market. So Dell beganto focus intensely on cost leadershipthrough global sourcing and logisticsstrategies driven by the desire for costefficiency. It will be interesting to seewhat happens to inventories and cashto-cashcycle time metrics.The third major operational decisionDell made was to shift its focus todelivering end-to-end customersolutions in the services arena.Research shows many in this industrylong ago figured out that it is difficultto compete on cost leadership in acommodity market. For example, IBMchose to sell its PC business to Lenovoand then focus on delivering servicesolutions to customers who are willingto pay premium prices.This is not to suggest that Dell sellits PC business; but it is worthwhileto observe and consider lessons fromhistory along with Dell’s own recentdecisions to acquire more cloudcomputing and software servicecapabilities. It’s also interesting to thinkabout the costly trade-offs Dell willhave to make to compete in this newspace. For example, what do you thinkwill happen to labor costs?There is a debate between theviability of push versus pull productionsystems. In an ideal world—wheredemand for your products isincreasing—a pull production systemmay be a practical operational strategy.However, in a commodity marketthat is driven by the cost efficienciesof an extended supply chain, pullproduction systems become strainedby the inherent challenges involvedwith the timing and forecasting ofdemand. Even if one chooses to relyon lean manufacturing principleswith emphasis on Just-in-Time andcontinuous improvement, thesestrategies may not be enough toovercome the realities of operating inwhat essentially is a push productionenvironment.So, given these lessons gleaned fromDell’s operational decision to shift awayfrom BTO, what does this say aboutmass customization from an operationsstrategy perspective? Considering theprice sensitivity of PCs, and manyproducts in other industries, canpostponement help? Perhaps. Thejury—the customer—is deliberating,and we are awaiting the verdict.John P. Collins, CFPIM, CSCP, is chiefexecutive officer for Nichols BrothersBoat Builders. He may be contacted atjohnc@nicholsboats.com.Eric P. Jack, Ph.D., CFPIM, CSCP, isassociate dean at the University ofAlabama–Birmingham. He may becontacted at ejack@uab.edu.12 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.By Bradley McCollumSales and OperationsPlanningHow Wrong CouldYou Be?Asking your S&OP team the tough questionsAmerican author Ursula K. Le Guin wrote, “The only thing that makes lifepossible is permanent, intolerable uncertainty: not knowing what comes next.”Change is inevitable, and uncertaintycomes from our inability to predictwhat changes will occur and how theywill affect our business. As I write this,I sit in the rain-soaked Midwest, whereflooding is at record high levels. Eightmonths ago, however, we couldn’tget a drop of rain to save our lives.In the consumer products business,extremes in weather or macroeconomicconditions can affect the demand forour products—just as distribution,promotion, and pricing do. Thesefactors are uncontrollable and difficultto predict over a longer time horizon.Many professionals look to thesales and operations planning (S&OP)process to eliminate uncertainty,expecting that better demand forecastscan be developed with additional effort.While this may deliver the perceptionof improved accuracy, it does nothingto help mitigate or prepare for the risksassociated with the inevitability of beingwrong. Change is unavoidable, anduncertainty continues; so, instead ofonly aiming for improved forecasts, alsofocus on your contingency plans.As always, a reasoned and reasonableforecast is required—everyone mustagree on one number. The ultimateforecast needs to be the one yourdemand team believes carries thehighest probability of becoming reality.Of course, that probability never is100 percent, which is what creates theneed for alternate scenarios. One ofS&OP’s primary objectives is to ensurealignment across the organization.Contingency planning supports thateffort because mitigation plans supportorganizational priorities instead ofdepartmental priorities.Once you’ve established demandconsensus, it’s time to develop thedemand scenarios that could occur oneither side of that number. For example,in some of the seasonal businesses inwhich I work, we consider the usualsuspects—distribution opportunities,promotions, and the like—but we alsospend a good bit of time discussinguncontrollable factors such as weatherand macroeconomic conditions. Weask, “What does our demand look likeover the 12-to-18-month horizon ifthose factors are positive on all counts?What if weather is unfavorable, buteconomic conditions improve?”We also consider how wrong we’vebeen historically and how variousfactors ultimately affected our business.Building this kind of causal relationshipbetween demand and different possiblescenarios can be challenging, but evena loose model is better than ignoringthe impact on demand error. Onceyou’ve identified the primary driversand agreed on a model that quantifiestheir effects on demand, you should beable to deliver a consensus demand anda reasonable range of probable demandscenarios.Not all demand scenarios will requireongoing supply plans. This will dependon how dynamic your demand sce-narios are in relation to the flexibilityof your current supply chain. As thisbecomes a regular part of your S&OPprocess, it will quickly highlight thoseareas that constrain your flexibility. Itmight be a particular facility, manufacturingcapacity, or raw material vendor—butsomething always breaks first.The objective of this exercise is to raisethe visibility of those constraints andunderstand when they become a risk.Then, together as an S&OP team, youcan keep a constant eye on them.The risk matrixYour risk matrix should drive mitigationoptions based on where you arewilling to take risk and where you wantto limit it as a business. Again, focuson overall company objectives, notdepartmental goals. This almost alwaysrequires financial integration, as riskdecisions have a financial componentthat must be understood. Do you wantto take on the working capital risk orpossibly miss a revenue opportunity?Should you make capital investmentstoday so that you have more capacitytomorrow? How will the plant economicsbe affected later if you’re wrong?These are the types of questions thatS&OP teams should be asking withevery cycle as they look at the 12-to-24-month planning horizon. If you’renot taking these steps as part of yourS&OP process, it’s time to stop askingfor better forecasts and start asking forbetter contingency plans.Bradley McCollum is the sales andoperations planning manager for JardenCorporation’s Leisure and EntertainmentGroup, which manufactures, markets,and distributes a broad line of consumerproducts. He may be contacted atbmccollum@jardenbc.com.APICS magazine | July/August 2011 13

EnterpriseInsightsBy Dave Turbide, CFPIM, CIRM, CSCP, CMfgETo comment on this article, senda message to feedback@apics.org.Your Shore or Mine?Reconsidering the decision to outsourceSeveral years ago, it was almost fashionable to outsource to low-wage areasof the world to reduce costs. Business leaders developed the mind-set of“offshoring is always cheaper,” and they scarcely looked beyond unit costplus transportation.Fast-forward to 2008 and 2009, andwitness the costly and embarrassingproblems surrounding the discoveryof lead in children’s toys, contaminatedbaby formula, and toxic drywall. Alsoconsider recent oil price shocks and theearthquake and tsunami that severelydisrupted supplies of many criticalelectronic and automotive parts in 2011.The US dollar has been on a downwardpath, making imports increasingly moreexpensive—and, on top of all this, wagesin China are skyrocketing. Is it anywonder that company decision makersare taking another look at the costs ofoffshoring?Re-shoring for profitThere is increased interest in bringingproducts back to US suppliers—or,re-shoring (also known as back-shoringor on-shoring). This movement is drivenby the economic realities previously outlined,along with increased awareness ofthe inherent risks of long supply chainsand a growing sense of unease over thedecline of American manufacturing.On the surface, offshoring seems likea no-brainer because the unit costs areso low. But unit cost is just the start.The most obvious additional costs arelogistical: shipping and handling, importexpenses, brokerage or agent fees, andmore.The hidden costs might be evenmore significant. For one, the lead timefor sourcing a component from Chinalikely will be measured in weeks or evenmonths. Lot sizes must be large enoughto justify the logistics costs and to coverdemand between shipments. Longer leadtimes also require larger forecasts andmore safety stock to cover the risks ofdisruption. There also is less flexibility torespond to demand changes and higherrisk of obsolescence. And if there is aquality problem with a batch, the impactis severe.Next, consider the communicationand management issues. There are languagebarrier and time zone differencesto deal with. There also might be a needto send a representative to the supplierto check on processes and quality, or tonegotiate terms.Changes in labor expenses,transportation fees, and exchange ratesare stirring reconsideration of offshoringdecisions. Many business leaders arepleasantly surprised to discover howcompetitive domestic sources canbe. North American suppliers havefocused on higher-margin businesswith short lead times, low volumes, andhigh precision—but would welcomean opportunity to bring back somehigher-volume work. And because laboris a relatively small portion of the costof goods, the higher productivity ofWestern plants can help lower overallexpenses.Of concern, however, are the issues ofcapacity and capability. Many companiesreduced or even eliminated internalcapability when they began outsourcing.Likewise, some domestic suppliersclosed their doors after businessmigrated elsewhere; so, finding adomestic supplier with enough capacitymight be challenging.Internet-based exchanges, which linkbuyers to contract manufacturers, mayhelp. One such trade exchange, MFG.com, recently rolled out a partnershipwith the state of New Hampshire toconnect New Hampshire-based buyersand suppliers. The company is talkingto other states about setting up similararrangements.Finally, consider that domesticsourcing is both lean and green. Long,complex supply chains violate many leanprinciples and contain non-value-addedactivities and delays. Shipping producthalfway around the world consumesfossil fuels and generates pollutants,and it makes it much more difficult tomonitor and control quality, content,and production conditions.Whichever term you prefer—nearshoring,re-shoring, back-shoring, or onshoring—thereare many advantages tobe found in bringing production home.And it is much more affordable todaythan it was just a few years ago.Dave Turbide, CFPIM, CIRM, CSCP, CMfgE,is a New Hampshire-based independentconsultant, freelance writer, and presidentof the APICS Granite State chapter. He maybe contacted at dave@daveturbide.com.14 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.By Antonio Galvao, CSCP, and Daniel A. Daggett, Ph.D.WorkingGreenA Tool that WorksLife cycle assessments prove to cut waste andgrow profitsIn the last installment of “Working Green,” we discussed the growing interestin life cycle assessments (LCAs)—analyses of products or processes thattake into account every stage of existence and measure environmental, economic,and social impacts of everything that goes into their manufacture,distribution, and recycling. But these days, it isn’t enough for a company toconsider its own operations. We also must look upstream and down, takinginto account the impact of everything and everyone in the value chain.Collaboration is once again key. However, before an organization can shareimportant information, it has to collect it. It is critically important to assure thateveryone in the value chain is using the same data-gathering standards. Otherwise,conclusions will be skewed, raising issues about the reliability of the LCA as aninstrument of environmental management. This fact prompted the InternationalOrganization for Standardization (ISO), the world’s largest developer and publisherof international standards, to get involved.ISO has published a series of standards for LCAs. Among these are ISO 14040,which establishes principles and a framework for LCAs; and ISO 14044, whichestablishes requirements and provides directives for use of LCAs in environmentalmanagement. The framework established by ISO 14040 consists of four interconnectedstages: definition of goals and scope, inventory analysis, impact assessment,and interpretation.In the first phase, definition of goals and scope, a business undertaking an LCAdefines its objective and establishes the breadth of its study, including the time andplace the product or process will be analyzed. Let’s say, for example, that we wantedto understand the environmental impact of a particular cleaning product. Wefirst would establish the time and place the product is going to be analyzed. Then,we would identify a “functional unit,” which, in this example, likely would be thedimensions of the area on which the cleaning product was used. If the scope weredefined as a cradle-to-grave analysis of the product—that is, one that takes intoaccount the environmental impacts at every stage of its existence—an accounting ofraw materials sourcing, logistics, energy consumption, disposal or recycling, and anyother relevant data would be required.The inventory analysis stage of the ISO 14040 LCA process is when datapertaining to energy use, materials, and other resources in the product or processare collected. To be clear, a cradle-to-grave LCA requires an accounting of everycomponent part of a product throughout its life cycle. This will involve a lot of effort,and the quality of that effort, more than anything else, will determine the quality ofthe LCA.In the third step, the environmental impact of all inventoried inputs and outputsis assessed. This involves a complete analysis of every component part of the productidentified in the inventory stage of the process. The result of this analysis is thecreation of a life cycle impact assessment. A variety of software solutions and toolscan help. However, the selection ofimpact categories, category indicators,and characterization models involvessome subjective choices that must bedocumented as part of the LCA process.The final part of the ISO 14040LCA process is the interpretive stage.It encompasses an analysis of themajor contributing factors, as well assensitivity and uncertainty analyses.Results are checked and evaluated forconsistency with the goal and scopeof the LCA in order to ensure that thestudy is complete. Understanding theaccuracy of the results is essential todetermining whether they met theobjective of the study.Because the required resources aresignificant, particularly in the datacollectionphase, LCAs currently areused primarily by large companies.Nonetheless, those businesses usingthem report that they are an effectivetool in reducing pollution and toxicwaste and helping companies respondto pressure from nongovernmentalorganizations, customers, andregulators. Users also affirm that theminimization of waste has improvedthe bottom line and provided animportant context for key technologicaland investment decisions.As this department often emphasizes,environmental stewardship once againmakes good business sense.Antonio Galvao, CSCP, is vice presidentvalue chain Europe at Diversey, a providerof commercial cleaning and hygienesolutions. He may be contacted at antonio.galvao@diversey.com.Daniel A. Daggett, Ph.D., is managercorporate sustainability at Diversey.He may be contacted atdaniel.daggett@diversey.com.APICS magazine | July/August 2011 15

