Brain Machine Interface Technology

Honda Research Institute Japan Co., Ltd. Advanced Telecommunications Research Institute International (ATR) and Shimadzu Corporation have collaboratively developed the worlds first*1 Brain Machine Interface (BMI) technology that uses electroencephalography (EEG) and near-infrared spectroscopy (NIRS) along with newly developed information extraction technology to enable control of a robot by human thought alone. It does not require any physical movement such as pressing buttons. This technology will be further developed for the application to human-friendly products in the future by integrating it with intelligent technologies and/or robotic technologies.

During the human thought process, slight electrical current and blood flow change occur in the brain. The most important factor in the development of the BMI technology is the accuracy of measuring and analyzing these changes. The newly developed BMI technology uses EEG, which measures changes in electrical potential on the scalp, and NIRS, which measures changes in cerebral blood flow, with a newly developed information extraction technology which enables statistical processing of the complex information from these two types of sensors. As a result, it became possible to distinguish brain activities with high precision without any physical motion, but just human thought alone.

source :humbleradio

Which supply chain design is right for You?

There are marked differences between supply chain designs. The challenge for

supply chain managers is to acknowledge that they may no longer be using the

optimal designs for the requirements of their businesses. It is widely accepted that the design of a product is responsible for more than 80 percent of its lifetime cost. In the same way, the design of a supply chain has a tremendous impact on the cost and value attributes of the product over its lifetime. The impact will only continue to grow as the battleground shifts in the 21st century from competition between organizations to competition between supply chains. Supply chain design will become a key source of competitive advantage. When considering supply chain designs, we can exploit some fundamental principles to enhance product flow across the value stream and to respond quickly to changing customer expectations. 1 However, supply chains are not static. The supply chain manager must continuously fine-tune planning and execution systems and the software that supports them to match evolving industry dynamics. What are these dynamics? The first is the fast-changing business landscape, itself. Customers are now requiring higher levels of service and attention, and the move toward personalization- the so-called "market of one" concept-puts pressure on those supply chains that are geared to mass markets. Second, competitors may deploy supply chains that give them an immediate edge, as happened when Dell launched its direct-sales, configure-to- order business model. Finally, there is now a wider range of more flexible supply chain designs, with fewer barriers to switching from one design to another. Complicating matters, however, is the fact that supply chain managers long familiar with an existing supply chain design may find it hard to understand or embrace different designs that better suit new market conditions. In this article, we review the four main types of supply chain design, examining their attributes and weaknesses. We argue that supply chain managers today must be prepared to review the efficacy of their current supply chain designs-and be ready to alter designs to better fit their companies' business needs.

*Four Types of Supply Chain Design *

Supply chains deliver products to the customer using one of the following four basic process structures.

1. Build-to-Stock (BTS).

The product is built prior to demand with a standard bill of materials-for example, Diet Cola. The BTS supply chain has the fastest response time to the customer. The customer order is placed and satisfied either from a retail shelf or from a finished-goods stocking point. Because the customer values immediate response for a BTS product, "impulse" products, such as many types of consumer goods, are supplied using a BTS model. However, the price of this immediate satisfaction is some loss of selectivity. The customer takes what is available in predetermined configurations supplied by the manufacturer. One common consequence of such limited choice: The
customer may purchase more product features than actually desired. The BTS model is by no means limited to discretionary consumer purchases. Many critical repair components, such as aircraft components, are supplied using a BTS supply chain design.

2. Configure-to- Order (CTO).

The product is assembled to demand with standard modules or components. Desktop computers offer an example. The CTO supply chain introduces orders prior to assembly and pushes the order to the customer but replenishes (pulls) parts to build he order. In this arrangement, the customer receives greater end-item choice but
sacrifices some of the immediacy of order fulfillment. The automobile industry offers another good example. Automakers and their distributors and dealers are in the initial stages of implementing CTO supply chains. The goal is to offer the customer a wider selection of color/option combinations than is typically available on the dealer lot. However, the customer will not be able to drive off the lot at the time of purchase; she must wait until the automobile is assembled to her specifications. A critical issue for those using (or considering) CTO supply chains is how quickly the customer's needs are satisfied; in particular, how much can they reduce the leadtime from assembly to final delivery. The North American automobile industry is now
targeting delivery of a custom-assembled car within a week of the order being placed, compared to the multi-week window in which it operates today.

3. Build-to-Order (BTO).

The product is fabricated and assembled to order with a standard bill of materials. Examples include executive jets and industrial machinery. In the BTO supply chain, customer orders are introduced prior to fabrication or at the start of the production process. BTO products are usually highly customized to customer specification, very costly to manufacture, or both. The BTO planning requirements are captured in a typical materials-requireme nts-planning (MRP) structure. In effect, BTO commits components, sometimes far upstream into the supply base, to specific customer orders. Once requirements are established, the supply chain produces to specific quantities and due dates. This is in contrast to the pull structure of BTS and CTO supply chains that respond to replenishment signals inside a planned capacity stream. Such locked-in quantities and due dates mean that MRP execution is subjected to significant
expediting and exception activities. Any disruption in the flow of materials can cause due-date slippage throughout the complete build sequence. So the typical MRP-driven supply chain reshuffles purchase-order due dates, the dispatch list,
and customer promises. These actions magnify the variations in capacity up and down the supply chain.

