Fortifying your supply chain stability through enterprise information management

© Hexaware Technologies. All rights reserved. www.hexaware.com
Fortifying Supply Chain Stability through
Enterprise Information Management
Whitepaper

Author’s Bio
Satesh Kumar (sateshk2@hexaware.com) is a Business Intelligence Analyst working at Hexaware Technologies in Business
Intelligence and Analytics Practice. His interest area primarily involves the application of BI technology to enhance business
processes and in defining different use cases for BI initiatives.
Whitepaper
Fortifying Supply Chain Stability through Enterprise Information Management
Table of Contents
Executive Summary
Need for Fortifying Supply Chains: An Introduction
Supply Chain: The Journey So Far
Supply Chain Stability: A Success Story
Supply Chain Risk: A Reality Check
Importance of KPIs for Supply Chain Stability
Enterprise Information Management (EIM) to Fortify Supply Chain
References
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2© Hexaware Technologies. All rights reserved. www.hexaware.com2© Hexaware Technologies. All rights reserved. www.hexaware.com

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Whitepaper
1 Executive Summary
Global sourcing, which predominantly involves sourcing from low-cost
countries, has created supply chains with opportunities and
challenges on par. With companies focusing on best practices such
as lean manufacturing and Just in Time (JIT) inventory, the lead-time
for supply has reduced significantly, increasing the need for greater
supply chain responsiveness. Many questions arise with the
increasing complexities in current supply chain systems. For
example, how can organizations tackle supplier risk when the supplier
base spans from Singapore to Seattle or Bangalore to Buffalo? A
2012 survey of chief supply chain officers found that 70 percent
believe their organization needs to improve the existing processes or
add capabilities to improve their supplier risk management.
This whitepaper briefly glances through the evolution of supply chain
and briefs on the existing supply chains. Later, it analyzes the need
for stability in the existing supply chains and provides a framework for
companies to assess the resilience of their supply chains. It also
focuses on the importance of Key Performance Indicators (KPIs) in
ensuring supply chain stability. Finally, it explains how an Enterprise
Information Management (EIM) would help organizations minimize
supply chain risks and maintain a robust supply chain in line with the
corporate strategy. For better focus, the discussion of this whitepaper
is pertained to the supply-side of the chain.
2 Need for Fortifying Supply Chains:An Introduction
In the year 2000, the popularity of mobile phones had reached its
zenith. Thus, the demand for cell phones increased manifold.
At such a crucial juncture, a lightning bolt set fire to a Philips
semiconductor manufacturing plant in Mexico, which supplied
semiconductor chips to Ericsson and Nokia. Although the fire was
contained immediately, the damage caused was magnanimous,
resulting in shutting down of the plant for two months. However, the
outcomes of this incident were different for the two companies.
For Ericsson, this plant was the sole supplier of semiconductor chips.
As a result, their mobile handset production was halted and the losses
incurred in sales amounted to as huge as USD 400 million.
On the other hand, Nokia immediately performed a damage
assessment. Nokia also reached out to other companies for alternate
supplies and accordingly, reconfigured its handsets. As a result,
Nokia maintained its dominant market position and did not suffer
losses as severe as Ericsson did.
An important lesson learnt is that had both the companies been
equipped with an intelligent robust system that would predict the
occurrence of a probable supply disruption; such a disaster could
have been averted. At the very least, the losses ensuing from such a
disaster could have been minimized.
This incident aptly demonstrates how a single event created a
massive supply side disruption. This event had a huge impact as it hit
a supply chain that was not adequately resilient. Consider the
financial crisis of 2008, which not only questioned the stability of
global financial systems, but also dramatically emphasized the
insecurity of existing supply chains. Thus, a robust framework to
fortify existing supply chains is the need of the hour.
Before delving into the specifics of a robust framework to fortify
existing supply chains, let us understand the evolution of supply
chains.
3 Supply Chain:The Journey So Far
The early days of industrial revolution in the nineteenth century saw
companies implement a rudimentary model of supply chain.
Companies setup factories wherever resources were available and
used local talent for production. They manufactured products and
sold them predominantly in the local markets. All of this changed with
the World War II. After the war, governments lowered trade barriers
and became open to the concept of globalization and companies
became vertically integrated. Vertical integration was the
incorporation of much or all of the supply chain into one company. At
this phase, the supply chain was stable but inflexible, predictable but
slow.
Globalization and economic liberalization of countries in the 20th
century changed the supply chain archetype. Companies started to
optimize processes and reduce manufacturing costs with global
procurement and production. Adopting industry best practices such
as Just-in-Time (JIT), lean manufacturing, outsourcing non-core
activities, and investing in R&D helped them evolve. In addition,
advances in e-commerce in the late 1990s and early 2000s
eradicated the barriers of time and distance.
With globalization, companies face a new spectrum of challenges.
These include political, economic, and social and technology (PEST)
risks. These geographically specific PEST factors influence the
logistics and supply front.
On the logistics front, flow of information, resources, and capital has
become complex. The supply front risks such as supplier failure
namely Environment Protection Agency (EPA) violations and
Occupational Safety and Health Administration (OSHA) incidents,
production disruption, and operational failures can have a ripple effect
on the entire chain. In a survey conducted by Aberdeen Group in
2012, 43% of 132 survey respondents indicated that incomplete
information regarding corporate supplier relationships is a top
business pressure affecting supplier management and eventually
their supply chain.
These issues indicate that although selecting the right supplier is
important, tracking the various aspects of supply chain on a regular
basis is also critical.