LeanCultureBy Ron Crabtree, CIRM, CSCP, MLSSBBA Shared AgendaBuilding trust with employees, suppliers, andcustomersIn the last edition of “Lean Culture,” I asserted that trust requires arigorous, well-thought-out process. I reviewed the first two steps:understanding the root causes for the lack of trust and the importanceof establishing a shared agenda around which to build trust. Now, I willillustrate how to create that shared agenda, as well as an effective approachto planning and executing a mutually beneficial solution.To institute trust quickly, there firstmust be a compelling reason to doso. And what is the ultimate commonmotivator? Money. Once it is agreed thatfinancial gain is of common interest, thenext step is to figure out what customerswant more of and are willing to payfor. When that list is agreed upon byall parties, define what your employeesand suppliers can do to help bring it tofruition.Generate value, gain trustNow it’s time to evaluate your businessand customers with these points inmind. First, what are the top things yourcompany can improve? Be specific:• What can be done faster?• What can be done better?• What can be done more cheaply?• What innovations can solve customers’problems and result in greaterrevenue or better relationships?Note that capturing the true voice ofthe customer is critical here. For a smallcompany, this may involve buying a fewlunches and asking your customers sometough questions. Larger organizationsshould use more sophisticatedtechniques, such as a marketing kaizenprocess, quality function deployment,social media mining, and traditionalmarket research techniques.When talking with customers, it’scritical to know precisely how muchthings need to improve to earn loyaltyor a bigger share of their business. Vagueinputs like “faster delivery” will notsuffice. Ask exactly how much fasterdelivery should be so you don’t wastetime and money on improvements thatare under- or over-kill. Following areadditional questions to ask:• What will the improvements be worthin revenue for your company? Whatdoes that equal in gross profit? Can itbe shared with your employees andpartners?• How much will you share withemployees and business partnersbased on their contributions?• Is the ultimate level of revenuesignificant enough to give you a goodbusiness case for change?Trust-building workshopThis workshop begins by bringing inyour key stakeholders and discuss-ing your reasons for wanting to buildtrust. With respect to the scope of thechange—for example, focusing on aparticular product or service line, reducingoverall operating costs, or bringingsomething new to market—identifywhich stakeholders to involve. This mayinclude representatives from across yourentire supply chain, including vendors,employee representatives, downstreamchannel partners, and customers.It’s vital that these people actually seethe desired changes as valuable. Scheduleenough time for a thorough review, andgive them time to prepare. Ask the teammembers to make a list of the activitiesthey perform in the specific valuestream—in other words, make a valuestream map. For each task, ask them tobe prepared to share the following:• How often is the task performed?• Each time the task is performed, howmuch money and labor are spent doingit?• Are there any delays in the process? Ifso, how long are they, and why do theyoccur?• What are the pain points associatedwith the overall process? If possible,identify the specific pain points at thetask level.Next, bring these people together, anddraw a simple diagram showing the tasksand the information for the end-to-endprocess for the entire value stream. Usethat information to create your rules ofengagement—a code of honor. Trust isnatural when people share the same valuesand priorities. Make sure you create16 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.the context for what you are working toaccomplish, and be prepared to keep theteam on track.Review the assembled data so thateveryone understands the current stateof the end-toendprocess. Payattention to thepain points, as 80percent of themlikely are relatedto communicationsissues. Thegood news is that these problems areoften cheap to fix and can translate to realresults quickly while serving to build trustand collaboration.Brainstorm, with full cooperation andinvolvement, ideas to improve the resultsand achieve the objectives you establishedup front. Ask for twice what you would behappy with. (For more on brainstorming,see “A Brainstorming Blueprint,” APICSmagazine, July/August 2009.) Then, moveon to the logical next steps. This is thepoint at which youorganize and prioritizeideas basedon their level ofimpact to the statedchange objectives.Document who willdo what and when,and verify how the benefits will be sharedupon completion. Execute the plan withfrequent interaction. Above all, keepyour word and require participants tofollow the rules.It’s vital that you understand how togain consensus and get results whilebuilding trust. Do what you say you willdo—before, during, and after. One slipupcan destroy everything you have workedfor. And, finally, commit to continuousimprovement.Ron Crabtree, CIRM, CSCP, MLSSBB, isa director-at-large for the APICS GreaterDetroit chapter and president of MetaOps,a training and consulting firm specializingin lean six sigma in operations, marketing,and sales. He may be contacted atrcrabtree@metaops.com.APICS extraAPICS Extra Live: the people Factor insupply chain excellencePresented by:Ron Crabtree,CPIM, CSCP, MLSSBBPresident, MetaOpsAuthor, “Lean Culture”Date: august 11, 2011Time: 1:00 p.m.–2:00 p.m. ctAttend APICS Extra Live to gain deeper insight into the July/AugustAPICS magazine article “A Shared Agenda,” which explores theimportance of building trust among suppliers and partners.In this APICS Extra Live, you will learn• the reasons behind the “people factor gap” in supply chain management• best practices in supply chain execution and purchasing• where your peers stand on this and other issues in the profession• proven solutions for closing the people factor gap in your supply chain.RegisteR online at apics.oRg/extRa.APICS magazine | July/August 2011 17

ExecutiveViewBy Tim BeckerBeyond the Finish LineBest practices for post-implementation management of megaprojectsIn the last installment of “ExecutiveView,” I focused on the initial setup oflarge transformational programs.I addressed the various elements ofprogram structure, including charter,governance and organization, scope,work planning, budget, the businesscase, and reporting.Adopting best practices in these areasis a prudent investment to ensure thesuccess of megaprojects. But even thebest-structured and best-launched programscan run aground because of poorsteering by program managers. Now,I will discuss some best-of-the-bestpractices to keep a megaprojecton course.Establish a program managementoffice (PMO). One of the mostimportant ways to keep megaprojectson course is to implement disciplinedprogram management. Large transformationalprograms are, in essence, setsof many interlocking projects. Thus,one best practice is to establish a PMO,which centralizes functions where consolidationis more efficient or absolutelynecessary—for example, in financialaccounting and reporting.A PMO standardizes processes acrossprojects, catalyzes the adoption of bestpractices, and realizes economies ofscale. It also consolidates reporting,rolls up finances, and tracks key risks.PMOs maintain a project’s foundationaldocuments, including charter, businesscase, and documents establishingorganization and governance.Avoid expediency and complacency.Managers must be careful not to letprogram management become a routineexercise. While many megaprojectsbegin with good intentions to maintainrigorous project management, expediencysometimes drives managers to cutcorners. Other times, the long grindleads to a gradual neglect of projectdiscipline.Whether intentional or not, theresults are the same. Risks are handledin perfunctory fashion. Foundationaldocuments are not updated. Reportingbecomes sloppy, uninformative, andinconsistent. This gradual slide into a“tick-the-box” approach can cause aprogram to veer, sometimes imperceptibly,toward failure. Accordingly, thePMO must be vigilant about maintainingprogram discipline against the lureof the twin sins of expediency andcomplacency.Prevent silos from forming.Another important—but difficult—program management function ismaintaining integration of the overallprogram. Integration must occur notonly on the inside (among the variousinterlocking projects), but also with thebroader organization on the outside,which often is more concerned with“business as usual.” The biggest dangercomes from the silo effect: Individualunits of a program focus so much onaccomplishing their specified tasks thatthey ignore and sometimes oppose theobjectives of other projects and of thelarger organization.The PMO plays a crucial role in preventingsilos from forming and razingthem when they occur. It accomplishesthis by creating interfaces betweenparallel projects with dependencies,sometimes forcefully. Often, all that isrequired are periodic meetings amongmanagers of dependent projects; but,other times, further intervention isneeded. This can include mediated18 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.discussions or the inclusion of specifictasks in work plans.Silos are an important issue withregard to the megaproject’s relationshipto the larger organization. To theorganization concerned with businessas usual, large transformationalprojects are separate, single-purposeentities, due to their significant resourcerequirements. Organizational resourcesbecome devoted entirely to these programs—often,for years. This separationcan create suspicion, isolation,and arrogance, leading to solutionsthat are unfit or not accepted by theorganization.There are a number of ways to mitigateprogram silos. Consider a regularrotation of resources into the programfrom the organization, at least forcertain positions. Any rotation shouldbe balanced by maintaining continuityin resources. During the program’sinception, all parties should agree toacceptance criteria for program deliverablesto be transitioned to the organization—forexample, solutions, functions,and processes. Perform frequent andongoing reviews of program deliverables.This includes representation bythe organization in the program’s governance,including a role on the steeringcommittee.Make risk management the highestpriority. The PMO is the central repositoryfor tracking risks. In this context,risks are threats to the schedule, budget,solution, or quality. All risks containboth a magnitude—such as a delay ofsome number of weeks—and a probabilityof occurring. The PMO mustensure that risk reporting is substantive.All risks should be well described,quantify both magnitude and probability,and contain specific actions andassociated dates to mitigate the risks.Risk management is perhaps themost important aspect of project management.Fortunately, there are easilycalculable metrics that can shine abright light on the endeavor. Followingare examples of questions that shouldbe asked and answered:• What percentage of project delays,budget overages, or degradationsin solution quality result from risksthat were not identified until theyoccurred?• For risks identified before theybecame manifest, how accurate werethe initial (and subsequent) impactestimates, and how far in advancewere the risks recognized?• For the sum total of acknowledgedrisks, how accurate were the initial(and revised) probability estimates?The best projects leave few risksunidentified, spot risks far in advance oftheir potential manifestation,and estimatepotential impacts andprobabilities with accuracy.They also havecarefully thought-outmitigation strategiesand a contingency planfor the worst-case scenario failure of amajor program component.Plan the transition. Managingmegaprojects can feel like sprinting amarathon. The exhaustion often causesprogram managers to give little considerationto the crucial task of transitioningsolutions and processes to theorganization. Program managers musttake care not to prematurely demobilizeprojects. To ensure a smooth transition,consider the following steps.First, establish metrics and reportingsystems to track operational readinessof the transition to the business. Thisincludes working with leadership todevelop acceptance criteria for finalprogram deliverables.Second, implement a trial period ofabout 60 to 90 days before making thetransfer. This allows time to work outany kinks. During the trial period, staffinvolved in the project should workdirectly with the business, resisting thetemptation to merely use documentation.Specifically, make efforts to• define operational metrics• designate internal entities andoutside suppliers to handlevarious problems, such as thepost-implementation organizationstructure• establish procedures for secondandthird-tier support functions• enact mechanisms such as servicelevel agreements to support thebusiness-as-usual operating model.Third, during the post-transitionphase, designate a period of aroundfour to six months of enhanced support.While this entails a longer andmore costly deployment, ultimately, itwill result in higher quality and betteracceptance of the transformation.Conduct independent reviews.Implementation of the preceding bestpractices will keep your megaprojectheaded toward success. However, itdoes not obviate the need for independentoversight. Accordingly, scheduleperiodic audits of the project byexternal parties with no direct stake inthe project. After all, even the best-runprograms can benefit from ongoingreview.Tim Becker is founder of Probity BusinessGroup LLC, a consultancy focusedon strategy, growth, technology, andoperations improvement. Becker helpscompanies hone their marketing and salesstrategies. He previously was a partnerwith Accenture. He may be contacted attabecker1@hotmail.com.APICS magazine | July/August 2011 19

ManagementPerspectiveBy Philip E. Quigley, CFPIM, PMPTo comment on this article, senda message to feedback@apics.org.Giving Your NewProducts a ProperSend-OffEssential strategies for successful launchesRecently, I taught a supply chain management class at California StateUniversity–Fullerton. The course was interesting to teach, and the studentswere involved and listening. However, there was a weakness in thecurriculum: There was no discussion about new product development andits impact on supply chain—and supply chain’s impact on new productdevelopment. That’s a major problem and, unfortunately, it reflects theopinions of many senior-level supply chain professionals.In practically every industry, the keyto long-term growth and profitabilityis the ability to develop, design, andintroduce exciting products into themarketplace. Take, for example, anautomotive manufacturer whose chiefexecutive officer wanted to successfullylaunch a car every quarter. In practicalterms, the business had to develop anassembly line processes to deliver onsuch a promise. At this company, supplychain and operations managementprofessionals responded by learninghow to seamlessly integrate the newcars into production on an ongoingbasis.For manufacturers working towardefficient launches, “seamlessly” alsomeans the old product is shut off Friday,and the new one launches Monday—and starts delivery to customers by theend of that week. It also signifies fullproduction rates within days, quality atsix sigma or above from the start, andconsistently meeting cost targets. Nodoubt we all know how difficult this isto accomplish.Get movingSo, how can you make product launchessuccessful? First, the developmentand design team must includemanufacturing personnel, engineers,buyers, and other stakeholders. Inthis way, you ensure the new itemis producible and that its parts canbe procured at a reasonable cost.Automotive companies have beenleaders in this area. Toyota, Honda,and Chrysler all have platform teamsthrough which organizational groupsare brought together under strongproject and program management inorder to work out the new product.Next, make sure your operationsgroup involves suppliers in thelaunch process. Suppliers are essentialmembers of the team, and they cangive input into technology; weigh in ondesign; and, if brought in early enough,contribute to meeting cost objectives.Make them true partners, and rewardthem with contracts or shared costsavings. Note that your contracts shouldbe awarded based on total value, notjust low cost.Third, schedule the ramp-up ofthe new product andramp-down of the oldone. A slow, steadyintroduction lets youidentify and solveproblems before theyinfluence the bottomline; however, it alsolets your competitionreact. Obviously, theright trade-offs for yourparticular business willneed to be assessed anddecided on. Be especiallycareful when new toolsand machines are neededto produce the new item.Funny things happen when you buildnew designs on new machines.These days, new product launchesare a key part of the supply chain andoperations management routine. Areyou prepared?Philip E. Quigley, CFPIM, PMP, is a seniorapplication portfolio manager for ComputerSciences Corporation. He teaches atChapman University’s Argyros School ofBusiness and Economics and California StateUniversity at Fullerton. He may be contactedat pquigley2@csc.com.20 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.By Mike ColvinSoftwareReviewFireproof PlanningOne manufacturer finds a cool scheduling solutionFor 25 years, Technical Glass Products has manufactured fire-rated glass products, including doors, windows, andcurtain walls, at our two facilities in Snoqualmie, Washington, and Milton, Ontario. Our goal is to provide a singlesource for fire-rated glass, framing systems, and specialty architectural glass products. The company also offerscontinuing education, project consultation, product specifications, computer-assisted design, and rapid-responsequoting to help customers find the right materials for their construction and remodeling projects.The challenge we faced at TechnicalGlass Products was to provide realisticshipping dates to customers. In the past,when a schedule changed and datesslipped, it became difficult to get backon track. After searching for the righttool, we came upon User Solutions’planning, scheduling, and tracking suiteResource Manager-DB (RMDB).OverviewRMDB provides credibility incommunicating production schedulesFigure 1: Scheduling screenand eases frustration. It gives usersthe data they need to convey to othersthat, while some jobs might be late,schedules can be manipulated to lessenthe overall impact on customers. Witha single screen, production can bereprioritized and rescheduled basedon critical parameters, such as numberof days early or late, customer priority,and material shortages. (See Figure 1.)RMDB even can determine if jobs canbe paused midstream without majorramifications.The software suite gives us an overallview of the shop floor, answering questionsabout whether a shipping date isrealistic for a new project. If a managerneeds to be informed that shipping isgoing to miss a deadline, RMDB canprovide the answer to the follow-upquestion, “how late?” This is a muchbetter situation than explaining to theproject manager and the customer, “I’llget back to you in a week.”With RMDB, it also is much easier tonegotiate delivery dates with customersThe scheduling screen displays job status and allows for drag-and-drop adjustments.APICS magazine | July/August 2011 21

