Ellery's Essays

Why Enterprises Need A Chief Supply Chain Officer

Gulf War air campaign - Wikipedia — https://en.wikipedia.org/wiki/Gulf_War_air_campaign

“Behind every great leader there was an even greater logistician.” -M. Cox

On a trip to Saudi Arabia in 1990 at the start of preparations preceding Desert Storm, the American-led military operation to take back Kuwait from invading Iraqi forces, United States Air Force General Chuck Horner was granted only one companion to accompany him. Some thought General Horner would bring his executive officer (XO).

General Horner chose to bring his logistician:

“If you’re going to a war, and you can only take one person, who would you take? ”

The answer was obvious—his logistician. There are three kinds of staff people who are never heroes, but without whom a commander is dead in wartime: his intelligence, communications, and logistics chiefs. He can limp along in peacetime with less than capable people in those slots, but he’s dead if there’s any weakness there when the shooting starts. There is great truth in that old adage that amateur warriors study tactics, and that professionals study logistics.” -Tom Clancy with Gen. Chuck Horner (Ret.), Every Man A Tiger (New York: G. P. Putnam’s Sons, 1999), p. 173

American military leaders have embraced supply chain logistics as a key component to victory in any conflict. Desert Storm was no exception and was an eye opener for future war plans. Logistics, notably the management of military supply chains, is still part and parcel of any country’s military doctrine in the present day.

Every American field commander has a logistics leader on his/her staff to run the day-to-day and long-term needs of their operations. Business leaders of private organizations, particularly those who market products and merchandise, would do well to do the same via a chief supply chain officer (CSCO).

Most of us know the supply chain is typically a pretty big and complicated operation made up of several sub-departments. It’s important there’s someone who should be in charge of it. Not many; not a few; just one person to rule it all.

The supply chain covers the flow of goods, services, and information through various operations and industries. In a typical organization that markets products, the supply chain’s scope covers purchasing to manufacturing to shipping. Included in that scope are support groups such as planning, engineering, maintenance, and quality control.

The supply chain encompasses a variety of activities such as but not limited to materials sourcing, inventory management, quality inspection & testing, production scheduling, demand management, storage & materials handling, orders management, transportation, maintenance, and after-sales services. Cost management from budgeting to operating expense (OPEX) and capital expenditures (CAPEX) is often within the bounds of supply chain management. Projects especially investments in facilities involve supply chain managers. And when it comes to discussion on topics such as product life-cycles, working capital, customer services, and organizational development, the supply chain manager would be a major participant.

Given the wide scope and the number of activities a supply chain executive’s job would entail, it comes to no surprise that some executives don’t entertain the idea of having one person managing all of an organization’s supply chain operations. Aside from seeing it as too big for one person to handle, it would be downright difficult to find a person who would qualify with the experience and skill-set. The CSCO would have vast authority over practically most, if not all, of an organization’s core operations. This is perceived as power that business leaders fear could be abused.

But even in very large organizations, such as the military branches of the United States armed forces, it makes sense to have one person running an organization’s entire supply chain.

The supply chain works best with a focused purpose and strategy. Whereas departments such as Finance, Sales, Marketing, Research & Development (R&D), and Human Resources have their specific supporting missions, so does the supply chain.

The supply chain’s role is to fulfil demand at the best value and best returns in investment for the organization’s stakeholders. In whatever way this purpose may be framed, the supply chain’s operations have a single end: fulfil demand. And one person should be on top of it, in leading it, and making sure it gets done.

Having one leader also gives recognition to the uniqueness of functions and the importance of contributions from each of those functions. With a united department under one executive, what each function does rises in importance in the overall organization. The function of a warehouse, for instance, would receive more recognition in how long items are stored and the costs that handle those items as a CSCO examines the total delivered cost of a product.

Just as functions would receive more recognition, so too would performance measures. A CSCO would rationalize all the key performance areas in all respective operations towards demand fulfilment consistent with corporate objectives. Quality measures, for example, would be focused towards the final outcome of a finished product. The Purchasing function would focus on materials quality in relation to Manufacturing’s consistency to produce within specifications. The Planning department would take into account inventory lead times in how they may affect product shelf lives. Logistics would consult Purchasing and Manufacturing on supply and production lot sizes to avoid overstocking and to mitigate risk of damages.

Having one supply chain leader means one decision-maker, one person to rally all of the supply chain functions in its day-to-day performance and long-term strategies. In unity come strength, and having a variety of unique functions working together requires a single leader who not only can make timely decisions but also provide guidance in consideration for all concerned.

The arguments against a single supply chain executive are more about finding the right person for the job than about the politics of one person having a lot of power. There really is no argument against the logic of having a single leader for the supply chain.

Fear prevents change in any organization. Fear in having one person running the supply chain is understandable considering the qualifications needed and the power that comes with it. But it should not be a deterrent but a means to understand and solve the issues that are causing such fear. Fear should be a motivation for change, not an obstacle.

High-ranking United States military field commanders have logistics experts as members of their staffs. Just one individual who runs the whole supply chain of any military operation. Private organizations should likewise have chief supply chain officers to singularly manage the supply chains that procure materials, manufacture products, and deliver them to customers. The unity of supply chain functions under one CSCO allows for more focus in strategy and performance. The fear that a CSCO would be unqualified or would have too much power does not argue against the need for a single leader. On the other hand, it should motivate business leaders to address the issues such that the benefits of having one supply chain leadership can be gained.

