QAD is a leading provider of manufacturing ERP software in the cloud and on premise. At QAD, we have imagined this, and are committed to helping you achieve this vision for the future that we call ‘The Effective Enterprise’.
One of the primary responsibilities of QAD’s Research and Development team is to stay ahead of the needs of our customers. We work to develop solutions that can help our customers address their challenges. As a result of the work of these creative and innovative minds, QAD has rolled out solutions such as Adaptive User Experience (UX), which is formerly known as the Channel Islands UX project, QAD Supplier Portal and the QAD Enterprise Platform. Sometimes these solutions are developed internally, but often, it’s the collaboration with our customers that brings about amazing results. This is the story of QAD Automation Solutions.
QAD customer Hendrickson is a leading global manufacturer and supplier for the commercial transportation industry. They produce medium- and heavy-duty mechanical, elastomeric and air suspensions; integrated and non-integrated axle systems; auxiliary lift axle systems; parabolic and multi-leaf springs; stabilizers; and bumper and trim components.
With both manufacturing and distribution operations held within each of their plants, large amounts of both raw materials and finished goods crowded work areas, causing various storing and shipping challenges.
Efficient Materials Management is a Must for Automotive Manufacturers
The need to store large amounts of raw materials and prepare, package and ship large amounts of various finished products to their customers often caused long lead times and the need for more material handlers and equipment. Hendrickson needed to be more efficient when managing their inventory. They knew they needed a solution because the enterprise resource planning (ERP) system in place wasn’t meeting their needs. After exploring several options within their current system, as well as external options, Hendrickson approached the QAD team for a solution. Working closely together, Hendrickson and QAD designed and developed two new automated processes that resulted in the best solution for their challenge…but it meant thinking outside of the box a bit.
“These were completely different processes for Hendrickson,” noted Scott Aselage, Hendrickson plant manager. “Not only was the software new but how the materials flowed was completely different. From the shop floor perspective, it wasn’t just learning new software. It was learning a totally new process.”
Technology Partners + QAD = New Solutions for Everyone
After extensive training and testing, Hendrickson was able to push the solution live and has realized substantial improvements. So much so that Hendrickson’s custom solutions have been standardized and packaged as a feature now available to all QAD customers – QAD Automation Solutions.
“We have been very pleased with the success of our plant pilot program,” added Aselage. “These two new modules are now part of our portfolio and will be used at subsequent plants as we roll it out across the company. QAD Automation Solutions scales up very well for easy application across our multiple facilities with their varying size and complexity.”
“Working with QAD has been a good experience for us – we shared quite a few ideas and it was clear that QAD has an innovative vision for the future of its customers,” concluded Senthil Kannan, IT project lead.
To learn more about the benefits Hendrickson realized as a result of the QAD Automation Solutions implementation, check out our case study.
Success in the Field from Success in QAD Labs
This story isn’t the only success of its kind at QAD. We are always looking for more opportunities to engage with customers in the pursuit of innovation. QAD Labs is another great example of this. QAD Labs is a virtual lab (before you start imagining a secret section of the QAD offices with members of the R&D team in the role of mad scientists!) created to allow for the experimentation of advanced technologies between QAD and our customers to address legacy or emerging challenges.
If you have a need or idea for experimentation around advancing technology, please let us know at QAD_labs@qad.com.
In many companies, people who conspicuously and consistently multitask are often considered to be among the hardest workers. It may very well be true that they work hard, but it’s only because the constant multitasking reduces productivity and innovation—and not only their own, but for everybody on the team.
When people multitask during meetings—for example, by checking email—they miss vital details of the discussion. From then either the team wastes time bringing the multitasker back up to speed, or the multitasker misses the details of the ongoing discussion and operates without the benefit of the team’s ideas. Either way, it’s a waste, and there’s research to back it up.
Sorting the Relevant from the Irrelevant
In a study conducted at Stanford University, multitaskers were shown to have a hard time sorting relevant information from irrelevant details. Have you ever been in a meeting with someone who can’t help but multitask the entire time? The whole room tunes out. What a waste!
Even worse, the research has shown that this problem persists even when the multitaskers are no longer multitasking. Their brains become less effective and less efficient. It could be that the only cure for this condition is a permanent end to multitasking. But what if multitasking, in your mind, is the only way to stay productive?
Multitasking can Reduce Productivity
When people multitask, most often they are engaged in rapid task switching rather than true multi-tasking. Research shows that multitaskers can be up to 40 percent less productive, and it can take as long as 25 minutes to resume a task after an interruption. This makes it harder to juggle multiple tasks because the brain has limitations that we might not immediately recognize.
Multitasking can Adversely Affect Creativity
Ideas are born from activity in the prefrontal cortex of the brain, however, this part of your brain can really only focus on one thing at a time. Multitasking puts an unnecessary burden on your prefrontal cortex and slows down your thinking capabilities.
A business team cannot effectively ideate if team members are multitasking as the prefrontal cortex requires “quiet time” to come up with new and innovative ideas. If the brain is not allowed this time to focus, creativity and subsequently innovation will suffer.
Eliminate Multitasking and Improve Innovation
Most multitaskers will resist the idea that their habit is adversely affecting their performance. You may need to take steps to help them break the habit. Here are a few ideas.