efore a project gets released. It allowsus to run what-if scenarios on plannedjobs and inform customers exactlywhen it’s possible to deliver.InstallationThe system was installed on WindowsXP and Windows 7 machines runningMicrosoft Office and connectingto a shared database on a local server.Within a couple of weeks, installationwas complete and the system wasoperational. RMDB integrated withmany existing functions, including ourenterprise resources planning systemand custom tools for scanners and timeclock functions. RMDB automaticallyreceives information from the timeclock system, giving us a real-time viewof employee scheduling. Feedback fromthe production floor is combined withjob creation tasks to generate realisticcapacity schedules. (See Figure 2.)The software is quick and responsive,Product summaryProduct nameResource Manager-DBType of programProduction schedulingbut performance depends on the numberof projects running. At TechnicalGlass Products, we put a fair load on thesystem: About 100 jobs are scheduledover four months, and each containsaround 12 steps. We are pleased withthe speed at which RMDB provides usneeded data.InterfaceRMDB’s interface is intuitive and easy tolearn, and we have not had any troublewith navigation. While the system camewith documentation and tutorials, wehave not needed those resources verymuch. User Solutions provides free,Figure 2: Resource calendarcustomizable training. After only a fewonline meetings, our questions wereanswered.While RMDB uses Microsoft Excelfor reporting (see Figure 3), one of theproduct’s shortcomings was the difficultyin condensing long reports into oneprintable, readable page. And some ofthe error messages could be more informative;although User Solutions wasvery responsive in fixing our problems.CustomizationAnother benefit of RMDB is the abilityto make suggestions for improvementsand see them implemented quickly. ForVendorUser Solutions11009 Tillson DriveSouth Lyon, Michigan 48178-93181-800-321-USER (8737)usersolutions.comRMDB’s calendars highlight capacity bottlenecks, backlogs, available capacity, and more.Figure 3: Excel-based reportingRecommend operating environmentWindows with Microsoft Officeinstalled. Excel 97 or greater.Recommended server operatingenvironmentShared drive for multiuser database(Jet Engine/Access or SQL). Hostingoptions available through Go-Globalor equivalent.RMDB features integration with Microsoft Excel for standard and custom reporting.22 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.Vendor commentsUser Solutions would like to thank theauthor for the honest review of RMDBand Technical Glass Products’ ongoingfeedback on our planning, scheduling, andtracking tool. RMDB has a unique designthat quickly and easily adapts to existingoperations and delivers benefits withoutthe pain of a complicated, costly, andinflexible system that’s hard to implementand maintain. It is the first tool that can beused by small companies with no formalsystems in place —as well as at larger companieswith existing enterprise resourcesplanning systems.What makes our products unique is thatwe solve planning, scheduling, and trackingchallenges the customer’s way. Insteadof forcing users to adapt business to arigid system, our software fits the way theywork right now. It’s encouraging to hearfrom customers, including Technical GlassProducts, that a successful application canbe quick, easy, and affordable—at less than$20,000 for a multiuser system, includingimplementation.Another benefit for our customers is thedepth of inclusive product features. Whenneeded, customers can add functionalityfor materials management, masterresources planning, and inventory, as wellas advanced planning and scheduling features,including alternate work centers androutings, multiple constraints, and skilllevel scheduling.Some of our customers start with onephilosophy in mind—such as classic routingcombined with bill of material—andreconfigure production to incorporate leanmanufacturing. RMDB can be reconfiguredto support a variety of approaches,including theory of constraints and Justin-Time,with no additional costs.Soon, we will release Resource Manager.NET, which will have all the flexibility ofRMDB with more built-in customizationoptions.example, we asked for a way to create a graphical flag for rush jobs and markcompleted steps based on updates from the tracking system. User Solutions listenedto our comments and made the changes at no cost in less than two weeks.The system has built-in flexibility for many varieties of user customization.For example, either forward or reverse scheduling—or both—can be selected.We also can interact with the schedule on the fly and add steps for trackingrework, queue times, and materials. The system has many ways to adapt thesoftware, and User Solutions has been great to work with. Their representativesare always prompt to answer questions and fix problems, and they aremore than willing to take our suggestions and improve the software.Overall, my colleagues and I at Technical Glass Products have been verypleased with RMDB. It was easy to install, easy to transfer our informationinto the system, and easy to navigate. It allows us to point out productionbottlenecks and illustrate when we cannot get a certain amount of work donewith limited time. It is a visual tool for displaying available capacity; managingcurrent workloads; and, most of all, creating understanding.Mike Colvin is production manager at Technical Glass Products, a manufacturer offire-rated glass and framing systems. He may be contacted at mikec@fireglass.com.MBAin Supply ChAinMAnAgeMentLearn from the expertsat michigan state universityBloomberg Businessweek 2010 Rankings#2 Supply Chain Management#2 Best ROI U.S. Schools#5 Teamwork#20 Best B-SchoolsMBA.MSU.EDU • 1-800-4-MSU-MBAAPICS magazine | July/August 2011 23

RelevantResearchAuthor By Richard Name E. Crandall, Ph.D., CFPIM, CIRM, CSCPSeeing the Future ofSupply ChainsToday’s topics and tomorrow’s expectationsWhat is the future of supply chains? Are they a well-established and majorcomponent of today’s business environment? Everyone likely will agree that supplychain management has become one of the hottest topics in business literature,particularly because rapid change has been the norm. But what does the future hold?Anyone claiming to know the futuremay be considered crazy or naive, butI will endeavor to do so nonetheless.The good news is that I am going toquote some other professionals before Iventure my own predictions. After all,that is the purpose of this department—to research what others have done.Before examining the future, it’sprudent to look at today’s businessenvironment, as predictions oftenare based on trends. Certain areasare somewhat predictable—whatcompetitors are doing or are goingto do, the trend of the economy, andthe flow of new technologies. Notethe caveat “somewhat predictable.”Even less predictable, or somewhatunpredictable, are society’s opinionsand political leanings, governmentactions at all levels, and environmentaleffects such as earthquakes andtsunamis. All of these areas affect, or areaffected by, supply chains.In addition, developments insupply chains are influenced by whatcustomers need and want, including• reduced costs• higher and verifiable quality• reduced lead times• reduced process variability• increased flexibility and agility• reduced risk to consumers• responsiveness to consumer needsand wants• assimilation of new technologies.Predictions aboundTompkins Associates (2011) lists the top11 priorities for service supply chainsand emphasizes the returns phase.Priorities also include executive sponsorship,organizational alignment, processesto handle contingencies, awareness ofregulatory trends, strategic outsourcing,and a commitment to sustainability.Both IndustryWeek and MaterialHandling Management outline anumber of predictions introduced byIDC Manufacturing Insights includinghow to simplify complex supply chains,develop business intelligence and analytics,recognize supply-side responsivenessin demand forecasting, increaseinformation technology (IT) visibility,shorten lead times with proximity sourcing,contain costs through IT outsourcing,add modernization tools, increasecollaborative processes, put a stake in“the cloud,” and incorporate mobileapplications and smart devices whilebalancing IT management concerns withemployee enthusiasm.In Logistics Today, Ellis adds dynamicoptimization of supply chains, salesand operations planning as a synchronizingprocess, convergence of supplychain and product life cycle management,investment in global operations,tightened transportation capacity,increased risk from offshoring, sensorsand machine to machine, and increaseduse of metrics.In addition, I did a survey at theAPICS Foothills Chapter to get anindication of the supply chain issuesthat were of the most concern. Table1 shows the results. The topics areranked by the average response, withthe percentage of responses shown foreach of the levels of concern. Responsesare grouped into the focus descriptionsshown in the far right column. Thehighest percentage in each row ishighlighted. I will use these responses,along with other inputs as shownin the references, to identify whatappear to be some of the major issuesconfronting supply chain managers. Itis worth noting that several issues haveresponses in all levels of concern, fromno concern to great concern.The major concerns are associatedwith short-term availability, cost, andassuring the continued flow of goodsand services. Following are morein-depth assessments.Outsourcing. Outsourcing has twomajor areas of concern. The first is theavailability and reliability of deliveries.(“Will I get what I need?”) This isaggravated for some companies becauseof the recent tragedy in Japan. Thesecond concern has to do with the totalcost of ownership of goods received.Company leaders are discoveringthe added costs of transportation,inventory carrying expenses, andquality variance are more than expected.Additional hidden fees can include lossof manufacturing capability at home,uncertain competition from suppliers,and consumer unease. Consequently,some companies are finding nearshoringa more comfortable alternative; othersare trying to figure out how to avoidoutsourcing altogether.Prediction: Offshoring will continueto increase—but at a more deliberatepace—and may be leveling off, at leastuntil uncertainty settles down. However,outsourcing requires more carefulanalysis than in the past.24 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.Figure 1: Supply chain survey resultsSupply chain issueor concern1 Raw materials availabilityand costs2 Transportation availabilityand costsOf noconcernOf someconcernOf moderateconcernOf considerableconcernOf greatconcernWeighted averageof responsesPrimary focus1 2 3 4 56% 6% 35% 53% 4.9 Short-termavailability22% 61% 17% 4.73 Supply chain complexity 6% 28% 33% 33% 4.74 Demand forecasting/management 17% 17% 39% 28% 4.55 Offshoring 6% 11% 28% 22% 33% 4.46 Risk management 11% 28% 44% 17% 4.4 Assurance of7 Information technology11% 39% 39% 11% 4.2flowcompatibility8 Trust among supply6% 11% 39% 17% 28% 4.2chain partners9 Product traceability 6% 11% 28% 44% 11% 4.110 Political unrest 28% 17% 44% 11% 4.111 Information sharing 28% 22% 39% 11% 4.0 Integration12 Relationship building 22% 44% 11% 22% 4.0andrelationships13 Product innovation6% 18% 29% 35% 12% 3.7and development14 Sustainability/reverse logistics 28% 33% 39% 3.715 Financing and funds flow 11% 33% 17% 17% 22% 3.716 Government regulations 6% 33% 22% 33% 6% 4.4 Uncertain or17 Unethical behaviors 56% 22% 11% 11% 4.2intangible18 Culture conversion 17% 39% 17% 17% 11% 4.219 Human resources availability 6% 44% 33% 17% 4.120 Dispute resolution 22% 39% 22% 11% 6% 4.1Demand management. Supplychain professionals spend a lot of timetrying to forecast demand. As supplychains extend around the world andbecome more complex, the old methodof statistically extending past historyto forecast future demand is no longeradequate. The future will not be like thepast. Even sophisticated data collectionmethods such as point-of-sale terminalsand rapid data transmission stillare only capturing past history, albeitalmost in real time. Forecasters musthave visibility into what customers aregoing to do, such as sales promotions,the introduction of new products, thephaseout of old products, entrance intonew markets, and other similar events.Even with this added knowledge, forecastershave to expect the unexpected.Prediction: Collaborative forecasts,jointly developed with your customer,will become commonplace.Risk management. Of all the supplychain concerns, risk management is theone most written about. Even before thedisasters in Japan, supply chain managerswere becoming more concernedabout what to do if the “big one” happened.Along with handling day-to-daydisruptions, now professionals worryabout truly major disruptions. Shouldmanagers develop a contingency plan?Or can they just hope to ride it out?It pays to be prepared. Choosing thebest strategy may mean the differencebetween success and failure.Prediction: Risk management willbecome a core competency. It is nolonger just a matter of buying a policyfrom your local agent.IT compatibility, security, and privacy.IT holds both hope and apprehensionfor supply chain managers. It canbe a way to extend enterprise resourcesplanning systems into supply chainplanning systems, enabling participantsto quickly and reliably share informationthat will provide benefits to all. Onthe other hand, IT carries the burdensof systems compatibility, informationsecurity, privacy of confidential information,and resource availability. Howdo companies separate the vital fewfrom the many trivial applications? Willcloud computing save the world fromdrowning in its own data?Prediction: IT will become an evengreater need in supply chain integration;however, it will require strategicmanagement more than ever before.Trust. Do you trust your customers?Do you trust your suppliers? Thesequestions haunt supply chain managers.Building trust requires metrics to gaugeprogress in building relationships. Trustis progressive and requires workingyour way through “coordinate, cooperate,and collaborate” cycles.APICS magazine | July/August 2011 25

Prediction: Trust along the supplychain will become a prized achievementfor a select few.Process technology. Technology hascome a long way. The development ofcomputers, robots, videoconferencing,smart grids, mobile devices, andelectronic readers are just a few of theadvances made in recent years. Moretechnological advancement is coming,thereby increasing the problem of howbest to integrate supply chains.Prediction: Technology can lead;however, if companies and supplychains don’t continually adapt theirinfrastructures and cultures, addedturmoil will follow.Knowledge corridor. We knowa lot about transforming data intoinformation, and we are learning moreabout how to transform informationinto knowledge, both tacit and explicit.The hope is that this will enable us tomake better decisions that will benefitnot only our businesses, but also oursocial and environmental goals. To dothat, we must add one more step to theknowledge corridor—wisdom. Whoin your company has the wisdom tolook toward the future? We may not yetknow how to teach, train, and cultivatewisdom, but it’s certainly time to startthinking about it.Prediction: Companies are buildinga knowledge supply chain; they mustalso begin the journey to build wisdom.Sustainability. The BrundtlandCommission provided the most quoteddefinition of sustainable developmentby calling it “development that meetsthe need of the present world withoutcompromising the ability of futuregenerations to meet their own needs”(1987). APICS magazine covered thissubject in November/December 2010.Classifications such as the triple bottomline, cradle to grave, and cradle to cradleare ideas generating momentum. Somebelieve the business community mustlead if this endeavor is to succeed.Prediction: Sustainability willbecome an imperative. Supply chainparticipants should prepare to be a vitalpart of the movement toward environmentaland social responsibility.Services. Would you buy anautomobile if there were no service andrepair available? Or a computer if therewere no help lines? Today, companiesmust assure customers that there areservices that makeproducts usefulthroughout theirlong and productiveshelf lives. Theseinclude insurance,facilities design,auditing and taxes,human resource management, andeducation. Businesses get social servicesfrom governments or other institutionssuch as education and health careproviders.Prediction: Goods without servicesare dead ends. Thus, services willbecome pervasive in supply chaindesign and management. Linkingservices to a single company will bechallenging; linking services along thesupply chain will be a monumental task.Supply chain complexity. It is easyto say complexity should be simplified,but it is difficult to do. The businesscommunity is in the early stages ofconfronting the enigma that fieldsof science have been dealing withfor several decades—complexity andchaos theory. These concepts dealwith nonlinear behavior of weather,insect populations, and business cycles.Writers discuss a complex adaptivesystem, the fitness landscape, strangeattractors, and the edge of chaos todescribe the world that lies ahead.Prediction: Complexity in supplychains will increase as globalizationincreases. Business professionals mustlearn to manage complexity by makingeffective decisions.The journey aheadThis “Relevant Research” exploressome of today’s most pressing supplychain challenges and prospects for thefuture. They represent the kinds ofproblems that supply chain managersare trained and eager to deal with.Here is a sequence of steps that canhelp lead you to a solution:• Contentment. First, take a weekendoff and prepare yourself mentallyand physically for what you mustdo next.• Complexity. It’s true that what liesahead is daunting. But good supplychain managers know they need aproblem to solve to be content.• Concern. When looking at allthat’s going on in the supply chain,it’s appropriate to be concerned.Just make sure it’s a concern thatstirs you to action, not one thatdiscourages you because of inaction.• Change. Change is good, especiallyif it’s your idea. Come up with someways you can work through themaze and lead others to a betterfuture state.• Challenge. It would not be nearly asmuch fun if it were not a challenge.Accept that you have the right stuffto get it done.• Confidence. Solving the problemand moving ahead throughchallenging times will give you theconfidence that goes with a jobwell done.• Continue. You have arrived. Takeanother weekend off and be contentuntil you start the cycle all overagain. This is why you got intobusiness, isn’t it?26 July/August 2011 | APICS magazine