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4 Supply Chain Stability:A Success Story
There is no doubt that supply chains offer tremendous value to
companies and boost their performance by effectively aiding in
planning, execution, design, monitoring, and control of businesses.
Consider the following success story that aptly portrays the benefits of
a supply chain.
“A global, diversified industrial manufacturing company with over $40
billion in annual revenue implemented a supply risk management
solution after investing significantly in lean, eProcurement, strategic
sourcing, reverse auctions, and other related supply management
programs. As a result of these programs, the company saved
hundreds of millions of dollars from unit cost reduction efforts,
increased inventory turns by 28%, and reduced the cost of non-quality
by 32%. Before embarking on its supply risk management formation,
the company monitored less than 5% of its suppliers, but today, is
actively monitoring 23,000 global suppliers for financial stability,
quality and delivery, debarment, suits, EPA and OSHA compliance,
and natural disasters.” Jim Lawton vice president and general
manager, Open Ratings, a D&B Company.
Nevertheless, the fact remains that instability in supply chain leads to
disruption causing huge monetary losses. This instability could be
attributed to a wide range of factors. Before a major disaster or
disruption strikes, some small events take place. These events are
often ignored. The opening story on Ericsson and Nokia
demonstrated culmination of a series of events leading to supply
chain disruption.
These events merely provide an outline of the risks and uncertainties
faced by the global supply chains. For example, a change in political,
economic or environmental factors in one part of the globe can disrupt
the operations in a factory situated miles away. Simply consider the
case of the recent Japanese earthquake; it severely affected
electronics production worldwide and led to prolonged business
disruptions for the automotive industry. This is why companies today
are fraught with the need for stability in supply chain.
5 Supply Chain Risk:A Reality Check
Although the supply chain has undergone transformations for
operational efficiencies, infiltrations of a multitude of factors challenge
its stability. Few high-level supply chain risks are:
• Supplies not reaching on time due to supplier failure
• Issues in transit route
• Unfavorable environmental factors
For efficient supply chain operations, one needs to have information
about the different facets of the chain such as location, production,
inventory, and transportation. The absence of certain aspects of
supplier data and processing may lead to supply chain disruption.
Few of them are described below:
1. Do you have information on all aspects of your supplier? –
Data Attributes
Evaluating a supplier and selecting the best must be done in a
manner that best fits the strategic goals of the company. Awarding
contracts based only on cost and time will not sustain in the end.
According to W Edwards Deming, a quality guru, "Do not award
business based on price tag alone". Information visibility with respect
to price and other generic details (such as supplier name, address,
product portfolio, contact) must be combined with supplier’s financial
stability, on-boarding status, R&D initiatives, transit routes and legal
aspects among others to get a 360o view of the supplier.
2. What is the source of supplier information? – Data Sources
After identifying the types of information to be tracked, the next step is
identifying the source of information. This could be available in
several disparate systems within the organization that contain past
transactions. However, in today’s dynamic economic scenario this
information alone would not suffice. A complete portfolio of supplier
information (from internet, social media) that could track the
day-to-day supplier actions and product rates is imperative to handle
supply uncertainties.
3. What are your supply risk mitigation plans? –
Multi-dimensional view of supplier
Best practices help in improving process efficiency, but also increase
the supplier risk. For example, best practices such as One Source
One Supplier, Just-in-Time inventory, lean manufacturing lead to
significant cost savings, increased throughput, and reduced
lead-time. However, they also increase the vulnerability of the supply
chain as they focus on strict timelines and increased dependency on
suppliers. With the volatile economic scenario forcing global and local
suppliers to shut shops, companies must have systems that facilitate
analysis and rate the suppliers taking into account the risks,
probability of their occurrence and their impact.
4. Do you have a hold on your maverick spend? - Action
According to Accenture's study on "Procurement to Payment
Processes," which surveyed and interviewed 50 large companies on
procurement practices, maverick spend accounts for as much as 32
percent of overall buying of the company.
An unexpected failure from the preferred supplier may hamper an
organization's production process. As a result, companies procure
supplies in an ad-hoc manner leading to off-the-track purchasing. This
is due to the absence of proper supplier tracking mechanisms.
In such cases, merely gathering data is insufficient. Converting the
data into right actions is the key differentiator.

