Automating The Cow Path

Session 3H“Automating the Cow Path”

Technologies to Improve the Supply Chain

By: F. Michael Babineaux, CPSM, C.P.M.President/CEO

Babineaux Educational Services and Training, Inc.www.BESTraining.com

901.853.0539

http://www.bestraining.com/

1973 - Home made Inventory Control1975 - Sequential Barcoding1978 - Inventory control system 1983 - Logistics system 1987 - EDI1993 - e-Procurement 1997 - P-cards 1999 - eRFx2001 - Reverse Auctions2003 - RFID

30 yrs of Systems Installations @

My Experiences

Automating The Cow Path?

“We have the opportunity to further streamline our operations and reduce or eliminate redundant requirements.

It is not enough to simply automate a maze of requirements that made sense before we had the capability to do better, but which now, may slow our progress.”

Acting Customs and Border Protection Commissioner Deborah J. Spero

2008 2012

$ 6.5B

9.2B

7% annually

SCM Technology ApplicationsSpend

AMR Research study

Technologies to Improve the Supply Chain Cow Path

• Procurement– e-procurement– eRFx– eReverse Auction– P-Cards

• Inventory Control– MRP

Technologies to Improve the Supply Chain Cow Path

• Transportation – Scheduling, Routing, Auditing,

Tracking and Tracing

• Warehouse– WMS– Equipment Automation– Barcodes & RFID

• Implementation Process– SDLC

How many of your organizations use an e-procurement

system?

e-procurement Process

• Through implementation of e-procurement systems, Best in Class Organizations . . .– Reduced maverick spending by 40%– Reduced their requisition to order cycles by

84% and costs by 59%

Aberdeen Research Report eProcurement Results

1. Paving the Cow Path As Is– 1983 Logistics System example

2. Don’t Try B4 Buy3. Not buying into Future4. Field of Dreams Approach

– January electronic show example

5. Big Bang Theory Approach6. Where’s the Executives7. DIY8. All Users are Equal9. Doing Nothing Cost More10. Ignore Benefits of Software as a Service (SaaS)

– Application hosted as a service over the internet

e-procurementTop 10 Mistakes

• No installation and operation on your own computer

• No software maintenance, ongoing operation, and support.

• Costs to use is a continuous expense– Not single capital outlay – on-demand pricing

SaaS Benefits?

eRFx Processes

• eRFI (Information)– Filling out form on website– Sending inquiry email

• eRFB (Bids)– Out and Back

• eRFP (Proposals)– Services– Undefined Needs

“an online, real-time dynamic auction between a

buying organization and a group of pre-qualified

suppliers who compete against each other to win

the business to supply goods or services that have

clearly-defined specifications for design, quantity,

quality, delivery, and related terms and conditions,”

--(CAPS Research, 2003)

Definition of an electronic Reverse Auction (eRA)

Unfavorable1. Specialized or

custom product2. Few qualified

suppliers3. Strategic relationship

is important4. Buyer’s business is

small5. Little or no excess

capacity6. Other issues are as,

or more, important than price

What’s Appropriate

Favorable1. Commodity or

standardized product2. Many Qualified

Suppliers3. Transactional

relationship4. Buyer important to

suppliers5. Excess capacity in

industry6. Price is key selection

criterion

345

• Cost improvements are greater than traditional negotiations

– Savings range - 15% to 75%– Average savings - 10% to 20%

--(CAPS Research, 2003)

Consequences: Cost and Price

1. Gather the Right people and Prepare Them2. Ownership of the Process is Personal3. Use the Right Tool4. Have a Contingency5. Sell it to the Stakeholders – Explain Rules6. Pick Right Suppliers - 3 bears concept7. RSVP’s & Testing8. Set the Decrements Appropriately9. Call in Witnesses10. Track the Savings