To comment on this article, senda message to feedback@apics.org.Ethics. Corporate socialresponsibility is the third part of thetriple bottom line, after financial andenvironmental responsibility. Mostpeople agree that ethical behavior isdesirable, both in our private livesand in business dealings. However,we continue to see unethical, evencriminal, actions in business. Howcan we prevent or control this? Canwe legislate or regulate it? Finding asolution poses a challenge worthy of thebest minds and hearts.Prediction: Ethics will be the nextbattleground—after we solve the world’sfinancial and environmental problems.Should my crystal ball prove accurate,remember: You heard it here first.References1. Brundtland Commission.1987. Development and International Economic Co-operation: Environment,Report of the World Commission on Environment and Development. 54.2. Cavinato, Joseph L. 2005. “Sorting through the chaos.” Inside Supply Management. 16 (9): 24–29.3. Ellis, Simon. 2011. “Top 10 Supply Predictions for 2011.” Material Handling & Logistics.4. Ellis, Simon. “Top 10 Global Supply Chain Predictions for 2009.” Logistics Today. Accessed March6, 2011.5. APICS Foothills Chapter. Survey of membership regarding concerns in their supply chains. SurveyMonkey, April 7–14, 2011.6. “Best Practices for Supply Chain Improvement, Manufacturing Roundup.” IndustryWeek. http://penton.ebookhost.net/iw/cognos/1/?linkcode=WPsect. Business Analytics Software. AccessedMarch 20, 2011.7. Manenti, Pierfrancesco. 2011. “Mastering Complexity, Driving Out Complication.” IndustryWeek.www.industryweek.com/PrintArticle.aspx?ArticleID=23844&cid=NLIWMT. Accessed Feb 11,2011.8. Tompkins Associates. “Top 11 Priorities in 2011 for Service Supply Chain,” www.tompkinsinc.com/2011. Accessed March 3, 2011Richard E. Crandall, Ph.D., CFPIM, CIRM, CSCP, is a professor at Appalachian StateUniversity in Boone, North Carolina. He may be contacted at crandllre@appstate.edu.For a free list of more than 30 annotated references on this topic, email the authorat crandllre@appstate.edu.EARN THE APICS CPIMDESIGNATION TO GAIN:EXPAND YOUR CREDENTIALSWITH THE APICSCPIM DESIGNATION• The tools to effectively manage global supply chain activitieswhere suppliers, plants, distributors, and customers are locatedaround the world.• The knowledge to apply principles ERP software is based upon,including lessons covering various functions within a company,including purchasing, planning, finance, engineering, and more.• The proven knowledge and organizational skills to strategicallystreamline operations.Visit apics.org/cpim or call APICS Customer Service at+1-800-444-2742 or +1-773-867-1777 for more information.APICS magazine | July/August 2011 27

Commandersof the FleetBy Maha MuzumdarLeveragingtechnology toachievetransportationexcellenceControlling costs is an essential component to achieving transportationexcellence. Successful transportation professionals continually seekinnovative, proven ways to mitigate rising costs and gain operationaladvantage over their competitors with the right transportationmanagement system (TMS).In today’s environment, however, soaring energy prices, roadway congestion,and end customer desire for faster delivery mean higher transportationcosts—and they are projected to continue rising. As a result, afundamental shift is occurring in transportation, whereby controlling costsis less about cost reduction and more about avoiding increases.Many companies also search for ways to increase transportation efficiencywhile maintaining or creating high standards of environmentalresponsibility. No longer is it enough to find consolidation opportunities28 July/August 2011 | APICS magazine

within the network or to negotiatecarrier rates: Successful companiesare managing costs while supportinginitiatives that drive margins, lowerinventories, and create a more sustainableand lean supply chain.These approaches can bring abouttransportation savings for the organization;but, more importantly, theyfacilitate a broad, logistics-basedview of the entire operation andelevate transportation in general. (Fora detailed case study of a sustainableand lean supply chain project inaction at a multinational organization,see the sidebar on page 31.)Cost versus serviceThe trade-off between cost andservice lies at the heart of the TMSdecision-making process. Servicerefers to the interested parties’satisfaction levels when dealingwith both transportation providersand the companies purchasingthe transportation. Transportationproviders historically are extensionsof the companies that purchasethe transportation, due to the highlevels of interaction with suppliers,distribution centers, and customers.For this reason, the planning andeffort involved with finding the rightservice providers are critical to thesuccess of the purchasing company.Service is gauged using metrics suchas on-time pickup, on-time delivery, andpercentage of damage—quantifiable,data-based approaches that can bebenchmarked against other providersand historical figures. At the highestlevel, service is measured by days intransit, which is linked to the transportmode chosen and the geographiclocations of origin and destination.Thus, overall sourcing is closely linkedto the proximity of customer orsupplier: The longer the duration of atrip, the lower the cost, as the serviceprovider can leverage economies ofscale, transporting more items andusing more fuel-efficient methods.Measuring the direct costs of transportationis relatively straightforward.Often, companies express these ascost per hundredweight or cost percube of product. But the indirect costsof transportation are more difficult tomeasure: Delays cause excess inventory;slower transportation modesincrease days-on-hand inventory as itmoves through the supply chain; andvarying customer satisfaction levelscan lead to higher or lower sales,depending on customers’ experiencewith the carriers of choice.After taking all of this into account,it is easy to see how higher servicelevels increase transportation costsand lower transportation costs reduceservice levels. Lowering your servicelevels might even be appropriate ifthe parties involved aren’t expectingthe level you normally provide—ifyou still match industry norms or ifthe positive effects (cost reductions)offset negative impacts in other areas.Arriving at valueConsidering costs and service levels asa backdrop for overall transportationmanagement, the following arethree essential components that aTMS must have to establish basictransportation competence in thecurrent business environment.APICS magazine | July/August 2011 29

Controlling costs is less about cost reduction andmore about avoiding increases.Transportation planning andshipment optimization. Traditionally,shipment optimization involvesweighing the characteristics ofinbound, outbound, and inter-facilityorders to arrive at a transportationplan that adheres to predeterminedservice levels while keeping coststo a minimum. The typically usedareas of planning and optimizationare order consolidation, shipmentconsolidation, mode selection, andthrough-point optimization. The savingsderived from these are easy tomeasure and often become the mainmeans of justifying a TMS purchase.Collaboration and automation.Automation of transportation andlogistics processes includes orderavailability, shipment tendering,pickup and delivery notifications, andfreight invoicing and payment. Theyare necessary attributes for any TMSto function within a properly staffedtransportation department.When these capabilities are presentin a TMS, personnel are able to takeon more value-added projects and,in turn, provide more benefit to theenterprise. Additionally, the ability tointeract with interested parties usingautomation is a significant benefit tothe transportation team, as the verynature of transportation is collaborative.Because transportation involvesitems being sent from one party toanother—typically by a third party—sharing information and creatingprocesses supported by technologyincrease the overall efficiency of theoperation and the satisfaction of allinvolved.Freight payment. An oftenoverlookedarea of transportation isthe auditing and payment of freightbills. When present in a TMS, the subsequentsavings can cover the entirepurchase and implementation of thesystem. Basically, freight paymentinvolves checking invoices electronicallyagainst shipment records anddetermining if this matches whatthe system expected to pay. In thecase of a match, vouchers are sentto accounts payable and checks arecut. Otherwise, the TMS will take aseries of configurable actions, such asinvoice decline, short vouchering, andalerting appropriate parties.It’s a journey, nota destinationOn their transportation journeys,many leading companies adopt lesscommon processes and practices tocreate value and move beyond merecost management. Cost managementcan find its way back into the project;but, when it does, it’s not as integralto the conversation, and stakeholderscan more easily accept it because theprogram no longer hinges solely on it.With that idea in mind, followingare some of the more interestingconcepts and technologies beingdeployed in transportation today.Global, local, centralmanagement. Advancements intechnology enable organizations tomanage large, complex, and globalnetworks more effectively. Visibilityacross the entire logistics networkmakes it possible for enterprises tomanage operations using a centralsystem and with local domainexpertise, personnel, and practices.This eliminates the need for multiplesystems and technology costs whileenabling cross-functional decisionmaking and creating relationshipsthat result in greater efficiency.This “command center” model hasbeen adopted by only a handful oforganizations and third-party logistics(3PL) providers, but it is a relativelynew concept.Extended logistics processes.Fleet management, global trade management,performance management,Executives face pressures to measure, manage, and mitigatethe environmental impacts of transportation.and cooperative routing historicallyhave relied on separate, silo-basedprocesses and systems. This no longeris the case, as technology has evolvedto the point where these areas canbe supported with a single platform.Adopting these functions into a TMSprovides incremental value beyondcore transportation management.Consider each function in turn:• Fleet management: For years,owning a private fleet meant usinga separate system to manage it.Inevitably, demand spikes and dipswould create resource challengesthat could not be resolved with asingle system. This would requiremanual intervention under majortime constraints, resulting in costoverruns and service interruptions.Managing both private and for-hiretransportation with a single systemreduces these challenges, easesstrain on overburdened informationtechnology departments, andcreates value for the organization.• Global trade management: Untila decade or two ago, many professionalsoutsourced internationaltransport to 3PL companies. Manycompanies now are reconsideringthis approach. There are clear synergiesand advantages to controllingboth domestic and internationaltransportation with a single system.Integrating global trade processescan help ensure government compliance,calculate total landed costs,and handle documentation requirementsfor imports and exports.• Performance management:Gathering transportation intelligence,creating scorecards,and sophisticated reporting areincreasingly important functionsfor a TMS. These capabilities helpmonitor progress through agreeduponmetrics and offer a link to thesources of performance glitches.With performance managementintegration, companies can comparelogistics performance to industry30 July/August 2011 | APICS magazine

enchmarks to evaluate where theystand among competitors.• Cooperative routing: With continuousmoves, companies gainthe ability to link full truckloadstogether to generate a lower permilerate, rather than treating eachshipment as an individual move.This approach lowers costs andstrengthens carrier relationships,but its management can provechallenging. Some companiesassess their transportation operationsto identify and create strategicopportunities by planning alongsidecustomer service and purchasingdepartments. With cooperative routing,carriers also are brought intothe discussion to fill in the missinglinks. Currently, only leading TMSsolutions support this strategic andtactical evaluation.Sustainable and lean transportation.Increased environmental awarenesshas drawn attention to—and, insome cases, scrutiny of—the fact thattransportation is a significant contributorto environmental degradationwithin the supply chain. Today, executivesface pressures to measure, manage,and mitigate the environmentalimpacts of transportation. Progressivecompanies are focusing on thesetransportation goals—striving forclean methods using lean principles.With the right balance of each, companiescan meet environmental goalswithout losing sight of operationalefficiency.Consider these sustainable and leanprinciples for focusing sustainabilityprograms in transportation:• Eco-efficiency: reducing environmentalimpact and cutting costs byincreasing transportation efficiencyin existing business operations.• Eco-innovation: designingor redesigning transportationprocesses to reduce costs andincrease revenues while loweringenvironmental impact.• Eco-transparency: measuring andreporting on environmental factorsto drive ongoing processimprovement, comply withregulations, and minimize risks.Case Study:Sustainable Transportation at Kraft FoodsKraft Foods, the world’s second-largest food company, recently was facingmyriad transportation challenges. Company leaders aimed to• reduce the costs of their large-scale food distribution operation, whichincludes 500 shipping points, more than 6,000 destinations, andapproximately 2,500 trucks on the road each day in the United States• support the company’s aggressive sustainability goal of reducingglobal manufacturing energy usage and carbon dioxide emissions by25 percent between 2005 and 2011• increase transportation efficiency by removing “empty miles” traversedin and out of distribution centers.Kraft executives decided to institute a synchronized-trip program forthe management of optimized, sustainable transportation. With this toolin place, they were able to• identify repeated or unnecessary patterns in truck movements• enable trip segmentation, reducing “empty miles” by 500,000in the first year and reducing greenhouse gas emissions by 3.3pounds per mile• integrate transportation tools with an existing enterprise resourcesplanning system, enabling better forecasting for future needs• gain insight into freight volume and costs across divisions, makingit easier to negotiate lower food distribution rates.Technology-enabled transportation management practices deliversignificant cost savings and service improvements through automation,collaboration, visibility, and decision support. Integrating core transportationmanagement processes and associated best practices with other logisticsareas—such as global trade, fleet and asset management, and sustainability—can provide significant dividends for companies. By taking a holistic approachthat considers people, processes, technology, and performance measuresacross business units, functions, and geographies, companies can achieveworld-class transportation excellence.Maha Muzumdar is vice president of supply chain marketing at Oracle,where he formulates, defines, and drives market strategy for supply chainapplications.He may be contacted at maha.muzumdar@oracle.com.To comment on this article, send a message to feedback@apics.org.The author would like to thank John Murphy, seniordirector of logistics at Oracle, for his input and insight.APICS magazine | July/August 2011 31

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Determining appropriate inventory levels is one of the most important and most challenging tasksfaced by operations managers. If you carry too much inventory, you tie up money in working capital;if you don’t carry enough inventory, you face stockouts. Fortunately, the cycle stock portion of theinventory equation is straightforward. What keeps people up at night is safety stock.CraCKthe CodeUnderstanding safety stock and mastering its equationsBy Peter L. King, CSCPSafety stock Cycle stockSafety stock simply is inventory that is carried to prevent stockouts. Stockouts stem from factors such as fluctuatingcustomer demand, forecast inaccuracy, and variability in lead times for raw materials or manufacturing. Some operationsmanagers use gut feelings or hunches to set safety stock levels, while others base them on a portion of cycle stock level—10 or 20 percent, for example. While easy to execute, such techniques generally result in poor performance. A sound, mathematicalapproach to safety stock will not only justify the required inventory levels to business leaders, but also balance theconflicting goals of maximizing customer service and minimizing inventory cost.Safety stock determinations are not intended to eliminate all stockouts—just the majority of them. For example, whendesigning for a 95 percent service level, expect that 50 percent of the time, not all cycle stock will be depleted and safetystock will not be needed. For another 45 percent of cycles, the safety stock will suffice. But in approximately 5 percent ofreplenishment cycles, expect a stockout. (See Figure 1.)While designing for a higher service level—say,98 percent—would result in fewer stockouts, thisrequires significantly more safety stock. There mustbe a balance between inventory costs and customerservice. By using the methods and equations thatfollow, you can find safety stock levels to achieveyour desired customer service levels.50% of cycles 45% of cycles5% of cyclesFigure 1: Inventory designed for a 95 percent service levelVariability in demandImagine the only variability you need to protectagainst is demand variability, and good historicaldata are available. The safety stock needed togive a certain level of protection simply is thestandard deviation of demand variability multipliedby the Z-score—a statistical figure also known asstandard score. For example, to satisfy demandwith a 95 percent confidence level, according tostatistical analysis, it’s necessary to carry extraAPICS magazine | July/August 2011 33

inventory equal to 1.65 standard deviationsof demand variability. This is equivalent toa Z-score of 1.65.To further understand Z-score, imaginethat no safety stock is carried. In thissituation, the Z-score is zero. Even so, therewill be enough inventory to meet demandin 50 percent of cycles. If Z-score equals 1,the safety stock will protect against onestandard deviation; there will be enoughinventory 84 percent of the time. Thispercentage of cycles where safety stockprevents stockouts is called the cycleservice level.Figure 2 shows the relationship ofdesired cycle service levels to Z-score. Asillustrated, the relationship is nonlinear:Higher cycle service levels requiredisproportionally higher Z-scores and, thus,disproportionately higher safety stocklevels. Typical goals fall between 90 and 98percent, and—statistically speaking—a cycle service level of 100 percent isunattainable.Rather than using a fixed Z-score for allproducts, set the Z-score independently forgroups of products based on criteria suchas strategic importance, profit margin, ordollar volume. Then, those stockkeepingSafety stock determinations are notintended to eliminate all stockouts—just the majority of them.units with greater value to the business willhave more safety stock, and vice versa.So far, it has been assumed that thedemand periods equal total lead time,including any review period. When this isnot the case, instead, calculate standarddeviation based on periods equal to thelead time. For example, if the standarddeviation of demand is calculated fromweekly demand data and the total leadtime including review period is threeweeks, the standard deviation of demandis the weekly standard deviation times thesquare root of the ratio of the time units,or √3.Taking all this into consideration, thesafety stock equation becomes:Safety stock = Z ×Z = Z-scorePC/ T1× σ D, where:PC = performance cycle, another term for total lead timeT 1= time increment used for calculating standard deviation of demandσ D= standard deviation of demand.The performance cycle includes the time needed to perform functionssuch as deciding what to order or produce, communicating orders to thesupplier, manufacturing and processing, and delivery and storage, as well asany additional time required to return to the start of the next cycle.Variability in lead timeIn the previous equation, safety stock is used to mitigate demand variability.However, when variability in lead time is the primary concern, the safetystock equation becomes:Safety stock = Z × σ LT× D avg, where:σ LT =standard deviation of lead timeD avg = average demand.When both demand variability and lead time variability are present,statistical calculations can combine to give a lower total safety stock thanthe sum of the two individual calculations. In cases where demand and leadtime variability are independent—that is, they are influenced by differentfactors—and both are normally distributed, the combined safety stockequation becomes:Safety stock = Z × PC 2( / T1× σ D ) + (σ LT× D avg) 2In other words, the safety stock is Z-score times the square root of the sumof the squares of the individual variabilities.But when demand and lead time variability are not independent of eachother, this equation can’t be used. In these cases, safety stock is the sum ofthe two individual calculations:Safety stock = (Z × PCSafety stock (Z PCT1 / × σ σD)+ D ) + ( Z × σ(Z × σLT × D× )Davg)Cycle service level and fill rateThe previous equations are useful for predicting the safetystock needed to attain a certain cycle service level—a percentage of replenishment cycles. Sometimes,business leaders instead wish to control the amountof volume ordered that is available to satisfy customerdemand—a quantity known as fill rate. Fill rate often is a better measure ofinventory performance, as cycle service level merely indicates the frequencyof stockouts without regard to their magnitudes. (See Figure 3.)Desired cycleservice levelZ-score84 185 1.0490 1.2895 1.6597 1.8898 2.0599 2.3399.9 3.09Z-scoreCycle service levelFigure 2: Relationship between desired service level and Z-score34 July/August 2011 | APICS magazine