Originally released in LinkedIn: https://www.linkedin.com/pulse/why-organizations-need-chief-supply-chain-officer-ellery-samuel-lim

About Overtimers Anonymous

Four (4) Supply Chain Scenarios and What to Do When They Change

We don’t know when it’s going to rain. So, we build dams. Dams are reservoirs, inventories of fresh water. Having a reservoir assures an adequate supply of water to meet the continuous demand of communities.

Magat Dam, Luzon Island, Philippines http://bagong.pagasa.dost.gov.ph/flood

Supply chain managers face a myriad of challenges in their operations. But one can categorise some of these challenges when it comes to inbound materials and outbound finished goods. The following are four (4) such categories or scenarios:

Unsure Supply, Sure Demand

Demand is known but supply is not. As in the example of the dam as water reservoir, demand (i.e. water consumption) is certain but supply (rainfall) is not. Supply chain professionals would put much time and resources in predicting supply or finding alternative means to maximise it (e.g. cloud seeding, drilling wells). They would also be investing in enough capacities for inventories (in this case, the reservoir) to assure demand is always met.

2. Sure Supply, Unsure Demand

Supply is assured but demand is unknown. People who have new products talk about this scenario a lot. But this also applies to products with not-so-long life-cycles such as attire and accessories from the fashion industry. In such cases, supply chain managers tend to stock up on finished products to ensure availability. But because finished products are the most expensive type of inventory, supply chain managers spend a great deal of time and money in policies and systems to make sure they only have enough—not too much and definitely not too few.

3. Sure Supply, Sure Demand

Supply and demand are certain and predictable. This can sound like an enterprise’s idea of a business dream come true but there would still be work to do for the supply chain manager. In such a scenario, the focus would be on reliability, that is, making sure that the enterprise’s processes are operating efficiently and delivering to the satisfaction of customers. This can be easier said than done especially for enterprises that have complicated manufacturing operations (e.g. chemical refineries).

4. Unsure Supply, Unsure Demand

The nightmare opposite of number 3? It’s a reality for many enterprises who market products such as consumer goods, machinery & parts, and household appliances. Enterprise sales managers would constantly be guessing demand (what they would call forecasting), while supply chain executives would be unendingly negotiating long-term contracts with vendors, at the same time managing inventories of materials and merchandise. There would be pressure not only to minimise working capital but also to ensure availability of items to customers. One key take-away strategy for this scenario is collaboration—working with vendors and customers.

These four (4) scenarios may sound over-simplified given the reality of issues that surround supply chains (how expensive materials are, where they originate, the shelf lives of materials and products, number of products the enterprise sells, etc.).

But they provide a starting point for Supply Chain Engineers (SCE’s) to devise systems that synchronise the flow of merchandise through supply chains to generate productivity and competitive advantage.

SCE’s can help managers calculate capacities and set inventory policies for unsure supply and/or unsure demand scenarios. SCE’s can also work out manufacturing reliability improvements, labour work-place settings, and equipment maintenance methodologies that would cover sure-supply / sure-demand scenarios.

As 21^st century business becomes more dynamic, SCE’s can help enterprises anticipate changing scenarios. SCE’s, for instance, can study the feasibilities of outsourcing production versus building in-house capacity given any of the different supply and demand scenarios. SCE’s can also plan contingencies for logistics such as determining how many trucks an enterprise should buy for itself versus how many should be outsourced to 3^rd party providers. SCE’s can also offer ideas for flexible production systems such as cellular manufacturing and fast-changeover assembly lines.

Enterprises face different scenarios depending on their business environment. Supply and demand of what they buy and sell may be certain or they may not. Whereas enterprise managers resort to inventories and capacities to make up for any uncertainty, supply chain engineers offer help not only in optimising for whatever scenario but also in anticipating to whatever changes that may come.

Supply chains can be complicated; supply chain engineers make it less so.

About Overtimers Anonymous

What Is the Right Supply Chain Model for New Products?

A lot has to get done when it comes to launching a new product. Aside from marketing and selling, enterprise executives need to know how much to make, how much to stock, and how they’ll spread that stock.

If the new product is replacing an older one, the enterprise would need to figure out what to do with the older product’s inventories and its raw and packaging materials. If the new product will involve purchase of new specialized manufacturing equipment, what will happen to the machines used for the older one?

New products also would have new characteristics. They may have more limited shelf lives. They may use materials that require special handling.

Many enterprise executives often plan very well the manufacturing and distribution of new products. Many, however, don’t have immediate plans how to respond to the actual demand as soon as the new product is launched. Higher than expected demand would wipe out inventories quickly and strain production and transportation capabilities. Lower than expected demand would result in inventories occupying precious floor space and idle machines and workers costing the enterprise money.

Every product has a life cycle. A new product may start slow or move fast but would eventually reach a plateau and decline. Some enterprises try to prolong the lives of their products especially if the products have profitable margins. Enterprise executives, on the other hand, won’t hesitate replacing maturing products in exchange for potentially more beneficial ones.

Joffrey Colignon & Joannes Vermorel, Product Life-Cyle (Supply Chain), April 2012, https://www.lokad.com/product-life-cycle-(inventory-planning)

Supply chain managers and engineers play a key role in the management of product life cycles. And it starts not when a product is launched but before. Many enterprise executives have the habit of telling supply chain managers to plan only when the product is just about to be introduced. And when the demand becomes reality, more often than not it comes out much different than expected; the supply chain manager ends up scrambling for more materials, more storage space, more production capacity, or the opposite.

