In Part 1 of this series, we left the C-suite executives in a discussion with the sales and marketing about why the firm was losing sales and customers. Naturally, their claim was, “Hey! It’s not our fault….”
NOTE: You will probably need the background provided in Part 1 of this series, so we urge you to find it and read it.
As happens in a great many business enterprises that rely upon inventory and product for delivering to their customers, when the sales department run into challenges like lead times that exceed customers’ expectations (or tolerance) and shipments being late, they often make a visit to the purchasing and production departments to try to figure out what is going on.
Not infrequently, since sales and marketing folks are typically closer to the C-suite executives, these conversations between sales and marketing and the purchasing and production teams take on more the tone of commanding and demanding than an inquiry.
Priorities and Actions Confused and Confusing
Let us begin our discussion by looking at the relationship between entities 14 and 15: IF  the management team members often find themselves in disagreement over which items to stock in what quantities, THEN  this is likely to lead to problems in meeting the expectations of customers regarding lead times, or delivery performance issues.
But why? Why do such disagreements arise in the first place?
We will look further down the tree to discover why.
Entity 3 says it is because the team is often finding it difficult to determine which actions might be effective and which priorities to set. You have probably heard (or, had) many discussions around some or all of these questions:
- Do we run large batches to get better efficiencies, or do we break setups and run smaller batches in order to meet customer demand?
- Do we do preventative maintenance on our equipment to prevent lost time at a critical moment, or do maintenance only when absolutely necessary?
- Do we buy in big volumes to get the lowest possible cost—while growing inventory, or do we buy only what is needed based on end-user demand?
- Do we hold prices to maintain our calculated margins, or do we cut prices to get more orders?
- Do we ship only complete orders to reduce shipping costs, or do we ship partial orders in order to satisfy more customers?
- Do we allow more overtime in order to meet customer demand, or do we hold overtime to a minimum in order to keep costs down?
Sadly, most management teams have tried both sides of all of these options! Oftentimes, they find themselves working both sides of these questions—switching priorities—on a regular basis. For example, the first part of every month or quarter comes a mandate to “hold costs down,” so big batches are maintained, maintenance is postponed, buyers make big purchases at rock-bottom prices, only complete orders are shipped, and overtime is dramatically curtailed or made totally taboo.
However, come the end of the month or quarter, everyone’s world is turned upside down. Forget about “cost control,” it is now all about getting those shipments out the door. Setups are broken to produce items on current open orders; small purchases of out-of-stock components are purchased to meet immediate demand for goods that must ship; excess shipping charges are paid on both inbound and outbound orders to keep things moving; and overtime is allowed for anything that needs to ship before the end of the accounting period!
Is it any wonder that Entity 8 is a cause? Actions and priorities are constantly changing.
In fact, oftentimes constantly changing actions and priorities actually drive higher shipping costs, overtime, and more. And,  if actions and priorities articulated by top management are constantly wavering between extremes, is it any wonder  that the team responsible for purchasing, inventory management and production have trouble determining what the proper and effective actions and priorities are—or, should be—at any given moment?
Of course not!
As you have likely experienced, all of the ensuing confusion and fire-fighting leads to more un-desirable effects including:  longer (average) lead times (and, certainly, unpredictable lead times), and  robbing from Peter to pay Paul, as the saying goes, when things get in a real knot!
If you have experienced similar things in your operations or supply chain, we would be delighted to hear from you. Leave your comments below or contact us directly, if you prefer.