Finished product inventoryIf lead time were variable, more safety stockwould be required to meet performance goals,and the safety stock equation becomes:Safety stock = Z ×PC 2( / T1× σ D ) + (σ LT× D avg) 2Cycle service level reflectsthe frequency of stockoutsFigure 3: Cycle service level and fill rateFill rate reflects the totalvolume of stockoutsAs illustrated in Figure 3, when supply and demand are relativelystable—that is, when standard deviations of demand and lead timeare low—fill rate will tend to be higher than cycle service level. Whilestockouts still occur, the magnitude of stockouts tends to be small.Conversely, when demand or lead time variability is high, fill rate will belower than cycle service level, and the volume of stockouts will be high.To better understand these equations, consider the following exampleof a warehouse that holds large rolls of plastic film. The film gets sold toprocessors who cut it into shorter, narrower rolls for food packaging, palletwrapping, or as a dielectric material in industrial capacitors.The following are the relevant data for one unit type:Weekly demand = 50 rollsStandard deviation of weekly demand = 10 rollsStandard deviation of lead time = 0Production cycle = weeklyProduction capacity = 496 rolls/week.The lead time is very stable and predictable. Process reliability is highenough that the manufacturing lead time never exceeds seven days,and the lead time of transport from the manufacturing facility to thewarehouse never exceeds one day. Because this gives a standard deviationof lead time of zero, the safety stock requirements can be calculated fromthe original equation:Safety stock = Z × PC/ T1× σ DThe desired cycle service level is 95 percent;that is, the business can tolerate stockouts ofthis product on no more than 5 percent of thereplenishment cycles, or slightly more than twoper year. Using the chart in Figure 2, the Z-score isfound to be 1.65. Performance cycle, which affects replenishment of thewarehouse inventory, is the sum of the seven-day manufacturing timeand the one day needed to arrive at the warehouse, for a total of eightdays. T 1, the time increment used to calculate σ D , is seven days. Thus:Safety stock = 1.65 × 8/ 7× 10 rollsSafety stock = 18 rollsIn this example, lead time varies witha standard deviation of half a day, orapproximately 0.07 weeks. Thus:Safety stock = 1.65 × ( 8/7× 10 2 ) + (0.07 × 50) 2Safety stock = 1.65 × 114.3 + 12.2Safety stock = 19 rollsThese results demonstrate that demandvariability is the dominant influence onsafety stock requirements: Its effect is almost10 times that of lead time variability. Withthe recognition of what factors dominatean equation, it becomes easier to focusimprovement efforts. In this case, if a reductionin safety stock is desired, it is far moreproductive to reduce demand variability thanlead time variability. Conversely, if a high levelof customer service is not required, safety stockcan be lowered to a more appropriate level.Once safety stock levels have beenestablished, inventory levels should bemonitored on an ongoing basis to determineif the inventory profile is as expected. Is thesafety stock being consumed in about halfof the cycles? Are service level targets beingrealized? If not, before any adjustments aremade, perform a root cause analysis to seeif any special causes are responsible for thedeviations from expected results.Safety stock alternativesThe previous calculations may result in safetystock recommendations higher than whatbusiness leaders feel they can carry. The goodnews is there are alternatives to mitigatevariability other than safety stock.Demand variability is the dominantinfluence on safety stock requirements.One is implementing an order-expeditingprocess for preventing stockouts whensafety stock is insufficient to cover all randomvariation. This practice is especially appropriatefor products that cost more to produce (andthus cost more to carry in inventory).APICS magazine | July/August 2011 35

In one example involving an expensive but relatively lightweight product, total supply chain costs were reducedsignificantly. The company carried small amounts of safety stock in overseas warehouses, and it relied on air freight to coverpeaks in demand. The cost of shipping a small percentage of total demand via air was minimal compared to the cost ofcarrying large amounts of safety stock of the valuable material on an ongoing basis.Another alternative to carrying safety stock is to consider a make-to-order (MTO) or finish-to-order (FTO) productionenvironment. If lead times allow, MTO eliminates the need for most safety stock. Meanwhile, FTO allows for less differentiationin safety stock than finished-product inventory, which lowers demand variability and reduces safety stock requirements.FTO and MTO also are well suited for situations where customers are willing to accept longer lead times for highly sporadicpurchases.In the end, safety stock can be an effective way to mitigate demand uncertainty and lead time variability while stillproviding high service levels to customers. But before proceeding with a plan, first understand how to determine appropriatelevels of safety stock—and what degree of protection they provide.Peter L. King, CSCP, is founder and president of consulting firm Lean Dynamics LLC and author of Lean for the ProcessIndustries: Dealing with Complexity. Previously, he was a principal consultant in the lean technology division of DuPont. Hemay be contacted at peterking@leandynamics.us.To comment on this article, send a message to feedback@apics.org.Network with APICS OnlineLinkedInParticipate in the APICS LinkedIn group to network with nearly 18,000 of yourpeers in this active community. apics.org/LinkedInFacebookConnect to the APICS community on Facebook. Like us today! apics.org/FacebookAPICS BlogsRead and engage with the APICS International and the APICS Young Professionalsblogs. blogs.apics.orgAPICS Learning CommunitiesConnect with your peers and have your questionsanswered on the APICS Learning Communities.apics.org/resources/learningcommunities36 July/August 2011 | APICS magazine

NEW EDITION WITH MORE THAN300 NEW TERMS AND DEFINITIONSDefine Your Career Pathwith the APICS DictionaryAccess the valuable terms and definitions to improve yourproductivity today.channel partners—Suppliers, manufacturers, distributors, and retailerswho form a supply chain to make and distribute a set of products. dynamickanban—An alternative use of kanban methodology to create an automaticlaunching of a purchase order to a supplier. Dynamic kanban is used as anelement of the manufacturing execution system to allow for Just-in-Timedeliveries to production. demand planning—Using forecasts and experienceto estimate demand for various items at various points in a supply chain. Severalforecasting techniques may be used during the planning process. Often, familiesof items are aggregated in doing this planning. Aggregation also may occurby geographical region or by life cycle stage. Forecast demand is compared toactual demand in order to measure and increase forecast accuracy. See: demandmanagement. inbound logistics—The group in charge of moving materialsfrom suppliers or vendors into production processes or storage facilities; or,the actual movement of such material. key performance indicator (KPI)—afinancial or nonfinancial measure, either tactical or strategic, that is linked tospecific strategic goals and objectives. materials handling—The movement ofitems from one point to another inside a facility or between facilities. strategicvariables—The most important variables that effect the business environmentand business strategy. These are typically the economic situation, populationdemographics, changes in technology and government policies. triple bottomline (TBL)—Measuring the economic, social, and environmental consequencesof a firm’s activities. visibility—The ability to view important informationthroughout a facility or supply chain no matter where in the facility or supplychain the information is located. warehouse management system (WMS)—Asystem that manages all processes that a warehouse carries out. These processesinclude receiving, picking, and shipping. continuous process improvement(CPI)—A never-ending effort to expose and eliminate root causes of problems:small-step improvement as opposed to big-step improvement. Syn: continuousimprovement. See: kaizen. lean production—A philosophy of production thatemphasizes the minimization of the amount of all the resources (including time)used in the various activities of the enterprise. It involves identifying and eliminatingnon-value-adding activities in design, production, supply chain management, anddealing with customers. Lean producers employ teams of multiskilled workers at alllevels of the organization and use highly flexible, increasingly automated machinesto produce volumes of products in potentially enormous variety. It contains a set ofprinciples and practices to reduce cost through the relentless removal of waste andthrough the simplification of all manufacturing and support processes. Syn: lean,lean manufacturing. (NOTE: “Lean” definition only says “Syn: lean production.”)operations management—1) The planning, scheduling, and control of the activitiesthat transform Advancing inputs into Productivity, finished goods and innovation, services. 2) and A field Competitive of study that Successfocuses on the effective planning, scheduling, use, and control of a manufacturingor service organization through the study of concepts from design engineering,industrial engineering, management information systems, quality management,production management, inventory management, accounting, and other functionsas they affect the operation. product life cycle—1) The stages a new productgoes through from beginning to end (i.e., the stages that a product passes throughThirTeenTh ediTionAPICS DictionaryThe APICSDictionary containsthe core terminologyand emergingvocabulary you needto speak the samelanguage acrossyour supply chain.APICS MEMBERS: Requestyour free printed ore-download copy of the APICSDictionary, 13th edition,at apics.org/freedictionary.APICS members: Order your free printed copy of the APICSDictionary, 13th edition, today. As a benefit of your APICSmembership, you receive the APICS Dictionary, 13th edition,in one of the following formats:• Printed version of the APICS Dictionary, 13th edition• PDF download copy of the APICS Dictionary, 13th editionAPICS DICTIONARY E-DOWNLOADDownload the APICS Dictionary, 13th edition, and save it toyour desktop to ensure you’re never without the terminologythat enables you to communicate across the office and thesupply chain.APICS DICTIONARY PRINTED VERSIONRequest a bound copy of the new 13th edition of the APICSDictionary today. Keep the latest edition of the APICSDictionary at your desk to ensure you have easy accessto the latest terms and definitions used in the operationsmanagement profession.MORE THAN 4,000 TERMSThe APICS Dictionary, 13th edition, includes more than 300new terms, giving APICS members access to both the coreand emerging terminology necessary to speaking a commonlanguage across your supply chain.Not an APICS member? Join APICS today to begin receiving valuablemember benefits including the APICS Dictionary, 13th edition, APICSmagazine, and more. Visit apics.org/join now.

Fueling Supply ChainTransformationPredictive analytics energizes dynamic networksBy Can A. Dogan, Frode Huse Gjendem, and Jade Rodysill38 July/August 2011 | APICS magazine

As companies fight for competitive edge, it is those businesses that bring products to marketfaster, more cost-effectively, and with greater customer intelligence that will survive and thrive.Superior supply chain performance is essential—particularly in a rapidly globalizing marketplace,where the ability to adapt to and predict fast-changing conditions is essential. To secure the requiredcapabilities, operations and supply chain management professionals need to leverage insights fromthe vast amounts of data available across their organizations and employ analytical techniques.Supply chain predictive analytics—using an integrated framework thatemploys quantitative methods toderive insights from data—couldbe the key differentiator in rapidlybuilding and sustaining a highperformingsupply chain in thedecade ahead. Accenture researchhighlights the scale of the challengesto be overcome. The 2008 report“High Performance Through SupplyChain Planning” revealed that mostcompanies are struggling with atleast some aspects of forecastingand supply. For instance, the medianforecast accuracy at the stockkeepingunit (SKU) level was just 75 percent.Additionally, we found that companieshave little visibility into what willaffect them at either end of the supplychain—from the flow of customerorders to the operating condition oftheir key suppliers. This is in large partdue to insufficient levels of collaborationwith suppliers and customers.Lacking the requisite linkage of systems,common processes, and readilyavailable commercial software tools,many companies are ill-equipped tocarry out effective advanced planningand scheduling, analytics, optimization,sales planning, and cross-functionalcollaboration.We know the leaders in this field areusing prescriptive (forward-looking)analytics to understand what’s comingnext. They have moved from descriptiveanalytics—understanding “what?”and “why?” and even “so what?”—toinsights into what is the best that canhappen.Using predictive analytics, professionalscan look upstream anddownstream to evaluate operationalimpacts of their decisions—spanningplans and schedules, carrier and assetuse, quantity and quality variation,cycle times, and landed costing.Armed with such insights, expertsbelieve these decision makers are asadept at shaping demand as they areat sensing it. Compared to their competitors,they are more than four timesas likely to achieve minimum accuracylevels of 80 percent in demand forecastingand more than twice as likelyto rate their ability to shape demandas “good” or “excellent.”The advantages extend to managingsupply, as well. Compared to laggardcompanies, successful organizationsare more than four times morelikely to quickly respond to disruptions,partly because they involvesuppliers in planning. Furthermore,these masters are twice as likely tohave explicit links between newproduct introductions and planningprocesses, which is ever more importantas cycles compress and introductionsincrease. They also have up to 50percent less finished goods inventorythan laggards.Predictive analytics can play a vitalrole in fueling the supply chain transformationsthat enable organizationsFor those businesses that commit to broad and deeptransformations, the end results can be significant.to compete at this level. There is noshortage of opportunity. However, a2010 Accenture survey of 600 seniormanagers at more than 500 blue-chipbusinesses shows that, for mostcompanies, analytics capabilities area long-term goal rather than a reality.Currently, just 6 percent of businessesare making significant use of analyticsin their supply chains. And, half therespondents believed their organizationalstructures prevented dataand analytical talent from generatingenterprise-wide insights.Advanced performanceSupply chain transformation focuseson building and sustaining the worldclasscapabilities needed to improveand sustain performance, which drivescost competitiveness, balance sheetflexibility, operational excellence,profitable growth, resilience, andsustainability. Supply chain transformationsembrace operations, asmultiple initiatives are used to addresseach of the key domains: planning,sourcing and procurement, fulfillment,manufacturing, product life cycle management,and service management.An assessment tool can be used toprioritize these initiatives by identifyingcapability gaps, quick wins, andmajor benefits.Successful supply chain transformationsaddress all primary levels in theshareholder value tree. (See Figure 1.)When properly executed, these initiativesshould deliver 1-to-5 percentrevenue enhancement and 5-to-25percent improvements in other areas.For those businesses that committo broad and deep transformations,the end results can be significant—strategically, on the bottom line, inAPICS magazine | July/August 2011 39