Declare an email break: Some business executives have set “no email days” and enjoyed large productivity gains as a result. Email can take up to 28 percent of the day, and it causes stress for workers. Setting limits on email will instantly improve productivity and reduce stress—leading to more creativity.
Schedule quiet time: Your brain isn’t designed to do two things at once and can’t come up with innovative ideas if it’s stressed and overworked. Give it the time and space to create the innovative solutions you seek.
Set priorities: Research is clear that focusing on multiple tasks at the same time reduces the effectiveness of the effort. Most high achievers focus on a single task for extended periods of time before moving on to other tasks, but people who are not clear on their priorities may not be able to do this without feeling stressed. Help them out by ensuring that priorities are clear.
Establish reasonable deadlines and balanced workloads: If you continually ask for the impossible from your employees, they will strive to achieve it by multitasking or turning in sub-par results. Unless this sort of approach is built into your plan, be reasonable when you ask employees to complete these tasks by a certain date, and listen to any concerns they raise about deadlines. Also, be sure that you distribute tasks equitably among team members.
Encourage mindfulness: Employees will do better and be more creative when they focus on the task at hand. If possible, discourage multitasking, which is often seen as the opposite of mindfulness. You don’t need to set a daily meditation time—although it doesn’t hurt to have everybody focused at the same time to minimize disturbances. Just make sure the team knows you prize attention and thoughtfulness over a mindless frenzy of multitasking.
Innovation Requires Focused Thought
The research shows that both creativity and innovation require focused thought. Help employees to understand this and set a good example by eliminating multitasking from your own life. You may be amazed at the increased productivity, enhanced creativity and reduced stress that eliminating this time-wasting, innovation-draining technique will yield.
There is plenty of innovating going on within QAD’s walls. In fact, much of the innovative research and development that goes on directly involves our customers. As an example, we are constantly engaging and collaborating with our customers through focused thought and experimentation in the QAD Labs, which by design allows for rapid application, evaluation and strategy-building for the purpose of driving innovation. Innovation is not born from the ideas of one team in one office. For us, it is vital that we involve those of an entire community of forward-thinking manufacturers to innovate for the future.
How does your company foster innovation? What are you doing to help promote the creation of new ideas in your industry? Let us know in the comments below.
China boasts one of the oldest, most advanced civilizations on Earth, with a history going back as far as 2070 B.C. Though, even as the country has experienced great economic and infrastructure growth, over its history, alternating periods of civil unrest, famine and foreign occupation have plagued China.
After Mao Zedong established the People’s Democratic Dictatorship socialist system after WWII. In 1978, his successor Deng Xiaoping focused on economic development and quadrupled the country’s output by 2000. Starting in the 1990s, China increased its participation in global organizations and assumed a prominent position in global political and economic activities.
China is the fifth largest country in the world, with a total land area just slightly smaller than that of the U.S. It has the largest population in the world of over 1.4 billion as of January 2019.
Manufacturing in China
China is the world leader in the gross value of industrial output. Key industries include mining, iron, steel, aluminum, coal, machinery, arms, textiles and apparel, oil, cement, chemicals, consumer products, footwear, toys, electronics, food, transportation equipment, automobiles, railcars, ships, aircraft, telecommunications equipment, satellites and commercial space launch vehicles.
The industrial production rate has been growing at slightly over 10.3% as of 2018. Industry employs about 28.7% of the workforce.
Other Important Industries
Service industries employ about 43.5% of the labor force. Key services include transportation, wholesale and retail trade, hotels, catering and food service, financial services and real estate.
China is also the world leader in agricultural production. About 27.7% of the workforce is engaged in agriculture. Rice, wheat, potatoes, corn, tobacco, peanuts, tea, apples, cotton, pork, mutton, eggs, fish and shrimp are the top agricultural commodities.
Supply Chain Infrastructure for Manufacturing
Communication is relatively easy in China, though the country’s landline telephone systems are not robust, with only 14 subscriptions per 100 inhabitants. The cellular penetration makes up for it with 107 subscriptions per 100 inhabitants. Most businesses and users access the internet on mobile devices.
China also has a robust transportation system that makes it easy to transport goods around the eastern half of the country and supports exports and imports. The west is mountainous and sparsely populated. The supply chain infrastructure in western China is not as strong as it is in the east.
China has 4,338,600 km of paved roadways, including 136,500 km of expressways allowing goods to move freely around the country.
China moved 19.806 billion ton-km of freight by air in 2015. The country has 463 airports with paved runways, simplifying the ability to move goods quickly. China also has 47 commercial heliports.
As of 2015, the country had over 121,000 km of traditional railways, which served as the second largest network in the world. By the end of 2018, China had more than 29,000 km of high-speed rail, which still serves as the longest high-speed railway network in the world. With 110,000 km of navigable inland waterways, China’s ability to move goods quickly is unmatched, despite the vast size of the country.
The unemployment rate in China was 5% in Q1 2019 and increase slightly from prior levels. The workforce is overwhelmingly urban, with 59% of the population living in urban areas. The most highly populated cities include Shanghai, Beijing, Chongqing, Guangdong, Tianjin and Shenzhen.
