The State of the Supply Chain Union

For the past few years, we have written a Supply Chain State of the Union or yearly outlook and published it in our blog.  We are late in doing so this year simply because we were not exactly sure what opportunities and issues to focus on.  We are sure now.  The focus for this year is simply:

Process Improvement

Our Principal, Mark Gavoor, has met with a variety of supply chain professionals at various levels in their organizations.  He has also met with sales and marketing people who are customers of the supply chain.  Here are the kinds of comments we have been hearing with greater frequency:

• “We have a new supply chain VP.  He has been here six months.  He seems very competent.  So why is our supply chain worse than ever?  You should come here and help them.”
• “Our supply chain is a mess.  Sales are increasing and that is good.  We have plenty of inventory and have opened new warehouses?  How come our customer service is so bad?  We are our orders backlogged so huge?  You should come here and help fix this thing.”
• “The supply chain and marketing are completely uncoordinated.  Our customers are upset with us.  Our suppliers [they outsource their finished good production to suppliers in China] are try their best but we jerk them around too much.  We expedite and rush everything.  You should help them out.”

We have heard this same message from Fortune 500 companies to small family owned companies.  

First let’s get the sales pitch out of the way.  Flat out, we can help. Give us a call, we will conduct an assessment, develop a plan to help improve your supply chain operations, and then assist in implementation of the plan.  

The more important question, is why is the State of the Supply Chain Union in some companies so dismal?  

We believe there are three major factors at play here:

[1] Too much work and too few people:  Because of the Great Recession, many companies severely cut back on their staffs. Often times it was the most experienced, hence most expensive, employees that were cut.  Even in the depths of the recession when there was less business,  the cuts were so dramatic that those that remained were working long hours.  

As business has recovered, many of these same companies have not added any staff.  As a result, there is even more work and more pressure on work forces that were already stretched thin. There is not time or resources to do everything they should be doing.  Richt sizing works both ways.  When an organization is overstaffed, there are opportunities for improvement.  On the other hand, a grossly understaffed organization cannot deliver optimal results either.  Where are companies on this continuum?  We believe toward the understaffed side of the equation.

If adding staff is out of the question, we believe we need to reengineer the work so that it can best be managed with the current staffing level.  This means letting the ERP do they heavy lifting and getting to where human beings are doing exception management... where exceptions are the rarity not the norm.  This leads directly into the next  point.

[2] Loss of process and process improvement focus: One of the things that is easily put by the wayside in the too much work and too few people scenario is process management and improvement.  The workload is high, everything cannot be done.  As a result, maintenance and process improvement are the easiest things to forego.  For a short period of intense workload, this might be manageable.  Over a period of five years, no continuous improvement effort and focus guarantees the process performance will deteriorate.   This is simply a law of process management physics.  There is no getting around it.

People are so busy doing things, expediting orders, and firefighting there is no time to maintain process performance let alone implement improvements.  The more the process is ignored, the greater the need for process improvement.  This oddly is reminiscent of the early days of the US Quality Revolution in the 1970s and 80s.

[3] Not understanding and fully communicating the capabilities of the supply chain:  Hand in hand with the above two points is poor communication between functions.  In the trenches, in the firefight, comes a reversion to the silo mentality that further cripples the organization.  Marketing and sales have unrealistic expectations of what the supply chain can reliably deliver.  The folks in the supply chain are just under constant pressure.  The true lead and reaction times are not clear and not well communicated.  It is very likely this has also become a data management issue and thus deteriorating ERP effectiveness.

Henry Ford once said that “if you need a new machine and do not buy it, you end up paying for it anyway and still not have it.”  This applies to staffing and process improvement i.e. if you need it and do not make the investment, you will pay for it and still not have it.  

In 2014, we encourage companies whose supply chains have any of these symptoms to:

• Evaluate staffing and make investments as needed.
• Re-energize process improvement and continuous into the company culture.