What gives supply chain executives insomnia every night? Global supply chains are the most critical core business process in organizations. Some may argue this point, but the fact is, every other core business process in organizations interfaces with, and is totally dependent upon supply chain strategy, planning, and execution success. All executives intuitively or directly have supply chain performance on their minds because performance can produce either significant competitive advantage or catastrophic operating and customer results. Between these two extremes are the hundreds of common daily chronic operating issues that serve as constant detractors of success.
Supply Chain Insomnia is a Choice
What’s interesting about these issues is that most are not new; they have been around as long as ERP and the lack of operating disciplines to make a complex integrated enterprise architecture function as intended. Anyone who has thirty years or more of supply chain experience knows about these continuous déjà vu operating issues. As you will learn from this blog, some of the root causes of insomnia are external and unpredictable. However, the majority of root causes of insomnia can be predicted and prevented with the right leadership, improvement strategy, experience, talent development, team empowerment, technology and analytics capabilities, and execution skills.
Below is a table of the most familiar strategic supply chain challenges and remedies for success. This is not an all-encompassing list as there are literally dozens of strategic issues and hundreds of specific tactical actions required to achieve continuous supply chain success. However, it is a good starting point for pursuing supply chain excellence. What is new in all of this is the manner and approaches by which we address these familiar challenges. Organizations must become more innovative in dealing with these issues due to a higher level of global network complexity, a higher content of technology and human dependencies in processes, and a new work force with very different motivation and job satisfaction needs.
|Strategic Supply Chain Issue||Remedies for Success|
|1.Strategy. Confusion in supply chain strategy, wavering leadership direction, conflicting metrics for success.||Define formally and clearly, the supply chain strategy and vision, expectations, and the right consistent success-enabling metrics. Put the right controls and metrics in place to assure alignment of the supply chain strategy with daily activities.|
|2. Leadership Development. VPs of Operations, Supply Chain, and Procurement understand the complexities, challenges, and inner workings of their global supply chains. To the rest of the organization, their perceptions are often oversimplified (e.g., poor sales forecasting, sales and order fulfillment commitments, financial inventory management, engineering unplanned usage and production disruptions for new products, repairs and spares management, end-of-month crunch, etc.)||The global supply chain is the most important enterprise-wide core business process. Eliminate the silos and deploy more holacracy-based operating models. De-functionalize the critical elements of this core process and spread ownership and accountability across the right functional areas through cross functional team-based planning and execution (e.g., S&OP (customers, sales, operations, finance, engineering, suppliers), supplier management (purchasing, engineering, operations, finance, suppliers), manufacturing (production, sales, engineering, suppliers), new product development (engineering, finance, manufacturing, sales and marketing, suppliers). Every cross-functional activity must have a designated owner/mentor. At lower levels, empower teams of order entry, credit, invoicing, production, and engineering to execute daily actions.|
|3. Process Dysfunctionality. Inefficient processes, practices, operating procedures, and basic data integrity issues that create significant wastes, costs, and other inefficiencies across the end-to-end supply chain.||Analyze supply chain planning and execution processes and establish priorities for achieving rapid breakthrough improvements followed by the need to recognize and implement continuous improvements as necessary. Establish a formal and disciplined practice of continuous improvement to identify and chip away at chronic wastes. Get the supply chain basics right as a first step.|
|4. Concurrent Information Flows. Balancing demand, capacity, throughput, mix, and supply to create an adaptive, synchronous supply chain. This is a tough proposition with continuous flows of data, some of which is corrupt, incomplete, conflicting, or based on an influential opinion.||Focus on the front end forecasting and sales and operations planning (S&OP) process. Re-engineer the approach to address segmented demand and supply streams vs. a one size fits all practice. Implement real time predictive and preventive data analytics capabilities. Understand with data and facts, the major root causes of demand/supply variation and disruptions, and implement the right permanent corrective actions (not symptomatic fixes and process silo band aids).|
|5. Complexity. Addressing the constant challenge of global supply chain complexity and uncertainty – and the associated incremental wastes and costs that it breeds||Reduce complexity. Develop an accelerated value stream map of the global supply chain process. Identify and focus on the tall pole problems first. create a bold, innovative vision of the next generation supply chain and implementation plan. Simplify and eliminate unnecessary activities, and take the time to fix chronic problems with the right corrective actions. Implement real time performance dashboards to create awareness, instant response, and ownership for success.|
