Ellery's Essays

We Need Engineers to Solve Supply Chain Problems, Not Managers

We encounter lots of problems with supply chains.

Customers complain about late and incomplete deliveries;
Vendors charge higher prices for materials;
Some products turned out defective;
Manufacturing didn’t follow the production plan;
Trucks didn’t show up to load for delivery;
Expenses are running over budget;
We don’t have enough skilled people for our operations.

But how serious are these problems? How do we as managers prioritise which problems we will put most of our time and resources into?

When the World Health Organisation (WHO) declared the coronavirus COVID-19 pandemic in mid-March 2020, governments immediately restricted the movements of people and merchandise. Supply chains went into standstill. Consumers rushed to buy and stock groceries & basic household items, which resulted in empty store shelves everywhere. Factories and offices were shut. Ports were closed. Perishable items and food got stuck in storage facilities and many products ended up undelivered and wasted.

We saw the pandemic problem as a health crisis. We sought ways to protect ourselves. We bought masks and stocked up on disinfectants, toilet paper, and soap. We stopped visiting relatives, cancelled attendance to parties & get-togethers, and even avoided going out for walks around our neighbourhoods.

At the same time, we struggled to continue making a living to support and feed our families. We figured out how to work from home, set up e-commerce websites to sell our products, and meet with business contacts via videoconferences & online chat rooms.

For the critical factories and facilities that needed to stay open, we bought and distributed to our employees all the personal protective equipment (PPE) we could find. We installed hand-washing stations at entrances and at workplaces. We separated workers as much as we could via dividers and staggered shifts. We mandated regular coronavirus tests for everyone and asked any employee who exhibited any hint of coronavirus symptoms to go on leave.

As much as we treated the coronavirus pandemic as a health crisis, we did not recognise it as a supply chain crisis.

Supply chains from their sources to their end-users employ millions of people around the world. Yet, they remain an untapped potential for enterprise growth and competitive advantage. More so for nations and countries seeking continuous revenues from global trade. There are lots at stake and much to reap from supply chains.

We, however, are hardly moving to improve supply chains. We failed to respond to the disruptions of the pandemic. We never had really put that much effort into improving our supply chains, before the pandemic, during the pandemic, and after the pandemic.

One reason for this is we simply didn’t treat supply chain problems with much urgency and importance.

Many corporations don’t have chief supply chain officers (CSCO’s). Many don’t even have supply chain managers in their organisations. Some enterprises, especially large multi-national corporations, separate their purchasing, manufacturing, & logistics departments in which each end up with conflicting priorities. And many executives push down many supply chain concerns to middle level managers, who end up doing more day-to-day troubleshooting than improving.

Supply chains became a hot-button issue during the pandemic. Media coverage had put supply chains on the limelight thanks to global shortages and runaway prices of products. We as enterprise executives promised better results. Resilience became the most popular supply chain buzzword.

Many of us who are supply chain managers are nothing more than daily fire-fighters. We sometimes have no time to think supply chain problems through when we face them. We fight them like fires, fighting to mitigate them before they become bigger problems.

Real fire-fighters work just as hard preventing fires & minimising risks as much as they work hard in putting them out and rescuing people. Fire-fighters audit & inspect facilities, train fire brigades, hold seminars, and conduct drills.

Fire-fighters, however, can do only so much. They communicate that the best way to avoid problems is for enterprise stakeholders to take the lead in making their enterprises’ systems & structures more risk-free.

The same goes for us as supply chain managers. We try to solve problems before they become fires (i.e., burning platforms). We formulate strategies & roadmaps. We hire & assign talented people to handle key operations. We bolster our resources, build inventories, and add capacities.

Sometimes, these measures work. But problems and their disruptions still inevitably pop up and we’d find ourselves once again fighting fires.

We often make the same promise at the aftermath of a supply chain crisis: it won’t happen again. But we don’t say how we’ll make sure it does not happen again.

We don’t say how we’ll make sure we won’t have future ‘fires’ because often, we don’t really know what the problems were and how important & urgent they were.

We will always encounter supply chain problems. They are inevitable. They may not be identical to past problems (hence, we are somewhat right they don’t happen again) but they’ll come sooner or later, whether we anticipate them or not.

Fire-fighters don’t solve problems. They fight them, mitigate them, and help us prevent them.

Likewise, we as supply chain managers don’t solve problems. As much as we may want to and spend much time trying to, we really do more fighting “fires,” mitigating them, and preparing for the next one.

Solving supply chain problems is the job of supply chain engineers. As supply chain managers work to fix problems to mitigate their adverse effects, supply chain engineers identify, define, and solve the problems.

Supply chain problems will always be there and won’t stop coming. We as supply chain managers don’t solve supply chain problems. We do quick fixes, stop them from getting worse, and try as much as possible to minimise the risks of disruptions.

Supply chain engineers solve supply chain problems. And the first step to solve supply chain problems is to recognise we need an engineer to do it, not a manager.

About Ellery’s Essays

Value Chains, Supply Chains, & Our Wrong Mindsets

Michael Porter introduced the Value Chain model in his seminal book, Competitive Advantage,¹ in 1985. The value chain broke down activities of the firm (the enterprise) and how they collectively contribute to the value of products & services.

How well activities perform and interrelate would manifest in the margins, which are the difference between value (what customers are willing to pay) and the cost to create that value.

The key words are ‘perform’ and ‘interrelate.’ How functions or departments perform and work together determine the value of the enterprise’s products & services.

It isn’t something new. Porter devised the value chain model in the 1980s and we have learned and improvised from the model since. The value chain brought to light the importance of our individual roles & responsibilities to the enterprise. At the same time, it emphasised interdependency in the organisation and between organisations.

Michael Porter, however, also brought to our attention to the value system. He shared that value chains of enterprises are linked. We connect, for example, with the value chains of our vendors, our customers, our channels (e.g. distributors, dealers) and 3^rd party service providers. We also interact with the value chains of our enterprise’s business units, such as with the other product lines of our business.

We are interdependent not only via the functions & departments within our enterprise but also with the enterprises we buy from, deliver to, engage for services, and share time, talent, & resources.

