Can Supply Chain Dashboards keep up the pace of the changing reality?

By Jacques Adriaansen, Director with Every Angle and UAMS Executive Professor

Some annoying trends in the pharmaceutical supply chain

More and more informed patients (the actual end consumers in the pharmaceutical chain) demand high service quality at the doctor’s cabinet and at the pharmacist, where they want to be served instantly. Pharmacist co-ops and wholesalers increase the delivery pressure on the pharmaceutical industry in order to reduce their inventory and increase their service level. Care institutions and governments put budgetary strain on the pharmaceutical industry, trying to optimize their own budget. The pharmaceutical companies themselves reduce their own costs as much as possible, in which purchase cost reduction is an important tool – putting strain on the chain. Legal changes influence the competitive position of many research driven pharmaceutical companies, forcing these companies into strategic repositioning. Throughout the supply network inventories are lowered, making the supply network players more and more interdependent, and as any increase of interdependencies leads to more complexity, companies have less insight. It is just a short list of things happening in the chain (reality is much worse). The pharmaceutical supply chain is under extreme pressure; complexity rules. Regaining insight by increasing supply chain transparency became a major issue, as transparency (or visibility) is a necessary condition to achieve Operational Excellence targets, such as reducing costs, increasing service level and improving due-date reliability.

A second important and nasty trend is that the frequency of changes and the magnitude of changes increased quite dramatically over the last few decades, and they are still increasing. It is the main reason for companies to become “agile”, to increase the ability to adjust the company’s structure to a constantly changing environment. The frequency and magnitude of significant changes confronts companies with a specific control framework problem. If the environment changes, the processes, structures as well as the control frameworks designed to control these processes and structures have to change too. If not, you’re out of control.

Building and changing a control framework is not that simple

A control framework has a set of key performance indicators (control variables), deducted from the strategic objectives: “to reach business objective x, we have to be good in y, which we measure with performance indicator z”. Just defining these control variables is quite a time consuming process. Questions as “What is turn-over?” and “What are the supply chain costs?” contain enough fuel to raise solid political discussions and persistent tribal wars on high company level. Rapidly showing the figures to gain insight in what a KPI stands for would help, yet it is tough to distil these indicators swiftly out of the ERP data.

Distilling information out of ERP data is tough, because ERP data structures tend to be complex in the first place. The data structure of an ERP system has to reflect the reality of the business processes it is used for. And because business processes can be pretty complex, the data structure of an ERP system is also complex. If you then take into account that best practice ERP-systems must cope with various types of business processes, than it is obvious that their data structures are even more complex. One just can’t have a simple data structure covering a complex business situation.

In order to gain real insight in the chain situation it is necessary to master the control logic that is embedded in an ERP system. This logic determines the ERP logistic control behavior. The planning functionality of the system projects “the foreseeable future” based on the control logic, the master data and the available operational data. The complexity of this control logic adds to the complexity of the system. Just look at the parameters for stock- or order control behavior, parameters for planning and scheduling, parameters controlling the system for order acceptance, production order planning and purchasing materials. To offer additional logistics intelligence, one needs to combine and calculate loads of information, throughout complex order networks. Traditional database technology and data warehouse technology turns out to be much to slow to perform this specific task.

If the logic that produces the figures in the KPI dashboard differs from the logic that is used to generate the ERP output, then a third roadblock appears. If planners don’t see the match between the dashboard figures and their reality, they simply won’t use the dashboard and they’ll fall back on their own Excel-forest to “gain insight”.

Fourthly, without the application of the logic it is hard to trace the root causes when an indicator doesn’t show the desired figures, turning to orange or red. In that case you assume there is something wrong, but you cannot discover why and what you can do about it.

Until now I’ve not seen many Supply Chain dashboards that completely cover the ERP control logic and that are fast enough to do the necessary math. And, what’s more, the number of experts with a thorough knowledge of ERP data structures, logistics control algorithms and parameters is very scarce, as well as the number of BI / ICT experts with a genuine interest in and an in-depth knowledge of operations management.

At the current pace of the changes happening in the world, traditional Supply Chain dashboards are inadequate. Building and filling the dashboards is simply too time consuming. They keep stumbling behind the changing reality. And it is quite costly (just think about the associated consulting-, hard- and software costs).

But as rapid change is a constant these days, doing nothing is not an option.

Make Supply Chain dashboards and IT cope with the rapidly changing world

Our Every Angle system is specifically designed to cope with a rapidly changing environment. This management support system for SAP R/3 driven companies with complex supply chains reduces complexity and increases transparency. It delivers dynamic, interactive KPI frameworks and control frameworks that can be used and adapted by a small team of involved managers and an expert key-user, to play along with the changes. An expert who understands processes, performance management and operations management principles, can team with a manager in an interactive session to design, build and show key performance indicators. This process takes minutes to a few hours, instead of weeks and months. The expert intuitively selects the relevant ERP basis information, defines the indicator calculation logic and immediately shows the calculation results. And when they are confronted with “alert colors”, Every Angle shows the root causes and the associated action lists to correct the situation. Speed in development and change of information systems is of utter importance to cope with rapidly changing environments, and the Every Angle system is specifically designed to deliver this speed.

Only very little IT knowledge is needed to operate the system, which disengages the time of scarce IT specialists – time that can then be spent on really challenging IT developments. An Every Angle installation connected to your SAP R/3 system is up-and-running showing your business content in one to two days. Managers and operational users (who analyze and solve the identified issues) are up-and-running with a few days of training. Rapid, interactive KPI framework prototyping with managers and focused operational improvement is already proven technology with Every Angle.

An example of real life results

Every Angle is used by more than forty companies worldwide, in various types of industries. They all use SAP R/3 and have some form of complexity in the supply chain. Intervet, Astellas and NVI (Dutch Vaccin institute) are pharmaceutical companies that implemented Every Angle. We can comment on one of our customers, Friesland Foods, which just recently rolled-out an implementation of SAP R/3 in one of their business units. Initially, SAP Business Warehouse was kept out of the implementation scope, as Friesland Foods’ experience showed that it is wise to start BW just after the implementation of SAP R/3. The knowledge and experience from the R/3 project is instrumental to get an efficient BW project. Yet due to a split of some of the units and an upcoming merger with another company, Friesland Foods had to start the BW project in parallel to the R/3 implementation project. In August 2008, Every Angle was brought into action to support this challenging project. As a first step, the master data team performed a logical control with Every Angle to check the completeness and reliability of the master data. After just two weeks, they could already start the second systematic control. The team now uses about 150 Every Angle control reports in the current Master data Control Framework, for continuous fast and user friendly master data checking. The BI/BW workgroup president states that Every Angle is also very valuable in the BW project, as it immediately delivers the operational information that is needed when going live. But the most important merit, as to Friesland Foods, is the fact that it enormously speeds up the BW report specification process, because it enables fast iterations to define the reports. The BI/BW workgroup president quotes that the use of Every Angle to bridge the information need in the first month after R/3 live, could well be the key for a successful parallel implementation of R/3 and BW. The project was supported by one Every Angle consultant.

Adaptability and controllability yield competitive advantage

Every Angle helps to master complexity and allows a company to keep its control framework swiftly in line with a rapidly changing environment. The described measure–analyze–act cycle keeps the company “in control”, and the adaptability yields an important competitive advantage.