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Whitepaper
6 Importance of KPIs for Supply Chain Stability
There are risks associated with every facet of business, and supply
chain risk is one of them. Key Performance Indicators (KPIs),
methodologies, and processes can mitigate these risks.
What gets measured gets improved. In the current scenario, supply
chain is not just flow of goods but also flow of information. Let us
explore the different areas in supply chain and the KPIs associated
with these areas by referring to Supply Chain Operations Reference
(SCOR) Model. SCOR is a reference model developed by Supply
Chain Council, an independent NPO for supply chain organizations
and professionals.
In addition to the above mentioned KPIs that are calculated
predominantly from the internal systems, intelligence can also be
garnered from external sources such as social media news feeds etc.
available via the internet. These KPIs when defined and tracked
appropriately can aid an organization by insulating its supply chain
from major supply chain disruptions.
7 Enterprise Information Management (EIM) to Fortify
Supply Chain
The KPIs defined in the above section aid in continuous monitoring of
supply chain processes and provide risk mitigation options by clearly
defining remedial measures. Nevertheless, it is important to have a
robust information infrastructure in order to deliver the KPIs. This is
where Enterprise Information Management (EIM) is indispensable.
An indicative road map that would help companies with different
information maturity levels to adapt to the EIM platform is illustrated
below.
Level 1 Organizations
Organizations at Level 1 face data quality issues due to multiple
versions being maintained on excel or disparate systems. Questions
that these organizations need to address include:
1. Am I losing cost benefits of large-scale procurements?
2. Are multiple channels of my business viewing the same product
versions? (up to product parameters)
3. I am planning for a supplier consolidation program, but who are
my critical suppliers?
EIM’s Master Data Management – MDM (Supplier and Product Data
Management) component provides end-to-end data management
capabilities, comprising of five key parameters:
• Strategy – To understand the long-term and short term objectives
• People – Establish a data governance organization and invoke
organization level commitment
• Data – Understand the data landscape and build a cleansing
model
• Process – Evaluate the current model and redefine as
appropriate
• Technology – Develop a technology road map to implement the
redefined process
MDM initiative aids in creation of a ‘single version of truth’ that lays the
foundation for data governance practice resulting in data quality of the
highest standards.
SCOR Model - Stage of
Supply Chain
Strategy
Plan
Source
Make
Deliver
• Supply chain cycle time
• New product launched count
• COGS as % of revenue
• SG&A as % of revenue
• Indirect supply chain costs as % of revenue
• # direct supply chain FTEs
• Span of control
• New product development cycle time
• New product revenue rate
• Cash-to-cash cycle time
• Return on working capital
• Return on supply chain
• Perfect order fulfillment
• Case fill rate
• Indirect supply chain costs: plan % of revenue
• Forecast accuracy
• Inventory accuracy
• Inventory days (raw materials, work in process,
finished goods)
• Inventory carrying cost
• Inventory write-offs as a % of revenue
• Indirect supply chain costs: source % of Revenue
• Direct materials spend $/FTE
• Direct materials spend on contract
• Direct materials spend with single/sole source
• Direct materials received on time
• Direct materials LCC spend
• Indirect materials spend sourced by procurement
• Indirect materials spend $/FTE
• Indirect materials spend on contract
• Direct materials supplier perform
• Total make costs: % of revenue
• Direct labor % of revenue
• Indirect supply chain costs make — % of revenue
• Overall equipment efficiency
• Capacity utilization
• Manufacturing outsource rate
• Direct wage rate
• Direct make FTEs
• Return cycle time
• Customer returns
• Indirect supply chain costs: deliver % of revenue
• Order management costs % of revenue
• Distribution operations costs % of revenue
• Transportation cost as % of revenue
• Returns cost as % of revenue
KPIs
Courtesy: Deloitte Supply Chain Book of Metrics

