One day recently, a manufacturer was cleaning out his attic and came across an old Persian-style oil lamp. It was dusty and tarnished, so he started rubbing the lamp with his handkerchief to see if its luster could be restored. Much to his surprise, a column of smoke rose from the lamp, swirled around the attic, and coalesced into a genie.
"I am the genie of the lamp. Tell me your three wishes."
"I know exactly what I want," said the manufacturer without hesitation. "I wish for a 1 percent increase in production yield for my manufacturing facility."
"You're kidding," said the genie, somewhat nonplused. "Most people wish for riches."
"Well, if I can just get a 1 percent increase in yield, I'll have thousands of extra units to sell, which will result in a multimillion-dollar lift in revenue."
"Oh ... I see," stammered the genie. "So what's your second wish?"
"I wish that my manufacturing company could trade for supplies online over the Internet in a fluid commodity methodology."
"You must have an MBA," said the genie. "Normal people wish for fame and glory."
"If I can just integrate my IT procurement systems with trade exchanges and suppliers on the Internet, my company will become famous as a modern and desirable e-business partner. Electronic procurement will reduce the cost of material acquisition, which gives me a wider profit margin and the glory that goes with it."
"You're quite the workaholic, aren't you?" sneered the genie. "Okay, let's have the third wish, but nothing too wacky this time!"
"Fine. I'll keep it simple," said the manufacturer. "I wish for higher product quality."
"That's it!?" barked the red-faced genie. "At this point, most people wish for a secure and peaceful future. What's wrong with riches, fame and security!?"
"A track record of quality would make my product famous, increasing demand for it and putting money in my corporate coffers," stated the manufacturer calmly. "With higher product quality, I wouldn't have to keep such a large inventory in a warehouse and millions of dollars in the bank to fulfill warranty claims. I could sell the excess inventory and invest the dollars to build a secure future for my company."
THE HURWITZ TAKE: It's unlikely you'll find a magic lamp in your attic. However, the emerging practice of supply chain intelligence (SCI) can fulfill the three wishes for your manufacturing company.
- Increase production yield. SCI is typically implemented as a packaged analytic application, supported by a data warehouse that collects (among other things) information from IT systems for enterprise resource planning, manufacturing resource planning, shop floor management, material management, demand planning, robotic devices and production planning services. With this complete view of the manufacturing process, an analytic application for SCI can reveal production bottlenecks, supplies' quality and compatibility issues that temporarily halt production, and events external to the floor (like late deliveries of supplies) that affect yield.
- Reduce supply costs. As more and more suppliers and corporate purchasers come online with business-to-business trade in upcoming years, the opportunities for finding the lowest possible bid for commodity supplies will increase dramatically. Even so, price is but one dimension of cost. Analytic systems for SCI can help a manufacturer (and others) assess the risk and total costs of doing business with known and unknown suppliers.
- Reduce warranty claims. Knowing which components of what products fail when in the hands of the end consumer is crucial to correcting design flaws and advancing product quality. Analytic systems for SCI take a broad-but- deep view of an extended supply chain, utilizing atomic-level data, which includes warranty fulfillment information. This is requisite to understanding long-term quality ramifications that affect total cost.
"Now I'm starting to get it, master," said the genie with a smile creeping across his face. "Your wish is my command!" he exclaimed. With a clap of his hands, the genie granted the manufacturer's wishes for increased production yield, reduced supply costs and reduced warranty claims.
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