The value chains collectively put together as the value system influenced the margins of each chain’s products & services. Vendors and service providers impacted our enterprise’s margins as much as we impacted our customers.’ At the same time, our interactions with other business units also influenced their margins.

Michael Porter’s value chain and value system reinforced the supply chain model which we have come to espouse. Although value chains are broader in coverage and stress maximising margins via competitive strategy, both value chain & supply chain emphasise the importance of performance & relationships within and between enterprises.

Thanks to the value chain and supply chain, we have managed to develop & implement strategies that have brought our enterprises to new heights. Our businesses have grown in leaps and bounds as we have been able to competitively deliver our products & services to markets around the world. Via cutting edge innovative technologies and via aggressive organisational development & teambuilding, we have integrated our operations into networks of interdependent activities with the common goal of making available merchandise at the lowest cost and best service. As a result, many of our enterprises have accumulated greater wealth, gained better than expected competitive advantage, become better corporate citizens, and seen our businesses prosper beyond our wildest dreams.

The value chain and the supply chain are models that have revolutionised the way we manage our business operations.

Why, then, however, are we complaining about supply chains? Why are we pinpointing them as causes of chronic disruptions to our overall strategies? And why are we often saying there’s a supply chain crisis? What are we missing?

We can speculate that over the more than 40 years since the supply chain was introduced, we have run into the following wrong mindsets :

Wrong Mindset #1: We didn’t accept supply chains in the executive suite

The value chain is a model to illustrate how we can better manage our enterprises to gain competitive advantage via increased margins in our products & services. We have used it to persuade our people to perform and interact together towards an aligned strategy.

The supply chain is a model for operations management in which we integrate the activities underlying the flow of merchandise & services toward higher productivity and added value for our customers.

Many of us, however, don’t see supply chain management as a top-level responsibility. We didn’t see the validity of integrating key operations under one leader. Whereas we’d have maybe executive positions for manufacturing, quality, or purchasing, we hesitated or avoided granting one that would cover all the operations that were essential to the flow of products & services.

And for some of us who did establish supply chain management positions, we limited their scopes. We would give supply chain managers authority over some functions like procurement, planning, and logistics but would not give them any power over purchasing and manufacturing. We rationalised that supply chain management positions would cover too much ground or would be too powerful to tame.

We, instead, relegated supply chain management to the middle of management hierarchies. Middle-level managers mostly, and frequently informally, ended up handling the issues that arose in supply chains. Logistics supervisors constantly followed up manufacturing for finished products so that pending orders would be served, production managers sought raw & packing materials from the inbound materials department, and the inbound logistics people would fight with quality assurance inspectors to release just delivered but badly needed materials.

As more and more supply chains became global in scope, disruptions intensified to the point of alarming executives. New enterprise upstarts, fickle international trade laws, a worldwide pandemic, military conflicts, and politically based economic sanctions became too much for middle management to handle. We eventually embraced supply chain management into our enterprises’ board rooms and executive suites.

Wrong Mindset #2: We treated supply chains as a given, not something we can change

We supply chain managers finally got our seats on the executive and board room tables, but many of us still had preconceived notions of what supply chains are and how they are to be managed.

One common preconceived notion is that supply chains are a given. We work with what systems & structures are available and we don’t think of changing them. The existing production lines, the warehouses, the systems our people use, the transportation modes, the shipping ports, the vendors, and the 3^rd party service providers are rigid. We don’t try to, or even think, of changing them for whatever illogical reasons, the number one of which is fear. We’re afraid we won’t find alternatives to what are already existing (e.g. international transport routes), we fear we’d be uprooting from locations (e.g. moving factories from places they’ve been for many years), or we just don’t want to face the resistance (e.g. labour unions refusing to consider automation).

The good news is that we can change supply chains. But it’s not only fear we’d have to overcome. We’d have to change another mindset in doing so.

Wrong Mindset #3: We believe we can improve supply chains by managing them.

We have employed supply chain management talent in the hopes that the new hires would effect significant changes that would mitigate risks and head off disruptions.

That’s not going to happen. Because supply chain managers work with what they have and don’t have the full-fledged expertise to change systems & structures.

An analogy is city traffic. In Manila, Philippines, where I live & work, traffic is a daily problem, if not crisis. City politicians and their police departments manage their respective traffic snarls by assigning enforcers at intersections, enacting ordinances (e.g. prohibiting cars on weekdays via their license plate numbers), revising road flow (e.g. making streets one-way instead of two-way), installing more traffic lights, and painting lines & putting up signs. In short, they manage traffic within existing the infrastructure of roads, traffic enforcement, public transport, & local politics.

Traffic management can do only so much, however. If the systems & structures remains the same, the traffic mess will continue. And in Manila, despite all the efforts of past decades, it has.

What’s needed to improve traffic in cities like Manila is not management but engineering. Managers manage what’s in the infrastructure; engineers change them. Engineers offer the problem-solving game-changing expertise that lead to new & better systems & structures. Manila’s traffic mess can only change when we design & build new road networks, reset & introduce new public transport systems, and overhaul & replace the governing hierarchy.

We can’t manage our problems towards solutions. But we can engineer solutions to our problems.

Michael Porter introduced the value chain in 1985 and it has helped to highlight the importance of supply chains in operations management. We have adopted both value chains and supply chains into our strategic portfolios, but we need to overcome wrong mindsets if we are to progress. These include the following fixes:

Accepting supply chain management as an equal in the high-executive echelons of our organisations;
Not treating supply chains as a given, but as an avenue for change;
Engineering, not management, will bring that change.

In effect, for supply chain management to work, we’d need to bring in the engineering talent to solve our problems and head off future crises.

The sooner we accept that engineering can be a partner for management in solving our supply chain crises, the earlier we can get things done.

