It seems to me that the most effective way to improve supply chain performance is not better software, but better thoughtware*.Thoughtware New.jpg

 

For me, the evidence is plain. Hundreds—perhaps, thousands—of companies have invested in more and better software for forecasting, planning, integrations, ERP systems, and more. Most of those companies have not experienced dramatic improvement in the performance of their supply chains. And, of those that have, even they would confess that the majority of the benefits did not flow from the technologies themselves. Instead, the really dynamic and effective changes stemmed from changes in their thinking about their supply chains should and could operate.

 

Only New Thoughtware Can Help Overcome Many Supply Chain Challenges

 

Only by learning new ways of thinking can companies and supply chains overcome many of the seemingly irreconcilable arguments in which managers and executives find themselves engaged time and time again.

 

Examples of these arguments will not be at all strange to many of you:

 

  • Batch sizing: Should we run larger batches to reduce costs and maximize efficiencies, or should we run smaller batches in order to achieve higher rates of flow?

  • Equipment maintenance: Should we service our production equipment only as needed (to reduce costs), or should we do advanced maintenance to prevent unexpected breakdowns that impede flow rates?

  • Volume buying: Should we buy in large volumes to keep unit costs down, or should we buy only in the quantities required to sustain flow in order to minimize inventories and the drain on cash?

  • Pricing models: Should we hold our prices in order to keep margins up, or should we reduce prices to increase flow volume?

  • Build-to-stock versus build-to-order: Should we build to stock in order to keep lead times as short as possible, or should we build to order to keep inventories and other expenses down?

  • Ship complete versus partial shipments: Should we ship only complete orders, in order to keep shipping expenses down; or should we ship partial orders in order to best meet ship-date promises?

  • Overtime conundrum: Should we allow overtime to meet promise-dates on orders, or should we reduce labor costs by keeping overtime to a minimum?

Each of the supply chain team members involved in these controversial discussions is seeking something good for the companies they serve: namely, improved profits. But, only new thoughtware can help companies and supply chains break away from the management oscillations (read: flip-flopping!) that typically stem from these irreconcilable differences.

 

Coaching, Not Just Consulting

 

We have found that “consulting,” in its traditional role of merely providing advice, is seldom sufficient when it comes to really installing new thoughtware. Instead, we have embarked on a new program of supply chain “coaching” based on demand-driven principles.

 

Here is an overview of our approach to supply chain coaching:

 

  1. Helping the executive and management team understand their current reality and its constraints – Getting the whole management team on the same page begins with understanding and modeling the current environment in a way that makes sense to everyone. We help the team find consensus without compromise, building on the basis of a goal of sound financial results (return on investment)
  2. Guiding the development of targets and standards for strategic inventory positioning in the supply chain – Helping the team understand thoroughly how to determine which inventory positions provide solid return on investment through decoupling of lead times and the absorption of variability affecting capacity-constrained resources.
  3. Assisting with the development and creation of dynamic adjustments that keep your supply chain attuned to the constant changes in the market – Explaining how dynamic adjustments and buffer management are the keys to producing to actual demand and sustaining flow in environments where make-to-order is out of the question
  4. Teaching the team how to develop and use demand driven planning tools – Supplying a new vision of how responsiveness to actual demand keep inventories low while improving customer service levels
  5. Supporting the design and development of key performance metrics (KPIs) that facilitates and accelerates the flow of relevant information and relevant materials across the entire supply chain – Aiding in the development of tools and methods that lead to high levels of visibility and collaborative execution across internal and external supply chain components

So, has your company discovered the need for new thoughtware, yet? Have you struggled with management oscillation and had to make the same decisions over and over again, and then reverse them (or, partially reverse them) when the results were not what you expected?

 

Tell us about your experiences by leaving your comments here, or feel free to contact us directly, if you prefer.

 

NOTES:

* More about the concept of new thoughtware—especially as it relates to supply chains—can be found here: Smith, Debra, and Chad Smith. Demand Driven Performance: Using Smart Metrics. New York, NY: McGraw-Hill Education, 2014.

 

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