Why is it so hard for manufacturing [and supply chain] executives to capture more of “the gold” from their operations?

That is the question that Dan Eckermann, former president of LeTourneau Technologies Inc., asks and answers in the forward to an excellent book: Demand Driven Performance – Using Smart Metrics.

 

What is Eckermann’s short answer?

 

The short answer is that they often do not see “the gold”!  Even when they do see it, they may not believe that it can be captured; and, when they do see it, and believe that it can be captured, they often do not know how.

 

Eckermann offers an explanation, as well—at least a partial one.

 

This is partially explained in that company logistics [and supply chains] can be complex, and that our natural behavior does not always lead us to doing the right thing, the right way in such complex situations.  In fact, our natural behavior can easily make a complex… situation worse….

 

Continuing his explanation, Eckermann says:

 

[There] is further explanation for not capturing “the gold” that relates to how and where management typically focuses. For example, it is completely natural for a[n]… executive to achieve an effective selling function, as he or she seems to always understand how important this function is to the company’s success. Similarly, the same management mind-set normally understands the functional importance of engineering, production, accounting, HR and IT; and therefore focuses here with expectations. To the contrary, the management of logistics [and supply chains] by the same executives is often expected to somehow “happen” without deliberate focus.

 

The management mind-set

Why do executives and managers seem to think that some functions are somehow automatically performing with the best possible results? Do they believe that some functions—like buying, positioning and moving inventories—are so inherently simple that it really doesn’t take focus or thinking to get them right? Do they believe that limiting factors like always incorrect forecasts are so pervasive that nothing can be done about the situation?

 

Here are Eckermann’s thoughts:

 

[M]anagement… frequently looks to the functions of purchasing, production control and similarly titled functions to inherently perform their supply chain management, and often believes that these functions are producing the best results possible [all factors considered].  After all, these functions are likely achieving results comparable to those of the past; and, with an acceptance of past norms being good-enough, this management mind-set fails to see that these seemingly hard working employees almost never achieve the results that may be possible. Bottom line: This mind-set in management does not expect, nor demands the achievement of real, break-thru improvements in their respective supply chains. [Emphasis added.]

 

Note that management may expect incremental improvements, but breakthrough improvements are generally neither expected, nor demanded. Eckermann continues:

 

Even when and where the achievement of real, break-thru improvements are expected in a company’s supply chain management, it is rare to find leadership that is capable of applying well-thought methods through-out the organization, beginning with the top.  Pause here for a moment and ponder these basic questions.

 

So, where is your CEO on the matter?

Dan Eckermann asks a piercing question on this front.

 

Where is your CEO on this matter?  Is this person visibly involved, leading the charge? We know that this person cares about improving your company results, but have you informed him or her of what is realistically possible?  Have you informed this person of how much “gold” is there to be had? And, have you informed this person of how much of “the gold” is not currently being captured?

 

Doing “the right thing, the right way” in supply chain management clearly requires breaking from convention and tradition. Through managing difficult challenges in an unusually complex case, I know that there are better ways to manage company logistics than what many companies are practicing today.  From this experience, I also know with solid confidence that many companies can improve their bottom line by first seeing “the gold”, and then by knowing how to capture “the same gold” with right actions.

 

What is Eckermann talking about?

Eckermann is talking about what kept him from achieving breakthrough performance at LeTourneau Technologies (later sold through Rowan Companies to Joy Global), and the book (Demand Driven Performance) outlines the methodologies and processes that allowed Eckermann’s management team to achieve huge gains in performance before the sale to Joy Global.

 

Now it’s your turn to go for the gold

 

So, read the book. It’s your turn to go for the gold, don’t you think?

 

Let us know your thoughts by leaving a comment below or contacting us directly, if you prefer.

 

 

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