Collaboration is an overused word. No one argues that collecting information from diverse sources is important, but collaboration is more than just gathering data from different people. For example, gathering forecasts from management, sales persons, and customers is useful, only if there is a well thought out process to reconcile the different inputs. All too often, efforts to create a collaborative process end with data gathering.

Cost containment seems to be the overriding trend in food manufacturing, according to a panel discussion at the Food Automation and Manufacturing conference in Florida. This has led to a greater emphasis on performance measurement and more widely to consolidation through mergers and acquisitions. Faced with a similar situation, the chemical industry in the mid 80's and 90's responded by using technology to streamline their supply chain planning and extract value from their supply chains.

Supply Chain Planning is neither a software issue, nor is it a business process issue - Successful implementations are the result of an intelligent blend of domain knowledge, technology, and up-to-date software.

SAP has been advertising that companies that use SAP have 32% higher profitability than the companies that don’t. A recent study from Nucleus Research claims that in fact the profitability as measured by return on equity (ROE) is lower for the companies that use SAP. The truth is probably somewhere in the middle. What is more interesting is that out of the three focus areas, enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM), SAP’s SCM customers fared the worst. Nucleus Research reports that SAP's SCM customers have a profitability that is 40% worse than their peers.
Full report at www.nucleusresearch.com

ATP/CTP issues in the process can be very different from those in the discrete. For this reason, processes that work well in a discrete context may be complete unsuitable in the process industry. In some of the processes that we have encountered, material in terms of a finished product is not homogenous. What this means is that a CSR has to select suitable material from existing inventory to fill certain orders. In other words, an ATP process that only looks for available inventory is flawed because the available inventory may not match the specs required by this particular customer.

Most people are still trying to figure out the implications of Sarbanes-Oxley. What is clear is that processes and and procedures that are the basis of forward looking projections need to be made more transparent.

Up to now most efforts at collaboration in demand planning stop at gathering the data from a number of different sources. Then "some magic happens", and somehow the forecasts get better. The trick to effective collaboration is how one uses the data. Studies have shown for example, that sales forecasts are normally more accurate in the short term. However, marketing and business forecasts tend to work well further out.

More on outsourcing - recently, some food manufacturing companies are outsourcing services including IT, purchasing, and even some key tasks like lot selection for blending. The actual manufacturing is done close to the final markets using small distributed manufacturing locations, but the expertise and other high value added services are centralized offshore.

Up till now, most companies elected to outsource specific functions. So if manufacturing costs were percieved to be cheaper somewhere else, then manufacturing would be outsourced. Each individual area like customer support, manufacturing, IT infrastructure, and others were looked at one function at a time.

Logistics cost breakdown can be used for an initial quick assessment of your supply chain. Since each company allocates costs differently, these breakdowns should be used with care. If costs in an area are 30% or 40% more than the norm shown below, than that indicates that the area deserves a closer look. As a percent of sales, the total supply chain costs (including transport, inventory, and administration) should be in the 7% to 9% range.