Transcript: Another Ducking Digest?! May 8th, 2023

Another Ducking Digest?!
May 8th, 2023: Bad ERP Data

Welcome to Another Ducking Digest. This is a weekly 10 to 15-minute news show hosted by myself and Lindsey Smith. I am joining you live from my hotel room. Today, I’m actually in Dallas, Texas, lobby crashing the ISM conference. I’ve been here throughout the weekend, networking with some awesome direct materials supply chain leaders, and plan to be here for the next couple of days. Lindsay is joining us from SoCal, and he has 30 plus years’ supply chain experience and most recently served as the SVP of supply chain for a mid-market manufacturer, which is how him and I connected and became friends.

Each week, Lindsay will share news that’s relevant to supply chain professionals working for a small or mid-size manufacturer. So this show is really, really targeted at small and mid-size. We feel that that’s often ignored, and there’s not enough content that’s produced and shared with the market in that space.

Each week we have a prompt or theme of our show, and today we are going to be talking about bad enterprise resource data, which impacts all manufacturers and leads to several negative outcomes.

Great. Thank you, Sarah, and I hope you survive your crashing the ISM meeting. Yeah, so let’s do the big idea, then maybe the little idea as it pertains to supply chain, and then the so what, what are we gonna do about it? All right, ’cause I always hate when people spend forever talking about the problem and there’s no homework, there’s no takeaway. Right? So yeah. One of, and this isn’t a new problem. This has been around since we turned on our first MRP, you know, the old saying is that, you know, this reduced ability to execute, you know, the old saying to error is human. To really mess it up, you need ERP. So the, there’s significant downside to this if we get it wrong. And the significant downside shows in multiple ways.

The common one, of course, is inaccurate inventory management, where we see both the production shortages as well as the excesses that collectively compromise our ability to meet customer demand. We see inefficient production planning, and that shows in a couple of ways that production’s hesitant about saying at the granular level, what are we doing today? What are we building today? Is it going to get finished? Is it gonna ship? Which are all very basic questions that we need to have our arms around to just to instill confidence and to avoid driving each other crazy.

Well, and I think Lindsay, that goes in line with this whole pivot from just-in-time to now having too much inventory. Now going back to kind of trying, companies are more trying to have a mix. They wanna have some inventory, but they don’t wanna have a two or three-year supply. And when your data and your ERP and MRP is crappy, it’s really, really, really hard to manage that.

Yeah, that would be a good thing to talk about another week, Sarah, the how, how, how, how hard you want to tap the brakes on, on, on GIT. So reduced ability to execute is a clear outcome of bad data, increased cost in increased cost. That shows the red flag as we’ve got extra stuff sitting on the shelf that people are scratching their head about why, how it got there. Planning is spending way too much time trying to figure out order status rather than doing what they were intended to do. And then, you know, ultimately the increased cost is that our brand is compromised, is that the customers lose faith in our ability to ship and deliver. The third one, which pertains more to, which is taken on a new nuance, if that’s the right word, in 2023. The third one is the ability to do what we often call the what if, you know, what if we build 10 this week instead of five?

What if, what if we change the schedule? What if we, you know, our ability to be nimble, our ability to be transparent and to share information with everyone without a supply chain subject matter expert having to go off and do an all-nighter to run all the numbers. And that takes on a whole new level in 2023 with this push to RPA robotic process automation and AI in general, you know, the expectation is we continue to perform at higher levels. So we’ve got to get rid of these legacy problems. So the Sarah, I think I’ve tried to paint a picture there of the bad ERP data, as you said, impacts all manufacturers, increased costs, decreased efficiency, loss of customer satisfaction. You know, what are we gonna do about it? How do we invest in a process to preserve accurate, reliable data and enable informed decision making? And the 2023, the year of AI, the…

I think we’re gonna have many years of AI, we’ll say, this is the first.

