by Doug Ugarte, Supply Chain Client Service Director
Approaches to Event and Exception Management
With the increased complexity of supply chains, businesses continue to explore ways to manage supply chain process variability with simple methods of continuous improvement. One proven route is to focus on supply chain event and exception management, moving from a reactive to a proactive response for resolution.
A supply chain event includes expected transactions or process steps, while an exception occurs when the event does not satisfy pre-defined conditions. Event management can monitor performance of on-time delivery, required inventory levels, and order accuracy. When event conditions deviate from what is expected, the system can apply exception management rules to automatically adapt in order to reduce cost, adjust service levels to meet the committed delivery date or route a discrepant shipment to the right department.
Supply chains lose time and resources dealing with repetitive variations in processes or data. Investing in improving existing processes, increasing data visibility and using available technology allows companies to manage many of their exceptions while maintaining or reducing inventory and lead time. Here are a few approaches to accomplish this.
Automated Decision Making
Supply chains that provide direct-to-consumer shipping face competitive pressures of next day or 2-day delivery requirements. Customers expect to know when a package will arrive before they make a purchase. Shippers have to decide if they use static shipping service level guidelines or dynamic service levels depending on origin, destination, committed delivery date and other customer specific attributes such as membership category.
An opportunity to minimize parcel shipping costs lies in automating shipping service-level decisions. The event management system can take data from multiple sources and select the least cost option that meets the committed delivery date. For example, if you’re shipping within the same zone, the system selects ground service and the package arrives within the committed timeframe. If you’re shipping a greater distance, the system selects 2-day shipping to meet your committed delivery date. While some companies effect this through a transportation management system, others create this capability using internal event and exceptions management functionality, especially if the shipping service level is influenced by data across multiple systems.
Another common challenge in any supply chain is resolving discrepancies that can occur during the ordinary course of doing business. Many companies spend an inordinate amount of time on regularly occurring variances that are not worth the human resources required to resolve them. Exception management allows a company to focus resources on other issues that are going to affect the bottom line.
Common examples of this are purchase order or invoice discrepancies on incoming materials. Troubleshooting these exceptions can be time intensive and increase operating expenses as resolution requires time, energy, and additional payroll hours. Even small variances that are easily sorted out in minutes add up to hours and days over the course of the year.
With a tolerance-based automated process where only the variances that are outside of acceptable thresholds are stopped and evaluated by humans, we focus the enterprise on using resources efficiently. In concert with these filters, feedback loops are built in to measure supplier performance over time to identify sub-standard suppliers or create healthy competition among a supplier network. With a more automated approach to managing these small variations, supply chains can more efficiently scale and grow to support the business.
Automation can be used to reduce operational latency and lower total cost while also avoiding longer lead times. It is important to evaluate your end-to-end supply chain to identify opportunities to minimize the need for human input with the help of improved process and technology.
Given the multitude of strategies to automate resolutions for common supply chain exceptions, larger more complex problems often need a cross-functional team to resolve and chart the new course. Research indicates that only 12% of companies coordinate supply chain processes via an empowered central organization that makes and implements decisions and measures performance.
With today’s technology, teams can be virtual and globally dispersed. Event and exception management is increasingly being leveraged across supplier and carrier networks. For example, event parameters rely on data from multiple systems and suppliers. Warranty product returns of serialized devices could seek to verify the serial number, customer warranty entitlement terms, if all accessories were included, and more. In today’s supply chains, collaboration is necessary and—if done well—is a competitive advantage that strengthens an agile supply chain.
While technology is part of a collaboration strategy, a measurable process is also critical. Enabling event and exception management frequently requires modifying processes to capture the data necessary to apply handling rules. Companies should be analyzing exceptions data and automating repetitive patterns that currently depend on human intervention. Doing so enables the supply chain to identify areas of automated exceptions handling, calculate the benefit of automation and measure the results to verify the benefit.
How we can help?
Plaster Group consultants have experience working within extremely complex global supply chains, decreasing costs and increasing efficiency. We leverage common, accessible principles to identify and model improvement scenarios using our client’s own data. Our solutions are not predicated on large technology or resource investments and frequently leverage existing data and systems to develop right-sized solutions for the client. Let Plaster Group help you explore how event and exception management could strengthen your supply chain performance.
Doug Ugarte is a Supply Chain Consultant specializing in Customer Experience Design and Reverse Logistics in the Supply Chain Practice at Plaster Group. He creates customer experiences through supply chain process design and is passionate about everything below the surface that allows a duck to look so calm.