China’s workforce is highly literate, with more than 96% of the population able to read and write. Most people complete 14 years of schooling. The workforce has been shrinking as the population ages, and wages have been rising to attract scarce workers. College graduates now account for nearly half of the workforce, making it harder to fill the lower paying manual jobs that once formed the backbone of the Chinese manufacturing sector. As a result, Chinese manufacturing companies are turning to technology to improve output and productivity.
The Chinese GDP has been growing at just under 7% for the last several years. Inflation is low at about 1.6%.
In 2018, China exported $2.48 trillion RMB of goods. Its principal export trading partners are the U.S., Hong Kong, Japan and South Korea. Primary export commodities include electrical machinery, computers, telecommunications equipment, apparel, furniture and textiles. China ranks number one in the world for exports.
China imported $2.14 trillion RMB in 2018, making it the number two importing country in the world. Import partners include South Korea, Japan, the U.S., Germany and Australia. Import commodities include electrical machinery, integrated circuits, computer components, oil and mineral fuels, optical and medical equipment, metal ores, motor vehicles and soybeans.
Taxes in China can be quite high, reaching up to 67% of business profit through direct and indirect taxes and required fees. High tech companies may be required to pay an additional 5% over the rate other corporations pay. Taxes are also complicated, requiring on average of 142 person-hours to complete the filings.
In theory, it’s relatively easy to start a business in China, but without local representation, it can be a very expensive and lengthy process. Many companies choose to open businesses in China as joint ventures rather than trying to navigate the process on their own.
Getting Down to Business
Doing business in China has many advantages and an equal number of challenges. Access to such a large and wealthy economy can be extremely attractive and highly lucrative, but also quite complex. QAD Internationalization enables companies to identify and overcome the challenges associated with the unique taxes, regulations and business practices in China. As an early entrant in the Chinese software market, QAD understands the nuances of this unique environment and can quickly adapt to a company’s manufacturing needs.
How would you describe the state of Manufacturing in China? Learn more about manufacturing and doing business in other great countries around the world.
The city of New Orleans played quite the host this year to our growing community of manufacturers for our largest annual customer conference, Explore. There were plenty of thought-provoking sessions to attend, depending on your industry or areas of interest, as well as a steady stream of varying discussions that arose throughout the week. Of course, Explore must inevitably come to a close, but I made sure to connect with QAD’s vertical market leads to learn about their take on the event, as well as some of the session favorites at QAD Explore 2019.
This year at Explore, many of the conference attendees were very excited about QAD’s advanced technology direction, including the debut of Production Execution in the QAD Labs. There was a lot of discussion among attendees I spoke with regarding how QAD can help them to rapidly advance their organizations in the face of all the transformation and disruption occurring in the markets they serve and within the four walls of their manufacturing facilities.
However, there was another underlying theme that I saw at this year’s conference more than ever. Attendees really feel they are under pressure to deliver solutions, based on best practices, to the business faster than ever. One of the top five rated sessions at Explore that drew a lot of interest and discussion in this area was entitled, Yanfeng Automotive Interiors’ (YFAI) Rapid Upgrade to EE and Move to the QAD Cloud. This session was delivered by the YFAI leadership team consisting of Mike Silletti, John Miciuda and Ram Krishnamurthy. Some of the key takeaways YFAI shared, with regard to the delivery of solutions at lightning speed, were YFAI’s ability to:
Acquire a plant that ran SAP and migrate it to QAD in four months in order to standardize ERP across all of YFAI’s operations
Take their Brownfield and Greenfield sites and bring them live in less than three months
Leverage QAD’s standardized “best practice” globally based on our Easy On Boarding (EOB) automotive process maps with minimal change to its global core model out-of-the-box
Take 6,000 customizations and reduce them to under 200
Bring 24 plants and 37 other entities live in seven months
Leverage augmented resources during the implementation with a core team of only five North American and four European employees
In one of the longest and most interactive Q&A sessions that I’ve experienced at Explore, the audience was extremely inquisitive on every aspect to learn how this team will drive 80+ site implementations globally in just two and a half years.
Once again, I had the great fortune to share the industrial and high tech session with a long-time QAD customer, Chuck Wierzbicki. As Director of Information Systems for Saint-Gobain Performance Plastics, Chuck was able to share insights around the progress that his team has made adopting a variety of advanced technologies such as IoT, augmented reality, data lakes and more.
Based on the outstanding response to QAD Production Execution, it is clear that QAD’s customers have an avid taste for advanced technology. QAD Production Execution was highlighted in a full-hour session on real-time aspects of ERP, on the main stage and in the Solutions Expo. QAD Production Execution provides operational extensions to ERP via an operator-centric shop floor interface. The resulting solution combines both production order data and IoT process data directly from shop floor equipment.
QAD Production Execution is a QAD Labs offering, which is available now for interested customers. In addition to providing a visual interface on the shop floor, the solution includes the line-side delivery of documents, the ability to create and track downtime events and the integration to QAD Automation Solutions for material management and tracking. All operator, production order and equipment transactions are recorded via data lake technology to provide for advanced traceability and operational metrics. QAD Production Execution works seamlessly with complementary QAD solutions, including MSW/PSW, Quality Management and Enterprise Asset Management (EAM) to provide robust support of manufacturing operations.
