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2016

In an enlightening (video) interview by Supply Chain Brain’s Bob Bowman, Andy Walker, Merck’s Head of Supply Chain Strategy, provided some crucial clues as to how Merck maintains flow across its supply chain. The key is in the new way that Merck now manages its relationship with many suppliers.

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Maintaining the flow of relevant information

 

“What we are actually working on,” Walker told Bowman in the interview, “from an execution perspective, is to ensure that there is a consistent set of information being delivered to [Merck’s] manufacturing facilit[ies] and [their] contract manufacturer[s]….” The goal of the new data flow, however, is to liberate these manufacturers “do enable them to do what they are really good at, which is scheduling and actually manufacturing the product” Merck needs, Walker said.

 

This differs from the way Merck used to manage their supply chain relationships with their manufacturing partners. But how?

 

Andy Walker explains: “So, what we are working on is a complete change in process…. We [now] pass [to our manufacturers] min/max parameters…. Then they can adjust and change their [own manufacturing] plan to replenish [their] inventory [within the min/max range]….”

 

Interesting, of course, but listen to this!

 

We no longer… rely on a forecast going to manufacturing…. We… just give them the… min/max, and then they can simply adjust their [manufacturing] schedule as they see fit,” Walker explains. [Emphasis added.]

 

Let’s picture this

 

Be collaborating with their suppliers and helping them establish buffers with minimum and maximum positions, Merck’s new approach works to assure that there is always a supply of products.DDMRP SupplierSideBuffering.jpg

 

No longer are the irrelevant data of weekly or monthly forecasts transmitted to the manufacturing facilities. Instead, the relevant data of adjustments to buffer sizes—changes in min/max levels—are shared with the manufacturing facilities. These changes are driven by—as Walker puts it—“true customer demand.”

 

NOTE: There is a proper place for using forecasts, but it is not in day-to-day execution planning. Forecasts—which are always wrong—should be used for mid-range to

long-range capacity planning. They are typically accurate enough for those kinds of decisions.

 

In the accompanying [conceptual] illustration, we see how three manufacturing suppliers might be managed:

 

  • Supplier 1 is used for three components. Each of these three components is strategically buffered at the manufacturing site. Min/max data are shared between Merck and the manufacturing facility for all three products.

 

  • Supplier 2 also supplies three components. However, careful analysis has suggested that only one of the three products need be strategically buffered at the manufacturing site. The other two are purchased and, if necessary, buffered only at Merck’s facilities.

 

  • Supplier 3 provides four products to Merck. Two of these are strategically buffered at the manufacturer’s site, and two are managed considered non-strategic and are not assigned buffer sizes by Merck.

 

We believe that this kind of collaboration and strategic buffering is the wave of the future—not only for international giants like Merck, but also for small to mid-sized business enterprises who want to maximize their profits through FLOW in their supply chains.

 

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Let us hear from you. What are you doing to maximize flow in your supply chain? In what ways are you collaborating with your suppliers? Are you finding yourself more or less reliant on forecasts for day-to-day or week-to-week execution planning? Tell us what is working and not working for you. Leave your comments below.

 

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RDCushing

Trump Fear with Buy-In

Posted by RDCushing Mar 28, 2016

In a fascinating (video) interview by Supply Chain Brain’s Bob Bowman, Andy Walker spoke of how Merck goes about introducing major changes for improvement into their culture and environment. Mr. Walker is Head of Supply Chain Strategy for Merck.

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In the interview, Walker talked about how some of the changes that were being made, especially in the realm of extended supply chain management, were really turning people’s worlds upside down. He said, “We’ve brought in something that is completely new.”

 

Getting buy-in

 

Walker understood that to achieve real success and reap the greatest gains from these dramatic changes and the investments of time, energy and money that were entailed, Merck had “to get the adoption” from the end-users and the people and functions connected with the changes.

 

These new and dramatic changes, Walker stated, led to “a lot of nervousness [and] a lot of apprehension.” Merck needed a way to, not force this upon the people involved, but “work through this with the people” that were going to be most affected—both upstream and downstream of the changes.

 

How did Merck going about dispelling the nervousness and apprehension about massive changes?

 

“What we did,” Walker told the interviewer, “is we got those people actually involved in the design” [emphasis added] of the solution to the challenges they faced.

 

Nothing better

 

This approach is exactly right! It’s the approach we use with our clients as much as they will allow us to do so.

 

Getting the people whose lives are going to be affected by significant changes actively involved in designing the solutions to their problems immediately and effectively turns them from enemies of change to allies in the implementation of the change.