Supply chain managers and engineers can contribute a great deal in the conception of a new product. The supply chain engineer (SCE) in particular can compute estimated needed capacities for production, transportation and storage. SCE’s can devise deployment plans and simulate various demand scenarios. They can also work out the quality assurance protocols not only for manufacturing but also for procurement and logistics.

In other words, SCE’s can develop a supply chain model for a new product. It wouldn’t just be a production plan or a distribution plan. It would be a comprehensive supply chain road-map that would synchronise the procurement of materials, production of goods, and inbound & outbound logistics. Such a road-map would even cover after-sales services such as warranty responses and retrieval of damaged or rejected items.

An enterprise would stand to benefit a great deal from a supply chain model for a new product. It would offer the enterprise’s finance team a better forecast of cost and working capital and give enterprise executives a clear crystal ball of how a product would do once it is in the market.

Making a supply chain model for a new product is not easy but it wouldn’t require re-invention.

Hernán David Perez, supply chain professional and teacher, developed a “Supply Chain Roadmap” that would answer the question: “which supply chain strategy best fits my business?” (Hernán David Perez, “Supply Chain strategies: Which One Hits the Mark?”, CSSCMP’s Supply Chain Quarterly, https://www.supplychainquarterly.com/articles/720-supply-chain-strategies-which-one-hits-the-mark, 2013 March 06).

Mr. Perez outlined six (6) generic supply chain models enterprises can adopt depending on their industries and strategies. The six (6) models consist of continuous-flow, efficient, fast, custom-configured, agile, and flexible. Each has a different focus, from low-cost (efficient) to agile (responsive to uncertain demand). An enterprise may adopt more than one model, i.e., it may use different models catering to different products or to specific areas of operations.

The role of the SCE would be to find and propose the right model that would best fit an enterprise’s new product. Mr. Perez’s six (6) models can be a reference for the SCE to tailor a model for the new product.

Developing a supply chain model for a new product is similar to managing a project, such as construction of a building. It starts with the design or what one wants the model to look like and function. Next would be the detailed plans of the supporting structures such as materials requirements, transportation, storage & handling methods, work crews, procedures & standards, quality assurance methods, and equipment.

Design and detailed plans are the end objectives, what we want the supply chain model to look like and how it will operate when the new product is launched. To achieve the end objectives, the supply chain professionals would need to draft the road map, the series of activities to build the structures that make up the supply chain model. It’s again similar to what project managers do: a critical path schedule that includes a timeline and the timing of investments in resources.

Implementing a supply chain model involves a lot of uncertainty. Demand, for starters, would be based on forecast and would no doubt come out much different than expected. The model should take into account various scenarios. To put it another way, the supply chain model should be ready to adapt. It should be quick to react to fluctuating demand such as preparing a customer order & shipping system that quickly notifies supply chain planners to position inventories immediately where they’re needed.

Costs, quality, and other issues would also likely crop up when a new product goes on line. Some people would blame it on the “learning curve,” that period of getting accustomed to a new set of activities. The longer the learning curve, however, the greater the expense and enterprises don’t want to spend too much time and capital for it. The supply chain model, hence, should also be prepared for changing situations on the ground. For example, the model should include training of machine operators and warehouse material handlers in regard to a new product’s characteristics and storage requirements. The model may also include facility designs that allow swift change-overs between product variants (e.g. sizes, colours).

The ideal supply chain model is one that does not only cover for the introduction of a product but it’s future life cycle stages as well. The supply chain model should incorporate monitoring systems that watch out for trends not only in demand but also in external factors such as commodity prices, freight rates, exchange rates, labour wages, taxes, and trade tariffs. It should also watch out for disruptions and opportunities which it should be ready to respectively mitigate or take advantage of.

It isn’t easy to launch a new product. It’s not simply just having stock ready when it’s time to sell the product. There are many things to consider if one wants to attain long-term success.

Every product has its life-cycle. One has to understand it and make a supply chain model for it in order to ensure its marketing success.

The best kind of supply chain model is one that is ready to meet the challenges of inevitable change.

About Overtimers Anonymous

How Control Charts Can Help Get Things Done Correctly and Consistently

How can enterprises better control their supply chains? How does one know if the supply chain is under control in the first place?

A soy sauce manufacturer bragged about its wonderful customer service numbers. The manufacturer showed charts that it was delivering 98% of orders on-time and complete. There was no problem with quality as there was barely any rejections from customers.

Customers, however, were telling a different story. The manufacturer’s largest buyer, a supermarket chain, complained that orders were arriving at merely 65% of the time. Fill-rates or order completeness was averaging 50%, i.e., the corporation was delivering only half of the supermarket’s orders.

It was even worse with product quality. Soy sauce sachets were leaking at the supermarket’s shelves. The supermarket chain was pulling out damaged sachets every day.

This is a true-to-life story and one that is repeated countless times not only at supermarkets but across industries. An enterprise boasts outstanding sales numbers, excellent customer service, and second-to-none product quality. Customers in the meantime grumble about poor service and unsatisfactory quality and frequent out-of-stock. Who’s right and who’s wrong? Clearly there’s conflict and something should be done.

Supply chains are product and service streams in which materials flow, transform, and advance in value from their origins (sources) to their final stage as finished goods. A supply chain’s aim is to deliver products and services correctly and consistently. Correctly means delivering the right products and services that match customer demand and expectations. Consistently means delivering products and services correctly all the time.

To do things correctly and consistently, there has to be control. Control is the influencing and regulating of activities, the critical ones especially, to attain discipline in desired results.

Many firms, particular those that do manufacturing, utilise statistical methods to keep operations under control. One prominent method is the control chart.