About Ellery’s Essays

¹Michael E. Porter, Competitive Advantage (New York, New York: The Free Press, 1985) pp. 33-61

²Ibid. Figure 2-2, p. 37 (arrows provided by writer of this essay)

³Ibid. Figure 2-1., p. 35

Negotiations Won’t Solve Our Supply Chain Crisis

During a Philippine Senate hearing conducted on June 21, 2023, the chief commercial officer of Cebu Pacific Airlines apologised for recent passenger service disruptions in which he added:

“We recognize that global supply chain issues are further worsening the situation and causing additional delays in aircraft deliveries. As a result, we have experienced delays ranging from anywhere 2 to 5 months for our scheduled deliveries in 2023,”

https://newsinfo.inquirer.net/1791237/cebu-pacific-sorry-for-disruptions-vows-to-resolve-challenges

Philippine Airlines likewise issued a statement:

“We sincerely apologize to our passengers affected by several flight cancellations that we experienced this week. Several aircraft had to undergo maintenance due to ongoing supply chain delays and unexpected technical issues that developed.”

https://www.rappler.com/business/airlines-say-spare-parts-shortage-maintenance-problems-cause-canceled-flights/#:~:text=%E2%80%9CWe%20sincerely%20apologize,issues%20that%20developed.%E2%80%9D

It’s not just airlines that are blaming supply chains for their woes.

Many enterprises in most industries such as online sellers, supermarkets, automotive dealers, hospitals, and construction hardware retailers are blaming supply chains for any shortage or failure of service.

We have managed supply chains since the term was first coined in the 1970’s. Supply chains have become the model for how merchandise and services flow from their sources (e.g. raw materials) through our enterprises and finally to end-users.

We as managers or executives have always had our work cut out for us in managing supply chains. We managed inventories, planned production, negotiated contracts with vendors, optimised transportation, and set up systems to serve orders.

We always had challenges to deal with such as undelivered pending orders, customer complaints about product quality, lack of transport vehicles, factory shutdowns, surges in demand, pilferages, and scrapping obsolete items.

But we never encountered what we experienced in March 2020 when the World Health Organisation (WHO) declared the coronavirus pandemic. Almost overnight, nations closed their borders, offices & facilities shut down, and transportation slowed, if not stopped. Shortages occurred and basic items like toilet paper & soap were rationed. We shifted to online selling & buying to survive and get the things we needed. It was a traumatic event that caught us and our supply chains off-guard.

Ever though pandemic fears faded three (3) years later, we have elevated supply chain problems to that of crises. We have not shaken off our bad experiences of product shortages and service disruptions stemming from the pandemic. And as economies picked up, we have come to demand better from supply chains to the point that managing them has become our number one priority in business.

Supply chains exist because of the relationships we have not only between the varying functions within our enterprises but also between the vendors, customers, & 3^rd party providers we engage with. Our relationships supposedly have one (1) common purpose: to move & deliver merchandise & services productively from their sources to their users.

But because we are individuals with differing views and visions, we don’t entirely share the same interpretation towards that one common purpose. We have our own interests and priorities in how we manage our supply chains. Hence, much of our work in supply chains involve much negotiation amid conflict and dispute. We jostle to justify and convince others to see things our way as much as they try to make us see theirs.

And that’s what we mostly have been doing with supply chains long before and through the pandemic. We’ve been predominantly negotiating our way out of supply chain problems.

We outsourced operations from the 1990’s to the early turn of the 21^st century. We set up information networks to communicate better and faster with vendors & customers. We engaged 3^rd party providers to handle our storage & transportation logistics. As our businesses have become complex and global, we honed our negotiation prowess as we worked with more people within and outside our enterprises and established contracts with 3^rd parties from various countries.

We have invested a lot in information technology (IT) hardware & software to not only integrate the flow of data within our enterprises but also to better communicate, negotiate, and execute deals we make with our vendors, customers, and 3^rd party providers. We continue to spend money to support development of automated & artificially intelligent systems so that we can work faster with the people we relate with and optimise our engagements with them (aside from reducing redundancy in head counts as well as shrinking the number of 3^rd party service contracts).

Being better negotiators and having more sophisticated IT tools to do it, however, had apparently not been enough to stem the stigma that supply chains are in crises. The shortages still occur, the service disruptions still happen, and the customers are complaining ever so louder to the extent they have garnered the attention of not only business chiefs but also political leaders & media outlets.

Negotiation is not enough to solve today’s supply chain crises.

What’s needed is a problem-solving approach and subsequent changes in systems & structures.

In other words: engineering.

Cebu Pacific and Philippine Airlines were trying to negotiate their way out of the crisis they were in with their customers, suppliers, government, & the public. Both airlines insisted their issues are caused by shortages of spare parts and maintenance services. They implied their vendors & service providers are the problem and not them. As if the crisis they’re in would be fixed by finger-pointing and apologies (other than by giving out travel vouchers & discounts).

It’s obvious that both airlines simply had not come up with better systems & structures to improve the productivity of their operations. And because they are in a quandary, their problems had become a raging crisis, a burning platform which are costing them not only loss of income but also goodwill from their passengers.

And this same reasoning applies to the firms and industries who continue to try to negotiate their way out of whatever supply chain crisis they’re in. We as stakeholders or customers pay the price when enterprise managers don’t have a clue to fixing their supply chain crisis other than via negotiations, if not laying blame on others.

We solve a crisis by first assessing and understanding it. We gather data. We analyse. We lay out our criteria and brainstorm our options. We select an option and formulate a solution. This is the gist of problem-solving, the basics of engineering. We need not be intimidated by the myth that engineering is only for rocket scientists or the highly technical.

It is from what we present as solutions that we partner with negotiation to push what we believe would be the best means to address any crisis. Negotiation gets better with credible and logical information.

Supply chains do tend to mend themselves. They bounce back often without our intervention. As pandemic limits lifted in 2022, transportation normalised and merchandise flowed close to volumes before the virus sowed fear around the world.

We had seen our businesses revive but we learned that supply chains are vital to our success, if not survival. Hence, we see problems with our supply chains as crises deserving top-management priority rather than as challenges relegated to middle management.

But we cannot work with the same methodologies and approaches we did pre-pandemic. We cannot negotiate or manage our way out of future supply chain crises. If we are to progress, if we are to become more productive, we need to apply engineering expertise to our supply chains.

Supply chain management offers no quick-fix silver bullets to supply chain crises. The solutions lie in the problem-solving approach exercised via the engineering field.