4. Engineer-to- Order (ETO).

The product is fabricated and assembled to order with unique parts and drawings. Example: A thermo-chemical reactor or the U.S. space station. This type of supply chain responds to a truly customized product that requires unique drawings and parts. Custom products manufactured for highly specific uses fit well into this category. The leadtime from order to delivery is often long because of the product's custom nature. Indeed, the front-end engineering is often a neglected but costly process within his supply chain. MRP planning prevails in ETO. The ETO supply chain is the prototypical single-lot, job-shop environment. Upstream planning and logistics are often varied and complex compared to downstream distribution. Distribution and transportation of ETO products are often planned in units of one.

*Design Trade-Offs *

Each supply chain alternative presents different value trade-offs for its participants. For example, in the BTS supply chain, suppliers speculate on assured demand by moving goods forward to satisfy the customer's immediate demands. Any forecast errors in numbers or types of finished products have to be corrected at the most inflexible point in the supply chain. Any overstock errors occur at the point where all components have been committed to a finished item. If the item is perishable or subject to obsolescence, the reverse logistics operation required to recapture value is at its most expensive point. Overstocked product must be moved, disassembled, remanufactured, and restocked. Likewise, under-stock errors require the supply chain to react from the point of the longest leadtime. That is, product shortages must be made up from components. In addition, when finished items are placed at the point of customer consumption, forecast errors at that location create forward stock-rebalancing activities that add to overall supply chain cost. Thus, the advantage of quick response times comes at the cost of inevitable errors in providing the right product at the right place.

>From the producer's perspective, the CTO supply chain has numerous advantages. First, there is greater postponement than with a BTS supply chain-the producer need not commit to a final product until an order is received. The components and modules may require some precommitment but not the end-item configurations, because the order is entered at the preassembly point. Second, because the producer doesn't commit to the finished item, there is less aggregate inventory because there is less diversity of modules than of finished products. Third, the producer need only forecast and plan at the component level, as we will discuss in more detail later in the section on "CTO Rate-Based Planning."

In the case of build-to-order, the customer waits the entire time for the product to be completed. For some products this can take weeks, months, or even years. BTO products are often manufactured from order backlogs, which serve as the "shock absorber" for variations in manufacturing and demand rates. Because customer leadtime is exacerbated by the backlog wait time, BTO manufacturers sometimes move the orders of preferred customers forward in the order-release schedule. However, such order "shoe-horning" disrupts the capacity planning of the manufacturing facility.

The BTO manufacturer has less speculation risk compared to BTS and CTO manufacturers because fabrication is not committed prior to a firm order. Although this feature benefits producers and their suppliers, it provides few benefits to customers. The customer accepts a long leadtime as a painful necessity in order to benefit from a high degree of customization. In addition, customers served by BTO supply chains are required to forecast their requirements over the leadtime fulfillment interval. These forecasts are often inaccurate, requiring order and delivery adjustments prior to promised delivery date. For example, at one BTO plant we noted that finished goods were sitting in warehouses and railcar sidings. Upon inquiry, the plant manager stated that they really didn't have finished-goods inventory because they built to order. Yet the physical evidence was before us. The finished goods were present because customers delayed receipt of goods as the due date approached. That is, customers' real-time needs caused them to request a delay in shipment. The customer's forecast error became this plant's finished-goods inventory.

In general, the trade-offs between BTS, CTO, BTO, and ETO supply chains can be characterized along five critical dimensions, as shown in the "Supply Chain Design and Value Trade-off" box on this page.

*Toward the Ideal Supply Chain Design *

The phrase "maximize external variety with minimal internal variety" succinctly captures the principle that managers should follow when designing any supply chain.3 In other words, the ideal design is one in which a small number of components are used to configure a large variety of end products. This principle can be accomplished by structuring product offerings so that material and resource commitment is postponed for as long as possible. We will refer to this as the RAP (or keep in-process inventory as "raw as possible") principle, which is shown in Exhibit 2. The RAP principle is essentially realized by the CTO supply chain, which differentiates the product only at the final-assembly stage. The extent to which the RAP principle can apply to a supply chain's design is often determined by the configuration of the item being produced and the leadtime requirements of the customer. But even consumer packaged goods that use a BTS system can still benefit from the raw-as-possible principle. For example, a bottling facility can employ the RAP principle by using in-line labeling of two-liter bottles rather than purchasing prelabeled bottles from suppliers. The product configuration is typically captured by its bill of materials (BoM). Therefore the first step in any supply chain design or redesign effort involves configuring or reconfiguring the BoM to facilitate the RAP principle. Companies can achieve an RAP supply chain design simply by pulling unique parts that are aggregrated at different BoM levels, or different points in the assembly process, to the same level across different end products. For example, in the apparel industry, the identification of a specific brand name (say, with a decal) can be done further downstream simply by altering the BoM accordingly. This postpones the point at which these unique parts (decals) are assembled onto the end products, thus delaying differentiation according to the RAP principle. Closely related to the RAP principle is the principle of aggregation, or risk pooling. It is well known that aggregated demand has lower variation than demand for individual products. In some instances, the BoM can be optimized to exploit risk pooling. The idea is to pull unique materials to the same location (BoM level) across multiple stock-keeping units. By so doing, the producer can strategically locate safety stock upstream to pool the risk across individual product BoMs.