Control charts makes visible the actual behaviour of operations versus what we would normally expect of them. The theory behind control charts is that results of most operations would follow a standard normal pattern, what statisticians call a normal distribution. Products as they are made would have characteristics that tend toward an average result. The variations between individual products would also follow an expected range, which statisticians measure as the standard deviation.

If items exhibit results that stray far from the average, that is, beyond the normal distribution curve, then chances are the operations making available the items have become erratic, or in other words, they are going out of control.

In the case of the supermarket chain and the issue of leaking soy sauce sachets, control charts can track the number of leaky sachets:

The control charts above are examples of what the leaky sachets can be like at the supermarket’s shelves every day of the week for sixteen (16) weeks. The control charts track the weekly average percentage of damaged sachets as well as the range or widest difference between daily samples.

The x̅ (average percentage) control chart shows close to an average 7.4% in leaking sachets while the R (range) chart shows an average variation of 0.4% between daily samples from each week.

Right away, management of both the supermarket chain and the manufacturing enterprise can see that at least 7 out of every 100 sachets are leaking on the shelves every week. For the soy sauce manufacturer’s executives, who pride themselves on their company’s reputation for zero defects, this is unacceptable.

But the point of the control charts wasn’t just to indicate how many sachets are leaking. The control charts showed that the percentage of leaking sachets was averaging 7.4% to 7.8%. The range (R) chart illustrates this variation, as differences between items varied at an average of 0.4%. This meant daily damaged sachets kept to a steady range between 7% to 8% of total.

There was an instance where one week’s average dropped to 7.2% and fell outside the control chart’s limits. Even as a drop in damaged sachets was a welcome sight, it was more of an exception. It wasn’t normal and the damaged average was not in normal control.

There were two (2) weeks in the R chart where variations spiked or narrowed outside the statistically set limits. This indicates samples on those two (2) weeks may have been gathered and computed differently or that operations in each of those two weeks were being done differently.

To put it as simply as possible, sachets are leaking daily at more than 7% average. From the consistency of the damages, one may speculate that the source of the damaged sachets is an operation at the soy sauce manufacturer’s facility.

It was later found that the manufacturer’s sachet packing machines weren’t sealing the soy sauce sachets 100% effectively. The sachets’ seals were deteriorating and opening as soon as the products left the soy sauce manufacturer’s premises. It was recommended the manufacturer refer the problem to their product research department to review packaging specifications and sachet production protocols. It was also suggested that the manufacturer and supermarket chain come up with common quality and service measures.

Control charts can be intimidating given the requirements to compute statistical numbers. But as much as one needs familiarity and initiative to set up control charts, they are not that difficult to make. The hard part usually is in identifying what specification or performance measure to chart.

But once they are established, control charts can be very useful as they provide instant feedback on how consistent and correct operational results are.

The whole point of supply chains is to deliver products and services correctly (matching customer expectations) and consistently (all the time). Being consistent and correct begins with being in control of the supply chain.

About Overtimers Anonymous

How Do We Define Quality?

Quality is a strange subject. It’s strange because people talk about it a lot especially when they have a complaint or an admiration about a product or service. At the same time, people don’t seem to take it seriously especially when they settle for a cheaper product or service because they don’t have the budget to spend more for a better one.

Over the years there has been so much said and written about quality. A very long time ago, it seemed to mean something done well for a very reasonable price.

But as time passed and people produced a lot of all sorts of stuff, quality has seemed to become doing things just right. The price might go up but that’s because stuff became scarcer and not because it was made better.

Things of luxury would equate themselves as things of quality. Brands that price themselves higher than others would market themselves as brands of higher quality. Things that were made via a precisely painstaking process would consider themselves better quality than those made on a cheap assembly line. A Swiss hand-made timepiece would market itself as superior to a Japanese mass-produced watch, for example.

Quality lately seems to be influenced by the level of technology involved. A state-of-the-art mobile phone with a bigger, high-pixelated screen and a camera that can take breath-taking photos would be touted as the best in the market.

What should quality be, therefore? Some would say it should be about what customers want. It should be what customers specified. It should be what customers value. It should be in how it performs versus what it’s supposed to do.

The problem with these definitions is it would mean quality is about satisfying everything for every customer. As in everyone who buys the product. But can a product satisfy everyone?

In the first place, not all products are for everyone. All customers do not necessarily mean everybody. Products cater to a group. It can be a big group or a select group, but a group nonetheless.

Quality then means meeting specifications for that group. It means tailoring a product to a target market group.

I bought a bag of instant coffee sachets from the supermarket a few weeks ago. One morning, when I picked out a sachet from the bag to prepare a cup of coffee, I noticed that the notch where it says “Tear Here,” wasn’t there. There was no notch. I had to get a pair of scissors to make a notch of my own in order to tear the sachet open to pour the instant coffee to my cup.

Did the sachet fail in product quality? The coffee tasted fine. Would I still buy the coffee sachets next time? Yes, I would. The lack of a notch was a minor inconvenience. But it won’t prevent me from picking out the sachets again from the supermarket shelf. The price was within my budget and the coffee tastes better than the other coffee brands I tried before.

Other customers may do mind, however. They may find the experience of seeing no notch to tear as a major annoyance. What if a customer bought the sachet at a roadside cafe and as he looked forward to having a nice cup of coffee, he couldn’t tear the sachet because the notch wasn’t there? And because there wouldn’t be an available pair of scissors, he’d be stressed trying to tear the sachet open. The annoyed customer may swear he’ll never buy that coffee brand again. He’ll buy a competitor’s sachets next time to avoid a repeat of that stressful experience. He’d tell his friends and family members that he thinks the multinational corporation that marketed the coffee isn’t worth the trouble of buying products from. All because a tiny notch was missing where it should have been.