 

No one struggles against, or undermines progress toward, the implementation of his or her own invention.

 

Making the users the “inventors” of their own solutions means they will become strong advocates and fight for—rather than against—the impending change. They have had a hand in designing something that they now—irrevocably—believe with confidence will make their lives better. If they didn’t believe that, they would have designed it in a different way.

 

In our approach, we actually get the people involved in the process of both discovering the real (root) causes of the many challenges they face in attaining their goals, and in designing the solutions to overcoming those root causes.

 

This has proven to be very effective where companies allow the time and are willing to gather the cross-functional team to accomplish this. We use a guided process applying Eliyahu Goldratt’s Thinking Processes to help their team discover causes and design solutions.

 

We think Andy Walker and the team at Merck are on the right track and applaud them for their success.

 

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How do you get buy-in for major changes in your organization? Do you involve a cross-functional team—that includes end-users—or are decisions primarily made by management and then pushed down into the organization? Let us know. We would like to hear about your experiences.

Please leave your comments below.

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SupplyChainLeadersMeetTodaysDemand.jpg

In an interview by Supply Chain Brain's Bob Bowman, Andy Walker, the Head of Supply Chain Strategy at Merck, said this:

 

"What we're trying to achieve, from an end-state perspective, is to build flow through our supply chains. What we mean by 'flow' is... making sure that all the nodes within the supply chain are connected... so they don't work in isolation, but are actually connected from an end-to-end perspective. So we can take true customer demand, and drive that through the supply chain, down to our manufacturing sites and our suppliers." [Emphasis added.]

 

I was really captured by what Mr. Walker had to say in this brief statement.

 

It appears that Andy Walker and Merck have discovered “the first law of manufacturing” [*] and are applying it. The first law of manufacturing states:

 

All benefits will be directly related to the speed of flow of materials and information.

 

This first law or manufacturing has an expansion that reads like this:

 

All benefits will be directly related to the speed of flow of relevant materials and relevant information.

 

This relevance factor comes into play when we get to goal of Merck’s supply chain strategy. Let’s take time to dissect Walker’s statement:

 

  1. What Merck’s supply chain strategy implementation is seeking to achieve is “to build FLOW through” their supply chains. This strategy is entirely different from traditional “push-and-promote” strategies. Push-and-promote relies on building to forecasts and then relying the sales folks to “sell into” the channel. “Flow through” and “sell into” are entirely different paradigms.

  2. Walker goes on to define what Merck means by “flow.” Flow, he says, comes from assuring that “all the nodes in the supply chain are connected… so they don’t work in isolation….”

  3. Look carefully at THE GOAL! It’s found in the statement that begins with “So….” All of this is “so” something specific can be accomplished. And what is that specific goal? “So we can take TRUE CUSTOMER DEMAND and drive it through the supply chain, down to the manufacturers and suppliers.

True customer demand is truly relevant information—forecasts are not. I contrast this truly relevant information to forecast demand that—as the true adage goes—is always wrong, and is, therefore, mostly irrelevant information. Forecasts waste supply chain resources by consuming limited resources in the planning, production, storage, handling and transportation of irrelevant materials—materials the end-user does not want or need. And, while forecasts consume resources with irrelevant materials, they simultaneous block those resources from planning, producing, storing, handling and transporting relevant materials. This causes shortages, stock-outs and poor customer service levels.

 

Andy Walker and Merck have got it right!

 

Now, this paradigm shift needs to happen in more companies—especially the small- to mid-size business enterprises that are struggling to survive or stay profitable while still applying outdated principles in managing their supply chains.

 

Don’t see an alternative to forecasting in your business? Ask me. I’d be delighted to have a chance to respond.

 

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[*] Ptak, Carol A., Chad Smith, and Joseph Orlicky. Orlicky's Material Requirements Planning. Third ed. New York: McGraw-Hill, 2011. Print.

 

 

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Some time ago I had a conversation with one of my daughters. She was deeply concerned—and not a little irritated--about management decision-making at her Quiz Questions.jpgwork place. She has a master’s degree, and works in the education field, but the principle that arose in our discussion applies in all industries, every type of organization, and across the full gamut of management.

 

Here is the scenario

 

The executive—in this case, my daughter’s boss—told her that she was going to make a management decision based on a process or metric—or to be more specific to the academic environment, a rubric (i.e., a process for scoring what might otherwise be a subjective decision).