While at Explore, we had a fantastic view of the Mississippi River flowing through New Orleans. An impressive sight, especially when you add the tremendous amount of ship traffic moving up and down the river. This vision made me think of the Explore experience. Explore is designed to flow information to our customers and connect people, similar to the moving river. What occurred for our Consumer Products and Food & Beverage attendees was the flow of information in both directions; QAD to customer and customer back to QAD.
The industry kickoff session got us started with Heidi Evilampi of the Oras Group discussing Oras’ upgrade to QAD Cloud. Many critical points were highlighted, such as the decision to upgrade, why to upgrade, benefits they received and potential pitfalls during this type of project. Then, Shaun Phillips, QAD DynaSys director of product management, discussed the future of supply chain in the consumer packaged goods (CPG) markets and current industry disruptors that are complicating supply and demand planning.
On day two, we had a fantastic industry-focused event; The Consumer Products and Food & Beverage Vertical Round Table lunch. The purpose of the lunch was to have industry peers network and discuss the hot topics of the CPG industry. It began with the attendees writing down the disruptors companies are facing today and topics and products they needed addressed. We then started talking about which disruptors are having the most impact today. The top five themes were:
Mergers & Acquisitions
B2B to B2C
The session was extremely productive. Our customers provided us with a tremendous amount of information and established contacts with people in similar industries facing similar challenges. In my opinion, this is why we hold Explore.
It was a tremendous opportunity to see everything that goes into Explore through the eyes of a QAD team member. This time last year I was experiencing Explore from the customer’s perspective. I was not aware of the “army” of QAD employees working toward the preparation of presentations, education of our users, and working closely with our customers to identify the changing nature of the industries we serve.
I was fortunate to be able to kick-off the Life Sciences session by presenting with Matthew Hinchman from Ajinomoto Bio-Pharma Services. We worked together to educate our customers on the disruptors affecting our industry, including XaaS, Digital Transformation of Manufacturing and Make to Order at Scale. Matthew presented a case study on how Ajinomoto Bio-Pharma Services leveraged QAD to meet serialization compliance requirements as part of the Drug Quality Security Act (DQSA) and the Drug Supply Chain Security Act (DSCSA).
Discussions with the Life Science customers in attendance helped to provide tremendous insight into the changing nature of their organizations. Customers continue to focus on emerging technologies and how they can be leveraged to make their operations and processes more efficient. These customers are looking to QAD for help in making more informed decisions. Discussions around QAD Labs and assurances that we continue to focus on these technologies were well-received. A primary industry driver will always be quality. This was evident through the attendance of the various QAD CEBOS Quality Management sessions.
This was not the first Explore attended by many of the QAD Life Sciences customers. These customers continue to see the value in the education provided and the ability to help shape the solution to meet industry requirements.
Join Us Next Year in Las Vegas!
If you didn’t attend this year’s Explore, don’t fret! Check out our recent blog article on what you missed. You can also view and download the conference presentations, explore the latest customer showcase videos and flip through our photo album. If you aren’t already, be sure to connect with us on social media and engage using the hashtag #QADExplore. We look forward to seeing everyone next year at QAD Explore 2020, May 11-14 in Las Vegas!
The effective use of a manufacturer’s inventory investment is an important determinant of the company’s success. Excess and obsolete inventory is a drain on resources, as is excessive safety stock. Stockouts affect customer satisfaction and revenue, and the frequent need to expedite orders adds to costs and highlights problems lurking in the system.
Managing an Inventory Investment
Inventory effectiveness measures the process that delivers the right part to the right place at the right time, while minimizing investment and meeting customer requirements. Managing inventory effectively is a delicate balancing act, affected by lead times, supply chain efficiency, demand variability, product complexity, product life cycles, warehouse space and practices, among other variables.
It is critical to monitor inventory effectiveness using five key metrics: Expedited orders, inventory turns, obsolete inventory, safety stock and stockouts. We already covered stockouts and backorders in a previous post, so in this post we’ll focus on the remaining four.
Expedited Orders: This represents the number of orders expedited in a given period. Whether you measure purchase orders or customer orders—and you should do both—high numbers indicate problems in your inventory planning and flow.
Inventory Turns: This represents the number of times a company sells and replaces its stock of goods during a given period. Calculate it by dividing the cost of goods sold by the average inventory value. Many organizations publish turns data by industry or SIC code to help gauge where you stand against others in your industry.
Obsolete Inventory: The value of obsolete, inactive or slow-moving inventory. It can be measured either as a dollar value or a percent of total inventory.
Safety Stock: This is an extra level of inventory held to reduce the risk of stockouts. Many companies just estimate safety stock levels, which may or may not be effective. There are numerous formulas for calculating safety stock depending on an item’s usage pattern, but the simplest one is to multiply the average daily demand by average lead time.
Using Metrics to Measure the Health of the Business
Companies use these metrics to minimize their investment in inventory without adversely affecting customer service levels. The absolute measure is less informative than the trend in the metrics.
For example, rising obsolete inventory may point to problems in managing new product introductions and the retirement of old products. Failure to balance the intro date of new products against the inventory on hand and usage for components that will no longer be needed shows that the new product introduction process may need refinement.