The perfect quality product is perhaps one that satisfies all of the customers’ needs and wants. But nothing is perfect. And how does one define specifications based on wants and needs of many customers? And how does an enterprise balance the attainment of the ideals of customers’ wants and needs with whatever capabilities it has at the moment?

The answers to these questions would be never-ending. But if there are to be working answers, they’d may be:

A product’s specifications are manifestations of the enterprise’s perceptions of what customers want. Therefore, enterprises should always be listening to customers for what they value from the products the enterprises sell. This is where market research is important. How a product sells over time would indicate how it’s meeting what customers want and need;
An enterprise should always maintain consistency of its product’s quality by keeping control of the operations that make and deliver the product. Consistency not only indicates control but also capability. How a product consistently meets its specs would naturally tell the enterprise what it’s capable of.

For the enterprise, quality is about meeting specifications. Specifications are the features that an enterprise translates from what it believes customers want. How well an enterprise bridges that belief with what customers really want determines its products’ quality reputations. The specifications should match customers’ values, the product should consistently meet the specs, and the customers prove both when they choose what to buy.

About Overtimers Anonymous

What is the Right Way to Serve Customers?

A manufacturer of metal parts hires a management consultant to help stimulate sales. The consultant at once suggests the manufacturer prioritise production of its top twenty (20) best-selling items.

The manufacturer thus makes one month’s worth of stock of each of the twenty (20) top-selling items. Three (3) months later, the stock is hardly selling. Meanwhile, customers complain that they haven’t received their shipments of items that are not on the top twenty (20) best-seller list. Pending orders is equivalent to one (1) month’s average sales and the manufacturer simply has no stock to serve the orders.

What happened?

The management consultant had analysed the manufacturer’s sales history and listed the manufacturer’s top selling items based on their average sales value over the previous year. The top twenty (20) items constituted 80% of the manufacturer’s sales that year. It therefore seemed logical to have on stock those twenty (20) items. It was easy to see that the top twenty (20) items have a high demand history.

The manufacturer hired a supply chain engineer (SCE) to do something about the pending orders and out-of-stock problems. The SCE analysed the manufacturer’s operations and observed that the manufacturer produced 1,800 individual items or stock-keeping units (SKU’s) in that same period of twelve (12) months. Most of the customer orders the manufacturer received, however, were delivered late and many others were cancelled due to out-of-stock.

The SCE noticed that the management consultant based his recommendation to produce the top twenty (20) selling items on the following analysis:

The SCE broke down the daily histories of the top selling 20 items and saw that each item had an erratic demand behaviour, in which for one (1) item, it looked like this:

Not one of the top twenty (20) items was selling at close to the overall average quantity at any day or even any week throughout the twelve (12) months surveyed. Each item would experience very high demand in one or few orders but hardly would any item be selling close to average every day or every week. The variance between average demand and each day’s demand over a year was very large.

The manufacturer sold more than 1,800 unique items over a one (1) year period and most of each item’s sales were limited to one or two orders sometime during that same period. Some items did have frequent daily sales but they were in small quantities. The management consultant’s list of top twenty (20) did sell up to 80% of annual revenue but the manufacturer was losing potential sales from unserved orders of other items.

The management consultant thought that producing and having stock of the top twenty (20) best-selling items would bring higher sales as based on historical numbers. The consultant, however, didn’t see that customers didn’t need the said items every day. A few customers with big projects bought large quantities of the top twenty (20) items in one or few orders. Other smaller scale customers ordered much fewer pieces of metal products at any one time and for certain items, more frequently. The consultant didn’t realize that the manufacturer’s items were not needed every day, or even every year. Customers only bought for projects or for maintenance needs; items were only needed periodically.

Further studies by the SCE showed that some customers ordered each of the top twenty (20) items only once. It would be a different customer ordering for a large quantity. There was no uniform demand pattern. Customers buying plenty of an item were probably buying for one-time projects. Customers buying smaller quantities were buying for fewer requirements.

And because they were for projects, customers would have unique specifications for the items they needed. A customer’s order of an item was often different from that of another. Some customers would want better finish on an item; other customers would deem the item’s finish as is as all right. Even if basic specifications were consistent, it was commonplace for the manufacturer to do additional work on an item as per a customer’s request.

The manufacturer therefore was really customising items more than making the same items over and over. Sales orders very often had instructions for how products would be finished, cut, and packed. Some customers required very tight specs, others did not. Some customers wanted their items cut to certain sizes. Some customers wanted more stringent packaging; some were satisfied without any packaging at all.

The manufacturer’s order fulfilment system did not take into account these frequent instructions. The information system had on file more than 10,000 items and it was found that many of the items were similar to each other. In other words, every time a customer order was received, it asked for an item that was made before but with slightly different specifications. The accounting and IT groups were constantly entering “new” items into the information system.

The SCE therefore suggested that the manufacturer re-develop its customer service strategy. The SCE suggested the manufacturer refocus the order fulfilment system from one that sells based on a fixed inventory of items to one that is based on customisation. Instead of having a system like a grocery store, the system should be like a machine shop—i.e., only make an item when there’s an order. The SCE also recommended that the manufacturer only keep stock of needed raw materials, not finished items.