 

However, after further discussions, my daughter discovered that whatever “process” or “rubric” was to be applied wad purely and evidently subjective to her boss alone. That is to say, what was set forth to reduce an otherwise purely subject and intuitive decision to a “process” – a “rubric” – was merely a pretense. Any decisions being made remained purely subjective and were not correlated to a “process,” at all.

 

Now, let me be clear: I am a free-market guy. I believe that business owners and their executives should be able to hire, fire and make other managerial decisions at will. I am fully committed to the fact that they may do as they please as long as their actions do not include coercion or deceit.

 

In this scenario, it is not the executives’ decision with which I take issue – which is why the decision itself will not be discussed here. What I wish to discuss is how many times executives and managers are themselves deceived as to the presence of a real “business process” by which they manage.

 

In my experience, if I spent time thinking about it, I’m certain that I could come up with a fairly large number of examples. However, to be brief, let me just toss out just a couple.

 

    1. First, I can think of numerous discussions I have had with executives over the years regarding so-called “sales management.” I say, “So-called,” because I have been presented with one of two variations on the same theme in this regard too many times.

      The first instance is where the owner of a small-to-mid-sized business (SMB) was the company’s first salesperson. This is quite natural, as the enterprise was likely an outgrowth of some entrepreneurial venture undertaken by the owner, and he or she still remains as the firm’s sales manager. Over the years, he or she has created a sales team of hand-selected folks, and the executive is convinced that each of these salespeople is unique and each requires special handling – a sort of prima donna approach.

      In the second scenario, the owner or chief executive is not in charge of the sales team. Instead, the firm has hired an experienced “sales manager” based on this person’s employment history and relative success in producing sales at some other firm in the same or a similar industry. This person has, then, hand-selected a team of salespeople. I find the sales manager often doting over his sales staff, making certain that each is uniquely satisfied with their particular arrangements for work and pay. This is a variation on the same prima donna theme, but with a layer of middle management.

      In both of these cases, however, the general attitude of the top management at the firm is that, while they may give lip-service to something they call their “sales process,” when one digs deeper, it becomes abundantly clear that the “sales department” is really surrounded by mystique. Each hand-picked salesperson has his or her own mystical mojo that is performed in a somewhat ritual-like fashion. This mojo, when properly carried out and when not too much interfered with by management and administration, produces a stream of sales to support the rest of the company.

      In these situations, the rest of the company’s executives and managers are under the implicit understanding that “I must not mess with the salespersons’ mystical mojo or things will go badly for the whole company.” Frequently, even top executives fear treading too much on the mojo, let there be bad repercussions.

    2. The second matter that comes to mind is “sales commissions.” On numerous occasions I have asked executives, “How do you calculate and pay commissions?”

      To this simple question, I am not infrequently given a simple answer: I have heard something along the lines of, “We pay commissions based on gross margins.”

      Simple enough, don’t you think?

      Well that is, until you begin to dig deep into the details. Then you starts hearing things like this: “Well, yes, we do pay commissions based on gross margins. But, if our buyers get a special deal on a purchase, we pay commissions on the ‘regular’ gross margins, not the actual gross margins of the sale of those special purchases.” Or, “Yes, we do pay commissions based on gross margins but, because the contract we signed with salesperson X is different from the deal we reached with salesperson Y and Z, the way we calculate ‘gross margins’ is different for each salespersons.”

 

 

Now I know you are probably asking, “What is the similarity is between your daughter’s situation and the two examples you have just provided to us?”

 

“Believing” you are managing is not the same as managing in reality

 

The similarity is this:

 

In each case the executive in charge called their decision-making a “process” (or, in the academic world, a “rubric”), and I think, truly believed that they were managing “a process” (e.g., “the sales process”). However, close inspection reveals that each decision was being made on a case-by-case basis, without reliance upon a process or rubric, at all.

 

Note that my objection is not to the case-by-case decision-making – although I offer that this is likely not a sound approach to managing a growing SMB. Rather, my objection is to the managers’ beliefs that they are actually managing to a “process” or by “a process.”

 

Simply put: If there is no process, it – whatever “it” is – cannot be managed.

 

The key point here is to separate purely subjective, case-by-case decision-making from the act of “management.”

 

Management implies the existence of “a process,” – that is, an understood cause-and-effect relationship in a sequence of dependent events leading to a predetermined goal. There are three critical elements to this definition of “management” and “a process”:

 

  1. The “process” must have a goal or outcome. If there is no goal or outcome that can be stated in advance, then there is no point in attempting to “manage” it, for to manage it would be to somehow affect the outcome of the process (e.g., improvement). If the goal or outcome of the process is not understood or has not been articulated, then there is little need for the act of “management.”
  2. The “process” must include more than one step or event, and the steps or events must be related by their sequential dependence. One cannot manage, for example, “the big bang.”