Figure 1: Shareholder value tree, impacts, and improvementThe shareholder value treeSupply chain impactsPercentage improvementRevenuen Revenue leakage reductionn Reduced stockoutsn Improved service level performance1–5 percentProfitabilityn Reduced direct labor costShareholdervalueInvestedcapitalCostsWorkingcapitalFixedcapitaln Reduction in direction material spendn Reduction in distribution spend(transportation and warehousing)n Increased inventory turns(improved cash flow)n Maximum asset utilizationn Reduced lead timesn Shorter build-to-order timesn Fewer physical assets5–25 percent5 –25 percentTBDareas of risk exposure, and across theenvironmental footprint. The provisois that, having invested in such largescaletransformation projects, decisionmakers should continuously seekways to improve primary levels andsustain whatever benefits have beenachieved.Five success factorsWe have identified five keysuccess factors for supply chaintransformation, all of which shouldconstitute the foundation of anyprogram.1. Develop a value creation agenda.Define the supply chain’s role indelivering overall business strategy, aswell as its value by individual productand product segment. It is importantto understand the vulnerability ofalternative supply chain models tochanging market conditions and thetotal cost of ownership (TCO), as wellas what it takes to deliver value—inother words, where is money left onthe table due to dysfunctional supplychain models?2. Configure supply chain processesaround value delivery. Supply chainsshould be configured to deliver TCObenefits and target customer valueby segment (customer, product,and geography), with supply chainstrategy rigorously focused onoptimizing TCO across networkconfiguration, operational parameters,and processes. Professionals mustunderstand the root causes ofwhatever inefficiencies are identifiedacross functional boundaries beforemoving swiftly to reduce costs incore and noncore supply chainmanagement processes. Resourcesand investment need to be focusedon integral processes that drive theoverall value proposition, with metricsand ownership defined by processtype.3. Use information technology (IT)to optimize supply chain processes.IT capabilities must link to plannedbusiness impacts. This meansestablishing the expected valueof technology implementation,connecting solution capabilitiesto business effects, definingrequirements by segment, anddetermining commonality. It’s alsoimportant to identify where supplychain analytics will bring the mostvalue. For this process to succeed,close collaboration between ITand supply chain professionalsis essential.4. Establish the organizationand people agenda. Leaders mustunderstand and buy in to the overallsupply chain vision, while beingaware of how its objectives willaffect behaviors, competencies, andattitudes. Key decision makers shouldbe identified and empowered. Skillgaps must be addressed and rewardsintroduced to motivate change andongoing performance by segment.As cross-functional teams play a vitalrole in driving end-to-end businessprocess outcomes, identify and planfor any training needs.5. Manage the change andimplementation journey. Companydecision makers must set clearmilestones for the transformation,with enough flexibility to ensurethe end state can be continuouslyreevaluated. They also shouldidentify early what actions will beneeded to drive decision making,competency, behaviors, and rewards.Although it is essential to closelyalign implementation approachand organizational culture, proven40 July/August 2011 | APICS magazine

Analytics enables the deeper analysis companies need toprepare themselves for a range of market conditions.change management methods can beemployed as needed to foster, absorb,and sustain transformation.Why analytics now?Burgeoning complexity, shorteningproduct life cycles and businesscycles, amplified price and volumevolatility, and increasing regulatorythreats throughout the extendedsupply chain mean that managersneed acute, real-time insights intowhat will affect them on the demandand supply sides. The time is rightfor high-performing companies toinvestigate the value that predictiveanalytics can bring to supply chaintransformation.To secure the acute insights theyneed, organization leaders must movedecisively to harness and leverage thedata at their disposal. The good newsis that technology no longer lagsaspirations in this area. Sophisticatedtools now are integral to the latestenterprise resources planning,decision support, financial, andcustomer relationship managementsoftware. Cloud computing hastransformed the ways in which vastquantities of data can be collected,stored, and processed. And opensourcesoftware has democratized theanalytics capabilities needed to drivemeaning and insight from data.Analytics, by definition, providesadvanced techniques that go farbeyond regular methods employedin supply chain transformations. Suchextra sophistication will provide betterresults when properly deployed.But the benefits are much broader.By providing new approaches andmethodologies, analytics enablesthe deeper analysis companies needto prepare themselves for a range ofmarket conditions, allowing them tohedge against current market risksand future volatility.Take inventory target setting, forexample. A traditional service levelmodel for an individual SKU mightprovide a viable inventory target forthe product, while ignoring significantinterrelationships (and impacts) acrossthe supply chain network. Powered byadvanced analytics, a multi-echeloninventory optimization solution woulddrive further benefits and improvedinventory levels by scrutinizingnetwork-wide matrices of demandand lead times.Further benefits are possible. Forinstance, where supply lead timesfollow random patterns, an analyticsbasedsolution could simulate supplychain network behaviors to providevaluable information on inventorylevels. By probing deeper, additionalinsights could be obtained, providingthe foundation for a broader and farmore realistic inventory managementstrategy.Analytics in actionNone of this is theoretical. Real-worldcompanies are enjoying significantbenefits with analytics every day.For example, consider a global officeproducts company that aimed toimprove its inventory performance.A supply chain mastery assessmentrevealed an opportunity to improveanalytics both within the supplychain and enterprise-wide. Using rootcause analysis, it was determined thatinventory processes were sound, butupstream collaboration processeswith merchandising and sales wereinadequate. This meant that inputsoften were late or inadequate.The company created analyticsinfuseddemand planning and salesand operations planning capabilitiesthat improved collaboration withbusiness units and enhanced thequality of the numbers within theprocess. Its integrated planningorganization now is supported by ananalytics capability, which increasesspecialization and overall accuracy.Statistical tools and models driveresults.Decision makers at an internationaloil and natural gas service companywanted to support internationalgrowth objectives. Using manufacturinganalytics, this business was able torealign its supply chain with growthmarkets, thus reducing cost and leadAdvantages ofAnalyticsUsing the advanced computingpower of analytical tools,operations and supply chainmanagers are• producing more realistic anddetailed models, coping withmissing and substandarddata, and enabling complexmethods and algorithms• securing quicker proofof value—meaning, theycan more rapidly buildmomentum behindlarger transformationefforts requiring process,behavior, technology, andorganizational change• creating a core analyticalframework around which newprocesses can be built andinstitutionalized• undertaking cross-domainanalysis of supply chainissues to enable complex andinterrelated problem solving.times and improving scalability. Basedon the insights obtained, the companyalso was able to shift supply to morecost-effective manufacturing andsourcing locations, embedding greateraccountability for cost, delivery, andsupply chain performance; improvingplanning and inventory managementcapability; and reducing its footprint.Project annual savings were between$100–140 million.APICS magazine | July/August 2011 41

Leaders at a major agribusiness company sought to identify, challenge, andevaluate supply chain improvement initiatives. There were four priorities:n Identify key SKUs through sales volume analysis.n Identify optimum levels of master data parameters for safety stockdetermination.n Analyze the business impacts of poorly maintained parameters.n Analyze current forecasting methods and forecast accuracy key performanceindicators.Supply chain planning analytics were used to identify the root causes ofperformance problems, and the methodologies were applied to forecasting,inventory, and cost-to-serve analysis. As a result, the company now is equippedto design a supply chain model that aligns directly with specific business needs.Benefits include a 20 percent reduction in inventory and working capital,13 percent reduction in transportation and distribution costs, and 8 percentreduction in cost of goods sold.These real-world examples underline the power of superior supply chainanalytics. Of course, not every business needs to build a high-performing analyticssupply chain. Indeed, because it calls for extensively accurate data, special skills,and substantial technology and training investments over time, many organizationsopt to buy analytics outcomes instead of developing these capabilities themselves.The analytics services are not entirely outsourced. Instead, the functional- andtechnology-intensive tasks are given to third parties that deliver them across a largerclient base.Regardless of which model a company selects, all supply chain transformationprograms can benefit from analytics-powered insights. The fundamentals remainunchanged. That is to say, successful transformations will continue to call for arigorous focus on value, process, innovation, and behavioral change.With this foundation in place, thefollowing basic steps should be takento move the organization toward ananalytical mindset:n Initiate proof of value in targetedsupply chain domains.n Cultivate a culture of analytical rigor.Educate the workforce on supplychain analytics capabilities.n Source external skills as needed,and do not allow internal skillsrestrictions to become a barrier toadvanced analytics.n Recognize that it can be a challengeto sustain analytics beyond a specificproject. Explore the option of buyingit as a service.Ultimately, the primary objectivemust be to develop enterprise-wideanalytics capabilities. This will enablerapid response and help operationsand supply chain managers predictwhat comes next. In today’s globaleconomy, both of these are must-havecapabilities.Can A. Dogan is a senior executivein the supply chain managementservice line of Accenture. He leadsAccenture’s Global Innovation andTalent Network, which includesAccenture’s offshore supply chainplanning and analytics capabilities.He may be contacted atcan.a.dogan@accenture.com.Frode Huse Gjendem is a seniordirector in Accenture Analytics. Hehas experience in the pharmaceuticals,electronics and high technology,chemicals, and consumer goodsindustries. He may be contacted atfrode.huse.gjendem@accenture.com.Jade Rodysill is a senior executive inAccenture’s North American SupplyChain Strategy group. His workfocuses on supply chain strategy, fulfillment,logistics, and risk management.He may be contacted at jade.rodysill@accenture.com.To comment on this article, send amessage to feedback@apics.org.DO YOU HAVE WHAT IT TAKES?Be an APICS Magazine AuthorAs an APICS magazine reader, you value the high-quality information, casestudies, and best practices you access in these pages. Now is the time toshare your knowledge and industry expertise by taking your involvementwith APICS a step furtherand becoming an APICSmagazine author.The editors of APICSmagazine and APICS Extraencourage you to submitan article for publication.Visit apics.org/magazineto learn more about APICSauthor’s guidelines, featurearticle specifications, andeditorial procedures.42 July/August 2011 | APICS magazine

Master CoreConceptsAccelerate your career in supplychain and operations management.Key topics include• inventory management• operations planning• manufacturingmanagement• distribution and logistics• managing operationsprinciples and techniques.The new APICS Principles of Operations Management programis the only educational program that delivers the fundamentalknowledge needed in the fast-growing fields of supply chain andoperations management.Participate in the APICS Principles program if you are➤ new to the supply chain or operations management professions➤ interested in earning an APICS certification and need coreknowledge before you begin➤ seeking education or training on specific supply chain andoperations management concepts.APICS Principles gives you➤ core knowledge to increase efficiency, reduce redundancy,and improve consistency at your organization➤ foundational skills and the education necessary to beginpursuing an APICS certification➤ opportunities to test your understanding of concepts throughpractice exams and excercises.Maximize your potential with the APICS Principlesprogram. Visit apics.org/principles for more informationor to find an APICS Principles course near you.APICS magazine | July/August 2011 43

ScoringA-Plus Productsand ProcessesOperations principles help onlineuniversities make the gradeBy Rangarajan Parthasarathy, CPIM,and Judith KristanThe number ofcollege-educated workers—especially those with advanceddegrees—is expected to decline dramatically in coming years.In fact, in the field of business management education alone,some analysts estimate there will be a shortage of one thousanddoctoral degree holders by the year 2020. As our educationalsystem attempts to respond to this crisis, operations managementprinciples and the APICS body of knowledge can offerconsiderable assistance.Market-funded, online private universities center on dualobjectives: to impart high-quality education to their studentsand to function as successful businesses. In order to achievethese goals, many education providers are applying andpracticing efficient and effective supply chain managementtechniques.Supply and demand chainsAn internal demand chain is an organizational resource that“sells” goods or services to customers. Unlike at traditionaluniversities, professors at private online universities—orsubject matter experts (SMEs)—do not have offices in onecentral building. Neither are they required to be affiliated witha single school. They are akin to vendors or suppliers that canbe located all over the world and who have multiple customers.At online universities, the program deans (PDs) recruitSMEs to prepare course content according to a set of generalinstructions stated in a contract similar to a supplier contract.Thus, the PDs perform the same role as buyers in a traditionalbusiness organization.The SME contract is like a purchase order. The PDs and theSMEs together are the external supplier team, which suppliescourse documents (the products) to internal teams. The twointernal teams that receive and modify the course documentsare the instructional design (ID) team and the quality control(QC) team. Together, these groups constitute the secondaryinternal customers.The ID-QC team combination is secondary becauseneither of these groups generates revenue directly. The IDteam inserts drawings, tables, and pictures into the coursedocuments and makes them pleasing to the students. The QCteam error-proofs the documents and makes them readableand accurate with the goal of attaining six sigma quality. Thecourse documents then are sent to the online faculty memberswho teach the courses. The primary external customers of thecourse materials are the students who pay tuition fees to gainknowledge and earn their degrees.Faculty members are the primary internal customers forcourse materials. These professionals are recruited for the solepurpose of delivering online courses to students. If they donot receive high-quality coursework, they are hard-pressed todeliver the same to students.44 July/August 2011 | APICS magazine