A large metal manufacturer a few kilometres away was actually doing that kind of thing. His inventories of finished goods were limited to stocks that are about to be shipped. He only kept at most a month’s worth of raw materials (he thought that already was too much) and he had no backlog of pending orders. Every item that was made had its own unique identity unless it was a repeat order to the same customer.

The SCE proposed a system in which the manufacturer’s sales representative would prepare quotations for customer inquiries. When a customer is interested in an item, the sales representative would quote not only price and quantity but also confirm specifications and schedule of deliveries. The sales representative would coordinate with a joint sales and supply chain support team that would translate customer inquiries into a quoted proposal for the customer. The quoted proposal becomes a sales order upon negotiation and agreement between customer and sales rep.

The supply chain team would keep stock of raw materials which happen to only number to less than twenty-five (25) items or stock-keeping units (SKU’s). The stocking strategy would be independent of actual demand but would take into account large spikes as in when a customer conveys interest for a very large order. Again, the sales and supply chain support team would ask the sales representative to negotiate delivery schedules to take into account the manufacturer’s capabilities to buy raw materials and produce the needed item.

How demand is fulfilled varies from industry to industry, enterprise to enterprise. One should study demand based on customer behaviour, not on overall totals or averages.

One should also tailor the supply and fulfilment of demand to the needs of customers. At the same time, one should always be aware of the system’s capabilities. Customers may be always right but the enterprise is not one with unlimited power. There has to be communication and collaboration via negotiation and mutually beneficial agreements that would address price, terms, and supply.

There has to be a right way to serve an order. Not for management, not for consultants. But for customers.

About Overtimers Anonymous

We Need Better Monitoring Systems

Most executives like performance measures. Otherwise known as metrics, key performance indicators (KPI’s), analytics, or scorecards, enterprises embrace performance measures as a means to assess how their businesses are doing.

The point of a performance measure is to check how an individual or team is doing against a target that is set by superiors. (No matter what people may say, it’s always the superior who sets the targets). Targets are set in line with strategic goals. Individuals and teams strive to perform such that resulting measures would meet targets to attain the goals.

But after more than twenty (20) long years since they’ve become popular, performance measures are no longer good enough, especially for supply chains.

Supply chains are product and service streams. Materials, merchandise, and information (printed and digital) flow through networks within and between enterprises. From one operational step to the next, products and services transcend in value as they make their way to their final destinations: the end users.

Supply chains are sensitive to disruption. When a disruption hits one process, every part of the supply chain feels it. A delay in the loading of a truck, for instance, may entail a change in production schedules at a manufacturing facility it is supposed to deliver to, which in turn may cause a shortage of a product the facility is supposed to make.

Performance measures are popular as many people could relate to them. They are simple and easy to appreciate. They show how a person’s work is doing versus a target that fits to that person’s tasks. The performance target would be linked to higher levels of performance measures that would finally connect to a strategic goal.

Unfortunately, performance measures do not work very well when there are disruptions. Whereas they are designed such that different levels of an organisation can be made accountable for them, performance measures are not flexible to changing circumstances.

For example, a production line supervisor is accountable for how many overtime hours his crew works in a week. His target is that each crew member does not work more than 4 out of 40 hours of overtime per week. He controls the overtime by rotating his crew members’ leaves such that not many of them have days off at the same time. But if the supervisor receives a surprise rush order such that he has to make double his weekly volume, he would be forced to ask his crew to go on overtime to meet that order. His boss, however, would ask him later to explain why he exceeded his weekly overtime target.

Disruptions are nothing new for supply chains. They can be big or small. They are the results of both adversities and opportunities And they can come periodically or frequently. They are never identical in cause and they sometimes come in the most mundane manner, like a surprise doubling of a production order such as in the example mentioned above

Performance measures work when supply chains run routinely, much like in a game of sports. Sports games operate under fixed sets of rules and conditions. Players score and meet goals to win. But if it rains, the game stops. In similar fashion, supply chain professionals perform to achieve objectives set by schedules under favourable and predictable working conditions. But if someone changes the schedule or everyone has to go home because of a disruption like a virus-causing government-mandated lock-down, the performance measures become useless.

Disruptions are normal. They aren’t exceptions. Disruptions occur often as a result of frequent adversities and opportunities that ripple through the fast-paced interconnected world we live in.

What supply chains need are monitoring systems that tell us not only what is going on but also notify us when there is a need to respond. We need monitoring systems that will tell us about upcoming disruptions and give us time to take action.

Two things comprise a monitoring system: visibility and guidance. Visibility in the form of real-time information and guidance in the form of alerts to events that merit a response.

An example is a fuel gauge in a car. The gauge provides visibility on how much fuel is there in a tank. It also gives guidance via a flashing light that alerts the driver that the fuel tank is almost empty.

Monitoring systems are not new to supply chains. Manufacturing managers harness instruments and gauges to monitor production lines and facilitate process control. A number of enterprises have adopted technologies such as radio-frequency identification (RFID) tags, block-chains, and artificially intelligent command-and-control systems to oversee supply chains even from long distances.

Many enterprises, however, have had little success in mitigating disruption in their supply chains despite the growth of high-tech monitoring systems. This is because many monitoring systems aren’t focused towards disruption. Instead, they are geared towards performance for the sake of measuring results versus strategic goals, which as aforementioned don’t really contribute very much in a frequently disruptive environment.

We, therefore, need to re-orient supply chains towards monitoring for disruption, not performance. By watching out for disruption and responding to it, supply chains would be able to muster resources to mitigate it, even perhaps take advantage of it.