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Organizations at level 2 face issues on integrating both structured and
unstructured data from various disparate traditional sources such as
ERP, legacy systems, excels etc. and non-traditional sources such as
email, social media, and internet feeds. Questions that these
organizations need to address include:
• The maverick spend of my organization is rising, details of which
are in the email. How do I fetch this data?
• Are any of my suppliers likely to become delinquent?
• Am I paying the right price for the product? I want to analyze
geographically specific commodity pricing on a daily basis.
EIM’s Enterprise Data Integration (EDI) and Big Data components
help organizations to acquire, manage, and act upon the intelligence
garnered by processing data both within enterprise walls and external
unstructured data. Supply and demand planning can have valuable
insights based on data (Big) collected from web clickstreams,
Facebook likes, Twitter feeds, news articles, Dun & Bradstreet data,
GPS, trailer/pallet tags, electronic on-board recorder (EOBRS).
On bringing these external data into enterprise boundaries and
applying appropriate data, mining techniques and predictive analytics
upon this data would deliver insights that were previously unavailable.
Organizations at level 3 face issues in converting/modeling the data
from transaction systems into a form (view) that would aid them in
analytical processing. Questions that these organizations need to
address include:
• I have data in my procurement system, how do I derive
intelligence out of it?
• What is to be measured and with reference to what aspect of
data?
• What parameters do I need to consider to rate my supplier base?
Upon getting the required data, the next critical activity is an accurate
data modeling process that would aid in linking the measurable data
(Fact) with the perspectives (dimensions) for end-user analysis. The
data model at a high level should have different subject areas e.g.
vendor, warehouse and logistics analytics with reports and KPIs for
that subject area. Interactive workshops that elucidate end-user
needs provide an important input to the data modeling process.
Organizations at level 4 face issues in getting the right
representations of data through new delivery channels and gap
between analytics and action. Questions that these organizations
need to address include:
• How can I analyze Business Intelligence (BI) reports on my smart
phone or tablet?
• Can there be a new yet meaningful way of BI representations?
• How can I link data insights into action?
The latest release of leading BI products (with Next Gen BI offerings)
enhances the user experience in terms of information delivery. Few of
these enhancements include:
• Data representation on mobile devices
• Disconnected analytics
• Integrating BI with operational systems workflows (e.g. When a BI
report indicates delay in shipments from suppliers, the system
provides an option to invoke an email to the supplier or choose an
alternate supplier)
• Improved information representation such as geospatial
integration
Having seen through the key EIM components and their applicability
to organizations with different information maturity levels, let us match
the supply chain risk elements (Section 5) with the EIM components:
As seen in this section, a well-strategized EIM platform will aid in
garnering relevant (structured and unstructured) data, putting the
information pieces together and representing data in an easily
understandable manner. An effective collaboration between business
and IT will help organizations mitigate the risks associated with supply
chain.
Do you have information on all
aspects of your supplier and
products? – Data Attributes
What are your supply risk
mitigation plans? –
Multi-dimensional view of
supplier
A well-defined data model with
key measures (facts),
dimensions and KPIs will help
in determining what are the
different data elements to be
captured for analytics
What is the source of
supplier/product information? –
Data Sources
A well-structured data
integration and big data
practice will aid in sourcing the
right information, applying
logical transformations and
storing the data in an easily
consumable manner
Do you have a hold on your
maverick spend? – Action
A well-strategized Next Gen
BI tool and technology that
links analytics with action
(OLTP systems) e.g.:
triggering a mail/SMS on the
occurrence of a threshold
breach
Risk EIM Component

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Whitepaper
8 References
1. https://webforms.ey.com/Publication/vwLUAssets/The_evolving_world_of_supplier_risk/$FILE/The_evolving_world_of_supplier_risk.pdf
2. http://www.som.cranfield.ac.uk/som/dinamic-content/research/lscm/downloads/57081_Report_AW.pdf
3. http://www.lexisnexis.com/pdf/Aberdeen_Procurement_Insight_Report_-_September_2012.pdf
4. http://www.biia.com/library/Why%20Supply%20Chain%20Leaders%20Face%20the%20Greatest%20Supply%20Risk.pdf
5. http://www.aravo.com/newsroom/pr_071509_raisesindustrybar.php
6. http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_consulting_scbenchmark2009supplychainbook_061410.pdf

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Whitepaper
Disclaimer
Contents of this whitepaper are the exclusive property of Hexaware Technologies and may not be reproduced in any form without the prior written consent of Hexaware Technologies.
To learn more, visit http://www.hexaware.com
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