A company may choose to introduce a new product while old stock and components are still high, but the company should be aware of the cost of this decision and balance that against the benefits of early market entry. Obsolete inventory may also indicate poor electronic communication network (ECN) and corrective action and preventive action (CAPA) processes, so if the number is trending upward, investigate both areas before changing any process.
The number of expedited orders is also an important trend that can indicate emerging business issues. The rise may be because of a deterioration in forecast accuracy, a problem in the supply chain or an internal order process issue. Watch the trends and dig deep to find the causes.
Inventory turns can identify whether changes in inventory management processes are effective, but they also serve as an important benchmark against competitors and similar companies. Never just choose a number arbitrarily as a target, since optimum levels vary between industries. Look at what the best companies in your industry achieve and then shoot for something similar.
By definition, safety stock is inventory you never plan to use, so it makes sense to minimize it as much as possible without compromising customer service levels. Safety stock can be minimal for items that are easy to acquire but may be higher for sole-sourced or custom items. Anything critical to your brand reputation or production process may require higher levels of safety stock. You may want to keep safety stock for extremely high-cost items low. The point is, one size doesn’t fit all when it comes to safety stock.
Best Practices for Inventory Effectiveness
Monitor forecast accuracy and work to improve accuracy wherever possible
Use consignment inventory or vendor managed inventory for critical items
Cycle count to identify any stockroom or warehouse process problems
Use safety stock optimization techniques to minimize the investment
Use bar coding or RF devices to improve inventory transaction accuracy
Use available-to-promise (ATP) to ensure promise dates are realistic on customer orders
Monitor supplier performance to ensure purchased item deliveries are consistent
Implement cross docking procedures
Design products and processes to enable postponement of the point when inventory must be committed
Use lean manufacturing and Just in Time to reduce inventory
Use effective CAPA and Engineering Change procedures to minimize obsolete inventory
Manufacturers are realizing the benefits of tightening relationships with suppliers to better manage the procurement of goods and lower supply costs. Collaborative processes transform a typical transaction-based association with suppliers into two-way access and a mutually beneficial relationship. This builds a more effective manufacturer-supplier partnership that lowers inbound supply costs and improves supplier performance. Both parties gain from accurate and timely access to order, shipment, schedule, invoice, inventory and other related information. Or, as one QAD customer stated, “The QAD Supplier Portal improves our productivity, saves us money and ensures we consistently meet our customers’ needs.”
Supplier Challenges Exist
Many manufacturers still rely on outdated processes or fail to understand the role supplier integration plays in maximizing global supply chain performance. Manufacturers we work with often mention their desire for a single source of truth that improves decision-making with suppliers, based on the same set of information. Along with the global and swiftly changing nature of sourcing, inbound supply challenges include:
Carrying too much inventory to address potential supply disruptions
Excessive premium freight charges to meet customer delivery expectations
Inability to accurately track and trace purchase orders, shipments, receipts and invoices
Mismanaged documents and processing errors leading to slow cycle times
Inefficient procurement workflow and processing causing unproductive supplier relationships
Buyers spending too much time “fighting fires” and addressing unexpected supply disruptions
QAD Supplier Portal Delivers Benefits
Successful supplier collaboration relies on transparency and aligned objectives with supply trading partners. Collaborative processes provide a foundation for a responsive and flexible supplier network that responds instantly to market volatility and changing customer demands. QAD Supplier Portal increases the availability and visibility of critical order, schedule, shipment, invoice and other information for suppliers so as to avoid the risk that an inbound supply issue will disrupt their business. Additional business benefits include:
Reduce inventory investment without risking material shortages and downtime
Eliminate processing errors by replacing manual methods with digital communication
Lower procurement costs with supplier self-service and proactive alerts
Improve supplier performance with quicker and easier access to inventory, order, shipment and invoice information
Cut production delays by ensuring timely delivery of material through accurate and automated receipt management
Increase order fill rates and procurement team productivity
Decrease error rates with full error correcting techniques and accurate labeling
Better control supply chain risk with greater inventory accuracy across complex warehouse and space management operations
To find out more about QAD Supplier Portal, check out our solution data sheet.
In 1964, the average tenure of companies on the S&P 500 was 33 years. That average dropped to 24 years in 2016 and is expected to shrink to just 12 years by 2027. This means that 500 of the largest U.S. based companies can expect to only be listed on the S&P 500 for 12 years before they fall off the list. What’s even more concerning is that almost half of all S&P 500 companies will either fail or be replaced over the next 10 years. To survive and even thrive, companies will need to embrace the disruption happening today and focus on the changes of tomorrow.
Inertia in the Face of Disruption
Manufacturers can miss opportunities to adapt due to their lack of speed in responding to disruptive forces, under-investing in new growth areas or applying existing business models to new markets. Furthermore, industry leaders tend to carry a higher degree of confidence in their ability to adapt, or believe that their current business model is enough to sustain growth. This can lead to underestimating disruptive trends or missing opportunities to respond. Unfortunately, your customer will not give you any forewarning. When they want change, they will want it now.
Embrace Industry Changes
Manufacturers’ business strategies and production tactics are being affected by “business disruptors,” including changes in the business environment and in the ways products are made. In working with our customers, we have identified three critical disruptors: Anything as a Service, Make to Order at Scale, and Digital Transformation.