  3. The “manager,” in order to manage effectively must understand both the goal of the process and the process itself.

 

In the case of much so-called “sales management” that I have observed, one could not readily determine—at times—whether the goal of management was to maximize enterprise throughput or minimize disturbances to each salesperson’s mystical mojo.

 

The point is, if one salesperson’s mystical mojo works by wining-and-dining customer executives, and another salesperson’s mystical mojo encompasses playing a lot of golf with executives and purchasing agents at customer firms, and a third salesperson achieves some measure of success by yet a third means, then there is no process and no truly effective “sales management” can be taking place. It becomes impossible to say that the firm can replicate its success—or, even, extend our success—by leveraging “a process” that has proven itself to be effective.

 

Whenever an executive must deal with sales operations as mystical mojo that is carried out in some seemingly inexplicable way by certain persons who were hired because they have a demonstrated facility for working this “mojo,” then that executive cannot be said to be “managing” the “sales process.” He or she may be managing many things related to sales, like the expenses related to sales, the number of salespeople, the sales territory assignments, and more. But he or she cannot be managing “the sales process” any more than he or she would be said to be managing a group of witch doctors in the work they do.

 

Let me go further to say, that even though the executive may have a “prescribed sales process” that includes a number of “steps,” even if those “steps” are somehow encoded in some CRM (customer relationships management) or other software application; and even if the salespeople are required to “check-off” against these prescribed “steps”; if such “steps” are subject to frequent manipulation by the salespeople or sales managers or if a near-constant series of concessions are being made to the demands of salespeople or sales managers in accommodation to their claims of “mojo,” (or something equally nebulous) then no real “sales process” exists in such an organization.

 

Also, if management is repeatedly finding itself caving-in to what amounts to little more than “threats” that “bad things will happen” if the salespeople’s and sales managers’ demands are not met in one way or another, then I would suggest that no “sales process” exists.

 

What difference does it make?

 

Now, I hear you asking: “What difference does it make if we have a “sales process” as long as we are making sales and surviving?”

 

To that question, too, there is a simple answer:

 

As an executive, if you do not have a real and manageable “sales process,” then you are at the mercy of the economic winds and the fickleness of fate. In the absence of a manageable process, you cannot know what actions will lead to improvement. Despite your title as “executive,” your only recourse is to try this or try that, simply because you have no fundamental understanding of the actual cause-and-effect relationships that lead to more sales or better sales.

 

By the way, this same principle applies to every aspect of management—supply chain, manufacturing, inventory, and more.

 

Is that really how you want to run what is arguably the leading edge of your business enterprise?

 

What do you think? We would like to hear the good, the bad or the ugly of your experiences with management of processes across your organization. Leave your comments here.

 

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The Supply Chain Technology (SCTECH) Conference is an annual gathering of supply chain management, technology, and engineering professionals, as well as financial experts. The goal of SCTECH is to equip supply chain professionals with the latest information and concepts in supply chain technologies, thus helping to build better, more efficient, more effective and more profitable supply chains. The ISCEA (International Supply Chain Education Alliance) Supply Chain Technology Conference and Expo 2016 is scheduled for 19-21 July at Navy Pier, Chicago, IL.

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Why should you attend…

1)    Listen to renowned speakers

 

By participating in SCTECH 2016, you will get a chance to meet and hear from prominent speakers from both the academic and corporate sectors. The speakers constitute an array of experts in supply chain management and technology. Plus, you will have opportunity to participate in panel discussions and debates on a variety of topics, while having your questions answered by highly renown experts.

 

You will leave SCTECH2016 better equipped to face the day-to-day challenges your supply chain throws at you. You won’t want to miss the advantages you will gain by participating in SCTECH2016.

 

2)    Leading exhibitors and sponsors

 

Leading companies from around the globe will be present at SCTECH2016 ready to showcase their technologies other solutions. There will be exhibitors to help you solve problems in the following areas:

• Supply chain planning and execution

• Sales, inventory and operations management

• Purchasing

• Material handling and storage

• Profitability optimization

• Among others

3)    Exciting new career opportunities

 

Both corporations and recruiters from the supply chain management industry will be at the show looking for outstanding talent among the attendees. You never know! It may be your chance to grab that job opportunity you have been awaiting. So, come along and bring your resume.