Reverse Auction ProcessTop 10 Tips

1. Senior management support

2. Clearly defined goals and objectives

3. Process improvement initiatives in place

4. Cross-functional team to design and manage the project

5. Dedicated program management

6. Focus groups comprised of potential users

7. Performance measurements and reporting

8. Extensive card user training

9. Back-end quality control enforcements

10. Ongoing communications campaign

The Procurement Card 10 Success Factors

Inventory Management Systems

• Carrying costs can range from 15% to 25% of total inventory value on an annual basis

• Inventory management efforts can cause a reduction in inventory

• Any reduction in inventory results in a reduction in carrying costs

2008 Aberdeen Group Research

• 138 enterprises using inventory control systems found that Best of Class organizations . . .

– have 30% greater percentage of orders received from

suppliers complete and on-time

– average 25% greater percentage of orders delivered to customers complete and on-time

– are 2.5x more likely than all others to have reduced inventory carrying costs over the past year

• Traffic Routing and Scheduling Systems– Sequencing & timing of stops– Route Determinations– Documentation Preparation– Vehicle Availability

• Freight-rate Auditing Systems– 3 – 5% overcharge/yr common– Lack of time and talent– Database of rates

Transportation ManagementTechnologies

• Product visibility Systems– Tracking and Tracing Capability

• Transportation Analysis Systems– Key Performance Dimensions

Transportation ManagementTechnologies

Categories

• Warehouse Management Systems– Order management to invoicing systems– Support of workload planning– Equipment utilization– Increase Warehouse capacity

• Automatic Data Collection– Barcodes & RFID

Warehouse Management Information Technology

Barcodes

• Use machine readable codes• Read by scanners• Common in Retail (UPC)• Reduces data entry• Increases data accuracy

Warehouse Management Available Technology

RFID• Primary components

– Host computer– Interface transmitter– Tag device (Passive or active)– Reader

• Real time communications• Areas of concern – data security, privacy

invasion, no single standard


Five stages of RFID

• Denial - "This has got to be a joke!"• Anger - "How dare they try to force-feed us

this untested gimmick!"• Bargaining - "OK, we'll do the very bare

minimum amount of investigation into this RFID test"

• Depression - "We're gonna go broke paying for all these tags and readers”

• Acceptance - "We're actually able to run a lot leaner thanks to RFID"

Warehouse Management

Equipment

• Automated guided vehicle systems• Automated storage/ retrieval systems

(AS/AR)• Material Handling Robotics


• The Problems with System Installations– Wrong or No clear objective & Scope– Lack of Leadership– Not enough money or time– Lack of User Involvement– Paving the Cow Path

Technology Implementation

415

• A method to develop or replace information systems

• Stages– Analysis– Design – Development– Testing

System Development Life Cycle

• Information output requirements– including level of detail, frequency of need

and timing

• Existing data and information support systems

• Extent of integration required

• Capacity available, both talent and hardware

System Development Life CycleAnalysis

• Integration plan – Based on the extent and types of integration required

• Data requirements– Including level of detail, timing and accuracy

• New hardware or communication systems requirements

• Implementation plan– Including responsibilities and timing

• Capacity requirements– Including talent and hardware. Training plans

System Development Life Cycle Design

• Total Cost of Operation Budget• Updating of policies, procedures and work

instructions• Training programs • Hiring any new employees

– Needed to support the system

• Changing functional relationships– As needed

• Implementing any new measurement or evaluation programs – Needed to support the new system

System Development Life Cycle Development

• Explicit criteria (measures)– Determine if the implemented system is

operating according to the design

• Test operate the system– Under all expected operating conditions

• Evaluate results– Against the criteria

System Development Life Cycle Testing



There are five things you need to have to survive in a world of SCM technology

1. Problem solving skills 2. Patience 3. Patience4. Patience5. A friend who knows more about technology

than you do!



By: F. Michael Babineaux, CPSM, C.P.M.President/CEO

Babineaux Educational Services and Training, Inc.www.BESTraining.com

901.853.0539

http://www.bestraining.com/

Automating The Cow Path

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