Anything as a Service (XaaS) is a business model where companies provide outcomes rather than products, shifting what customers seek and ultimately buy. An example of this is the popularity of subscription-based services like Spotify and Netflix. Why pay to own music or movies when you can pay to simply listen or watch what you like most? The very same approach is happening in B2B environments.
Make to Order at Scale is an emerging customer requirement where end users expect personalized products and services to meet their unique needs and requirements. An example of this is the high level of personalization that is part of the car buying process for the Mini Cooper. This isn’t just part of the consumer experience either, it’s now being pushed up the supply chain.
Digital Transformation is happening globally. Manufacturers must acquire and utilize enterprise-wide and value chain data to measure and optimize company processes to deliver peak performance in a rapidly changing business environment. An example of this is the growing interest from consumers in food traceability, tracking food recalls as well as production from field to fork. With emerging technologies like machine learning and data lakes, traceability is peaking interests across all industries.
Digital Transformation can act as a Trojan Horse, helping to enable new business models such as XaaS and Make to Order at Scale. It is a critical foundation layer for successfully competing in a changing and uncertain market.
How will Manufacturers Survive Disruption?
Changes in the business ecosystem, like those above, can happen seemingly overnight. It’s all about how manufacturers are able to prepare themselves for future change. It is important to formulate disruption strategies for both the short and long term.
Below are a few tips to help guide you on the path to improved longevity.
Adopt a Digital Strategy
Digital transformation has been a strong focus over the years, especially in the last decade, but the speed in which manufacturers will need to adapt their business models and strategic approach will only increase. Changing technologies and changing customer behaviors, for example, will play a pivotal role in determining company tenures. Companies will struggle to compete, and those without the right approach in place will struggle the most.
So, how can manufacturers build their strategies and plan for change when it’s becoming increasingly difficult to anticipate and predict what will come down the road?
Optimize Business Processes with an Effective ERP
When it comes to the key elements of successful supply chain management and production execution, a rapid, agile and effective enterprise resource planning (ERP) solution can greatly improve your outcomes. Though all too often, ERP projects become about the software and not about why you need it or what you need it to do. Even with the understanding that a continuous improvement approach is needed to optimize processes—aligning people, process and underlying technology—traditional ERP solutions can be difficult to modify, or adapt.
Applications built on the QAD Enterprise Platform can be created quickly and eliminate the need to create costly and complex customizations that make it difficult to make changes in the future. Long-term rigidity in a system can make it even more difficult to ensure that future enhancements and upgrades don’t complicate existing processes or impair longevity.
Continuously Improve as a Manufacturer
When you ask, “Will my company exist in 10 years?” it’s worth doing a lot of digging. Don’t just look at what your competitors are doing, research trends too. And if you find yourself in search of an ERP, first ask yourself—why?
Choosing an ERP solution based solely on the individual goals and KPI metrics of key stakeholders today can result in a suboptimal solution in the years to come. Recognize the pace of change and the need for business systems to rapidly respond. A continuous improvement approach starts with people and processes; the technology is there to support your efforts. Disruption in manufacturing will remain, and even accelerate for the foreseeable future, so why not do all you can to ensure your company not only survives but thrives into the future. Adaptability is the new competitive advantage.
People are often confounded about innovation, claiming that you can’t program ideas. The reality is that you can, by applying focused innovation techniques, and it all starts with understanding your customers’ needs. You have competitors—everybody does. So, what makes customers buy from you instead of them? Answering that question is the first step to focused innovation.
Who Are You?
This isn’t an existential question—it’s the core of successful innovation. What is the problem you are solving for your customer? It’s not technology, and it’s not bringing a new paradigm to the market. Don’t bog yourself down in buzzwords and marketing speak. That’s the sure path to conformity.
Use the Mom Test
Try the “Mom test.” If your mother wouldn’t understand what you do, you aren’t there yet.
There’s a fundamental issue that you address, and you should be able to state it in plain language and in fewer than 25 words. This isn’t an easy task. It may take days or weeks before you are able to do it. If it doesn’t, you are either very good or fooling yourself. This statement should become your “North Star.”
Create a Map
Companies usually believe they know how customers use their products or the problem they solve. Some companies believe this without ever having listened to a customer or watched them use the product in the real world. It’s even more eye-opening to watch your competitors’ customers use their products.
After talking and watching people using the product, you should be able to identify the role your product plays in a process. You should also be able to map the process from beginning to end and understand the customers’ goals.
Develop a Strategy
There are several ways to create an innovation strategy for your product once you understand it from the customer’s point of view.
Simplify using the product
Eliminate product gaps
Enhance the footprint
Eliminate non-value-added process steps
Reduce product cost
Shorten the delivery cycle
Which of these fits in with your 25-word product description? Actually, that’s a trick question. They all should.
Use the Lean Approach
Manufacturers are familiar with the concepts of lean—value stream mapping, continuous improvement and eliminating waste. They use these concepts masterfully when it comes to their own processes, but often ignore them when it comes to their customers’ day-to-day.
If you’ve taken the time to learn the customer process and how customers use your product to attain their objectives, you’re half-way to focused innovation. Apply your “North Star” and use the lean tools and you should be able to identify several areas ripe for innovation. Then prioritize and tackle each one.