|6. Talent Development. Developing, mentoring, and retaining the best supply chain talent is a constant challenge. Today’s professionals want to be more independent, empowered and engaged, and mentored vs. closely managed. They are not interested in becoming a 25 year P&IC veteran, they demand multiple career exposures and the opportunity to accumulate a wealth of learning experiences or they move on. This is a huge challenge requiring balance. Many younger professionals are lacking the depth and breadth of experience, and the appreciation of how the wrong actions in one area can create severe, multiple interaction problems across the total supply chain. Organizations must deliberately build and nurture a culture of supply chain excellence.||Develop a formal supply chain development and career path plan that allows for professional coaching and mentoring, continuous educational development, and many shorter assignments across the supply chain. Encourage cross-functional teaming vs. departmental supervision (co-location of different disciplines that act as a business within a business is very effective). Implement formal means to measure development progress and interests. Establish supply chain councils or other means where professionals can meet regularly in a shared learning environment. Create a way to communicate supply chain issues and recognize professionals for their accomplishments in making things better.|
|7. Supplier Management. Managing global sourcing and supplier performance (i.e., supplier capability and capacity, delivery performance, quality, cost, value-added services such as design collaboration, problem solving and cost reduction, etc.||Don’t select the supply base on price and promises alone. Conduct a detailed supplier due diligence of leadership, capabilities, capacity, quality systems, and commitment to continuous improvement. There is a pressure to minimize costs, however too many organizations choose cheap suppliers lacking the capability and capacity to meet lifecycle requirements. The hop-scotching around and constantly changing suppliers is much more costly than doing the right things right the first time.|
|8. International Compliance. Globalization has resulted in the need to meet so many compliance, trade, customs, local quality and regulation standards, and other country specific requirements. These standards are a moving target and can create serious distribution, shipping, and non-compliance headaches/costs when serving a global customer base.||Create a capability to constantly monitor and update international compliance requirements. Many organizations have expanded their top Quality Assurance role to include responsibility for international compliance because this issue is so critical to avoiding disruptions and excess costs in their supply chains.|
|9. Risk Management. Global supply chains include an extremely high content of technology and professional, knowledge-based human content. By definition, there are many risks and unknowns in all supply chains. The challenge is to predict and prevent as many risks from happening before they occur. Supply chains are not an exact science; creativity and innovation is necessary to alleviate potential risks.||Integrate formal risk management and evaluation practices within the organization’s continuous improvement initiatives. Continuously monitor and search for potential weaknesses and what-if situations that could introduce unforeseen risks, costs, and disruptions into the supply chain. Assess the probability and size of these risks, and always be prepared with contingency plans. There will always be some unpredictable events that require deep experience and know-how on the spot to resolve these situations.|
|10. Longer Range Capacity and Resource Planning. All organizations are faced with optimizing asset management whether it is continuing with maintaining existing equipment or replacing current capabilities with new equipment.||Develop and manage to a living long term capacity and equipment requirements plan that is integrated with the organization’s strategic plan. This plan can be revised to fit emerging requirements, and it provides a fact-driven basis for replacing existing equipment with the right new state-of-the-art capabilities at the right time and with enough planning details and lead time to avoid disruptions in the supply chain.|
The above table provides guidance about how to improve global supply chains. The reality is that this interconnected network of processes is highly complex, often with hundreds of touch points in many organizations. It takes time to isolate and translate fuzzy causes and effects into actions that permanently eliminate the largest detractors of performance.
Improve and Sleep Tight
Supply chain insomnia is a leadership choice, and aggressive strategic improvement is the cure for this condition. When supply chain improvement is planned and executed well, it also has a huge interaction effect on all core processes of the business. Improving global supply chain performance is often a contradictory proposition in many organizations that demand results now, but are impatient about investing time, resources, and effort into effective asset management of this core process – which by the way directly influences as much as 90% of their cash flow, profitability, and growth potential. Recognize that many organizations are well underway and continuously busy implementing benchmark improvements and practices in the above areas . . . and are positioning themselves for superior industry performance. For executives and their organizations who chose to allow the above strategic issues to exist and fester, it’s no wonder why they are losing sleep. _____________________________________________________________________ About the Author
Terence T. Burton is President and Chief Executive Officer of The Center for Excellence in Operations, Inc. (CEO), a management consulting firm that works with mid-market and private equity organizations on Operations, Supply Chain, Go-To-Market, and other major strategic and operational improvement initiatives. CEO is located in Bedford, New Hampshire with offices in Munich, Germany.
Terry is the author of a new book by McGraw-Hill, Global KATA: Success Through the Lean Business System Reference Model™. This book provides new insights about how to adapt Lean thinking and strategic improvement to major global supply chain management challenges.
For additional information visit www.ceobreakthrough.com or contact the author directly at firstname.lastname@example.org