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Focus: Supply Chain Trends/Issues

Feature Article from Our Supply Chain Trends and Issues Subject Area - See All

From SCDigest's On-Target E-Magazine

 

Sept. 7 , 2011

 
Supply Chain News: New (to some) Class of Software Focused on Managing Short Term Supply and Demand Issues


"Response Management" Can Help Both Top and Bottom Lines, Enabling More Real-Time Demand-Supply Matching; Like a Football Play Where the Coach can Keep Communicating with Each Player as the Action Unfolds

 

SCDigest Editorial Staff

 

Can a category of supply chain software be both old and new at the same time?

SCDigest Says:

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So if this sounds a lot like a next-generation available-to-promise solution, you would be correct in that perspective, with the added capability of doing dynamic available-to-promise more intelligently over the full order lifecycle.

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That may just be the case for a type of application some supply chain software vendors call "Response Management," with at least three software vendors offering products (two of them in partnership) clearly placed under the "Response Management" category, and others said to have or be in development of similar products, whether that name is used or not.

What are Response Management applications? They are a different type of supply chain planning application that have been around for many years, but in some respects are just now starting to gain awareness and significant market adoption.

On a recent videocast on our Supply Chain Television Channel, Michael Hartman of ICON-SCM, a company that developed a Response Management solution about a decade ago and is now partnering with SAP to deliver its application, said Response Management is in part about "how I manage my comittment strategies to customers."

He said that many companies embracing Response Management "were previously aggregating up their total demand into one big demand picture, and the supply side of the house, whether outsourced or internal, was then producing to that plan. They left the rest of the organization to determine how to distribute that to their customers."

But this leaves holes in commitment strategies, and often causes companies to lose orders because they are unable  to commit to delivering even though they could be capable of doing so if they could see the big picture, Hartman said. This challenge is especially great given the compressed time windows in both ordering and delivery, along with Lean inventory strategies that limit delivery capabilities.

The crux of Response Management, Hartman said, is keeping a real-time view of both demand and supply, and "pegging" specific demand to committed capacity in a way that allows for opportunistic reaction to new demand-side opportunities by in effect "de-committing" previously committed supply for new incoming orders if it is possible to make that switch and still maintain those existing comittments.

The time is now for Response Management because market and customer volatility continues to increase, said SAP's Mark David on the Videocast.

"The volatility in demand signals that are coming from customers have increased. The opportunity for companies to differentiate themselves as a result in terms are responsiveness to customers is very strong," David.

David cited the example of one consumer electronics company that in the 2009 Holiday shopping season was able to respond faster than its competitors when demand at one major retailer was higher than expected, and requests for new order commitments were made to various manufacturers with little notice. SAP's customer was able to secure the business based on the rapid response, and add a substantial new order to its top line revenue.

Below is an excerpt from this outstanding videocast, the full version of which includes a video demo of the ICON-SCM/SAP Response Management solution. The full videocast, the presentation slides, and a podcast of the Q&A session can be found here: Supply Chain Response Management, The New Benchmark for Supply Chain Leadership.

 

 

 

 

 

(Supply Chain Trends Story Continued Below)

 

CATEGORY SPONSOR: SOFTEON

 

 

Kinaxis is among other supply chain software providers that offer solutions positioned under the Response Management category. Like ICON-SCM, Kinaxis has had such a solution for many years, but has only more recently started to use the Response Management designation. Slowly, supply chain software analysts are also starting to use this term as a separate supply chain category.

"With Response Management, we're talking about one of these Holy Grails of supply chain that we have never been able to hit, and tha's revenue," David added."On the supply side, Response Management does a very effective job of matching your demand signals with your global supply."

 

Response Management Technology Starts to Take Hold

 

 

Source: SAP

 

So if this sounds a lot like a next-generation available-to-promise solution, you would be correct in that perspective, with the added capability of doing dynamic available-to-promise more intelligently over the full order lifecycle.

Hartman adds that a key component of a Response Management solution is taking in all orders and even quasi-committments and creating a "forced ranking of demand" - an "order of orders." From there, the solution looks holistically at both supply and demand issues and then recommends the optimal solution that considering what orders can be pulled in or forward, what order committments can be met with later production than originally pegged, where ovetime is needed to fully meet demand opportunities, and other alternatives that in many companies are not well analyzed or are done so in a very un-systematic way.

Response Management tools allow a company decide how to best "respond" given these supply and demand dynamics, taking over where traditional supply chain planning applications leave off.

This really is just another example of how operational and even to an extent tactical planning are starting to blur to become one integrated process, rather than separate ones.

During the Videocast, Hartman used an analogy of a football play to describe Response Management, in that it let everyone on the supply chain team know what is expected of them to maximize revenue and lower costs.. SCDigest Editor Dan Gilmore took the analogy a step further, saying it was like after the play was started, and the offense met contact with the defense, that you "could keep in communication with the whole team as the play is unfolding and keep telling them what they need to do to succeed."

Hartmand and David both said Response Management is appropriate for any number of manufacturing sectors, including consumer packaged goods, high tech/electonics, consumer durables, and many more.

Are you familiar with the Response Management concept? Is this really a new category of supply chain software, or just an augmentation of what we have? Do you see it solving real problems we have today? Let us know your thoughts at the Feedback button below.

 

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