The more complex the supply chain, the moredifficult it becomes to achieve integration.The ID-QC teams also are a quasi-demandchain because they must receive first-ratecourse documents from the PD and SME teams,which then enables them to complete, package,and “sell” these documents to the online facultyand students.There is a clear supply and demand chainin this scenario, and all principles that applyto supply chain management in an industrialcontext also apply in an online universitysetting. Just as efficient management andoptimization bring about process efficienciesand cost savings in manufacturing, they providesimilar benefits at an online university. Figure1 shows a generalized process map with thesupply and demand chains in this environment.QUASIDEMANDCHAINProgram deansInstructionaldesignContractSubject matterexpertsQuality controlEXTERNALSUPPLIERSSECONDARYINTERNALCUSTOMERSOptimization throughmodernizationSupply chain integration refers to the cooperation,interaction, and collaboration that existsamong all players in a supply chain. Everyonemust share the goal of providing outstandingcustomer service while meeting qualityand profit expectations. The more com-PRIMARYINTERNALCUSTOMERSOnline facultydelivering coursesto studentsOnline studentsFigure 1: Online university supply and demand chainsPRIMARYEXTERNALCUSTOMERSAPICS magazine | July/August 2011 45

plex the supply chain, the more difficult it becomes to achieveintegration.Research has shown a correlation between supply chainmodernization through the use of technology and successfulsupply chain integration. When a supply chain is modernizedand integrated, it functions well because of better informationflow, more successful interactions, and the resulting monetarysavings. In fact, modernization can and should facilitate integration—butthis can happen only when there is mutual trustbetween the organization and its suppliers. As such, there alsomust be implicit faith in the technologies being used.The following action items are strongly recommended whenworking to attain supply chain optimization.1. Modernize the supply chain and increase qualitycontrol through the use of technology. The SMEs, PDs, andother key players in an online university environment may beworking from remote locations, so technology can smooth theprogress of their interactions. Collaboration is facilitated by theuse of content management software, and websites can provideaccess to shared drives. E-learning applications also are useful,as they give SMEs and PDs the same level of interaction andefficiency they would enjoy if they all worked in one corporateoffice building. Finally, quality control is enhanced when modernsoftware helps users perform copy edits, analyze data, andcalculate metrics.2. Eliminate barriers tomodernization, such as distrustof new technologies, difficultyadapting to new tools, and fear ofchange. These can be mitigatedwith training and by modernizingin small increments. Aninterval of time between the introduction of one solution andthe next gives users an opportunity to learn. Whether at amanufacturing plant or an education provider, it’s always wiseto clearly explain how a tool will make someone’s job easier.This also helps dispel fear of layoffs. These elements shouldwork together to form part of a detailed change managementaction plan.3. Integrate the supply chain through modernizationand collaboration. Supply chain integration requires interactionand collaboration on a regular basis to achieve acceptableoutcomes, shared purposes, and overall process efficiencies.In an online university context, this involves the SMEs andPDs interacting with the ID and QC teams in order to increaseawareness in the external teams of the timing and quality expectationsthey face. By a similar token, members of the internalgroups can be better prepared by understanding requirementsin relation to contractual obligations of the SMEs. Everyonemust appreciate the importance of their particular function as itpertains to system costs and student expectations.4. Assign the quality department a pivotal role in productand process improvements. The supply chain managementsystem in an online university system is the core processenabling internal and external teams to develop courses andcourse documents. There are many facets that help ensureProcess quality musthold equal importance toproduct quality.these deliverables serve their intended purpose. First, developmententails various steps; and, for this reason, process qualitymust hold equal importance to product quality. The systemshould be defined in terms of its processes, rather than itsdepartments, with QC team members providing informationon how to improve the process steps. In addition, statistics andcontinuous improvement—or kaizen—can help users achievefact- and numbers-based progress. It is conceivable that suchadvancements will involve changes at both individual andoperational levels. Elimination of waste and non-value-addedactivities is an essential requirement at this stage. An onlineuniversity system whose quality department does not play apivotal role here will die a slow death as costs rise and educationquality declines.5. Close the gap between course planning and curriculumdevelopment teams. Again, students are the customersin an educational setting, so soliciting their feedback is essential.In order to understand their needs and expectations, it’snecessary to first convert this feedback into actionable items.This is best achieved in a team setting that involves operations,curriculum development, and other key departments, withQC professionals at the center of the effort. Techniques suchas brainstorming, Ishikawa diagrams, Pareto analysis, and rootcause analysis may be used at this stage. Once actionable itemsare obtained, these are communicated tomanagers for execution. Closing the gapbetween the suppliers (SMEs and PDs)and the customers (students) in this wayis an essential part of the supply chainmanagement function.6. Develop a process map, andperiodically review and revise it. Amap of process flow makes it easy to identify the points thatneed to be modified as demands evolve. In this way, the onlineuniversity is able to respond to the needs of the supply chainand its student customers.Student needs are changing all the time. Leaders of privateonline universities must understand how to deliver productswhile taking care not to dilute the quality of the education providedor erode profit margins. Recognizing and managing thesupply and demand chains will ensure these universities canimpart knowledge and be successful businesses. If this dualityis achieved, online universities certainly will make the grade.Rangarajan “Raj” Parthasarathy, CPIM, is the manager ofquality control at DeVry’s online division in Wood Dale,Illinois, and a six sigma black belt. He may be reached atrpartha463@yahoo.com.Judith Kristan is the dean of academic affairs at DeVry’s onlinedivision. She may be reached at jkristan@devry.com.To comment on this article, send a message tofeedback@apics.org.46 July/August 2011 | APICS magazine

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Buyers’ guide ListingsDemand Works Co.PO Box 627West Chester, PA 19381PH: (484) 653-5345Email: info@demandworks.comdemandworks.comSmoothie® is the industry standard solutionfor desktop and server-based sales andoperations planning that’s used by many ofthe best global companies. It is available ina range of editions, but all Smoothie solutionsfeature Pivot Forecasting® and PivotPlanning®, proprietary technologies thatmake it possible to seamlessly plan at anylevel of aggregation and along any dimensionlike product, channel or customer.Retire your spreadsheets and contactDemand Works for highly accurate forecasts,collaboration, time-phased multilevelinventory planning, and S&OP.IFS300 Park Blvd., Ste.555Itasca, IL 60143TF: (888) 437-4968Email: request@ifsworld.comIFSworld.com/usIFS delivers software to make enterprisesmore agile by streamlining four core strategicprocesses: service & asset management,manufacturing, supply chain and projects.IFS develops, supplies, and implementsIFS Applications, a component-basedextended ERP suite built on SOA technology.IFS provides software solutions thatserve manufacturing, project-based andasset-intensive industries. We thrive incomplex environments and with businessesthat strive to be agile.IFS Applications is a pioneer in providingbusiness software based on actual businessprocesses. Companies can reconfigure thesoftware on the fly, enabling them to adaptquickly to changing market conditions. Andbecause IFS Applications is componentbased,customers need only deploy thefunctionality they require and implement itstep by step, adding new components astheir business changes or expands.OM Partners1700 Water Place SE, Suite 304Atlanta, GA 30339PH: (770) 956-7118E-mail: sales@ompartners.comwww.ompartners.comOM Partners has over 20 years of expertisein chemicals, pharmaceuticals, food & beverage,consumer goods, metals, plastics,flooring, glass, paper, packaging and otherindustries. OMP Plus introduces in-memoryintegration of intelligent planning modulesfor Network Design, Forecasting, S&OP,Master Planning, Transportation Planning,DRP/VMI, Order Promising and Scheduling.For the first time, this innovative technologymakes integrated demand planning,supply planning and scheduling a reality.With OMP Plus you can replace traditional,time consuming planning cycles by an integrated,synchronized approach. OMP Plusintegrates with SAP, Oracle or other legacy/ERP systems. OMP integrator is certified forSAP NetWeaver ®.Supply Chain ConsultantsPhone: 302 738-9215Toll Free: 877 722-7627sales@supplychain.comsupplychain.comSupply Chain Consultants (SCC), founded in1993, is the developer of Zemeter advancedplanning and scheduling (APS) solutions formanufacturing supply chains. With headquartersin Wilmington, Del., and Europeanoperations in Antwerp, Belgium, SCC is positionedto support organizations across theglobe. Zemeter products enhance productivityand reduce operating costs in the supplychain, providing the full range of featuresnecessary for effective Sales and OperationsPlanning (S&OP). Zemeter tools are Microsoftbased, fully integrated, and have a significantlylower total cost of ownership (TCO)than other software solutions. For more informationvisit www.supplychain.com.Master of Science in Logistic andSupply Chain ManagementApply NowDesigned for working professionals, thisAACSB-accredited program offers:• Business relevance – Each studentcompletes a project that returns directand significant value to their sponsoringorganization• Innovative curricula – Courses are basedon best practices, leading-edge researchand input from industry. Learn from facultywith extensive business and researchexperience.• Cohort learning environment – Learnwith experienced professionals fromdiverse business environment.• Flexible, one-year program – Combinesonline instruction and five weekendresidencies.www.wright.edu/business/grad/lscm/Dr. James Hamister, Academic Directorrscob-isom@wright.edu937-775-289548 July/August 2011 | Special Advertising Section

Buyers’ guide ListingsEpicor Software18200 Von Karman Ave.Suite 1000Irvine CA 92612 USATF: (800) 999-1809PH: (949) 585-4000FX: (949) 585-4091Email: info@epicor.comepicor.comProduct: Epicor DistributionStrengths: Epicor Distribution offers youthe full range of functionality you require,including in-depth supply chain solutions,customer relationship management, businessintelligence warehouse managementsoftware and more. So whether you simplypick, pack and ship or provide extensivemulti-order channel processing with fulfillmentservices on your clients’ behalf, EpicorDistribution provides the competitive edgeyou’ve been looking for with our comprehensivedistribution enterprise resourceplanning (ERP) software.Red Prairie3905 Brookside ParkwayAlpharetta, GA 30022Nicole Crowe, (770-735-1776, nicole.crowe@redprairie.com )PH: 877-733-7724, or 678-639-5000(Outside US)redprairie.comProduct:RedPrairie is the leading providerof productivity solutions that enablemanufacturers, distributors and retailers tosynchronize and optimize the managementof workforce, inventory and transportationthroughout the supply chain and intoretail stores. RedPrairie’s modular softwareplatform helps both process and discretemanufacturers track raw materials throughto finished product, with forecastingtechnologies, supply chain optimization,sequenced inventory, warehouse management,recall preparedness, returns management,labor management and much more.Smart Software, Inc4 Hill RoadBelmont, MA 02478PH: (617) 489-2743Email: info@smartcorp.comsmartcorp.comProduct: Smart Software is the innovativeleader in enterprise demand forecasting,planning, and inventory optimization. OurSmartForecasts® and SmartCollaboratorsolutions help companies worldwidemanage the future of their business. You’llincrease forecast accuracy, reduce inventorylevels, improve customer service, and savemillions of dollars annually-because withSmart Software, you see what’s next!For 25 years, we’ve helped thousands ofplanners and inventory managers worldwideand pioneered many forecasting andplanning solutions in the marketplace. Wemake demand forecasting and collaborationfast, easy, and accurate and our patented,Intermittent Demand Forecasting technologyfor hard to forecast items continues toset the highest standards of accuracy andROI performance for our customers.HighJump Software6455 City West ParkwayEden Prairie, MN 55344TF: (800) 328-3271Email: sales@highjump.comhighjump.comProduct: HighJump WarehouseAdvantageStrengths: HighJump WarehouseAdvantage offers advanced warehousemanagement functionality to manage eventhe most complex distribution environments.This powerful WMS helps to ensurefast, accurate fulfillment through directed,optimized workflow, utilizing the most advancedwireless and bar code technologies,including RFID. The HighJump warehousemanagement system executes strategicprocesses such as receiving, put-away/flow-through, inventory management,order processing, replenishment/pick/pack,loading and shipping. And with its uniquelyflexible architecture, the system is easy topersonalize, without changing source code.WAM Supply Chain600 West Germantown Pike, Ste 230Plymouth Meeting, PA 19462TF: (800) 358-8305PH: (484) 530-4380FX: (484) 530-4854Email: info@wamsystems.comwamsupplychain.comProduct Name: WAM Supply Chaindelivers research, analysis, best-practicesconsulting, benchmarking and advancedsupply chain planning solutions to companiesin the process industry, includingchemicals, refining, pharmaceuticals, andprocess CPG. The WAM solution providesa broad set of visualization, decision support,and optimization tools that addressthe unique challenges found in managingcomplex process supply chains. For over20 years, WAM has helped companiesaddress a wide range of business processesincluding sales & operations planning,collaborative demand management, inventoryoptimization, distribution planning,production planning, scheduling, andprocurement planning. For more informationon WAM Supply Chain, please visitwamsupplychain.com.Special Advertising Section | July/August 2011 49

Product ShowcaseSales and Operations Planning SoftwareFeaturing productsand services across theenterprise and supply chainmanagement marketplaceSmoothie ® is theindustry standardsolution for desktopand server-basedsales and operationsplanning that’s usedby many of the best global companies. It is available ina range of editions, but all Smoothie solutions featurePivot Forecasting ® and Pivot Planning ® , proprietarytechnologies that make it possible to seamlessly plan atany level of aggregation and along any dimension likeproduct, channel or customer. Retire your spreadsheetsand contact Demand Works for highly accurateforecasts, collaboration, time-phased multilevelinventory planning, and S&OP.Demand Works Co.PO Box 627West Chester, PA 19381PH: (484) 653-5345Email: info@demandworks.comdemandworks.comRedefining ERP Software for Manufacturingand DistributionEpicor enterpriseresource planning(ERP) raisestechnology toa level that delivers unprecedented business managementand control, supporting continuous performance throughreal-time, in-context business insight. More than 9,500manufacturers and distributors worldwide have putEpicor’s powerful, yet easy-to-use manufacturing anddistribution software to work in their business. All thefunctionality is embedded and works together to helptake control of customer contacts, configurations,estimating, sales processing, planning, cost control,production scheduling, inventory, fulfillment, finance,and much more. Featuring Epicor True SOA and robustfunctionality for businesses globally and across industries,Epicor is redefining enterprise application software.Epicor Software18200 Von Karman Ave.Suite 1000Irvine CA 92612 USAPH: (949) 585-4000FX: (949) 585-4091Email: info@epicor.comepicor.comAgile ERP for Complex, Demanding IndustryIFS delivers software to makeenterprises more agile by streamliningfour core strategic processes:service & asset management,manufacturing, supply chain andprojects. IFS develops, supplies, andimplements IFS Applications, acomponent-based extended ERPsuite built on SOA technology. IFSprovides software solutions that serve manufacturing, projectbasedand asset-intensive industries. We thrive in complexenvironments and with businesses that strive to be agile.IFS Applications is a pioneer in providing business softwarebased on actual business processes. Companies canreconfigure the software on the fly, enabling them to adaptquickly to changing market conditions. And because IFSApplications is component-based, customers need onlydeploy the functionality they require and implement it stepby step, adding new components as their business changesor expands.IFS300 Park Blvd., Ste.555Itasca, IL 60143TF: (888) 437-4968Email: request@ifsworld.comIFSworld.com/us50 July/August 2011 | Special Advertising Section

