Prepare Your Supply Chain Planning for Automation in 6 steps
By Benjamin Obling
The robots are coming!
The use of physical robots is used intensively for automation in all steps in the supply chain easing manual work and bringing down costs. Equal advantages are found in the automation of the planning process in supply chain with iron and plastic being replaced by bits and bytes.
But the automation of the planning process is highly dependent on master data.
If you are worn out by all your messy master data and use endless amounts of time trying to update your current ERP system, then this article is for you.
Switching to an automated system is often believed to be overly complicated, but the truth is that just getting started will take you a big step of the way. In fact, by the end of this article, I hope to have convinced you that it is choosing NOT to automate that is the complicated choice.
In this step-by-step guide, you will be introduced to the wondrous world of automation systems in supply chain management. Let’s get your ERP system up to speed and move into a new era of supply chain management.
Step 1: Why and what to automate?
Of course, the first question you need to ask yourself is why to even bother automating your supply chain planning.
Although the answer may seem obvious, it’s important to pin down your priorities. Some possible goals could be to:
- reduce the time spent (for example on ordering)
- improve performance, like securing sufficient stock or a higher level of service
- minimize warehouse requirements
- diminish errors
- ensure higher liquidity by reducing working capital
Determine the primary reasons you want to automate, as your specific needs will guide you in the process of what data to pay attention to. Various processes can be automated in the supply chain planning, so you need to find out what makes the largest impact in your business.
Examples of effective supply chain planning automations include:
- Stock replenishment through automated ordering
- Demand or supplier forecasting
- Capacity calculation
- Safety stock and ROP calculation
- Sourcing of data for analysis.
The relevant processes depend on the purpose of the automation exercise – in short: What business advantage you want to gain.
No matter the reasons, you need to start by looking at your master data.
Step 2: Take charge of your master data
If you are like most retail and production companies, you probably do not feel like you are in charge of your master data.
This is where automation will help you in the future.
The bad news is that master data is key to any automated process. It is a simple equation: garbage in equals garbage out. If the master data input is bad, the automation output will be equally poor. The more precise and updated your current master data is, the better the automation will be.
But fear not if your master data needs an upgrade. The good news is that upgrading your current data does not need to involve endless hours of manually plugging in the correct attributes in your never-ending catalog of products and materials.
Actually, my clients often tell me that this is the very reason they never get started. They believe it is necessary for all data in their current systems to be correct before progressing to more automated expert systems.
Believe me when I say: It’s impossible!
It’s like painting a bridge — the moment you are done, you can start all over again. Instead of having a mindset that you need to be in control of all your master data, accept that you are not.
Spend your energy on the data that actually matters. This is a key takeaway. Focus on the top ten or twenty percent of the most important SKUs, customers, etc. and start fixing those. Forget the rest, at least for now.
To identify the most important master data you can use revenue, number of transactions, stock value or other measures. This will provide you with the gross list to validate.
For instance, if you are validating your purchase order sizes, try to look at the purchases you have made in the last year. Sort these by the quantity or calculate the average or median and compare the results to your master data in the ERP. Voilà — now you can easily pinpoint the master data you need to correct to begin with.
As you can see, with a few tools, you can easily get started.
However, if you’re already keen on automating tasks now, you can optimize this work by introducing automations at the detections level. Setup an alert for where the master data might be wrong and auto-generate proposals on how to correct it.
Step 3. Compile all data (back) into your ERP systems
This step is a continuation of the previous one. However, it is just as important.
I often come across businesses that create separate master data sets. They do so because their current master data in their ERP systems is not accurate. They end up making extractions of data into separate Excel files. I understand that it might seem like the best solution in the moment. But believe me when I tell you that the pleasure is brief, and it becomes extremely messy afterwards.
ERP systems are supposed to create a single source for your data for everyone in your business. Not using your ERP systems correctly means that different departments end up with separate datasets. In the end, this creates isolated knowledge, which is the opposite of what is needed. Suddenly, Julie from production planning is the only person who knows how many packages of screws are needed. This is, of course, not ideal.
Find all the hidden data and add it back into your ERP system.
Use your ERP systems for what they are good at
An additional point I want to make before moving along is to remember what ERP systems are good at. They are brilliant at managing day-to-day activities within purchase and production proposals. Take a step back and begin to use your ERP systems proficiently again. Building an automation process for your supply chain does not mean erasing the systems that already work well for what they are supposed to do. Instead, it is a call for integration of current systems with newer ones.
This leads us to the next step.
Step 4. Setup a clear governance
Once the most critical 10 % of your master data is corrected and stored centrally in the ERP system, you need to make sure it stays that way. To do that, you need clear and stringent governance models.
Governance models can be overly complicated – or just complicated because the world is complicated – but with master data you can boil it down to the following:
- Which master data to update (order size, lead time, etc.) and what is the scope: top X % with the largest impact.
- Who will do it?
- How often?
- Who will follow up if it is not done?
Once your governance model is up and running, you can move along to the next step.
Step 5. Identify your business logics
Now the fun is about to begin.
However, this is where your current ERP systems cannot continue on their own. They are simply not clever enough when it comes to their automating software.
In order to reach the next level of automation in your supply chain, your updated ERP system and BI system need to be integrated into a dedicated automation system.
What can you do to prepare for such an integration?
Look at all the master data found in the previous steps and pinpoint everything that can be classified as “business as usual.” Basically, this is everything in your standard assortment.
This is the type of data that is easily converted into automation.
At this point in time, I want you to figure out which business logics need to be added to your data. But what are business logics?
Business logics are all the custom rules set up to handle the exchange of information in your data systems. When integrating a dedicated automation system, there is a need for robust algorithms. For algorithms to work wonders, you have to add business logics. The more (correct) business logics added to the system, the more educated and precise the algorithm becomes.
Examples of business logics:
- A product takes up a lot of space in stock
- A product is both cheap and takes up no space in your stock
- A product is only sold seasonally
Once you’ve identified what distinctive attributes your most important SKUs have, you are ready to start automating. With your business logics in place, you can make sure your automation acts exactly as intended.
Step 6. Decide on a dedicated automation system
Now, it is time to decide which automation system best suits your needs.
This step is important if you wish to bring your supply chain to the next level. This will enable the automation of the following functions in your supply chain:
- Data cleaning
- Analyzing forecast errors
- Tuning forecast models
- Updating and validating forecasts
- Acting on issue codes
- Adding market intelligence
When your business logics are incorporated into your master data, your supply chain management automation can begin to perform some of the data-heavy and trivial tasks. This can free up your time for more value-adding work, like diving into your business insights and forecasts for more exceptional products.
In short, getting ready to automate parts of your supply chain management is too often postponed because the task seems insurmountable.
However, by accepting that you can never automate everything and acknowledging that introducing automation software does not mean replacing your ERP systems, you can easily get your supply chain management ready for the next level.
When automating your supply chain planning, begin by:
- Determining the primary reason that you want to automate
- Getting hold of the master data of the top 10% of the most important SKUs
- Bringing together the Excel data sheets that people have exported from the ERP over the years and gathering everything back into the ERP system itself.
- Setting up a clear governance model and making sure everything stays in order
- Identifying your business logics and adding them to the master data in order for your automation software to make clever decisions
- Decide on a dedicated automation system based on your needs
With these six steps covered, you will be ready to automate the most important areas of your supply chain and leap ahead of your competitors.