About Ellery’s Essays

Challenges & Crises: The Two Types of Problems We Tackle in Business

We encounter all kinds of problems every day. And they go by different names, such as:

Dilemmas
Situations
Emergencies
Obstacles
Opportunities
Illnesses
Chaos
Curiosities
Puzzles
Conflicts
Projects
Competitions
Controversies
Complaints
Burning Platforms

These problems, especially while managing our enterprises, end up as either of two types:

Challenges
Crises

We categorise the issues clamouring for our attention as crises or challenges depending on how urgent and important either one is.

A crisis demands our immediate attention and response. If we don’t address a crisis, serious adversities would result. Running low on cash to pay bills, for example, is a crisis that can (and will) lead to the shutting down of the business.

A challenge is a problem which we resolve to make progress towards our goals. Challenges emerge whenever we plan strategies and set targets. We need to overcome challenges to get whatever we want and reach wherever we want to go. How to price products competitively, for instance, is a challenge as the enterprise has profit goals to attain.

A crisis can be a looming threat or the aftermath of a catastrophe. It can be a risk that manifested itself or a probable danger in the very near future. Whenever we face a crisis, we put priority to alleviate or mitigate it. We don’t stop until we at least have tamped down the effects of the crisis. A fire in the building is a crisis and even if we put it out, we’d have to deal with the impact of the damage afterward. A crisis is not over until we are back on our feet.

A challenge can either be a roadblock, or simply a requirement. Challenges are either foreseeable or unanticipated but when we tackle them, we work to get around them or beat them. We don’t grow or meet our goals unless we hurdle challenges. We, therefore, take challenges seriously as we work to accomplish our objectives. We, for instance, plan the employment of skilled people needed for our businesses and we lay out a strategy to offer & negotiate attractive compensation packages to hire & retain the best employees we can find.

In crises, we go into survival or defensive mode. We confront a crisis now otherwise we will suffer potentially irreversible damage or significant setbacks to our business. We don’t review roadmaps or long-term visions because in a crisis, we are under threat or busy doing damage control. In a crisis, our immediate task is to end it before it ends us. If we’re on a boat and we see a storm coming, for example, we batten down the hatches. We don’t dilly-dally otherwise our boat sinks.

With challenges, we review our present states versus our future states. We assess a challenge’s impact to our roadmaps and timelines, and we plan how to hurdle them. When we buy a house, for instance, we foresee how we’ll be living in it in the next twenty (20) years versus today. Do we allow for future expansion or do we plan to move out when our children grow up? How much would it cost to live in the house over time?

Crises demand our urgent attention.

Challenges demand planning based on what are important for us.

The problems we face as professionals stem from crises and challenges. How well we solve our problems starts with determining whether one is a crisis or a challenge. Sometimes (if not most of the time), however, we make the mistake of mixing up one with the other.

And making that mistake can be dangerous.

The treasurer of a commercial building association noticed from the property’s annual financial statements that there was a cash-flow discrepancy of PhP 6 million ($USD 107,000). The treasurer could not trace where the cash went and requested the building’s property management to immediately find the money. The property management contractor, however, took more than a year to make a report, despite continued urgent follow-ups and complaints from the treasurer. Exasperated, the treasurer asked an external auditor to take over the investigation. The external auditor, however, also took so long to report, which left the treasurer very frustrated.

The missing cash caused delays in investments in building improvements. An elevator broke down and was not fixed. The building’s fire protection system had sprinklers that did not work. Worse, as time passed, it got harder to trace where the missing cash went.

The missing cash was a crisis but, unfortunately, was treated more as a challenge. The result was the likelihood that the building wouldn’t recover the money and services for the owners & occupants would not be up to par.

In another example, a large manufacturing corporation had a warehouse full of slow- to non-moving inventories of materials and products. The chief executive officer (CEO) assigned the problem to task force to handle what to do with the non-moving inventories. The task force, after several months of study, recommended that the corporation invest in an enterprise resource planning (ERP) software system to streamline its inventory management system. After many weeks of planning and implementation, however, the ERP system failed to reduce the non-moving inventories.

The corporation’s chief finance officer sounded the alarm that the non-moving inventories were dragging down the company’s cash flow. But the CEO didn’t think it was a crisis and he delegated the problem back to the task force for further study.

The CEO saw the non-moving inventories as a challenge as the non-moving inventories didn’t pose an immediate threat to the corporation’s business. But because he didn’t put much importance to it, the corporation didn’t grow as much as it could have because of the inventories’ drag on the company’s finances.

What we see as challenges can really be crises. And what we see as crises can just be challenges. But challenges can evolve into crisis if we don’t address their importance and crises can downgrade into challenges when we respond to them and mitigate their immediate threats.

We deal with all sorts of problems every day. In the course of doing our jobs, we categorise problems as either a crisis or a challenge, depending on their urgency and importance.

We must be careful, however, to know the difference between crises and challenges. In the end, it depends on how much we value our enterprises that would determine how we distinguish between the two.

About Ellery’s Essays

Comparing Supply Chain Management versus Supply Chain Engineering

What’s the difference between supply chain management (SCM) and supply chain engineering (SCE)?

Supply chain management is the management of people, structures, & systems that underlie the relationships of functions which enable the flow of merchandise & services from their sources to their destinations and users.

SCMs work with existing systems & structures as they harness resources, negotiate with vendors & 3^rd parties, and manage their teams to transform materials to products and serve their enterprises’ customers.

Supply chain engineering involves the building of those systems & structures SCMs manage. SCE’s tasks include setting up logistics networks, developing procurement & production systems, proposing & implementing additional capacity projects, erect new facilities, customising demand & inventory management systems, writing up methods & procedures, and improving the environments & conditions of workplaces.

SCMs plan, organise, direct and control existing systems, structures, & facilities.

SCE’s study, design, and construct new systems, structures, and facilities.

Both SCMs and SCEs overlap in that both manage the resources and people assigned to them. But each has its own exclusive aims.

Both SCMs and SCEs have huge scopes. Supply chains encompass activities from the acquisition of merchandise, the transformation of materials to finished products, the storage & handling of inventories, the dispatch & transportation of items, to finally the delivery of items & post-sales services. Supply chains extend beyond the borders of enterprises and thus require negotiation & collaboration with vendors and 3^rd party service providers. It can be overwhelming for both SCMs & SCEs.

Supply chain management is related to operations management, a subject that falls under the business administration degrees in many colleges. It has become a visible and high-profile field brought on by the need to be perfect & productive in the competitive business world of the 21^st century.