Demand Planning, Forecasting, InventoryOptimizationSmartSoftwareis theinnovativeleader in enterprise demand forecasting, planning,and inventory optimization. Our SmartForecasts ® andSmartCollaborator solutions help companies worldwidemanage the future of their business. You’ll increaseforecast accuracy, reduce inventory levels, improvecustomer service, and save millions of dollars annuallybecausewith Smart Software, you see what’s next!For 25 years, we’ve helped thousands of planners andinventory managers worldwide and pioneered manyforecasting and planning solutions in the marketplace.We make demand forecasting and collaboration fast,easy, and accurate and our patented, IntermittentDemand Forecasting technology for hard to forecastitems continues to set the highest standards of accuracyand ROI performance for our customers.Smart Software, Inc4 Hill RoadBelmont, MA 02478PH: (617) 489-2743Email: info@smartcorp.comsmartcorp.comGlobal Supply Chain Visibility, S&OP, DemandPlanning, Scheduling, Inventory OptimizationWAM SupplyChain deliversresearch, analysis,best-practicesconsulting,benchmarking and advanced supply chain planningsolutions to companies in the process industry, includingchemicals, refining, pharmaceuticals, and process CPG.The WAM solution provides a broad set of visualization,decision support, and optimization tools that address theunique challenges found in managing complex processsupply chains. For over 20 years, WAM has helpedcompanies address a wide range of business processesincluding sales & operations planning, collaborativedemand management, inventory optimization,distribution planning, production planning, scheduling,and procurement planning. For more information onWAM Supply Chain, please visit wamsupplychain.com.WAM Supply Chain600 West Germantown Pike, Ste 230Plymouth Meeting, PA 19462TF: (800) 358-8305 PH: (484) 530-4380FX: (484) 530-4854Email: info@wamsystems.comwamsupplychain.comCompany IndexThe following companies appear in this issue of APICS magazine either as part ofthe editorial content or as a paid advertisement. Note: Advertisers appear in bold.Accenture 38Advantech 11Agentrics 10Best Buy 12Cargotec 11Chrysler 20Crown Equipment 10Datalogic 11Dell 12Demand Works demandworks.com 48, 50, 52Dematic 10Enterprise Minnesota 54Epicor epicor.com 48–50HighJump Software highjump.com 49, 52Honda 20IBM 12IFS ifsworld.com/us 48, 50, 52IQMS 11JustEnough Software 10Kraft Foods 31Lenovo 12Logility logility.com C2Navis 11Neopost ID 11Netherlocks 11OM Partners ompartners.com 48, 53, C4Opto 22 11Red Prairie redprairie.com 49, 53Revware 11Sapient Automation 10SATO America 10SCO Logistics 11Silvon Software 10Smart Software smartcorp.com 49, 51, 53StormSource Software 11Supply Chain Consultants supplychain.com 48SYSPRO 54TAGSYS 11Technical Glass Products 21Tompkins Associates 24Toyota 20Transplace 11University of Michigan umich.edu 23User Solutions 21Villanova University villanovau.com 47Walmart 12WAM Supply Chain wamsupplychain.com 49, 52Windings 54Wright State University wright.edu 48APICS CPIM apics.org 7APICS CSCP 6, 8, 55APICS International Conference & Expo 1, 6APICS Principles 7, 43APICS magazine | July/August 2011 51

supply chain DirectoryDemand Works Co.PO Box 627West Chester, PA 19381PH: (484) 653-5345Email: info@demandworks.comdemandworks.comProduct: Smoothie® is the industry standard solution for desktop and server-based sales and operations planning that’s used by many ofthe best global companies. It is available in a range of editions, but all Smoothie solutions feature Pivot Forecasting® and Pivot Planning®,proprietary technologies that make it possible to seamlessly plan at any level of aggregation and along any dimension like product, channelor customer. Retire your spreadsheets and contact Demand Works for highly accurate forecasts, collaboration, time-phased multilevelinventory planning, and S&OP.IFS300 Park Blvd., Ste.555Itasca, IL 60143TF: (888) 437-4968Email: request@ifsworld.comIFSworld.com/usProduct: IFS delivers software to make enterprises more agile by streamlining four core strategic processes: service & asset management,manufacturing, supply chain and projects. IFS develops, supplies, and implements IFS Applications, a component-based extended ERPsuite built on SOA technology. IFS provides software solutions that serve manufacturing, project-based and asset-intensive industries. Wethrive in complex environments and with businesses that strive to be agile.IFS Applications is a pioneer in providing business software based on actual business processes. Companies can reconfigure the software onthe fly, enabling them to adapt quickly to changing market conditions. And because IFS Applications is component-based, customers needonly deploy the functionality they require and implement it step by step, adding new components as their business changes or expands.WAM Supply Chain600 West Germantown Pike, Ste 230Plymouth Meeting, PA 19462TF: (800) 358-8305 PH: (484) 530-4380FX: (484) 530-4854Email: info@wamsystems.comwamsupplychain.comProduct Name: WAM Supply Chain delivers research, analysis, best-practices consulting, benchmarking and advanced supply chain planningsolutions to companies in the process industry, including chemicals, refining, pharmaceuticals, and process CPG. The WAM solutionprovides a broad set of visualization, decision support, and optimization tools that address the unique challenges found in managingcomplex process supply chains. For over 20 years, WAM has helped companies address a wide range of business processes including sales& operations planning, collaborative demand management, inventory optimization, distribution planning, production planning, scheduling,and procurement planning. For more information on WAM Supply Chain, please visit wamsupplychain.com.HighJump Software6455 City West ParkwayEden Prairie, MN 55344TF: (800) 328-3271Email: sales@highjump.comhighjump.comProduct: HighJump Warehouse AdvantageStrengths: HighJump Warehouse Advantage offers advanced warehouse management functionality to manage even the most complexdistribution environments. This powerful WMS helps to ensure fast, accurate fulfillment through directed, optimized workflow, utilizing themost advanced wireless and bar code technologies, including RFID. The HighJump warehouse management system executes strategic processessuch as receiving, put-away/flow-through, inventory management, order processing, replenishment/pick/pack, loading and shipping.And with its uniquely flexible architecture, the system is easy to personalize, without changing source code.52 July/August 2011 | Special Advertising Section

supply chain DirectorySmart Software, Inc4 Hill RoadBelmont, MA 02478PH: (617) 489-2743Email: info@smartcorp.comsmartcorp.comProduct: Smart Software is the innovative leader in enterprise demand forecasting, planning, and inventory optimization. Our SmartForecasts®and SmartCollaborator solutions help companies worldwide manage the future of their business. You’ll increase forecast accuracy,reduce inventory levels, improve customer service, and save millions of dollars annually-because with Smart Software, you see what’s next!For 25 years, we’ve helped thousands of planners and inventory managers worldwide and pioneered many forecasting and planning solutionsin the marketplace. We make demand forecasting and collaboration fast, easy, and accurate and our patented, Intermittent DemandForecasting technology for hard to forecast items continues to set the highest standards of accuracy and ROI performance for our customers.OM Partners1700 Water Place SE, Suite 304Atlanta, GA 30339PH: (770) 956-7118E-mail: sales@ompartners.comwww.ompartners.comOM Partners has over 20 years of expertise in chemicals, pharmaceuticals, food & beverage, consumer goods, metals, plastics, flooring,glass, paper, packaging and other industries. OMP Plus introduces in-memory integration of intelligent planning modules for NetworkDesign, Forecasting, S&OP, Master Planning, Transportation Planning, DRP/VMI, Order Promising and Scheduling. For the first time, thisinnovative technology makes integrated demand planning, supply planning and scheduling a reality. With OMP Plus you can replace traditional,time consuming planning cycles by an integrated, synchronized approach. OMP Plus integrates with SAP, Oracle or other legacy/ERP systems. OMP integrator is certified for SAP NetWeaver ®.Red Prairie3905 Brookside ParkwayAlpharetta, GA 30022Nicole Crowe, (770-735-1776, nicole.crowe@redprairie.com )PH: 877-733-7724, or 678-639-5000 (Outside US)www.redprairie.comProduct:RedPrairie is the leading provider of productivity solutions that enable manufacturers, distributors and retailers to synchronizeand optimize the management of workforce, inventory and transportation throughout the supply chain and into retail stores. RedPrairie’smodular software platform helps both process and discrete manufacturers track raw materials through to finished product, withforecasting technologies, supply chain optimization, sequenced inventory, warehouse management, recall preparedness, returns management,labor management and much more.Special Advertising Section | July/August 2011 53

DepartmentCaseTitles StudyAuthor NameTo comment on this article, senda message to feedback@apics.org.Enduring ERPA custom manufacturer attains lasting benefitsCHALLENGE: Better handle mixed-mode manufacturing operationsPRODUCT SOLUTION: SYSPROCOMPANY: WindingsFACILITIES: New Ulm, MinnesotaOPERATION: Producer of custom motors and generatorsThe challengeWindings specializes in custom productionof electromagnetic motors, generators,and sub-assemblies for industriesincluding factory automation, renewableenergy, aerospace, and defense. The companyhas operated since 1965 and is 100percent employee owned.Windings is unique in that its contractassembly and manufacturing servicecompetes with many of its customers’own manufacturing operations. “Wehave highly trained personnel in placewho have worked on the difficult partsfor many, many years,” says executivevice president and chief financial officerScott Ward. “This is why customers withwhom we compete on one level willcome to us to produce highly specialized,low-quantity-run motors, mosttypically of the permanent magnet type.”Until 1998, Windings managedits accounting, manufacturing, anddistribution operations with a softwaresystem that, Ward says, lacked the flexibilityrequired to deal with mixed-modemanufacturing operations, includingmake-to-stock and make-to-order.The solutionCompany leaders enlisted the helpof manufacturing consulting firmEnterprise Minnesota, an affiliate ofthe National Institute of Standards andTechnology’s Hollings ManufacturingExtension Partnership, to find a bettersolution. Windings ultimately decided toA Windings machine operator works in the New Ulm, Minnesota, facility.purchase SYSPRO’s enterprise resourcesplanning (ERP) software suite.According to Ward, “We looked atseveral options, and we agreed thatSYSPRO software not only possessedthe versatility we were seeking, but alsooffered migration to SQL, which wouldenable us to do custom programmingand incorporate a greater degree ofanalytics into our decision makingprocesses.”The resultsWindings began seeing benefits uponimplementation. “We developedinterfaces between SYSPRO and ourshop floor program,” Ward says. “Theyenable us to obtain real-time data onwhat’s happening on the manufacturingfloor. When engineering makes aproduct change, the production floorimmediately gets the documentationand is able to make the necessaryadjustments on a timely basis.”SYSPRO also has boosted responsetime and customer service. “Theproduction floor uploads real-time datato the SYSPRO database, indicatingsuch information as when a new jobis initiated. In this manner, customerservice professionals are able to notifythe customer, advising the status of thejob, including details such as how muchtime is left and whether the productwill ship on time.” He adds, “If thedelivery is delayed for some reason, weare able to provide early warnings to thecustomer.”Over the years, Ward says the choiceof SYSPRO has proven to be a wisedecision: “Our business has grown by600 percent in the last 12 years, whileour office staff has virtually remainedthe same.”54 July/August 2011 | APICS magazine

IMPLEMENT FRESH IDEASAND BEST PRACTICES IN SUPPLY CHAIN MANAGEMENTGet started today with the APICS CertifiedSupply Chain Program (CSCP)Earn the APICS CSCP designation to demonstrate your mastery of supply chainbest practices and your commitment to the profession. This valuable credentialenhances your earning potential, increases your job security and differentiatesyou in a competitive job market.According to theOperations ManagementEmployment Outlook,APICS CSCP designees,on average, earn 17percent more than thesalary of non-certified supplychain professionals.Source: apics.org/research.Access the new Get Started Toolkit and test-taking tipsdocument. To learn more, visit apics.org/cscp.

LessonsLearnedAuthor By Matt Name Ravikumar, CIRM, CSCPTo comment on this article, senda message to feedback@apics.org.The Ins and Outs of Sarbanes-OxleyUsing SOX to gain greater control over your company’s financesThe Sarbanes-Oxley (SOX) Act’s standardsfor operations are mandatory forpublically traded companies. However,I’ve recently come to realize that theycan significantly help myriad organizationsimprove the bottom line bypreventing common causes of financialdrain.SOX is a financial control and regulatorymechanism. Financial transactionsare audited for possible conflicts ofinterests, segregation of duties, and generalmanagement control. Major areasof concern are revenue recognition,vendor payments, customer discounts,and whether financial adjustments aremade via journal entries. Some SOXcontrols also affect manufacturing andcompliance and thus can heighten efficiencyand productivity while yieldingbetter key performance indicators.The standards that provide thegreatest opportunity for benefit involvepurchasing and receiving. Whenconsidering the former, begin byensuring your purchasers are not thesame people who request the items tobe purchased. Always have a dollarlimit so higher-ticket orders go throughan approval process. Monitor repetitiverequests for the same item or vendorto prevent people from bypassingapprovals.Close purchase orders at the end ofthe fiscal year if the threshold receivingpercentage has been achieved. This preventsa buyer from reusing old purchaseorders by creating amendments tothem again and again. Purchase ordersfor services generally yield no formalreceipts, so they should not be allowedto be amended, extended, or givensupplements.For receiving, firstmake sure your receivingprofessionals are notallowed to move stock.Otherwise, it is too easyto skip a required inspectionprocess. In addition,products subject to anexpiration date shouldhave a double-checkprocess to assure thevendor’s lot number andexpiration date werecorrectly entered into theinventory records. Afterall, an expiration datetypo could result in acostly recall.SOX also offers considerableopportunities with planning andwork order management. There alwaysis conflict between what plannersrequire and what operations managersseek to accomplish. Good workorder management will define whocan release orders and who can makechanges to their quantities or scheduledates. Any quantity or cost variance ona completed order alerts managementto verify the bills of material or checkfor excess material consumption.In short, to make the most of SOXstandards, define your objectives.Determine whether the goals relate torisk management, regulatory compliance,process improvement, or costmanagement. Next, establish newprocesses by building a framework thatis adaptable to organizational goals. Setdeadlines for completion of objectives.These should be mandated from theinternal audit team or management.Develop an implementation plan thatdefines activities and priorities, assignsresponsibilities, and communicates theplan to key stakeholders. Finally, createstandard and exception reports that areavailable to management and internalaudit groups. As with all improvementactivities, this step—review and monitor—canbe the most critical to success.Matt Ravikumar, CIRM, CSCP, is employedwith a biotechnology firm in the SanFrancisco Bay area. He may be contacted atmattravikumar@gmail.com.Do you have an anecdote that teaches,enlightens, or amuses? Consider sharing itwith the readers of APICS magazine. Storiesshould be approximately 700 words. Emailsubmissions to “Lessons Learned” editorRandall Schaefer at randallschaefer@att.net.Illustration by Terry Colon56 July/August 2011 | APICS magazine

EXHIBITORS AND SPONSORS:2011 APICS InternationalConference & ExpoDevelop new leads and enhance existing relationships.Achieving Sustainable ProductivityMeeting Customer Demand in an Unpredictable World2011 APICS International Conference & ExpoOctober 23–25, 2011, Pittsburgh, Pennsylvania, USAapicsconference.orgWhen: October 23–25, 2011Where: Pittsburgh, Pennsylvania, USADavid L. Lawrence Convention CenterJoin us as an exhibitor or sponsor and reach oneof the world’s largest gatherings of operationsmanagement professionals.More than 1,500 attendees from 39 countriesrepresenting• logistics• materials management• production and inventory control• sales and operations planning• scheduling• supply chain.Exhibitor and sponsorshippackages now availableContactJohn StultsDirector of Corporate Partnerships+1-773-867-1815jstults@apics.orgDetails at apics.org/expoGet your message in front of a broad range ofindustries, including• aerospace• automotive• consumer products• electronics• food and beverage• pharmaceuticals• transportation• utilities.Maximize your visibility. Network with buyers.Increase your value in the marketplace.apicsconference.orgAPICS magazine | July/August 2011 CV3

Perfect Fit?www.funcke.beOM Partners provides supply chain planning softwareto fit your needsIndustry fitOM Partners has 25 years of expertise in industriessuch as chemicals, pharmaceuticals, food& beverage, consumer goods, metals, plastics,floor covering, glass, paper & packaging andothers.Functional fitOMP Plus is the planning solution to fit yourneeds for Network Design, Inventory Optimization,Forecasting, S&OP, Master Planning,Transport Planning, DRP/VMI, Order Promisingand Scheduling. Its innovative technologymakes integrated demand planning, supplyplanning and scheduling a reality.Integration fitWith OMP Plus you can replace traditional, timeconsuming planning cycles by an integrated,synchronized approach. Moreover, OMP Pluscan be integrated with SAP, Oracle, Microsoft orother legacy systems. OM Par tners is SAP softwarepartner and OMP Integrator is certified forSAP NetWeaver ® .CV4 July/August 2011 | APICS magazineAntwerp – Atlanta – KölnLondon – Paris – RotterdamPhone: +1 (770) 956-7118www.ompartners.comsales@ompartners.com