*Shifting from One Design to Another *

Supply chain designs should respond to customer values rather than to being inherently appropriate for a particular type of product. That is, the product's structure and supply chain design should respond to changing customer requirements instead of being taken as a given, frozen in time. Indeed, we have observed two interesting shifts in supply chain design that align with the RAP principle: a marked shift from BTS to CTO designs and a similar movement from BTO to CTO. Shifting from BTS to CTO. As customers seek products tailored more closely to their needs, producers are widening their product offerings by extending their current product lines and adding new ones. There is, however, a trade-off between the scope of products offered and the resources required to support that scope. This trade-off is more severe for BTS supply chains. That is, a BTS supply chain requires greater "asset intensity" to support downstream distribution, inventory, and retail facilities than CTO or BTO supply chains. This asset intensity, in turn, must be supported by larger profit margins. The CTO model can provide better margins for many products because it often requires less asset and expense commitment to support downstream supply chain elements.

A number of industries are showing this shift from a BTS to a CTO model. Already, the recording industry is letting consumers configure music CDs by choosing their own songs. In the North American automobile market, some companies are experimenting with CTO supply chains for consumer-configured automobiles. Many consumer-electronic s products can be assembled and distributed quickly if a CTO supply chain is deployed. As Dell begins to move cautiously into the consumer-electronic s markets, we expect to see the segment migrate more quickly toward a CTO model. Shifting from BTO to CTO. The shift is even more dramatic as more traditional BTO companies are exploiting the RAP principle and moving toward CTO solutions. We have observed trends in this direction for the last five years across a number of industries. Historically, many BTO companies have argued that fast-cycle supply chains do not apply to them because they are highly customized "job shops." However, that stance incorrectly views the supply chain from the perspective of the final product. Many BTO supply chains actually use many common components, ingredients, and modules that are sufficiently repetitive for them to consider moving toward a CTO solution.

One company we know well-a producer of electrical conduit-has made that move. This company specializes in customized solutions for laying electrical conduit within commercial buildings. Every order used to be treated as an engineer-to- order job; as such, it was processed from custom drawings. Yet the company uses the same types and sizes of conduit on every job. We proposed that the company design the conduit in sections of standard lengths and angles. A software program could then arrange the custom-conduit layout using standardized elements for more than 95 percent of the job. The standard sections could then be pre-staged as uncommitted parts available for configuration. By applying this CTO supply chain design, the company's order-to-delivery cycle time was reduced by more than 80 percent.

A typical objection to such an initiative is that it creates greater inventory risk. Although that claim is technically true, the consequences are not as severe as might be expected. Process inventory is certainly required, but it is often less than the sum of in-process jobs crawling through the manufacturing facility in a traditional job-shop environment. In addition, the amount of in-process parts is matched to the estimated build rate per time period. If the planning and execution time cycle is fast enough, then the amount of pre-committed parts can remain relatively small, thus reducing the inventory risk.

*Relationship Between Design, Planning, and Cycle Alignment *

The supply chain design is strongly influenced by the product structure. In turn, the product structure influences both rate-based planning4 and cycle alignment. Rate-based planning is the mechanism for aligning capacity with execution in a lean supply chain, and cycle alignment is the degree to which demand and fulfillment are matched in time. These mechanisms are familiar to most supply chain managers, but amid the everyday challenges, it is easy to underestimate their significance to supply chain design. To show that impact, we will discuss the two mechanisms in more detail in context of BTS and CTO supply chains.

