Supply Chain Insights from JDA Focus Breakout Sessions
A few weeks ago, I offered my written trip report of the JDA Focus 2015 user conference in Orlando, highlighting key news and themes overall and summaries of the keynote presentations. (See Trip Report: JDA Focus User Conference 2015).
Given JDA has some 4000 customers worldwide, a sizable percentage of the SCDigest readership touches JDA products one way or another, so I think the event deserves a strong level of coverage. As I promised in part 1, I am back this week to highlight some of the more interesting breakout sessions at the event, attempting as always to do so in a way that provides useful insight into what companies are doing and thinking in the supply chain - whether you are a JDA user or not.
"Pepsico has DCs all over the world, and has developed five templates for what these DCs should look like from least to most sophisticated in terms of WMS software, configuration, storage and materials handling systems, etc."
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On Sunday, I once again attended the JDA Demand Optimization Council (DOC) meeting, a group of some of its best retail, consumer goods and wholesale customers who discuss key issues and what they are doing now in their supply chains, generally around a specific meeting theme.
It's a good group, run well by David Johnston, but is tricky to manage because for obvious reasons direct competitors can't be part of the club - so if another company beats you to the punch, you are kind of outside looking in. I am limited in what I can report out of this meeting, but can share some broad highlights.
This meeting, members were asked to present their company's top supply chain priorities for the year. Before that, I kicked things off with a short presentation on supply chain strategy, on the theory that the strategy should be driving the top initiatives.
I included an exercise where I ask each attendee to write his or her definition of what a supply chain strategy is. The responses, to put it mildly, were all over the map. It is actually kind of amazing that this far into the supply chain era there is really no consensus or common knowledge at all about what a supply chain strategy is. I have evolved my own definition, which I will share in coming weeks.
I was struck by the range of supply chain initiatives presented by I think 13 different companies. A handful were major efforts and transformational; others were much more tactical, like building a new distribution center someplace. No two companies had a similar set of supply chain initiatives at all, and I find that very interesting.
One retailer in the group is moving its demand planners from the supply chain organization, where they were in effect paired with replenishment planners, to under the merchandising organization. Why? Because a new CEO want to make merchandisers/buyers more accountable for inventory levels, and believed if things were organized the way they have historically been, the merchandisers could just point the finger at the forecast errors as the source of inventory issues.
That led to a discussion that indicated most companies swing back and forth on how these demand planning jobs are structured (e.g., one planner does both demand and supply planning or not) and deciding where demand planning sits in the organization, depending on who's at the top and their views on such matters. Again it seems to me we need more thinking/data here as a discipline about what usually works best and why.
One large regional retailer is almost finished with its multi-year effort to move to true store-level planning, using JDA software. It expects large benefits from the move, but the technical and processes changes are significant, so be prepared. This retailer also believes as its Leans out its inventory from this process, its risk swings more towards the impact of supplier variability.
Ok, let's move on to some of the true breakout sessions.
I attended a panel discussion on "the warehouse of the future," and like every other of the 6-8 such sessions I have attended with this title over the years, it had very little to do with a vision for the future DC but rather what companies (Pepsico, Amway, Genco) are doing right now - but it was a good discussion nevertheless.
3PL Genco is using the new age Baxter robots from Rethink Robotics in some of its facilities, specifically in support of fulfillment for DVD giant Redbox. The Baxters can open cartons of solid SKU DVDs (that's how they are shipped into the DC), extract them from the box and place them on some takeaway unit conveyor, since that's how they are shipped to individual kiosks. On that processing line, you might have a human, a Baxter, a couple more humans, some more Baxters, etc. working side by side.
The jury is still out on Baxters in distribution in my mind, but at about $45,000 each Genco believes the payback has been high in its application.
None of the three companies have any real initiatives for use of RFID in their DCs - whatever happened with that Walmart mandate? - but JDA chief science officer Adeel Najmi, who moderated the panel, noted that other technologies, such as image recognition systems using smart glasses might provide the desired benefits of RFID at much lower costs (no need for RFID tags).
Pepsico has DCs all over the world, and has developed five templates for what these DCs should look like from least to most sophisticated in terms of WMS software, configuration, storage and materials handling systems, etc. So when it needs a new facility or upgrades an existing one, it decides "this is a level 3" or whatever and everyone understands what needs to happen based on those templates. This is a smart idea for global companies with many facilities.
Kimberly Clark (KCC) presented on its use of JDA's carrier bid optimization solution. First, it is rather amazing that a company that spends some $700 million on freight annually until two years ago was doing its procurement manually, using spreadsheets and with all the problems that approach creates - though KCC is hardly alone in this regard.
The new JDA tools have dramatically streamlined the process, and are being used across bids for truckload, LTL and ocean (each a separate "event"). Interestingly, on the trucking side Kimberly Clark looks to go no more than 2% below "market rates" for each lane, based on a benchmark database it participates in, because it thinks much below that will result in carriers simply not meeting their service commitments. Also, KCC decided not to show carriers how they rank on each lane at the end of each round of bidding -though the tool supports that - and instead simply shows each bidder a target rate for every lane.
A key point: calculating the ROI for this automation can tricky, especially in the current environment where TL and LTL rates have been rising rapidly. Can "cost avoidance" from having lower than market increases in rates from the automated bidding process be determined? Yes, but not easily.
Chip maker Analog Devices gave good but fairly standard presentation on its deployment of JDA's factory scheduler (that came along with the i2 acquisition), but made a couple of interesting points of general interest on supply chain software selection practices.
Forced to look for a new system after IBM announced plans to drop support for a scheduling product, initially Analog Devices came up with 120+ key functional requirements. After trying that approach for vendor selection, it found that it was just unmanageable. So it retrenched, and identified just 10 truly critical capabilities the replacement system would need. Every alternative was evaluated based on those 10 essentials, dramatically simplifying the process.
Once JDA was identified as the leading candidate, Analog Devices then invested in a "proof of concept" program, using its full data set. While this took three to four months and cost some money, it gave everyone confidence in the proposed system before signing on the dotted line. That investment also largely paid itself back in terms of a faster and less expensive full deployment - which was achieved in just 6 months or so. Proof of concept - this should be used in almost every area of supply chain software adoption more often.
Out of space as always - it was a good show for me.
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