There we go, 2023, another year of AI. Yes. You know, data is king, data is valuable. People are saying companies are now data companies, and so data’s only begun to become more valuable, unless of course it’s wrong. So the little idea that goes with that for our team today is, how does supply chain avoid getting marginalized? How do we avoid getting demoted or blamed? So I assume everyone on the call would much prefer to avoid that scenario. You know, the supply chain primary tool remains MRP and when that’s marginalized or discounted, we see the red flag is we see other departments working around it. And that’s yes, the spreadsheets pop up and MRP then has no longer the single version of the truth. And that’s our big red flag that, okay…

I would say spreadsheets and post-it notes and lots of paper and things that make me cringe when I see some buyer’s offices.

And cringe, yes, you, you, you are right to cringe. That’s your intuition serving you well. But that’s a red flag to management that, okay, we’ve got to have a system that eliminates the need because these aren’t malicious people. These aren’t people that love post-it notes. These are people who are conscientious like time trying to do the job and the system isn’t giving them a way to do it.

Lindsay, we have Michael Keller joint said, “Don’t bury your head in the sand!!!”

So let’s, let’s hold that one and, and let’s, we’ll circle back to that. Let’s not let go of that. So the challenge is, it’s difficult to manage there. And there’s no single offending data field. There are many, many offending data fields. It’s fact, it’s a remarkably long list. I don’t know if there’s a top 20 or a top 10 or top 20. We could come around. Let’s, let’s take a handful and let’s do the stat. Let’s do a couple of static and a couple dynamic, couple of static. One of my favorite parts entered with lead time equal to zero, the day the part is required. MRP duly rolls out a new buy suggestion, absolutely catastrophic drives production shortages, parts without a buyer code. In larger organizations, multiple buyers parts get divvied up on the new buyer recommendation and hit lo and behold, someone entered the part, didn’t populate the buyer code field, and it never went to a buyer. It was never seen, it didn’t get planned or bought. These are both static problems and we’ll talk about how to fix them. Dynamic problems, dynamic problems.

I’ve lost so much sleep over them. My favorite bill to order factory order that was tied to a sales order and the sales order gets updated. Either the customer says, “Let’s move that out from May, let’s move it out to September,” or the customer says, “Let’s cancel that one ’cause we’ve got engineers got a new configuration,” and customer service does their job, order entry does their job, they cancel out the customer order. We’ve now removed the customer liability for these parts. There’s a work order in the factory. There’s a job or a work order that also has to be scheduled or rescheduled, cancellation costs assimilated if appropriate, catastrophic if your organizational culture, your lack of discipline allows order entry to cancel a sales order but not leave the factory order in place. Because now, now you’re allocated. You could be, well, at the very least, you’re incurring cost. At the very least, you’re doing work that you don’t need to be doing. Catastrophically, you’re consuming critical component material on an order that’s not required. It’s about to be replaced by a new order that requires some of these same parts and you no longer have them. You went ahead and built them on the down route assembly. And of course, the other dynamic one is your favorite service.

Favorite, yes.

Yep. Can anyone guess? Yep. Purchase orders without supplier confirmation. That’s a doozy. Especially when we see very busy purchasing teams. They’re being tracked on a KPI for throughput, number of lines they place a day and, you know, by some tough purchasing manager like Lindsay. And lo and behold, someone misses the fact that the supplier came back and said, “Yeah, I don’t understand what you’re asking. Or We don’t support that anymore. Or that’s…”

Or, or the supplier doesn’t confirm at all.

So many examples. And that’s just that, that the point is collectively, the point is every time supply chain contributes to a production shortage, that’s a violation of the trust of supply chains’ immediate customer. And we all need to be focused on supply chains’ immediate customer, which is the production floor. That’s, they’re our people. They rely on us. And our job is to make sure they have all the parts to build the scheduled jobs. So when this violation happens, how the organization reacts, that is a reflection of organization maturity. I’d like to think, I think in general, in big companies, we have the resources to go after it and find out. Let’s drill and find out what happened. In small companies, in the absence of these resources, or if we’ve got a marginal ERP implementation, then we can go to the dark side, and that’s unhealthy, unfortunately. You know, deep breath, I have heard factory managers say, “Purchasing has no sense of urgency. Purchasing doesn’t work hard enough. Purchasing spends too much time smoothing with supplier reps.” Now, whether or not these knee-jerk responses are true, it’s overlooking the root cause that bad data is loaded into our system, and whenever a root cause is overlooked, the defect is gonna continue to occur. So a more astute observation, a problem statement, if you will, for the team to sink their teeth into would be, “Our change management process does not adequately address maintaining base data integrity.” So, alright, good. So what, what, what are we gonna do about it? Well, we gotta lean in on, we got to address this granular problem statement and be sensitive to the fact that there’s a complex cause and effect. So three-part approach: discipline, visibility, and collaboration, or escalation. What’s the discipline? The discipline is to document the exception and the change management processes and train everyone, and then automate wherever we can.