*BTS Rate-Based Planning *

Typical BTS producers use planning bills of materials to forecast replenishment requirements for finished products and components.5 With planning focused on the end items, the BTS manufacturer uses the end-item demand rate to estimate the rate of component replenishment. The greater the scope of the end items, the more inventory is required to support immediate response. Put another way, the cost of speculative end-item placement puts limits on the scope of end items that can be supported economically. For example, a beverage bottler can provide various beverage flavors and container sizes but cannot economically support finer classifications of flavor or size. While the beverage producer can provide several sizes of soda, it cannot provide additional single-ounce increments from five to 16 ounces without exceeding the inventory and space levels it can reasonably and economically support. Thus, there are trade-offs between scope and economics for the BTS producer.6

The BTS supplier uses the planning bill of materials to design the supply chain capacity requirements. Components are speculatively placed to support upstream replenishment signals. For example in a soft drink supply chain, the periodic consumption of finished goods forms the basis of the bottling facility's production schedule, as illustrated in Exhibit 3. In this figure, two-liter bottles of a soft drink has a forecasted demand rate of 5,000 units per time period. This forecast is used to determine the demand rate and the associated demand variation for each end item. For this example, the three-sigma standard deviation of the forecasted demand sets the boundaries of expected demand between 4,000 and 6,000 units, or plus or minus 20 percent of the forecasted consumption rate. Thus, the forecast establishes the pacing rate as well as the expected variation to be accommodated by the bottling lines in a given time period.

The relationship between the finished product and its ingredients (components) is established in the bill of materials (ingredient card). For example, if the ingredient card requires one pound of concentrate for every 500 units of two-liter cola, then the concentrate demand rate is established at 10 pounds to support the forecasted rate of 5,000 units. The concentrate rate boundaries are set at plus or minus 20 percent, as with the finished product. The demand rates for the remaining ingredients are evaluated similarly.

In this way, product "streams" can be planned upstream from the point of order fulfillment (finished goods). As goods are sold, replenishment signals move upstream to replenish the goods sold. The supply chain is able to respond because the stream capacity is in place to satisfy actual demands. One can imagine that this process of linked pull signals would ideally move all the way back to the suppliers of the bottles, for example. If the beverage company could configure the supply chain so that demands are satisfied from a centralized warehouse, with fast transportation replenishment using "milk runs" and in-transit transfers of product, then the aggregate inventory could be reduced. Consolidation confers the benefits of reduced inventory by pooling the demand variation of the forward stocking locations into a single location. This same result can be obtained by employing advanced shipping notices to support cross-docking at the forward stocking location. In this design, the advantages of transportation economies are achieved without committing the forward stocking location to stock levels to replenish demand. The demand is replenished upstream, while the forward stocking location merely breaks, cross-docks, and stages consolidated shipments into store-level runs.

*BTS Cycle Alignment *

The BTS supplier must also align what we term the "wheels" of the supply chain-that is the production, delivery, and demand cycles shown in Exhibit 4 on page 56. The wheels capture the time within which the supply chain can respond across the complete range of the products. Although this concept is understood by most supply chain managers, it is often not given sufficient emphasis. We regularly discuss the need for inventory to buffer variation, but rarely do we discuss the need for inventory to support cycle imbalances, which is usually much more important. In the case of supply, the cycle is measured as the amount of time required to provide all the components to support the product range; for production, it's the amount of time the production system is able to produce all the products; for delivery, it's the amount of time between delivery dates for all the products; and for demand, it's the amount of time to sell the complete range. The BTS supply chain principle is to align these wheels to the demand wheel, as shown in Exhibit 4. Assume, for simplicity, that the BTS beverage company packages five different flavors of beverage in a single shipment. Now suppose that all five flavors are purchased across the retail network every day. However, moving one step back in the supply chain, if the product is delivered every three days, then the retailer must stock three day's supply of each flavor on the shelf to avoid stockouts between deliveries. Since the delivery wheel is not aligned to the demand wheel, inventory must result. The preceding discussion underscores the retailers' need for frequent deliveries to ensure that the delivery wheel more closely matches the demand wheel, thus reducing shelf space requirements for a particular SKU without compromising fill rates. The discussion also highlights the benefits of using third-party logistics providers (3PLs). 3PLs can provide aggregated transportation logistics across multiple suppliers to support increased delivery frequency and scale economies.

Now consider the bottling facility. Assume that the bottling facility is only able to produce the five flavors every seven days because of long changeover times and large batch sizes between flavors. Therefore, the bottling facility will need to hold multiple days of finished-goods inventory to support the delivery trucks. This view of the supply chain makes the value of improvements very obvious. If the beverage supplier could create a more flexible bottling facility so that every flavor is produced every day, and the delivery system could be made to deliver every flavor every day, then the whole supply chain would be fully aligned with the demand wheel. Such a configuration would minimize the amount of "cycle" inventory to the amount needed to support a single day rate plus safety stock to cover daily variation. Such a supply chain would flow to the rate of demand.

The speed with which forecasted demand is adjusted is a function of the sales and operations planning (S&OP) cycle. For example, a monthly planning cycle provides only monthly changes in the planned build and replenishment rates. Any change in forecasted demand must wait for new monthly signals from the S&OP process before the supply chain rate can be adjusted. Such long planning cycles usually generate large rate changes since demand changes are made over a monthly cycle. As the planning cycle improves to weekly or daily, the underlying planning rate can adjust more quickly to demand changes. As the planning cycle moves toward weekly and daily cycles, the supply chain can adjust more smoothly to demand changes. This adjustment must, of course, be coupled with increased flexibility within the supply chain to accommodate the revised rate broadcasts. Such flexibility is a function of engineering variables (constraints) inherent within the process. For example, for now the automobile industry can only economically adjust build rates biweekly, because of the cost of changing the assembly line.

