By Brian Higgins
It’s 1 a.m., and real-time event data from a supplier of material used on many of the products by a multi-location North American manufacturer will experience a significant delay in a shipment from an Asia facility. Immediately, always-on “sentinels” take over to sense, interpret and process key information to manage key alerts and activities. This includes providing supply chain visibility by generating alerts related to the expected shortfalls and shipment delays, cascading the impact on its own production plan and shipment schedules and leveraging heuristics and advanced analytics to determine the potential impact on service levels, revenue, and cost.
In addition, sentinels generate “What if?” scenarios consisting of sourcing, transportation, production planning and customer impacts; use optimization engines to evaluate the scenarios to determine next best action(s) based on event templates that learn continuously based on machine learning; and enabling business process management and RPA to manage cross-system transactions and facilitate approval workflows to planners so that orders can be created and approved, if required.
The manufacturer has six facilities in North America and ships products to installation job sites and wholesale distributors around the world. Ship dates, based on initial promise, are especially critical to its job site customers, and any delay receiving the product could result in a five- or six-digit penalty based on service-level agreements, increased transportation costs and lost repurchase revenues. The manufacturer also has sub-assembly operations and material suppliers in Europe and Asia.
Meanwhile, many of the products have a two- to three-week lead time, and, in order to meet required ship date, the manufacturer requires near-real-time production, inbound supply and order status to respond quickly to supply chain volatility and minimize shipment risks.
Using a control tower augmented by these always-on “sentinels” to improve delivery and supply chain reliability, the manufacturer can optimize operational resources and working capital. In such a scenario, the sentinel technology components can streamline processes that are typically constrained by manual intervention or lack of system integrations by sensing supply chain disruptions such as delayed shipments, raw material shortages or natural disasters such as weather and other events. Examples include: robotic process automation, business process management, machine learning and heuristic algorithms.
Without a sentinel-enabled control tower, the manufacturer would most likely not have visibility into the suppliers’ inability to ship orders until the materials failed to arrive. The company would need to scramble and assemble a team to do damage control, conduct a “rear-view” causal analysis and continue with its firefighting processes. With the augmented control tower, the company is able to proactively identify potential issues, choose the best options to mitigate the disruptions and proactively contact customers.
Enabling Autonomous Sense and Respond Sentinels
The obstacles to installing a supply chain control tower with sentinel technology have traditionally been high and challenging to overcome. Sentinel-enabled control towers require investment for the technology and complex integrations to translate data into insightful information. Now, manufacturers looking to drive service levels and operational performance to the next level are investing in sentinel-enabled platforms with a focus on end-to-end supply chain visibility, predictive analytics, business process management and robotic process automation. While control towers require up-front investment, recent technology developments are reducing the time-to-value and providing the desired return on investment.
Cloud-based technologies, B2B collaboration hubs and software-as-a-service (SaaS) solutions are some of the technologies reducing the capital investment and streamlining integration efforts. As more companies and supplies on-board these various technologies, the cost and level of effort associated with enabling should shrink. Companies can also take leverage third-party providers and conduct some or all of the necessary functions “as a service.”
Starting the Journey
A sentinel-enabled control tower is a journey guided with an understanding of where the value-creation opportunities can be achieved. It begins with an understanding of what areas of a manufacturer are underperforming, and which of these areas can provide the greatest short- to long-term value. When establishing a control tower, regardless of the level, it’s a good idea to limit the scope with a focused pilot in order to prove the concept and generate momentum. The following are a few considerations:
* Identify areas with declining service levels, high operating costs, low inventory turnover, material shortages or poor supplier performance;
* Establish the desired performance and road map that starts with a pilot and expands; try to avoid a single ‘big bang’ deployment;
* Determine the opportunities that will provide the greatest value in the least amount of time; and
* Align the planning organization, define roles and responsibilities, and standard operating procedures.
Sentinel-enabled control towers are a relatively new concept, but have demonstrated value in solving complex demand and supply challenges facing supply chain managers. The ability to leverage real-time information and respond with speed and accuracy to unexpected events are essential capabilities for manufacturers that desire the next level of competitive performance and sector leadership.
Brian Higgins is an advisory principal and product operations and procurement leader at KPMG LLP. KPMG Advisory Procurement and Product Operations director Kevin Reale contributed to this article.