Here Be Dragons
Don’t let lurking dragons get you. It’s easy to lose your way if you take your eyes off the North Star. Watch your map and stay true to your North Star—which remember, is based on providing customer benefits.
Many companies fall into the trap of focusing on their own benefits when it comes to innovation. While it’s a bonus if your innovation idea helps reduce your cost, it’s only going to excite the customer if you share the wealth. The same holds true for simplifying your manufacturing process. Great. But will that new-found productivity translate into shorter delivery cycles or lower prices?
Lead the Market
Market leadership is a popularity contest and it has strict rules. Fill a need better, faster or cheaper than the competition. Identify a previously unknown need and deliver a solution before anyone else. When you develop your go-to-market plan and messaging, focus on that.
Customers don’t care that this product is improved over previous versions unless it helps them. Don’t say “better than the previous version.” Customers translate that into “It used to be lousy but now it’s less lousy.”
The customer doesn’t care about cool new technology—they care about how that technology makes their lives easier. Forgo the acronyms and buzzwords. Use active language rather than wishy-washy passive voice. Tell the customer exactly how the product will solve a problem or improve their day-to-day existence and do it in plain language. Keep it simple, and focused innovation will lead you to the market leadership you seek.
Learn more about the ways in which innovation can be harnessed and better utilized when and where it’s needed most.
On 23 June 2016, the citizens of the United Kingdom voted to leave the European Union. This is formally named the “United Kingdom European Union membership referendum,” but is more commonly referred to as Brexit, a portmanteau of “British” and “exit”.
Nine months later Brexit became official. On 29 March 2017, the UK served their withdrawal notice under Article 50 of the Treaty on European Union. By triggering Article 50, Prime Minister Theresa May started the clock on a two year period to negotiate terms for the UK’s withdrawal.
Brexit Withdrawal Dates and Extensions
The UK and the EU concluded negotiations and drew up a withdrawal agreement in November 2018. On 15 January 2019, Prime Minister Theresa May put the deal before Members of Parliament (MPs) in the House of Commons. MPs rejected the deal, 432 to 202. The withdrawal agreement — with some adjustments — was put before the Commons two more times. Both times MPs rejected it.
The UK was due to leave the EU on 29 March 2019. Since MPs would not ratify the deal, the Prime Minister asked the EU to extend the departure date. The departure date was initially pushed back to 12 April 2019, but is now slated to take place on 31 October 2019. The extension meant that the UK avoided a “hard Brexit” — that is, leaving the EU without a deal.
A hard Brexit outcome, however, remains possible. Theresa May announced her resignation on 24 May 2019, and her successor is unlikely to champion some version of her withdrawal agreement. Furthermore, EU officials have repeatedly stated that substantial changes to the agreement are not possible. If MPs do not ratify the withdrawal deal, or agree upon a different model for future relations with the EU, the UK will leave the bloc without a deal.
The Impact of a Hard Brexit on UK/EU Trade
Under a hard Brexit, the UK will cease to be a part of the EU customs union. Without a deal, trade between the UK and the EU would be governed by World Trade Organization (WTO) rules. This would mean that goods which currently move freely between the UK and the EU would be classified as imports and exports, adding time, cost and complexity to the supply chain. This will impact UK/EU trade in a number of different ways. Here are six key issues.
Under WTO rules, goods leaving an EU member state for the UK will require an export declaration. The export declaration must be made to the relevant customs authorities in the originating country. Let’s take the example of goods being shipped from Germany to the UK. In such a case, you would file an export declaration with the German authorities.
Customs authorities must accept the declaration and assign a unique identifier to your shipment before it can be transported. Customs can also call for a physical examination of your goods before they clear them for export.
To comply with these regulations, companies will need to create and electronically file export declarations for each shipment. This can be accomplished by implementing a software solution to file declarations with the relevant customs authorities, or by engaging a third party, such as a carrier or customs broker, to file on your company’s behalf.
Import declarations will be required under a hard Brexit. For example, a company bringing goods into Germany from the UK would need to make an import declaration to German customs authorities. The EU will impose duties on goods imported from the UK. The company would be obliged to pay the duties on imports before customs releases the goods. The company, however, would be exempt if the goods are to be re-exported and the company participates in a duty suspension program. Therefore, whether you are importing or exporting between the EU and the UK, you will need to file declarations for each shipment by using a software solution, or by engaging a third party to file on your behalf.
Any company engaged in export or import activities has to classify their goods using commodity codes. Examples of these codes include the WTO’s Harmonized System (HS); the EU codes from TARIC, the integrated Tariff of the European Union; and the Harmonized Tariff Schedule (HTS) of the United States. Should a hard Brexit occur, the UK will publish its own tariff book and classification codes.
Commodity codes identify the type(s) of goods to customs authorities and allow authorities to determine if the goods are restricted and if tariffs apply.
If your company is based in the UK and has only traded across the EU, it is likely that you won’t have classified your goods since there was no regulatory requirement to do so. You will need to do so, however, under a hard Brexit. Goods traded between the UK and the EU bloc will be seen as imports and exports, therefore, they need to be classified using the relevant codes.
