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2016

Maybe you’ve never actually said it out-loud. Maybe it’s just been one of those things that nags at your mind while you’re showering or during your morning and evening commutes.

 

Maybe you even have struggled with admitting to yourself—let alone openly, in a company meeting—that this is, and has been, a problem for several years. It might be that you’ve struggled with this matter—nearly in silence—for a decade or longer.Indecision_metaphor.png

 

What is this nagging question?

 

Well, the question varies a bit, but it usually comes down to something along these lines:

 

WHY? Why, when we have spent our most precious resources of our time, our energy and our cash, do we still fail to make long-lasting and significant improvements to our bottom-line? We don’t scrimp on talent, and we’ve expended huge effort from time to time, but nothing seems to last.

 

Resource contention

Strategy starts at the top. We all know that.

 

But, your company’s ability to effectively implement strategy is entirely dependent upon its ability to fully align internal resources so that they are all focused on the top-level goals established in the strategy.

 

Most—in fact, almost all—organizations fail at this task!

 

Competing initiatives, like improvement efforts that are focused on one department or a single function, drain away time, energies and money. Programs, like the purchase and implementation of new technologies, may also consume vital resources while the programs themselves have never been effectively linked in measurable ways to the company’s overall strategies.

 

Investment decisions are often made in a fragmented way—investing in an “improvement” in this department or that function in the vague—and, frequently, vain—hope that it will in some mysterious way contribute effectively to substantive bottom-line improvements.

 

Because the inter-dependencies across silos and functions are seldom fully comprehended, improvements in one silo or function are too frequently negated by unanticipated effects in other silos and functions after the time, energy and money have already been spent.

 

In order to hit new inventory target levels, stock-outs and manufacturing delays increase. Manufacturing and purchasing cost targets are finally achieved, but quality falls below acceptable limits and the ability to deliver on-time declines, too. Key products for crucial customers are hitting their targets while the other 80 percent of products and customers suffer and sales are lost.

 

Agreement on the need

If you are like most folks, you and your whole management team agree that what is desperately needed is a system of metrics (KPIs) that encourage appropriate local actions while being fully in-synch with corporate strategic goals and that actually deliver consistent bottom-line results.

 

While there is much agreement on the need, most companies have spent years and years struggling to find such metrics and guidelines. So, they keep re-trying the same things they have already tried dozens of time before, hoping beyond hope for different outcomes this time around.

 

This is real insanity: doing the same things over and over again, but hoping for different results.

 

Breaking out

The only way to break out of this cycle is to radically change your thinking.

 

Consider this:

Why should you expected radically different results from doing the same things that you—and everyone else—has been doing and trying for the last dozen or more years?

 

If you are going to keep doing the same things, you are going to keep getting the same (mediocre) results.

 

What you need is a new way to think, and we can help with that. Changing what you look at will change what you see, and changing what you see will change what you measure. And, changing what you measure will change how people act. And changing how people act may dramatically improve your bottom-line now, and in the future.

 

Contact us with your questions.

 

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RDCushing

Got Capacity?

Posted by RDCushing Sep 6, 2016

Got capacity? How much of it is being wasted—or, rather, misused?DDMRP Bimodal Inventory Distribution.jpg

 

Let me help you answer that question.

 

Bimodal Inventory Distribution – A Common Malady

I don’t care where we go, or the size of the enterprise with which we are working, the most common situation we encounter is expressed in the accompanying figure, and in the following statement:

 

“You know—the biggest problem we have (all the time!) is that we seem to have too much of the wrong stuff and too little of the right stuff.

 

While the goal of every supply chain and every supply chain manager may be summarized by having the right quantities of the right items at the right place at the right time, the failure to do so is nearly ubiquitous in almost every industry.

 

You’ve Got Capacity!

If you have “too much of the wrong stuff” on a consistent basis then, in some odd way of thinking, this is actually a good sign!

 

Why?

 

Because having excess inventory is evidence that you have capacity to produce stuff in your supply chain.

 

The problem is that you’re just producing the wrong stuff.

 

The Flow of Relevant Information and Relevant Materials

Having too much of the wrong stuff and too little of the right stuff means that you probably do not have a capacity problem in your supply chain.

 

It definitely does mean that you have a signal or information problem in your supply chain.

 

Having too much of the wrong stuff means that your supply chain is sending signals to produce the wrong stuff—or, at least, to produce it at the wrong time. Signals that tell your supply chain to produce the wrong stuff or at the wrong time means that you have irrelevant information flowing in your supply chain.

 

When you have irrelevant information flowing in your supply chain’s information infrastructure, you will get two results:

  1. The flow of too much irrelevant materials (read: the wrong stuff), and
  2. The lack of flow of relevant materials (read: the right stuff)

 

Two Things that Must Change

In order to correct this situation, we have found that two things absolutely must change—and, in this order:

  1. How the supply chain managers think and measure in determining actions and priorities
  2. Where and how they get their signals that drive actions and priorities

 

In case you haven’t noticed, the methods that were pretty effective ten or twenty years ago are now almost universally obsolete. That why new thinking and new metrics absolutely must supplant the current way of thinking (in most supply chains) before significant and lasting progress can be made with regard to the flow of relevant materials.

 

If you tired of fighting—and, fighting again—the same old supply chain battles and fires you have been struggling with for that last five, ten, 15 or more years, we can help you start thinking differently for lasting improvement in your supply chain’s performance.

 

Contact us and we will be glad to discuss some options.