*CTO Rate-Based Planning *

The planning structure for a CTO supply chain is designed such that there is less variety in components than in end-items. The supplier does its planning at the module level. For example, Dell does not plan using the demand-rate forecast for its finished products; there are too many possible variations for that to be worthwhile. Rather, Dell uses order management information to forecast module- and component-demand rates and variation. That way, its aggregate demand and variation can be determined at the component level by summing component averages and pooling variances across bills of materials. The upstream suppliers can use that rate information to provide immediate replenishment within the planned capacity stream. The order management system would track actual component and module consumption as orders are configured by customers. If the component demand exceeded the planned maximum capacity, the order management system would respond with an exception. The customer would be told that the component selection is not available-to- promise within normal delivery leadtimes, and an extended-promise date would be offered. The customer could then select the extended-promise date or select a different component that may not have exceeded planned capacity. Because the CTO producer builds items to customers' specifications, it cannot afford to lose leadtime by waiting for orders to aggregate into an economical shipment size for a particular region. The producer can gain logistical economies by combining custom orders into a single shipment. Such a strategy would reduce the amount of time any particular order waits for an economic shipment size.

*Continual Review Needed *

There is no one-size-fits- all supply chain design. Nor is there any guarantee of permanence for a supply chain design. Rather supply chain designs need to change as market sectors are buffeted by shifting customer needs, by unexpected moves from competitors, and by many other factors both internal and external. We have outlined four fundamental supply chain designs and explained the advantages and limitations of each. Each differs in terms of rate-basedplanning methodologies, order-point initiation, stocking strategies, degree of speculation risk, RAP potential, and push/pull signal placements. We have also pointed to important shifts from one design to another and provided additional viewpoints for examining supply chain performance with fresh eyes. Supply chain design cannot remain static. Just as the Internet has challenged preconceived notions of music distribution, so will technology, product, structure, and customer requirements change supply chain architecture.

It is our belief that supply chain managers expose their companies to unnecessary risk when they do not continually review the appropriateness of their supply chain designs. It is crucial that they evaluate competitive dynamics and artfully select the correct design for the correct set of opportunities.

Source :James M. Reeve and Mandyam M. Srinivasan

Balanced Scorecard

balanced scorecard, (BSC) adalah suatu konsep untuk mengukur apakah aktivitas-aktivitas operasional suatu perusahaan dalam skala yang lebih kecil sejalan dengan sasaran yang lebih besar dalam hal visi dan strategi. BSC pertama kali dikembangkan dan digunakan pada perusahaan Analog Devices pada tahun 1987. Dengan tidak berfokus hanya pada berfokus pada hasil finansial melainkan juga masalah manusia, BSC membantu memberikan pandangan yang lebih menyeluruh pada suatu perusahaan yang pada gilirannya akan membantu organisasi untuk bertindak sesuai tujuan jangka panjangnya. Sistem manajemen strategis membantu manajer untuk berfokus pada ukuran kinerja sambil menyeimbangkan sasaran finansial dengan perspektif pelanggan, proses, dan karyawan.

source :wikipedia

HOW TO EFFECTIVELY MANAGE DEMAND WITH DEMAND SENSING AND SHAPING USING POINT OF SALES DATA

Predicting what and when the consumer will buy has never been an easy process for manufacturers or retailers. Burdened by the daunting task of precisely matching supply with demand, manufacturers are constantly improving processes to achieve the highest forecast accuracy to ensure when the consumer walks into the store, the product they are looking for is on the shelf. During times of economic uncertainty, the need for more accurate forecasting becomes increasingly critical as companies work to trim costs in the supply chain to ensure stability and profitable growth-without sacrificing customer service.

With this in mind, manufacturers are actively looking for the best methods to gain visibility or "sense" consumer demand. These efforts have included programs such as Vendor Managed Inventory (VMI), Efficient Consumer Response (ECR), and Collaborative Planning, Forecasting and Replenishment (CPFR). But each of these initiatives has challenges and does not necessarily capture true consumer demand. With VMI and ECR, inventory policy management drives the replenishment process instead of consumer demand. With CPFR the driver is demand planning. CPFR is focused on a broader buyer-seller relationship, which gives the manufacturer greater visibility of demand along with more time to respond to specific changes including planned promotions or special events.

With demand planning as the key driver in the CPFR process, the challenge is deciding which demand signals will drive the collaboration process. Many companies prefer to leverage multiple demand signals (order history, shipments, Point of Sales (POS), new product plans, promotions, syndicated data, etc.) to calculate their forecasts.

Even though CPFR programs have been successful in getting consumer-centric supply chains on the same page, some initiatives have not achieved the mass adoption anticipated for several reasons. Most of the companies still relying on product-centric supply chains-in which manufacturers push their goods out into retail and wholesale channels-can no longer afford to build inventory and wait for customers to buy. They need to get as close to consumer demand as possible. Leveraging POS data is an excellent way.