SCMs have merited a place in the upper echelons of organisations, in which more and more enterprises have welcomed chief supply chain officers as valuable members of the executive suite.

SCE, meanwhile, is a spin-off from Industrial Engineering (IE), which is concerned with the boosting of productivity via improvement of systems, methods, and the workplace. Industrial Engineering, however, is a not well-defined field and remains one where many do not see it as deserving as equal to other engineering disciplines.

It doesn’t help that IEs are constantly re-defining what Industrial Engineering is and thus, have not gained much recognition because they have not resolved their identities universally among enterprises and industries.

And since IEs are constantly trying to convince people who they are, even as they themselves try to figure it out, SCEs naturally would not have much of a starting chance for recognition themselves. Supply chain engineering is invisible, misunderstood, and unappreciated, and will remain so for some time.

Which is too bad.

Supply chain management has become a high-profile job. We have come to rely on supply chain managers to seek solutions to the causes of disruptions in the flows of our merchandise. We have elevated SCMs to critical roles to attaining the productivity we want in our operations. We see supply chain management as a hopeful avenue to enterprise success.

Well and fine for SCMs but unfortunately, SCMs are only as good given what they have.

Being managers, SCMs do a lot of work via their relationships with the people that report to them (e.g. procurement, logistics, planning, manufacturing), their peers in other departments (e.g. sales, R&D, finance, marketing, legal, personnel), their superiors (e.g. CEO, COO), and with customers, vendors & 3^rd party service providers. It is through these relationships that SCMs get things done.

Managing relationships, however, has its limits. In relationships we work with what we have. We work within systems & structures. We make do with whatever resources we have available. Owners may give us budgets to augment our resources but SCMs usually just add to whatever they have, instead of changing how things are done.

For example, because of looming risks in sourcing via international trade, SCMs would seek vendors closer to their operations. They would opt to source from multiple vendors, rather than to just one or two. They add to their alternatives but don’t really change the system of procurement.

SCMs do get things done, however. SCMs succeed in serving the demands of customers and they make great strides in continuously improving the productivity of their operations.

But only to a certain extent.

When it comes to changing how things are done, supply chain managers aren’t the best fits. That job best goes to supply chain engineers.

Whereas SCMs work with what they have and who they relate with, SCEs change the structures & systems that underlie supply chain operations. SCEs change how things are done and the very platforms where they are done.

Going back to the example above about sourcing from vendors, whereas SCMs may source from multiple vendors closer to home, SCEs would study & develop changes to the procurement process altogether. SCEs would examine the system of sourcing and how the enterprise buys the merchandise it needs. They would look at better ways to improve the system; they would look for that one best way of procurement.

SCMs manage with what they have on hand to realise results. SCEs change systems & structures so that SCMs shall realise results further from what existing systems were capable of.

We see supply chain management becoming a highly recognised high-profile profession that has earned a key role in achieving enterprises’ strategic priorities.

It, however, can only do so much with existing systems & structures.

Supply chain engineering gives us the potential to change our supply chains to make them more capable and productive. SCE, however, is not a well-known field and lacks recognition in most, if not all, industries.

There are a lot of issues and challenges facing enterprises in their supply chains. We could use all the help we can get not only from supply chain managers but also from supply chain engineers as well.

If we are to tap our supply chains, we should not only manage them well, we should also change them. We would need to recognise the potentials of the supply chain engineer.

About Ellery’s Essays

Freedom Comes via Control & Influence

Gurus and so-called motivational experts teach that we are free to decide our future, to do whatever we want, to believe whatever we wish. We can be whatever we want to be. We can pursue personal goals and choose our path to happiness.

Viktor Frankl experienced life in several Nazi concentration camps through World War 2. He lost several members of his family, including his wife. He was deprived of liberty.

Viktor Frankl said we determine our happiness (meaning of life) via our freedom of will. We are free to think what we want, to feel what we believe.

Liberty is a condition or right to engage in actions as allowed or limited by the laws of wherever we happen to be. It is freedom limited by other people, that is, societies, governments, enterprises, private associations, etc. We can do only what the laws allow.

Freedom in the context of free will and what gurus & motivational experts talk about is about the unlimited space we have to decide our fates, to choose what we like, and to go to wherever we want to be.

What the gurus & motivational experts don’t say, however, is that freedom comes with a price.

Boundaries of countries, regulations, economics, culture, peer pressure, and our social & family ties attempt to corral that unlimited space. Some of these boundaries are real, some are all in our minds. But they’re there and we pay a price whenever we challenge them for the freedom we want. What we have within these boundaries are liberties, not freedom.

Freedom is not free. The more we want it, the more we’d have to pay for it, to work for it, to fight for it.

Sometimes it’s not just a good idea to fight for that freedom of unlimited space.

I’ve seen young families opt for the good life of travel and neglect their families. They cry at the funerals of their passed away relatives as they regret not being there when they were needed. Afterwards, they travel again and in their later years, they regret not saving enough time for retirement. Their children, meanwhile, follow the same footsteps of enjoying the good life and neglect their families.

As much as we are tempted to negatively judge people for choosing paths that seem wrong, we are in no position to do so. The people were and are free to decide what they wanted and they paid the price for it.

Freedom isn’t about enjoying unlimited space but is about gaining more control and influence.

Control depends on our values & principles. We steer our lives based on what we believe are important to us. And we put our efforts and resources to controlling our actions towards those values & principles.

The beauty of our values & principles is we can change them as we learn and experience. And in effect, we can change what we control.

Our degree of control depends on what we can influence. We should strive to be more influential to gain greater control. Influence is not power; it’s the ability to bring others to share your values & principles, and to lead yourself & others to common goals.

Influence is a paradox in that in order for us to sway others to our side, we need to listen and consider the opinions of those others. To sway, we should allow other people to sway us. Influence is a two-way street; we influence as we also are influenced.

Freedom is that unlimited space we wish to enjoy. Liberty, on the other hand, corrals us to a limited domain depending on where we are. We strive to gain and experience more of that unlimited space that lies beyond liberty. We pay a price for it when we do.