 

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Recently Kinaxis released an insightful whitepaper entitled Overcoming Five Roadblocks to Supply Chain Success. In this paper, they list the five big roadblocks to supply chain success as:

  1. A Focus on Plan Optimization – The Myth of the Better Plan
  2. Siloed Functions – The Pain of the Domino Effect
  3. Distributed Operations – Too Much Time Wasted on Assembling Distributed Data
  4. Multi-System Environments – Integration and Harmonization is the Stumbling Point
  5. Supply Chain Visibility – Expand the Definition to Match the Goal

Kinaxis header.jpg

 

As the Kinaxis writing clearly articulates, each of the obstacles to success are worthy of serious consideration by every supply chain manager, and even strategic-thinking CFOs and CEOs. However, I want to spend some time discussing what they have to say in their introduction, along with the first and second points.

 

Traditional approaches have become obsolete

The Kinaxis opening salvo is a hard-hitting one. It has serious impact for two big reasons, in my opinion: first, because it is unequivocally true; and, second, because this point is being ignored by far too many CEOs, CFOs and supply chain managers who really should know better (at least, by now!).

 

Here is the first excerpt of which I am speaking:

Companies can no longer predict the future with acceptable levels of accuracy. As a consequence, the success or failure of supply chain performance depends on how quickly and effectively stakeholders can understand and respond to evolving situations. As businesses become more complex, because of globalization, product portfolio expansion and outsourcing, the traditional approaches to supply chain visibility, planning, and analysis have become obsolete.

 

So, let’s break this statement down a bit further.

 

Why is it true that companies can no longer predict the future with acceptable levels of accuracy?

 

Well, there are lots of contributing factors. Among them are these:

  • Supply chains are longer, so end-to-end lead-times have grown. This means that forecasts must look further and further into the future; and the further into the future the forecasts look, the more nebulous they become.
  • Products have much longer “tails.” Customers are now expecting a broad array of products, colors, styles, sizes and more kinds of diversity. This means supply chains are no longer just making “Colgate Toothpaste,” for example. They are making a dozen or more different varieties of Colgate Toothpaste” from which customers may choose.
  • Customer tolerances have shrunk. Customers expect virtually immediate delivery of their selection. They simply won’t wait. They will buy elsewhere if your supply chain can’t supply it.

 

It is quite easy for a forecaster—or forecast algorithm—to tell you there’s a 30 percent chance of rain. But, ask the forecaster which 30 percent of his forecast area will actually get wet; or ask him the likelihood of his entire forecast area getting equal amounts of precipitation, and he’s likely to confess that there’s a 70 percent chance he’s 100 percent wrong.

 

Similarly, it is pretty easy for even relatively unsophisticated forecasting systems to tell you that you are likely to sell, say, 1,812 units of Colgate Toothpaste out of your distribution center next week. But, when you ask the forecasting system to pinpoint which flavors of Colgate will make up that 1,812 units; or which retail outlets need how much of each flavor to satisfy customer demand next week and the forecast become very, very muddy.

 

And, just what are traditional approaches to supply chain visibility, planning and analysis anyway?

 

A big one that still plays a major role in almost every extant ERP system in use today is traditional MRP (material requirements planning). It is so unreliable that the vast majority of companies that use it, also supplement it heavily with external “work-arounds” like spreadsheets, Microsoft Access databases, and even whiteboards, in order to sort out what they really want to do.

 

That’s because traditional MRP logic remains unchanged from the days of its inception and early development. That happened in the middle of the 20th century. That logic was encoded (enshrined?) in computer code in the 1970s and 80s, and has never caught up with our changing world of business.

 

No wonder “traditional approaches” have become obsolete.

 

The status quo is no longer sustainable – supply chain innovation has become an urgent necessity

Most existing supply chain processes and supporting tools were not designed for today’s reality of change…. With current market dynamics and economic pressures, we’ve reached a point where the status quo is no longer sustainable and supply chain innovation is an urgent necessity.

 

It is high time for supply chain innovation. But, until companies begin to realize that it’s all about flow, instead of it’s all about costs, their supply chains will remain mired in old-think. What companies need today is more new thoughtware before they open their wallets for new software.

 

Understanding the root cause is essential to achieving significant and sustainable improvements in financial performance

Only when you understand and address the root cause of the issue can you put in place the people, processes and technologies your supply chain needs to deliver significant and sustainable breakthroughs in… financial performance.

 

You know, despite all of the fancy metrics and KPIs being bandied about these days for supply chain performance, when it comes to the bottom-line—I mean, the real bottom-line—there are really only two metrics that speak to the system-wide performance of your supply chain. Those two metrics are these:

  1. On-Time Performance, and
  2. Return on Investment (ROI)

 

Regardless of the performance of your operational silos when measured in other ways, it really is all about flow. Flow is what drives on-time performance and flow is what really adds to your supply chain’s return on investment.

 

All the inventory that is sitting—not flowing—is really a liability (even though your accounting system views it as an asset).

 

But, if you don’t understand the root causes of those things that are inhibiting the flow of relevant information and relevant materials—there’s already way too much irrelevant information and materials in your supply chain (most likely)—you still don’t have a clue about how to achieve significant and sustainable improvement in these two crucial metrics on supply chain success.

 

The good news is: we can help.

 

Our focus is on, first, delivering new thoughtware, before deciding what technological changes might help you bring sustainable and significant improvements to your supply chain’s performance.

 

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