One doesn’t have to start with an intricate, complicated or expensive system. One can begin with simple reports from various operations along the chain. For instance, vendors, brokerages firms, and shipping companies can email the status of orders for imported materials.

A status report such as the one above can tell stakeholders about impending issues such as a shipment that’s about to be considered abandoned and subject to penalties.

Supply chain engineers can make improvements step-by-step by tailoring feedback systems to fit different processes. SMS texts summarising daily customer orders, entered orders in the database, communicated factory orders, MRP II real-time plans are examples.

A supply chain monitoring system can also be like a tsunami warning system:

https://en.wikipedia.org/wiki/Deep-ocean_Assessment_and_Reporting_of_Tsunamis

Or it can be manifested like a dashboard for supply chain professionals to see:

https://www.nintex.com/blog/digital-supply-chains-part-3-delivery-management-contract-management-procure-to-pay/

Whatever the design, the purpose of the monitoring system is to allow stakeholders to watch out for disruption and respond when needed.

Performance measures have not proven to be helpful in our disruptive-driven world. We need monitoring systems that provide visibility and guidance especially for supply chains. They don’t have to be complicated; they just have to be adequate enough to bring attention to disruptions.

Disruptions are a result of both adversity and opportunity. In either case, it’s always best to be one step ahead whether it be to mitigate or to take advantage of whatever’s out there.

The Basics of Supply Chain Mapping

A map is a visual representation. In the context of supply chains, it describes the flow of operations and/or information pertaining to the procurement, transformation, and logistics of products and services.

To put it another way, it’s a visual aid that shows what a supply chain looks like and how it functions.

The simplest way to map a supply chain is via the flow chart:

Some supply chain professionals (consultants especially) use different shapes to distinguish the kinds of processes in their maps. Rectangles, for instance, may represent a transformation process; a triangle is a checkpoint or a quality inspection; a circle is a starting point, endpoint, or a reference to another flow map. Lines can be solid for physical flow or dotted for information flow:

Other mapmakers go further by organising steps by departments:

Followers of the Lean concept use Value-Stream Maps (VSMs) to show the lengths of time steps take during a process. The point is to show which process adds value (such as where there is transformation) and which does not (such as waiting, inspection, movement):

Maps are to Supply Chain Engineers as structural plans are to Civil Engineers and as circuit schematics are to Electrical Engineers. Whether it be to build, repair, troubleshoot, improve, or optimise, Supply Chain Engineers need maps just as every other engineer needs a diagram.

Typical civil engineering construction plan

Unlike engineering drawings which focus a lot on structures and specifications, supply chain maps put more attention on flow. But this does not mean supply chain mapping doesn’t consider structures. One can have supply chain maps in the context of facility plans.

Supply chain maps can become more detailed and thereby look more complicated. The level of detail in a supply chain map depends on how small a step is to be made visible.

Engineering drawings are arbitrarily detailed depending on the audiences they address. Engineers draw their plans and diagrams on differing levels of details. They usually start with an overall plan and then break down the plan into varying descriptive drawings. For example, civil engineers would draw an overall structural plan which would be supported by plans showing sectional details and specifications.

In the same way, SCEs would draw an overall map and add more detailed maps showing specific details of processes or steps.

Executives, managers, staff, and stakeholders should be able to easily understand supply chain maps such that they can make rational decisions.

Supply chain maps should be treated the same way as engineering drawings when it comes to setting up new product and logistics streams. Many times, enterprise executives would build facilities first and then hand them over to supply chain professionals to set up and run operations. And in those many times, the operations would start in spectacular failure or experience immense and expensive difficulties.

This is what happened when a large multinational built a new factory. Equipment was high-tech and the manufacturing process assured high quality coupled with high-capacity production. The drawback was the facility was located far south of the city. Logistics managers were just told to adapt the transportation flow to the new facility. Deliveries at the start ran into problems as truckers complained to having to drive longer distances for the same contracted freight prices. This was eventually resolved but only after the company shouldered significant expenses.

Supply Chain Engineering must go hand-in-hand with any planning and implementation of a new or improved process. It cannot be a discipline that takes care of what was neglected. It should be an active and equal participant from the start to end of any product and service strategy.

Mapping is a basic first-step tactic Supply Chain Engineers use to make visible the supply streams they study. Maps come in form of flow charts, value-stream maps, or operational plans. They differ depending on how they are applied. Their purpose is not only for visibility but also for planning. Maps are useful for building and improving supply chains.

We build after all based on our visions.

Twelve (12) Things Supply Chain Engineers Do for Enterprises

Supply Chain Engineers (SCE’s) are much like any other engineer. Just as engineers design, build, and install structures and systems, SCE’s do the same specifically for supply chains.

Supply chain engineers shape the networks, processes, and systems that underlie product and service streams. Their projects are either big and small. Project scopes can range from setting up a whole new distribution network to the simple improvement of inspecting inbound materials at a receiving dock.

Most supply chain managers try to solve their operations’ problems by themselves. If a customer order was undelivered because there was no room on a delivery truck, the manager would find another truck to load and ship the ordered items. But if the manager observed that pending orders were accumulating and it’s because demand is outstripping trucking capacity, he’d ask truckers to just get more trucks. He wouldn’t realize that an SCE can determine the best transport asset mix and routing system instead of having more trucks a freight provider will eventually charge to the enterprise. Without SCE’s, supply chain managers often patch problems with band-aid solutions.

