All SCM managers likely face a crossroads, and recent SCM studies show us that:
- 50% of their processes are identified as processes that need to be improved as the market demands more and more.
- 50% recognize that senior management looks to SCM as a strategic part of the company and demands not only cost reduction, but added value from SCM
- 80% see their ERP as something that delays or stops improvements to their processes with the flexibility they need. Their ERP is a straitjacket that doesn’t allow them to move freely.
How are they going to achieve their objectives in this situation? Before answering that question, let’s take one step back and find the root of the majority of waste in our processes.
ERP Data: the rotten fruit that spoiled the whole box
Let’s think about a classic SCM process. A common way of running our operations could be:
- Vendors or suppliers shipping raw materials and components to the warehouse based on purchase orders.
- From the warehouse a replenishment of manufacturing the production orders in the production plan.
- Manufacturing returns finished or semi-finished goods to warehouse.
- Goods in the warehouse are shipped to customers based on sales orders.
Of course this is a generic example, and there could be several variations such as:
- Operations without manufacturing (PO to Warehouse to SO) as a typical distribution business.
- Manufacturing without a warehouse, a Just-in-time production and distribution to the customer.
- Operations without vendors, like mining or oil and gas operations where the raw material is extracted from a mine or rig.
But let’s go back to our simplified SCM process. Any of the steps can experience issues and problems:
- Suppliers fulfilling the POs wrong due to errors in the PO.
- Suppliers delivering late or to the wrong address due to errors in the shipment information.
- Wrong allocations in the warehouse due to errors in the WM system that can lead to spoiled or damaged materials
- Stops or delays in production, due to errors in the continuous replenishment of the production lines
- Errors in warehouse operations after production can lead to additional errors during picking or packing
- Late or wrong delivery to the customer
In the end all this could mean an unhappy customer, and probably result in lost future sales.
Let’s take a moment to analyze most of these issues. All of them have a common root problem; one that isn’t normally addressed. Instead of fixing the root issue, most companies keep a lot of their resources firefighting on a daily basis. The common issue, the “rotten fruit that spoiled the whole box” was in front of us all along – our ERP data. We run our processes and operations based around the data of our ERP, and the more issues we have in our ERP data, the more problems we will suffer in our daily operations.
Gartner estimates that more than 25% of the critical data within large companies is somehow inaccurate or incomplete. These errors in the base of the pyramid are spreading up to our operations, adding costs and inefficiencies.
But the impact of that bad data doesn’t stop there – our ERP data provides the foundation for our operations, which in turn provides the base for our decisions. After spreading up to our operations, those inefficiencies heavily impact the business, resulting in millions of dollars in added costs.
The current situation isn’t the real reason we should start using Lean techniques in our data management. The real problem is in the future, as that data grows.
- Companies are estimated to duplicate their data volume by 2-3 years, and a lot of these data-generation processes are inefficient and manual, leading to a high percentage of errors.
- A lot of our employees spend 1 to 3 hours a day filling data screens in SAP, instead of dedicating that time to value-added tasks.
Doing More with Less and Better
This is the environment SCM professionals work in today, while their senior management demands them to continuously do More with Less and Better. They are demanded to continually decrease costs and add more value by increasing their service levels:
It’s time to get back to the open ended question: how are they going to achieve these objectives? Winshuttle’s Lean Data Management approach allows you to manage ERP data in your enterprise through the use of lean applications that streamline data collection, validation and movement. If you have any questions on Winshuttle’s lean approach, or want to learn more ways to improve your SCM processes, please contact me today!
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