Our freedom, however, grows via how much we control and influence. Control is about maintaining our path towards our goals. Influence is about getting more control over those things that limit our freedom. We gain influence not by asserting our beliefs but by considering other people’s points of views and sharing ours.

[The Philippines celebrated its 125^th Independence Day on June 12^th, 2023].

About Ellery’s Essays

Starting with the Symptoms

We encounter frequent symptoms with our supply chains. One reason is our supply chains are large in scope. Supply chains start from the source (e.g. mining of raw materials, harvest of agricultural crops), pass through a multitude of activities that supposedly add value (e.g., procurement, storage, manufacturing, handling, dispatch, transport), and end with our target markets of many users and consumers.

The symptoms we encounter with supply chains happen enough times to keep us busy and preoccupied. These include:

Delayed deliveries of materials from vendors
Customers complaining about product quality
Customers rejecting products delivered
Unscheduled shutdowns of production lines
Delivery trucks not showing up as scheduled
People not showing up for work
Pilferages
Losses
Equipment breakdowns
Items out of stock
Service provider asking for higher freight rates
Sales & marketing asking why their new products aren’t delivered yet
Finance managers insisting we lower inventories today

We spend a lot of time addressing symptoms. We do a lot of quick fixes. We stock up (or draw down) inventories, we hire (or fire) staff, and we buy from multiple vendors rather than relying on just one.

We attempt to permanently prevent symptoms via investments in automation & sophisticated information software (e.g., robots, artificial intelligence), via additional capacities (e.g., more warehouses, more manufacturing lines, more trucks), and via negotiations for more favourable terms & conditions in contracts with vendors & service providers. We outsource operations to offshore locations, or we build facilities to near-shore our supply chains closer to home.

We sometimes just bear with the symptoms and hope they will go away. That’s what many enterprises did when international ocean freight prices skyrocketed in 2021. Prices eventually plummeted from late 2022 to early 2023. Many business firms just rode with the wave. Some increased prices of their products while others simply cut back on orders of items from abroad.

Global container freight rate index from January 2019 to March 2023 (in U.S. dollars)

We sometimes are satisfied just working day-to-day mitigating symptoms. We’d rather not spend any more capital for our supply chains. Many of our bosses just don’t like the idea of spending any more time or resources for supply chains versus allocating money for marketing or research & development.

Many executives, who are our superiors, spend a lot of time developing strategies. To many executives, we should start with a strategy before we think of improvements to our supply chain operations. A strategy, after all, helps us plan what resources we need and how we will use those resources to reach our desired destinations, i.e., our goals.

We can’t, however, think about strategy and the goals we want to accomplish when we are bugged by symptoms. We can’t improve our operations if the symptoms are like burning platforms. We find ourselves putting out fires instead of contemplating longer-term changes.

We, therefore, improve our supply chains by starting with symptoms. As long as we feel them, we likely are suffering in terms of higher costs, lost productivity, and wasted cashflow.

Symptoms are effects of problems. We start with symptoms to identify causes and define the problems. To identify causes, we diagnose.

A diagnosis is not an audit. Audits aim to assess conformity to mandated rules, standards, & policies. Diagnoses determine the root causes of unwanted symptoms via the examinations of operations.

A typical diagnosis of a supply chain consists of four (4) steps:

Mapping
Data Research
Analysis
Identification

Mapping

Mapping helps us see and appreciate the operations of supply chains. Maps show us the activities, and present how functions work and relate to each other.

Mapmakers usually favour flow charts. Flow charts are either simple, i.e., basic shapes (e.g. circles, triangles, squares, arrows) or complicated, i. e., intricate in detail (e.g., value-stream maps, engineering schematics, critical path method [CPM] charts).

Maps can also come in the form of diagrams such as the fishbone or Ishikawa diagram and the Force-Field Analysis diagram.

The point of whatever mapping method we use is to visualise the supply chain so we can find out where we are feeling the symptoms and where to start our research.

Data Research

We research to catalogue bits of information and their sources. Data Research isn’t just data mining, which is about gathering as much as information as possible about a subject or individual. Data research is about reading and comprehending information from the data gathered. It includes interviewing people and comparing different versions of whatever stories they tell.

The finished product of data research is an organised report about the operations in which it explains where the symptoms are emanating from and where they are having an effect. Data Research provides the foundation for analysis.

Analysis

Analysis is the study of the research from which we draw conclusions.

We analyse via different means, such as:

Scientific
Statistical
Financial
Subjective
Comparative

So-called experts would tell us to analyse scientifically, in which they imply we should be objective, and not subjective. In a scientific analysis, we often use reductionism, in which we break down what we’re studying into its parts or components. The objective of such an analysis is to find out what specific part or component could be the root cause of an issue.

In a statistical analysis, we grind data to find mathematical correlations via parameters such as averages, standard deviations, probabilities, and trends. We look for where these statistical numbers lead to or originate from. And then draw conclusions from these numbers.

In a financial analysis, we assess the impact of the research on the wealth of our enterprises. We compute factors such as rates of return, depreciation, cashflow, and income derived from our supply chain operations. We then determine if the symptoms are worth addressing.

A subjective analysis is the opposite of a scientific analysis, in which we base our conclusions on our points of view and intuitions. We gather comments or suggestions from peers or teams based on the information we gathered. Or we make up our minds ourselves based on “gut-feel,” in which rely on our hunches or what we would call calculated guesses based on experience or even, emotion.

A comparative analysis checks our research between similar operations or between data from what we gathered in the present to what we recorded in the past. We use scientific, statistical, financial, or subjective methods as we compare varying scenarios.

Whatever analysis we do, we come out with our findings and conclusions. We identify the root causes of our symptoms.

Identification

In the final step of diagnosis, Identification, we articulate our conclusions and pinpoint the root causes of symptoms.

Root causes may be outright obvious, as in, for example, we see the cause right away from a fishbone diagram.

Sometimes, however, they are not so obvious even after analyses. This can happen if our analysis’ conclusions imply several causes.

For example, salespeople at a snack foods corporation complained about late & incomplete deliveries of pending orders. The salespeople cited empty shelves at supermarkets & convenience stores as an effect. Data research, however, showed that the logistics department was delivering orders efficiently, like 95% completely and on-time. Analysis concluded that:

Salespeople were submitting orders late, like up to one (1) week after customers called in their orders;
Items salespeople said were out of stock were often in-stock and available at the central warehouse, up to 90% of the time.

