Are your company’s supply chains leading or lagging?
Don’t have the cost or asset efficiency answers to this question? Then you are probably not truly in control of your company’s supply chain performance. At the highest level managing supply chains starts with understanding how well you perform and developing strategic initiatives to improve or maintain supply chain performance.
Many executives ask us how to start the process of making strategic investments in supply chain. One answer is to show how you perform in comparison to your competitors and peers, and your trends versus industry trends. Benchmarking your financials is not difficult and PCG Benchmarks can provide you you with the first insights. Continue reading
When I recently had to explain to my aunt (she is in her 70s) what I do she struggled with the word(s) supply chain – ‘during her work life supply chains did not exist’. I tried to explain how supply chain looks at the total flow of goods in a company – from suppliers to customers and everything in-between. After we parted I thought about how many of the companies I work with or have worked with have the same problem.
Occurrence of supply chain terms in literature 1800-2000
Today, 2015, there are still companies that have no concept or limited understanding of supply chain – even though the majority of the money they spend is directly controlled by supply chain processes. Over the last 20 years I learned that the difference is whether a company considers their supply chains as a strategic asset. Many companies that struggle or are merely median do not. They tend to focus on their manufacturing capabilities.
A company that considers its production capabilities strategic will be focused on optimizing factory operations. The emphasis will be on key drivers such as Cost of Goods Sold (COGS) for cost, Capacity utilization for asset efficiency and forecast accuracy for pretty much anything. Customer centric metrics are often translated to metrics like: Schedule adherence or manufacturing cycle time. This was common practice in the early nineties and resulted in the formation of supply chain special interest organizations back then. Continue reading
One of the most challenging problems I encounter with Supply Chain teams, and executives, is the lack of credibility when they try to get support, sponsorship, approvals for major supply chain transformations. It was the #1 problem when I interviewed executives over the last 10 years in supply chain events. It manifests itselves in transformation programs when I hear “How do we know this is going to work?” or “We spend so much money on IT but we never see anything improve, how is this different?” in discussions with VP-level, or even C-level executives, and the teams begin to flounder. They’ve had this discussion before, and embark on one of three paths – discussion of features, discussion tools, or discussion of problems – hoping they can get buy in for a transformation project. Continue reading
I reviewed order management flow with a client some time ago, as part of a process capture exercise within a re-engineering program; it was within a business to consumer context. As orders flowed during the day, the local teams would review inventory manually, and then when it reached an appropriate reorder point, they would manually enter an order in their ERP environment. That order would then be printed out, and Faxed to a central warehouse. The central warehouse would re-enter the order in their ERP environment (which, by the way, was the same one), and an interface file would be generated with shipment parameters.
To make a very long story short, the order continued to be ‘touched’ several more times by humans until it was actually received in the destination warehouse to replenish stock. If something went bump, it was a manual process to adjust all the numbers in all the interfaces along the way. Keep in mind, this was essentially an intercompany inventory replenishment signal. It reminded me of a memoir of a child of a dysfunctional family – what seems strange to the reader, to the child of course was completely normal. I was wracking my brain to figure out why – why there were 12 steps or so, why the same process was performed over and over. Continue reading
On a recent customer engagement the project team experienced issues getting acceptance from manufacturing teams for the proposed new planning processes. The reason: “The plan should be done in the factory”; “we have full visibility of current inventories, orders, production output” and so on. This however was primarily a language issue: Are we talking planning or scheduling? Once we explained the difference both teams calmed and agreement was reached. So, what’s the difference, you ask?
One way to differentiate is looking at an example. The daughter of a friend in Europe and her friend graduated from high school and were planning a multi-month USA road trip. She did her planning extensively: Continue reading
I had to create a communication package once for the CIO, CEO, and President of HP on difficulties in their “going direct” supply chain process. Perhaps it was my Caltech Science background, or having a lot of raw data, but I came up with what I thought was a wonderful, lucid, though 400-page, presentation. My SC and IT team had been through the HP-Compaq merger, and we had reams of analysis of both companies, and likewise on the four or five attempts by both companies to try to leverage indirect fulfillment supply chains for direct sales (hint: it doesn’t work well). I started walking Bob Napier, CIO at the time of HP (Bob is no longer with us), through the presentation. He was an old Navy guy with a deep voice like dark polished wood, and he filled his office with a booming laugh. “Oh Joe. It’s the first time.” Continue reading
Supply Chain Benchmarking – an endlessly debatable topic. I wanted to share with you one way I like to use benchmarking, which is to frame a conversation with Supply Chain executive leadership around direction and distance of performance change required. My first pass at benchmarking years ago was for the CIO of HP, around IT cost as a percentage of revenue, to gauge whether IT budgets were in line with industry peers. We used one of the big-five consultancies, and 3 months and $400K later, we had the numbers, and had a great view of, by each tech market we were in, what level of tech spend was appropriate, and where budget changes may be mandated. I found the process very subjective, which it was, but valuable in the sense that it provided “bracketing” or bounding for what we should expect to set strategically. Continue reading
As I speak to supply chain audiences, I focus on key messages that are important, but sometimes forget where they came from. One key message I focus on is that the best supply chain organizations are not “managing by project” – they consider that a type of management failure. Continue reading