Free Trade Agreements
Manufacturers in the EU may be adversely impacted if they source raw materials from the UK. Under a no-deal scenario, goods made with UK content may no longer qualify as EU origin products. Thus, if a manufacturer is exporting to a non-EU country that has a free trade agreement with the EU, the goods would be subject to tariffs and cost more to land in that country.
Some carriers have made contingency plans in order to facilitate UK/EU trade under a hard Brexit. These plans include charging for their services for shipments between the UK and EU, which previously did not need a customs declaration. To use these services, companies will need to provide additional information and shipping documentation such as a Customs Invoice and a Packing List containing commodity level details. To do this, companies may need to change their tools and processes for order processing and fulfillment.
Grouping together shipments going to different customers in the same country or market is a “consolidated shipment.” Consolidating shipments means fewer export declarations — you only need one for the entire shipment instead of a separate declaration for each package.
DHL, UPS and other express carriers that handle high shipping volumes offer consolidation services, but those services come at a cost to reduce regulatory headaches. It is also possible for exporters to manage consolidations in-house; consolidated shipments are exported and sent to an express carrier’s depot for last mile delivery.
How Automated Software Solutions Can Help
The trade and transportation challenges presented in a hard Brexit requires agile adaptation of tools, processes and services to handle the new rules and regulations that would be implemented. Many of the processes can be automated by integrated software solutions to manage global trade and transportation to ensure accuracy and adhere to the newly implemented guidelines.
QAD Precision’s solution allows shippers to manage global trade, trade compliance and transportation from a single platform. With QAD Precision’s integrated solution you can satisfy compliance requirements, minimize regulatory exposure, perform due diligence and ensure accuracy by automating documentation production and customs reporting. Industry leaders use our international trade management solution to adhere to regulatory requirements and reduce the hidden costs associated with global trade.
With QAD Precision, you are able to deploy a transportation solution that manages multiple providers, gives you visibility across carrier costs and service levels and creates consolidation opportunities upfront. With a single, detailed view of your freight spending, you can undertake supply chain planning, route optimization and carrier rate negotiation based on fully vetted data. QAD Precision offers not only a hedge against Brexit risk, but also offers tools to better navigate through tariff uncertainties.
QAD Explore 2019, the company’s premier customer conference connecting its global community of leading manufacturers, recently took place in New Orleans, Louisiana, and was a pleasure to attend. The conference provides an unprecedented opportunity to contribute to the discussion on the future of manufacturing and how changes in business ecosystems impact manufacturing supply chains. Among others, this year’s Explore featured informative sessions dedicated to the game-changing evolution of the modern supply chain. Some of the topics presented and discussed included the impact of geopolitical events on global trade, the advancement of digitization to drive augmentation and automation, and the proliferation of advanced analytics to support fact-based, real-time decision making.
QAD’s Director of Consumer Markets Stephen Dombroski kicked things off with some insights and trends on the consumer goods and food & beverage industries as well as the key disruptors impacting manufacturers. Such disruptors include Anything as a Service (XaaS), Make to Order at Scale and scenarios that encompass the Digital Transformation of Manufacturing.
Oras Group, a European manufacturer of faucets, presented their QAD upgrade customer case study, shared their lessons learned, benefits and next steps.
Finally, QAD DynaSys Product Manager Shaun Phillips drilled down into several new innovations available in Demand & Supply Chain Planning (QAD DSCP) to support these industries, including Predictive Analytics, Machine Learning and Trade Promotions Planning.
Welcome to “Supply Chain Planning 2020”
The next session focused on Supply Chain Planning 2020. Manufacturing companies today are operating in a new world and dealing with constant changes in geopolitics, exponential speed and the digitization of everything, more demanding and less committed customers, and ever-changing supply chains. Shaun Phillips discussed some of the major events impacting global supply networks, notable strategies, and technologies that may be adopted to not just survive, but thrive in 2020.
The Next Generation of Demand Planning: Intelligent and Real-Time
Modern-day planners are bombarded with large volumes of both historical and real-time data. Planning systems must rapidly identify trends, exclude outliers, and turn data exceptions into actionable insights, which is why supply chain planning is a natural candidate for machine learning. In this presentation, we discussed how machine learning and demand sensing change the demand planning game.
From S&OP to IBP: How to Align Operations and Financial Plans
It was standing room only in the Demo Theatre for Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP). QAD DynaSys Senior Sales Executive Jeff Livingston described the growing importance of S&OP and IBP processes to maintain operational and corporate alignment. Jeff stressed the importance of collaboration and data. Particularly insightful was the crucial role of finance in S&OP to not only align budgets but assess cash flow impacts and ROI analysis.
Then, to make this journey a reality, QAD DynaSys Manager of Customer Engagement Pierre-Julien Buard (PJ) selected three demonstration scenarios: budget misalignment between finance and operations, executive S&OP decision making, and collaboration between different geographic entities. PJ expertly walked through each of these business challenges comprehensively illustrating the decision-making process. It was a perfect showcase for QAD DynaSys DSCP.
Conference Sessions Available for Download
These sessions highlighted, along with all other Explore 2019 sessions, are available to watch or download on the QAD Explore website. We are here to help you build the future of your supply chain and to become an Agile, Effective Enterprise.