So if we’ve got lots of boats on the ocean, the Nexus app, if we’ve got lots of purchase orders going to suppliers and lots of changes associated with them, then the source, the app takes the repetitive, the mundane, the tedious off the table, automates that portion, and lets the supply chain do what they were meant to be doing all along. So that’s the discipline, the added and maybe discipline scrutiny that we drill down into the nuances of our workflow. Secondly, drive the visibility. How do we do that? Most ERPs have an email alert system. That’s a valuable tool that you, Lindsay, can get an email that says, “Hey buddy, you messed up this. Again, soak in every other user or user supervisor, get an email that this fault condition has occurred.” Go ahead and drill into it. Create KPIs. KPIs should be our friend, insightful friend versus just quality audit wallflowers. Don’t waste a KPI on something that’s always a hundred percent, you know. Instead, for example, a daily, weekly, monthly account of production shortages caused by missing supplier PO. Great KPI. The component parts attached to a production work order that have no cost, you know, a great KPI. The one we just talked about, the canceled work orders that were inadvertently closed to stock to inventory when the work order was closed out, rather than being written off. Last number of sales orders per month that were canceled or rescheduled without a corresponding change on the work order. The point is, as one of our attendees said, you know, don’t hide your head in the sand.

Let elevate it, escalate it, make it, make it visible. Don’t let it be hidden inside the mystery world of Mr. MRP. Let’s get it out there and let’s get it talked about. And then who are you gonna talk to with, well collaborate, find a friend. Finance, finance wants to get this done. They don’t know how. Sales doesn’t want to live with the consequences of being late. It doesn’t like being hearing that, you know, all the money they spent on our ERP isn’t yielding the results that we wanted. So whoever it is, whoever has the ear of the executive decision-maker, pull them in and have a buddy, have a collaboration, have an escalation.

So, so Lindsay, that all sounds great, but I am, let’s say I’m working for a smaller mid-size manufacturer and I may not have internal resources to be able to help with data, work on data, clean it up, put processes in place. What do you recommend?

So, great, great question. Real-life question, right? So two things. One, we’ve got to have that compelling message that this is the hard cost, that there’s gonna be a hard cost and a soft cost. The soft cost is that supply chain wants to pull their hair out and have a mental breakdown. Hopefully, companies are sensitive to that. The hard cost is gonna be the excess inventory. The hard cost is gonna be the late shipping, the hard cost is gonna be lost customers. So if we don’t have the com create a compelling reason and bring in an outside resource, bring in someone like, you know, Susan Walsh, the classification guru. Bring in folks that specialize in ensuring legitimate data integrity. Create a tiger team, you know? Yeah. Bringing an outside consultant if that’s so, that’s what’s required. But yeah, you, you, you def the mis you’re right, Sarah, the mistake is to not do the job just because everyone in-house is too busy.

Well, I would like to thank all of our listeners for their time today and would also like to ask our live audience to drop your suggestions for future show topics in the chat. So if there’s something in particular that you’d like to have Lindsay cover as we do our weekly news show, something that’s top of mind, something that’s a pain point, something that you’ve lived through, please, please drop that in the chat. You can also reach out to him or me on LinkedIn and give us those recommendations. We wanna make sure what we’re talking about is super relevant to this audience, in particular to small and mid-size manufacturers. With that, we will see you next Wednesday at 10:00 AM central time.

Thanks, Sarah.