It turns out there is really one root cause: the ordering system was not in sync between the sales department and the orders processing department. The system’s functions of receiving, validating, and allocating inventories for deliveries were working separately than together.

Identification as a diagnostic step is a form of post-analysis of root causes. It puts together the conclusions and pinpoints articulately what’s the cause of the symptoms.

We often start from the symptoms when we want to improve our supply chains. As engineers, we diagnose our operations by focusing on where we are feeling those symptoms.

Diagnosing involves mapping, research, analysis, and identification. We map our operations to see how functions work & relate with each other and look where the symptoms are having an impact. From mapping, we research not only by mining data but also by reading, comprehending, and organising them. We analyse via the methods we think are best applicable to our diagnosis and we conclude by identifying the root causes of symptoms.

A diagnosis is not a tool. It’s a method or procedure built into our problem-solving approach especially for our improvement of supply chains.

And it is the first thing we supply chain professionals do before we define and solve problems.

About Ellery’s Essays

Managing Uncertainty

We’re like baby sea turtles when we begin our careers. We don’t know what awaits us as we venture out into the world. We learn to deal with a lot of uncertainty.

A property manager proposed a project to build a warehouse that would require an expenditure of PhP 2,500,000.00 (USD$ 50,000). Three (3) out of five (5) directors of the corporation’s board approved the project. Two (2) questioned the economics, in which both felt it would be better to just leave the money in the bank and earn interest.

In the debate that ensued, the three (3) directors in favour believed the proposed warehouse’s return on investment will outpace the bank interest rate over time, especially after the warehouse investment pays out after an estimated eight (8) years.

One of the minority directors said the PhP 2.5 million would be better invested via financial instruments. The money would earn from growing interest and by dividends, especially if invested in securities, like stocks.

In justifying business projects, we compare alternatives by determining how much money we earn from the investments. We look at the paybacks from the investments in terms of the additional income earned and we evaluate the rates of return versus what it would be if we just did nothing or leave money in the bank.

The trouble with computing paybacks and rates of returns is that we assume certainty in the numbers. We assume that the estimated returns of investment will be what we realise.

In developed countries such as the United States and European nations, many people plan their daily routines with a high level of certainty. Because city traffic is predictable, they would confidently know what time they’ll be at work and what time they’ll be at home every day. People make long-term plans for their families and businesses as they enjoy stable political & economic climates.

For people in not-so-developed countries such as the Philippines (where I live), we deal with a lot of uncertainty. We don’t know what tomorrow will be like, despite what routines we aim to follow. Traffic is as unpredictable as the weather; we don’t know what time we’ll reach our destinations and we don’t know if it will rain today. We plan more for the short-term than the long-term because frequent changes in laws & regulations make for uncertain political & economic climates. Prices fluctuate without warning, taxes rise and fall in short notice, and even contracts are not ironclad as they are subject to fickle legal rulings.

We anticipate uncertainty by building in back-ups and contingencies into our systems and structures. Better flood control, for example, would reduce the probability of inundated roads and traffic gridlocks. We also stash more cash for the so-called rainy days, as hedges against disruptions, whether natural or man-made.

In the warehouse project mentioned above, the corporation operates in the Philippines. Three (3) of the corporation’s four (4) directors who voted for the warehouse live in the Philippines. Two (2) who weren’t warm to the warehouse project reside in America.

We remedy uncertainty by gaining greater influence over our businesses. The directors who favoured the warehouse believed investing in a facility in the Philippines gives the corporation greater control over its assets. The minority two (2) directors could not immediately understand this as financial investments in the USA offer stability and earnings growth. They didn’t see that financial investments in the Philippines are more uncertain in financial returns than in developed countries.

We perceive greater risk with uncertainty simply because we are unsure of what will transpire today to tomorrow. But we can turn uncertainty to an advantage by investing in systems & structures that give us more influence over the results. Having a warehouse where we can decide the price of the lease sounds better than leaving it up to bankers, whom we really don’t know, to determine how much interest we’ll earn from our investments.

The key word is influence, and it’s why I believe it’s a strategic priority that ranks up there with wealth accumulation, competitive advantage, and esteem.

Uncertainty varies from one place to the next, more so between developed and not-so-developed countries. We manage uncertainty by investing in assets that we have greater influence over. And as we gain from the returns from these assets, we also don’t stop seeking opportunities to invest where we can have the same or more influence in what benefits we can gain.

About Ellery’s Essays

The Convincing Need to Test Ourselves

We go to the doctor when we feel sick. We hardly go see the doctor when we are healthy. If we’re feeling all right, we think we’re okay; we don’t see the immediate need to get ourselves checked.

Health experts have repeatedly advised us to get ourselves examined at least once a year. We’re supposed to have our blood chemistry assessed for such things as glucose and cholesterol. We’re also supposed to undergo a colonoscopy when we reach the age of 40.

But we don’t. We feel good so why the need?

We check our cars more than we check ourselves. We look under the hoods of our automobiles to see if they have enough coolants in their radiators and enough fluids for the power steering & automatic transmission. We see if our cars’ tires are properly inflated, and we dip the dipstick to know if we have sufficient oil in our engines.

We upgrade our kitchens and bathrooms. We remodel our houses, and we maintain our gardens. We bring our pets to the veterinarian to get them vaccinated so they’d be safe against pathogens.

But we procrastinate when it comes to scheduling our once-a-year physical or dental appointment.

Our doctors can only diagnose and prescribe treatment when they have available up-to-date data about our bodies. If we’re going to prevent future illnesses, doctors need to get information about our health. We shouldn’t wait to be sick to find out how we can stay fit.

Other than the money and time we’d have to spend, we dread the discomfort of annual physical exams and laboratory tests. Blood chemistry tests often require overnight fasting from food & beverages. Magnetic Resonance Imaging (MRI) and positron emission tomography & computed tomography (PET-CT) scans usually require preparations such as a limited diet and fluid intake hours beforehand. We also need to restrict eating and take laxatives before a colonoscopy. So-called executive physical examinations usually require an overnight stay at the hospital.