The growing use of POS data helps manufacturers take a giant step in using consumer driven demand. Over the past several years, the availability and accuracy of POS has increased dramatically. POS data is often viewed to give a truer picture of consumer demand because it is unencumbered by elements such as batch sizing, shipping quantities, and lead times. It can provide an early indicator of what's selling and what's not-critical information for new product introductions (NPIs) or short shelf-life products. This gives manufacturers the lead time necessary to make adjustments in their manufacturing and distribution plans, ensuring they are appropriately positioned to meet changing demand patterns.

The adoption and availability of technology that captures and analyzes POS data has led to its increasing integration into the demand management process. Manufacturers that have successfully incorporated POS data into the demand management process are experiencing increased forecast accuracy, improved NPIs, lower out-of-stocks, and decreased total costs. According to AMR Research, "Reducing out-of-stocks can contribute as much as 4% to the bottom line."

For example, when a consumer goes into a mass merchant retailer and buys a popular mascara, the product is scanned at checkout, creating POS data. The mascara manufacturer receives a demand signal that indicates the specific product has been purchased at a specific store at a specific date and time. They gain visibility and start refining their replenishment plans within hours. This granularity gives a very clear picture. Relying on traditional forecasting techniques would base the plan on order or shipping information. The forecaster would assume that because 10 cartons of mascara were shipped from the distribution center in September, market demand equals 10 cartons. Better visibility requires leveraging POS data to refine the demand plan and truly understand timephased replenishment needs.

BENEFITS AND CHALLENGES OF POS DATA

The benefits of leveraging POS data as a primary or secondary demand signal are significant. It improves accuracy because scanning is far more precise than keying in numbers from a pricing label. It gives a quick, near real-time look at the products moving through a specific retail channel. Additionally, POS data provides a granular SKU/store-level insight along with aggregate information to better manage inventory, trigger replenishment, and analyze sales patterns including the success of promotion plans.

There are also challenges that come with POS-based demand signals. First, syndicated data available from IRI, Nielsen and others, the primary source for corporate marketing analysis because of its broad sample, is available only at the category level. Furthermore, syndicated data does not include POS data of major retailers like Wal-Mart and thus may not cover global markets. The format in which data is available also creates problems because there is no single standard format, including EDI (Electronic Data Interchange), calendars, and selling horizons on the data from major retail chains. Also, since POS data is available in huge volume, it can be challenging to manage in a timely fashion. However, over the past five years or so, POS data accuracy has improved significantly as a result of technology upgrades and consistent cashier training. Additionally, retailers and manufacturers have a better understanding of the rich data and timely insight that can be harvested through POS .

Manufacturers must be driven by the demand of consumers and thus utilize POS data to more accurately predict, sense, plan, and respond to real-time demand signals across a global network of suppliers, retailers, and consumers. When executed effectively, a supply chain driven by consumer demand will positively impact profitability, inventory investments, customer satisfaction, and asset utilization. In The Handbook for Becoming Demand-Driven, AMR Research published a compelling assessment of the benefits of a consumerdriven demand business model, which found that the most advanced demand sensing companies have achieved a distinct competitive advantage across the business including 15% less inventory, 17% higher perfect order performance, and 35% shorter cash-to-cash cycle time.

BECOMING MORE DEMAND-DRIVEN

So how do manufacturers become demand-driven? You must first realize that technology alone will not transition you from a product-centric to a consumercentric manufacturer. It requires a combination of people, process, and technology. With a common focus on the consumer, you can begin breaking down internal corporate barriers between departments. This will ensure the commitments you make to retail customers will be delivered by your entire organization. Don't let organizational silos limit your success.

Realizing, that manufacturers struggled to respond to sudden spikes in demand or unexpected surges in inventory, profitable growth continues to be an elusive goal. In fact, the majority of manufacturers are driven by forecasts modeled on historical shipments or orders to retailers rather than on sales to end consumers. This traditional approach is geared to keeping production plants efficient but often leads manufacturers to "stuff" their channels with costly excess inventory.

With shorter product life cycles, increasing customer expectations, and needing to support a portfolio of NPIs, supply chain leaders must supplement the traditional demand planning process with POS demand signals. With more timely access to POS data, manufacturers can sense changes to demand more quickly. Figure 1 shows the researchfirm, Aberdeen Group, finds that 50% of companies report that it takes more than one month to sense changes in demand, which is unacceptable in today's marketplace.

Aberdeen recommends that companies with any of the following attributes should focus on establishing more rapid demand sensing and response capabilities:

* Maintain safety stock levels to account for poor short-term forecast accuracy.

* Have short-to-medium lead times for products (one to six weeks).

* Use promotion-intensive marketing strategies that require strong SKU-level forecast accuracy.