 

4)    Contests and competitions

 

SCTECH 2016 will include numerous contests—like an exciting robotics competition! You will be amazed to see how technology professionals have developed and extended robotics capabilities to help solve your supply chain challenges.

 

5)    Explore further education

 

Also in attendance at SCTECH2016 will be several top-ranked universities showcasing their supply chain and technology education programs. If you have always wanted to pursue further education in supply chain or technology programs, then attending SCTECH may be right for you.

 

6)    Seminars and Sessions

 

Top-notch researchers in the supply chain industry will conduct several seminars and sessions. The sessions are geared to focus on the improvement of supply chain management practices—and profits.

 

7)    Training workshops

 

There will be a variety of exciting and useful educational and training workshops for you to attend. The workshops will offer education, certifications, and industry-recognize training in an array of supply chain topics.

 

8)    A chance to have your business funded

 

Do you have a promising idea, but lacking funds to get off the ground? SCTECH venture capital partners will be there to help you. All you need is to avail yourself for the conference and showcase your big idea to the investors. If they are impressed with it, your business may be the next big thing.

 

Needless to say, there are more than enough reasons why you should attend the SCTECH 2016. Mark the date and be part of the professionals ready to share cutting edge technologies in the supply chain industry.

 

 

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If you’re nоt соnnесtеd tо the іntеrnаtіоnаl community оf рrоѕреrоuѕ ѕuррlу сhаіn buѕіnеѕѕеѕ, thоught lеаdеrѕ, and trendsetters, уоur company аnd уоur саrееr саn nеvеr rеасh thеіr full potential.

 

The Supply Chain and Transportation Expo (4-7 April 2016 | Georgia World Congress Center | Atlanta, GA) іѕ аn event ѕесоnd tо none, оffеrіng уоu virtually unlimited орроrtunіtіеѕ tо lеаrn from іnduѕtrу рrоfеѕѕіоnаlѕ, hеаr dуnаmіс ѕреаkеrѕ, аnd network with some of the most іnfluеntіаl supply сhаіn leaders in the wоrld.

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Yоu’ll аlѕо connect with thе lаtеѕt ѕuррlу сhаіn management knowledge, rеѕеаrсh, аnd industry developments.

 

Join your соllеаguеѕ from all over the wоrld іn Atlanta, Georgia аnd mаkе the connections that wіll accelerate уоur ѕuссеѕѕ, both personally and for your supply chain.

 

Aѕ a ѕuррlу сhаіn mаnаgеmеnt рrоfеѕѕіоnаl, you wіll nоt wаnt to mіѕѕ the opportunities the Supply Chain and Transportation Expo affords:

  • Tо review the latest in industry рrоduсtѕ, services, аnd іnnоvаtіоnѕ
  • Tо better understand thе challenges ahead for supply chains, and to see first-hand the іnnоvаtіоnѕ on the horizon to help you meet them
  • Tо meet fасе-tо-fасе wіth industry leaders and thе реорlе you've bееn following оnlіnе
  • Tо participate in opening and improving соmmunісаtіоns bеtwееn іnduѕtrу lеаdеrѕ, buyers, ѕеllеrѕ, аnd government agencies governing various aspects of supply chain operations
  • Tо have орроrtunіtу tо еѕtаblіѕh nеw buѕіnеѕѕ соntасts, while nеtwоrkіng, nоurіѕhing аnd ѕtrеngthеning еxіѕtіng ties and аllіаnсеs

 

The Supply Chаіn and Trаnѕроrtаtіоn Expo аllоwѕ уоu tо ѕее, tоuсh, and еxреrіеnсе thе lаtеѕt ѕuррlу chain advances up сlоѕе аnd реrѕоnаl. Experts will be оn hаnd to show how уоu, too, can орtіmіzе уоur ѕuррlу chain starting the day after the expo.

 

The Exро іѕ a grеаt way to mаkе ѕurе your соmраnу knоwѕ how vаluаblе уоu аrе! Onlу by аttеndіng wіll уоu gain all a wealth of knоwlеdgе while building a strong network of people who саn hеlр mаkе success happen.

 

Sеѕѕіоnѕ аrе lеd bу ѕоmе оf thе brіghtеѕt mіndѕ in thе ѕuррlу chain industry and уоu'll gеt tо hеаr аbоut the top сhаllеngеѕ fасіng supply chains іn thіѕ nеw есоnоmу. You will also gain реrѕоnаl еxреrіеnсе аnd discover іnnоvаtіvе ѕоlutіоnѕ. Don’t miss it.

 

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