Health examinations are not only inconvenient but also uncomfortable. We, therefore, try to put them off as much as possible. There’s not as much pain in checking our cars & pets and in renovating our houses as much as there are in physical exams.

We try to tell ourselves that it’s worth it to regularly have our bodies checked. We know if we don’t get tested or examined, we risk serious ailments from diseases that would be harder to cure than it is to prevent. We need to tell ourselves that whatever discomfort & inconvenience we’d get from an exam would be far easier to endure than whatever expensive and painful medical treatment we’d suffer through from a sickness we could have avoided.

It’s not just about the tangible resources we’ll be spending but also the intangible investment of time, convenience, and comfort. Investments aren’t just about money or resources spent but how we prioritise our time and relationships.

How true is the adage: an ounce of prevention is worth a pound of cure.

About Ellery’s Essays

Managing Performance

We as supply chain managers typically oversee the following:

Demand
Inventories
Performance

It’s all part of our job to be perfect in serving customers and productive in meeting the standards of our superiors.

We manage demand to synchronise supply.

We manage inventories to make available products & services and make sure we don’t have too much (or too few) items on hand.

The third thing we do is we manage performance. Managing performance is about making sure the supply chain operations we manage are doing what they’re supposed to do in the fulfilment of demand.

Whereas managing demand is about matching our supply chains’ capabilities to the demands of our customers and whereas managing inventories is about establishing and maintaining stock levels of merchandise, managing performance is about how we converge people and resources to do the activities that add value to the flow of items through the supply chain.

Managing performance necessitates the basic skills of:

Planning
Organising
Directing
Controlling

For us who work in the supply chains, we use each skill for specific functions. The following are some examples:

Scheduling Operations

We schedule to synchronise supply to demand. And it can and is a daily daunting challenge for supply chain operations managers. We schedule what and how much to buy, what and how much to make, what and how much to deliver to every customer every day. We balance tailoring deliveries to serve customers to their standards and optimising deliveries to minimise cost and maximise revenue.

The challenge of scheduling in supply chains is the planning and syncing of multiple but uniquely different operational steps while at the same time negotiating with third parties like vendors and freight providers which we depend on for reliable services.

The best tool for scheduling is usually the simplest:

Ref: Behold The PSI: A Basic Tool for Supply Chain Planning

Organising Crew & Resources

Preparation is a very important word in supply chain management performance. The more prepared one is, the more likely a supply chain will perform well.

Preparation requires a great deal of organisation. Not only is it about having a structure, policy, or plan, it’s also about engaging, marshalling, and deploying the talented crew of people and the required resources together.

Examples of tasks in organising include:

Assigning crew members such as who to operate equipment & when;
Staging of materials, components, equipment (e.g. pre-mixed chemicals, pallets, parts, machines) for easy obtaining and utility by an operation;
Booking of transportation assets;
Negotiating supply contracts with vendors;
Working with 3^rd party brokers in processing of imported goods.

Many of us delegate the organising of our people and resources to team leaders or trusted deputies. As much as this may be fine in many cases, it doesn’t spare us the responsibility to be hands-on and watchful of the work itself. In short, it’s our job to organise; passing it on to other people to do doesn’t make us less accountable.

Ref: What Organising Really Means

Setting the Pace

Supply chain performance is determined by its pace, which is not only how fast our items flow but also how we do it in step with all operations together.

We make sure schedules are followed but we also don’t hesitate to respond and adjust as needed.

Examples:

We increase production if materials arrive early or if our people are finishing their work faster than we planned (and we reward them if we could);
We alter a delivery truck’s route due either to heavy traffic than usual or if customers ask for a last-minute change in their receiving location;
We move up preventive maintenance on a production line because of delays in raw material arrivals that would potentially idle our manufacturing team;
We revise the purchase requisition of packaging materials due to noticed issues detected by our quality control team.

We supply chain managers set the pace of our operations as part of our efforts to fulfil demand perfectly and productively.

Ref: The Nimble Supply Chain: Is It Even Possible?

Disciplining the Teams

We are the managers and ideally, the leaders of our supply chain organisations. We are the ones who set the standards for which we motivate our people to follow. In short, we discipline our teams.

Discipline is a basic management aspiration. But it’s not just about getting people to follow rules, urging 3^rd parties to comply with contracts, or enforcing neatness & cleanliness in the workplace.

Discipline is also about collaboration balanced with firm enrolment to standards. We work with our people and our 3^rd party service providers to set & agree to rules & procedures but without compromise to principles our enterprises believe and adhere to.

We praise our people for jobs well done;
We negotiate win-win contracts with our 3^rd parties;
We listen, empathise, adapt but at the same time, stress our side in getting what we want;
We communicate with our 3^rd parties and our people when we disagree or take a stand to enforce rules.

Punishment in the disciplining of supply chain operations is always a last resort, something we want to try to avoid. It’s not because of any dominant management philosophy but that supply chains consist of interdependent steps which determine the flow of products & services. We take care to maintain the relationships; punishment indicates things aren’t going well with them.

Ref: Management is Not Leading, and It Isn’t Staffing Either

We apply each of the basic skills of planning, organising, directing & controlling on its own and altogether how we manage people and our operations.

We always begin with goals, rooted in the overall strategy of whatever enterprise we work for.

From those goals we determine our performance standards which we will measure ourselves against. Performance standards are the bases of performance measures. We and the people we manage must know in a timely fashion how well we are doing.

Performance measurement spurs action planning. What plans we make in response to the measures we assess must be SMART, i.e., Specific, Measurable, Actionable, Realistic, and Time-Bound. The action plan itself is expected to address challenging goals and thus should be methodical, reflecting a visible path to ultimate accomplishment. Because action plans in supply chains often need multi-functional coordination, we collaborate with partners to get things done.

As supply chain managers, we not only manage demand and inventories but also manage performance of our operations. We apply our basic skills of planning, organising, directing, & controlling but we tailor them for the variety of unique activities which define our supply chains.

Supply chain management is challenging work because we not only oversee the operations we are assigned to but we also maintain relationships with the people & 3^rd party partners we are linked to. It requires collaboration and cooperation on top of basic management.

About Ellery’s Essays