* Fail to have the right SKU mix on retail shelves, creating measurable losses in sales and gross margins.

* A desire to improve customer-service levels, as well as to have smoother upstream manufacturing processes.

Supply chain technology has evolved quickly over the past decade, often outpacing capabilities that manufacturers have been willing or able to implement. The current dynamic market may be the catalyst needed to give a consumer-driven business strategy a top priority. Even with the increase in the use and availability of POS data for demand sensing, it is just one component of a comprehensive demand management process that also includes demand planning, demand shaping, and demand collaboration to profitably and efficiently match supply with demand. (Demand sensing means sensing a change in the demand pattern using downstream data such as POS and Radio Frequency Identification-RFID; demand shaping, on the other hand, means to shape the demand using marketing, price, promotion, trade and sales incentives.) Together, these techniques establish a process for predicting, dynamically sensing, shaping, and reshaping demand to move your business from reacting to demand, to anticipating demand, to driving demand across strategic, operational, and tactical planning horizons.

KEYS TO A ROBUST DEMAND MANAGEMENT

Although the concepts of demand planning, demand sensing, demand shaping, and demand collaboration seem simple, their implementation requires a holistic approach to demand management. With a consumer-driven demand business strategy, forecasting increases in importance as it evolves into a robust demand managementprocessthatbecomes the foundation for upstream supply chain activities. To gain valuable insight into your business, consider the following changes in demand management.

* Plan for Key Customers and Channels: It is critical to model and forecast your top customers and/ or channels to better understand key drivers, specific demand patterns, and customer service requirements. Although readily available in leading demand planning solutions, only a minority of manufacturers leverage customer-level and/or channel-level forecasting for their most important customer ship-to locations.

* Leverage Downstream Data: Complement traditional forecasting processes with downstream data including syndicated data, POS, and, in some cases, RFID. These more timely indicators coming from consumer demand will increase supply chain responsiveness to current market activity.

* Flexible Planning Periods: If appropriate for your business, the availability of POS data can help your team move from a monthly to a weekly forecasting process. At a minimum, it will allow you to fine-tune and synchronize replenishment activities. Most businesses need a comprehensive demand plan that supports strategic, operational, and tactical planning horizons for a variety of roles in the business. An accurate long-term forecast is critical to aligning production capacity and sourcing resources.

If adopted as a key demand signal in the demand planning process, POS data gives manufacturers a strong competitive advantage. Particularly in the CPG industry, POS data can significantly decrease shelf level out-of-stock rates and increase demand forecast accuracy. More and more manufacturers have turned to demand planning solutions to increase visibility and capture and use POS data to create the demand forecast.

FUTURE OF POS DATA

In today's economy, the demanddriven supply chain is a powerful weapon for businesses of all sizes. With dynamic market swings, volatile fuel prices, less predictable consumers, and intense global competition, corporate profit margins are experiencing a convergence of pressures. While researchers have talked about the importance of using POS data in the demand management process for almost a decade, the adoption rate by manufacturers was initially slow. Today, many fastmoving consumer goods manufacturers are increasing forecast accuracy by leveraging POS data in addition to data from orders and shipments. The insight that a planner gains by having access into multiple demand signals has been proven to advance the accuracy of the overall forecasting process and ensure improved customer service.

Consumers are fickle and predicting what they will purchase is never an exact science, but the technology to aid in this process has reached a level where it is possible to establish a clear and timely prediction. The volatility of the economy is always at the forefront of a manufacturer's strategic direction. As a result, finding a better way to manage demand becomes more critical to building profitable growth. As the accessibility and reliability of POS improves as well as the adoption of demand planning systems to leverage the data, more and more manufacturers will benefit from the POS demand signal to reduce inventory, improve customer service, and boost profitability.

Source :Karin Bursa

Approximate Analysis and Optimization of Batch Ordering Policies in Capacitated Supply Chains

Devising manufacturing/distribution strategies for supply chains and determining their parameter values have been challenging problems. Linking production management to stock keeping processes improves the planning of the supply chain activities, including material management, culminating in improved customer service levels. In this study, we investigate a multi-echelon supply chain consisting of a supplier, a plant, a distribution center and a retailer. Material flow between stages is driven by reorder point/order quantity inventory control policies. We develop a model to analyze supply chain behavior using some key performance metrics such as the time averages of inventory and backorder levels, as well as customer service levels at each echelon. The model is validated against simulation, yielding good agreement of robust performance metrics. The metrics are then used within an optimization framework to design the supply chain so as to minimize expected total system costs. The outcome of the optimization framework specifies how to move inventory throughout the supply chain and how to set inventory control parameters, reorder levels and replenishment batch sizes.

Source : Abdullah Karaman, Tayfur Altiok

Organizational Viewpoint of the Relationships in Supply Chains

A supply chain is a strand, or chain, of operations that passes through an organization's supply network. Many different terms (and the concepts described by them - e.g., purchasing and supply management, physical distribution management, logistics, merchandising, material management, and SCM), some of which overlap are used to describes various parts of the SC. They represent an increasing degree of integration among the SC linkages.

