Event fatigue

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Magazine Article, Source : The Manufacturer
Zone : Supply chain and Logistics
Published : November 2002

As every manufacturing manager knows to their cost, a factory’s supply chain can quickly become the stuff of nightmares. Malcolm Wheatley wonders whether supply chain event management is the panacea it appears to be

The supply chain is notorious for having a lot of the touch points that impact on customers, but also being an area that’s difficult for manufacturing executives to actually influence,” sums up Le Roux Cilliers, head of manufacturing consultancy at Deloitte Consulting. So in theory, an emerging technology that provides forewarning of those nightmares ought to be the proverbial gift horse. In boardrooms around the country, manage-ments will surely recognise that as with any emerging technology, a few bugs remain to be ironed out, but - hey! - it’s a solution. Where do we sign?

But it’s not quite turning out like that. Supply chain event management (SCEM) is proving a surprisingly difficult value proposition to sell - especially to manufacturing industry.

Why? Let’s start with a definition: when one part of the supply chain needs notifying about something that has occurred in another part of the supply chain, it’s the role of SCEM to do just that. A shipment not despatched on time, or stuck en route? SCEM provides notification of this, in the shape of an alert. Inventory at critical low levels? Again, SCEM issues an alert.

In essence, you name it, and SCEM can be programmed to issue an alert. Helpfully, too, the alert can arrive in a number of forms - such as

e-mail, fax, or pager, depending on how serious the matter is - and management prompted to intervene before a minor local difficulty turns into a crisis.

For companies critically dependent on their inbound supply chains, the attraction is obvious. But many of the larger and more sophisticated such manufacturing companies - the hi-tech electronics automotive giants, for example, typically outsource their inbound supply chain transport to third-party logistics providers. So it’s to these third-parties to which one must look for implementations.

Exel, for instance, spotted the opportunity in early 2001, explains e-commerce manager Jane Berrisford-Smith. In September 2001, the company signed a contract with Guildford-based G-Log, a subsidiary of an American company with which its US-based operation had already formed links.

“With our customers wanting to move from forecast-push to order-pull, something more than mere track-and-trace was required,” she says. “What’s more, the ability to merge-in-transit is increasingly key, as customers want us to be able to pull together goods from a variety of sources while they are in transit.” The inbound supply chain of one (undisclosed) global electronics company has already been implemented with SCEM, and further implementations are underway.

Examples like this are, however, distressingly rare. Three or four years after the term was coined, businesses are still struggling to get their heads around what it might do for them. And manufacturers in particular can hardly be blamed for looking askance at the concept, believes Simon Pollard, vice-president of European research at consulting analysts AMR Research. Over the last five years, he says, too many companies have binged out on over-sold systems that subsequently under-delivered. Throw in the present economic downturn that has beset the industry, and a reluctance to invest in still further suspect technology can hardly be blamed.

There’s also the question of SCEM software vendors’ marketing message. “They’ve played on fear, uncertainty and doubt - and the dramatic example is always far more compelling than the mundane,” charges Pollard. What’s more, those dramatic examples have tended to be a little, well, repetitious. Scratch an SCEM vendor at random, and chances are you’ll find a marketing message with a strong logistics flavour: the events to which companies are being alerted are chiefly to do with the movement of goods, usually outbound from the factory to the customer.

But that’s not necessarily where the concept delivers the most value. “The biggest return is almost never in the outbound supply chain, but in the inbound supply chain,” asserts Lisa Hebert, an associate partner in the supply chain practice

of management consultants Accenture. Why? Because, she explains, the opportunity for a return on the information that SCEM provides is so limited. “Typically, the in-transit time is so short that the shipment concerned is either already delivered, or about to be delivered,” she notes.

Instead, she believes, SCEM will deliver greater value if focused on either the inbound supply chain - including plant breakdowns at suppliers - or hiccups in order management foul-ups. “Are critical components or materials going to be late or under-ordered? Are we about to launch a trade promotion or coupon drop with insufficient inventory in place? These are much more significant problems,” she says.

But, notes Alan Waller, a visiting professor at Cranfield School of Management and a vice-president of supply chain innovation at Solving International, a management consultancy, tackling them involves more than simply buying a piece of software. Instead, he argues, it involves the recognition that the supply chain is more than a collection of stand-alone processes - and that for SCEM to work as it ought, businesses must provide their supply chain partners with a great deal more transparency into their business processes.

This, he says, is easier said than done. “Businesses have yet to come to terms with a future in which as much as 60 per cent of their supply chain functionality lies outside their own organisation. The problem is that collaboration is seen as a technical issue, and it isn’t one,” he says. “The real problems lie with people, and business processes.”

But in a field so new, few users have developed the maturity of thinking to recognise this. Only now, for example, is one of the very first live implementations of the technology treading this footpath, explains business systems analyst Lisa Denis of Overland Storage Inc of San Diego, California.

The company, a manufacturer of computer tape drive and other data storage products, is an SCEM veteran, having been one of the first customers of Categoric Software of Leatherhead, the software vendor which pioneers the concept. Some three years into its implementation, she says, Overland has now begun to think about the inbound supply chain, having focused almost exclusively on the outbound side.

“We think that there are stages of evolution in an SCEM implementation - a sort of Maslow’s hierarchy,” she muses. “If you’ve never used SCEM before, you see it as a fire-fighting tool. Only later do you get round to seeing it as something more than that.”

And even so, care is needed. “You can alert too many events to the same user, with the result that they become event-overloaded, and consequently wind up ignoring them,” she says. “Unsophis-ticated users can also ask for too much: they’ll want something checked every ten minutes, for example, and so they get swamped when they get the same alert every ten minutes.”

Some sort of filtering is clearly the answer. But how? The usual approach is escalate the alerts up a predefined tree of management, the longer that they remain unresolved. It’s a nice idea in practice, but usually has the result of placing the problem in the lap of executives without the required day-to-day grasp in order to resolve it. To achieve action, they must push the problem down again, to the people at the sharp end.

The future of SCEM may lie not with firefighting on the basis of individual alerts, but with using the generated alerts to highlight perennial weak spots in supply chain processes. “Knee-jerk firefighting is all very well, but you need to use the information to analyse where things are consistently screwing up,” argues Simon Bragg, an analyst with ARC Advisory Group of Cambridge.

The visible problem might be missed production and late shipments, but such analysis might reveal that the root cause wasn’t late deliveries from the supplier - or even late production from the supplier - but the fact that the supplier is placing his material orders too late. That’s a different problem altogether, and one that it would otherwise be difficult to discern.

Better still, analysing alerts might well provide a much greater granularity of perception. A transport system, for example, might report that 97 per cent of shipments arrive on time - a cause for congratulation, one might think. But not if it transpires that virtually 100 per cent of the time, deliveries to one particular destination always arrive late. Whereas conventional analysis tools would probably miss this, a constant stream of alerts would be harder to miss.

As both SCEM vendors and their prospective customers look forward with little relish to a continuance of tough trading conditions in 2003, the news that a trouble-shooting panacea might work best as an analysis and intelligence tool will hardly be welcome. But until hard evidence emerges that SCEM does indeed work as advertised, the jury must remain out.