One of the things that would help many supply chains and supply chain participants is simply settling on a goal. Too many executives and managers find themselves tossed back and forth between the goal of making more money and cost-cutting. Generally, they don’t see these as being contrary to one another, but a focus on making more money drives efforts to increase throughput and flow; whereas, a focus on cost-cutting will frequently result in larger process and transfer batch sizes, slashing inventories everywhere, and similar actions. This kind of oscillation is very damaging to the morale of middle managers and production workers.
Number 2: Let go of your ego and wrong-thinking
If this is your fourth or fifth (or fortieth or fiftieth) cycle through all of the various standard approaches to cost-cutting, expediting, fire-fighting and so forth, then it is probably time to start looking in a new direction. This is especially true if you have tried and re-tried all of the typical approaches and you have seen no significant improvement from where you were two, three or more years ago.
Number 3: Start reading (a lot)
If you’re involved in supply chains, here are some books I would recommend you read that will give you immediate insights from a new perspective:
- Orklicky’s Material Requirements Planning – Third Edition (only the third edition; and read chapters 1 through 4 and 22 through the end of the book)
- Demand Driven Performance Using Smart Metrics
- Lean RFS (Repetitive Flexible Supply)
- Profit Beyond Measure
- Throughput Accounting
Number 4: Stop trying to imitate others
“Best practices” have very little applicability in the long run. At best, they will lead to mediocrity. All of the best paths—the paths leading to the greatest successes—will come from breakthrough thinking and will be untried. They will be, to some extent, unique to your company, your supply chain, your position in the market, your position in the supply chain, and dozens of other unique factors. (Read more here.)
Number 5: Start focusing on your goal
See Number 1 above. If you have decided that your goal is to make more money, then do not allow yourself to become diverted into cost-cutting. Instead, focus on ongoing improvement that improves flow and drives up Throughput (defined as revenues less only truly variable costs).
Number 6: Start building a healthy organization and supply chain
A truly healthy organization is one where everyone from the shop floor all the way down to the CEO have learned to thinking about their entire organization and, even, their supply chain as a “system.” They no longer think about silos, functions and departments. Instead, they have learned to think about the impact of every action—and every improvement—in terms of its impact on the Throughput or flow across the entire system (i.e., the entire company or supply chain).
Number 7: Start asking the right questions
A good starting point for “right questions” is this: What are the top five or ten things that are keeping our company (or, our supply chain) from making more money tomorrow than we are making today. “Right” questions lead to system thinking about improving Throughput and flow. “Wrong” questions are questions about local (e.g., departmental) efficiencies and cost-cutting.
Number 8: Stop tolerating waste that impedes flow
Benefits (read: profits, among other benefits) accrue in your enterprise and its supply chains through the flow of relevant information and relevant materials. The flow of irrelevant information (such as faulty forecasts—and they are always faulty) or irrelevant materials (such as materials not actually demanded by end-user consumption) is waste. Lean identifies seven forms of waste that can impede the flow of relevant information or materials:
- Transportation waste – moving information or materials that are irrelevant to the processing necessary to satisfy the customer
- Inventory waste – storing and maintaining information or materials that are irrelevant to the satisfaction of the customer
- Motion waste – the movement of people, equipment or inventories more than is required to satisfy the customer
- Waiting waste – time spent by people, equipment or inventory waiting for the next step in the process of satisfying the customer
- Overproduction waste – producing materials that are irrelevant to the satisfaction of actual customer demand
- Over-processing waste – irrelevant steps in the process of producing goods or services to satisfy actual customer demand
- Defect waste – efforts involved in inspecting for and rectifying defects in other processes in the flow
Number 9: Discover the recipe for “cooking up” a durable competitive advantage
Stop trying to win in your market by cutting prices. Price-cutting is the easiest thing for your competition to copy—and there’s no end to it. You need to take time to truly hear “the voice of your customer” in order to find out where you can deliver increased value that will be difficult for your competitors to duplicate. Frequently, a truly durable competitive advantage has nothing to do with price, or even product features. In many cases, it is the mode of delivery, terms of delivery, or services surrounding the product that lead to a durable competitive advantage. (See “mafia offers.”)
Number 10: Don’t let inertia set in
Stop trying to improve by implementing the latest fad in management. And, putting out fires will never lead to real improvement. Real improvement, and a growing competitive advantage, can be yours (and your supply chain’s) through dedication to a process of ongoing improvement (POOGI). A relentless pursuit of improvement is what your supply chain needs. Never let inertia set in because, when it does, you will be moving backwards, not forwards.
Do any of these things strike home for you? What have you tried? What has worked? What has not worked for you?
Let us know. We would like to hear from you. Thanks.