SCM is a broader and strategically more significant concept that includes the entire SC, from the supply of raw materials through manufacture, assembly, and distribution, to the end customer. It includes the strategic and long-term consideration of SCM issues as well as the shorter term control of flow throughout the SC.

The exact nature of the relationship among the different linkages within the SC can be viewed on a continuum that goes from highly integrated at one extreme to temporary and short-term trading commitments at the other. The organization tries to define the totality of working tasks, their mutual relationships, connections and synergies, as well as mechanisms for the suitable connection and coordination of organizational factors.

For the formation of the working structure, the organization is able to use different starting points. Modern conditions of work demand that organizations include into the structure plans the characteristics of the informational process needed for the realization of organizational aims. The organization can use the traditional or modern plan for the formation of the structure. The traditional access to the formation of the structure is based on considering vertical informational connections. But for most organizations, the vertical connections are not enough, so they fulfill them with horizontal connections.

For the formation of the organizational structure, the organization can use functional grouping, divisional grouping, grouping with more viewpoints, and horizontal grouping. Different structures in the frame of functional, divisional, and horizontal structures define different levels of coordination and integration of an organization.

In the frame of functional and divisional structures, the management is able to create total business support by forming whole vertical and horizontal connections. In such a way, the efficiency of present vertical connections will increase and the integration of the organizational work will improve. In horizontal structures, the activities are organized horizontally around the basic (or key) working process. Most organizations form specific hybrid structures, which include characteristics of two or more structure types, on these starting points.

Source Dr. Vojko Potocan, University of Maribor, Slovenia

What are ERP and CRM?

ERP is a process that helps you put any and all resources involved with an organization to the best possible use. ERP has had other names in its past iterations: Materials Resource Planning and Manufacturing Resource Planning. Manufacturing Resource Planning shows that, at its roots, it was used as a tool most often in a manufacturing environment. Typically, it was used in reference to a process with several discrete operations or discrete objects, many of which can be broken down further into atomic level objects or processes. An example would be a simple wooden bar stool. A bar stool with three legs, three dowels connecting those legs at a predefined space interval, and a round wooden seat. A process might be to drill the hole for leg one into the bottom of the seat piece. There would be three similar processes like that one, one for each leg into the seat. Each leg might have a process assigned to it of drilling two holes, each hole has a depth and a diameter and an angle in reference to the leg and an angle in reference to the other legs. The finished product (bar stool) as a whole has a demand for each component (e.g., legs, screws, seat) and you have a predefined amount that is allocated to waste. Tracking all of this information, as well as tracking those times when the projected numbers fall outside of the expected ranges are all things that historically were tracked by a MRP system either in a spreadsheet, in a notebook, or in early databases (usually with homegrown applications built as a front end).

ERP methodology has grown significantly from its manufacturing roots, although many times MRP is still the basis from which the implementation of an ERP system grows. Today the concept of ERP often refers to a broad set of activities that a company or an enterprise performs, both internally and externally. The computerized system that is often referred to when discussing the management of planning of an enterprise's resources (all resources, including money, physical, and people) is an integrated solution. Such a software system is typically made up of multiple modules that interact together, share information amongst themselves and each other, and provide management with a broad, all-encompassing picture of the entire enterprise. These systems can now be used to meet needs in any industry.

Within the software is stored the information that management needs to operate its business day to day. ERP software systems break down the departmental barriers that sometimes still exist in organizations and allow the information that may have been in silos before to be shared across the enterprise. Further, it takes a process-oriented view of the organization and uses that view to allow the organization to meet its goals by tightly integrating all aspects of the organization. With ERP software, a company can better integrate its entire supply chain, automate many of its processes, and reduce its lead times and exceptions to the process along the way.

CRM is the process of finding, getting, and retaining customers. It encompasses the methodologies, strategies, and other capabilities that help a company or enterprise organize and manage its customer relationships, as well as the software tools to help achieve those ends. Today, many companies focus on the wants and needs of the customer, so the ability to track information about the customer, learn from that information, and use that information to better serve the customer is crucial. CRM helps a company learn what works and what does not. It helps the company identify the profile of the most profitable customers, gain a deeper understanding of the most and least profitable customers, and will allow the company to target the most profitable customer profile when it is searching for new business. For companies that are forming alliances with business partners, CRM is centralizing information on the customer base in a way that can be shared between partners to help to create products to better serve the end user. Before, customer-centric information was likely already stored within the company. It was unlikely, however, that this information was stored in a central location or that it was easily accessible by multiple departments therefore reporting on customer information in an enterprisewide manner was nearly impossible. If it is difficult to report on, it is likely nearly impossible to perform analysis on.

CRM will help your customer base, and your reputation within that base, by allowing faster response to customer's inquiries because the information is centrally stored and accessible by the people who are interfacing with the customer

source : Oracle E-Business Suite