SCE’s offer an engineering expertise that go beyond the scope of supply chain management. They synchronise the interconnecting links of supply chains by designing, building, and implementing systems, facilities, devices and processes that would sustain the productive flow of goods, services, and data. To put it another way, SCE’s bring about supply chains that run reliably at lowest cost and at best quality and service for enterprises and customers.

SCE’s do a number of tasks that help enterprises with their supply chains. The following are twelve (12) examples:

Map Supply Chains. SCE’s can lay out the flows of supply chains and make visible the nitty-gritties of an enterprise’s operations, including the processes involving vendors and customers. Supply chain maps are instrumental in identifying weak points along product and service streams;
Set Up Monitoring Systems. SCE’s can set up systems that would show what’s going on in supply chains as well as alert managers of impending disruptions. SCE’s can create dashboards that would show key data about supply chain operations, such as status of imports, inventories, pending orders, losses, and scheduled deliveries;
Customise Order-to-Delivery. SCE’s can tailor order fulfilment systems for companies depending on their industries and customer service strategies;
Propose Supply Chain Models for New Products. SCE’s can design supply chain models for new or relaunched products and services;
Balance Operations to Synchronise Flow. SCE’s can devise systems that synchronise the flow of merchandise from vendors to enterprise to customers. It is an SCE’s aim to streamline flow to minimize waste in waiting times and work-in-process inventories;
Implement Statistically Based Process Control Systems. SCE’s can implement systems that minimize variability, what some would call statistical control. At the same time, SCE’s can tweak operational capabilities to churn products and services consistently for quality assurance;
Study Feasibility of Projects. SCE’s can study the feasibility of capital expenditure projects via their expertise in engineering economics and evaluate options to determine which would provide the best rates of returns;
Introduce Ideas to Spread Inventories. SCE’s can develop inventory planning methods that would spread product stocks along various points of the supply chain which would lead to better customer service and minimal working capital;
Design Operations That Adapt to Supply & Demand Variability. SCE’s can plan and lay out work-place operations that would be flexible to fluctuating merchandise volumes;
Determine Supply Chain Capacities and Baseline Efficiencies. SCE’s have the technical prowess to compute supply chain operational capacities and efficiencies, whether they be machine, labour, or logistics-related.
Find the Best Method to Maintain Fixed Assets. SCE’s can evaluate what would be the best maintenance program for the supply chain’s equipment, facilities, and logistical infrastructure.
Develop Frameworks to Support Collaboration. SCE’s can help enterprises set up support structures to collaborate better with vendors and customers. These range from simple communication protocols such as mobile messaging of purchase order status to shared networks and methods for vendor-managed inventories and customer inventory replenishment;

These tasks may sound familiar to industrial engineers. That’s because they are from industrial engineering. Supply Chain Engineering is an offshoot of Industrial Engineering in that both share the same purpose: finding ways to continuously improve productivity.

Whereas IE’s traditionally work within the confines of an enterprise, SCE’s look at the entirety of supply chains. SCE’s judge their work in the context of supply chains. SCE’s seek beneficial value for all stakeholders along the supply chain from vendors to customers, from in-house departments to 3^rd party providers. SCE’s strengthen the interdependencies that exist in supply chains.

Supply Chain Engineers build supply chains. They do what engineers do but more so for supply chains. SCE’s have the abilities to do a number of things that would benefit enterprises.

SCE’s are a new breed of industrial engineers and they have a lot to offer. It is hoped enterprises will welcome their opportunity to contribute.

About Overtimers Anonymous

Bad Things Happen to Everyone

Asian airlines such as Cathay Pacific, Singapore Airlines, and ANA are known for their excellence in customer service. A lot of people love flying with these airlines.

But thanks to the coronavirus (COVID-19) pandemic, these same airlines are experiencing their worst business slump in recent memory. No one wants to fly these airlines not because their service deteriorated but because nations have closed borders or people risk losing days in quarantine if they travel.

Customer service excellence has made Asian Airlines the pride of their nations and has given them leadership in competitive air travel industry. But it took just one adverse virus to bring down their business.

Adversities such as the coronavirus can quickly kill an enterprise. It doesn’t matter whether business has been bad or good, whether the enterprise has a very high reputation for service, or whether the enterprise has a very nice reputation. Adversity has no bias.

Customer service is very much defined as in we know it when we experience it. Adversity is the opposite. We know it when it’s there but we don’t know what shape, size, or form it would take and we don’t really know what the experience will be like. Adversity comes unexpectedly, without any warning, and we can’t determine its degree until it’s there.

One may manage service but one cannot manage adversity. Service is controllable but adversity is not.

We may mitigate adversity. At least we can make our enterprises capable to ride them out.

As much as we don’t know what, when, and how an adversity would arrive, we only have the weapon of our experiences to help us.

It is in experience that we design the drills and exercises to simulate how to deal with adversities like earthquakes and fires. It is in experience that we formulate security protocols such as daily back-ups of files, updating our anti-malware software, and the simple locking of our doors at night. It is in experience that we spend time and money to see our dentists and doctors on a regular basis. And it is in experience that we set emergency response plans that automatically trigger without any delay or need of approval from executive management.

Drills, exercises, protocols, and check-ups make us ready to meet the next adversity. They may not address an incoming adversity directly but they help our enterprises become structurally fit to withstand the possibly damaging effects.

Bad things happen to everyone. It doesn’t matter if your enterprise is riding high as a reputable service provider or as a ruthless start-up. Adversity hits without warning and without prejudice. Only those who are fit with ready methods and structures have the best chances to overcome the impacts.

About Overtimers Anonymous