I interviewed Stuart Emmett who discussed The Eight Supply Chain Rules.
It’s nice to speak with you again, Stuart. Today I’m looking forward to hearing your views on the topic of the eight supply chain rules. Before we start, can you provide a brief background of yourself?
Yeah, sure, Dustin, thank you. I worked in supply chain really for many, many years now. I used to work in logistics—my background’s in logistics—and I did that based in the U.K. but also down in West Africa. And then in 1990, quite some years ago, I moved into the training-education side of things with an institute here in the U.K., the Chartered Institute of Logistics and Transport, which, of course an institute very similar to people like Apex and ISM, et cetera, that you have in the U.S. That got me into the education side of things and subsequent to studying out in 1990, I’ve been fortunate enough to go to many different countries, working—I think it was about 35 the last time we did a count upon it—delivering training programs all along the supply chain emphasis, although we go into some detail on separate topics like procurement, like warehousing, like inventory besides just the overview of supply chain. That’s where I come from, Dustin. If you’d like, I’ll just carry on. Should I on how I came to come up with the supply chain rules and what the importance is?
What happened in a lot of the travels I was doing in working, people were starting to ask me just what the supply chain was about. I thought there’s an opportunity here to just sit back and think about what the merger of supply chain, so that forced me, really, into looking into it and coming up with eight rules. I’m going to just go through those very quickly. They don’t specifically need to be in the importance I’m going to give them, although for reasons that’ll become clear, the first two or three probably are in importance. These are aspects that we must get right. And probably there are some obvious ones that people recognize and also perhaps not so obvious ones. Perhaps it’s useful if I just start off with my definition—and others’ definition, really—of supply chain. Supply chain is, of course, a process and what it’s about trying to do is to integrate and coordinate and control this whole movement of materials, goods, and information, which is starting off simply from a supply—we’ll come back to that—through a series of customers until it reaches the final consumer.
You and I are always at the end of a supply chain as consumers. I think the main thing about the definition is that it’s a linking process. It’s linking all the activities that go on between supplies and customers to the consumer and doing that in a timely manner. Supply chain involving the management of activities like buying and sourcing, manufacturing, making of product, the moving, logistics side, and also the selling the side. There we go. The important bit, really—and I think most people know this—is in the chain name that all these activities are connected.
Out of that, you can get the words coming out, but, really, the whole thing is very dependent on each other, isn’t it? What we really need to do is really recognize that, and I’ll be coming on to that one again a bit shortly. What we find is that a lot of dependent process, people manage it independently. They’re just not joined up, and because they’re not joined up, you cannot view them like this, an aspect where people can maybe be managing the supply chain. That’s the background on supply chain. Let me just go into it now and just run through the rules if I could.
1. The first supply chain rule for me is what I call win the home games first.
That’s really taken from a sports-team analogy, where if you want to be top of the division, top of the league, whatever it is, the priority’s got to be, you’ve got to start to win the home games, you’ve got get your internal organization working well. All internal operations and activities really need to be integrated, coordinated, and controlled. This is often where supply chains fail before they’ve even started, because that just doesn’t go on. You start to find that one function has maybe got a role over others; they don’t work well together; internal customers sometimes become internal enemies; we just don’t find that the internal operations are working very, very well.
It’s been nicely also but across by one of our profs here in the U.K. who said what we need is T-shaped people, the T being having people who’ve got debt in a function, but also that’s on the vertical side, and then the T on the horizontal is that they need to join up with the left and the right side of them. That’s a nice side of putting it, really; we just need to get this internal collaboration working well or, rule number one: win the home games first.
It’s a very big start for organizations because getting into culture is getting into changing the way we’ve done things around here, which is often not very easy. There’s rule number one and I would say definitely the number one rule in supply chain.
2. Number two really goes through into looking at inventory. Rule number two for me is that the format of inventory and where it’s held in the supply chain has got to be of interest to all supply chain players; therefore, it must be something that’s jointly examined and investigated.
Now, this is done often, of course, with people who are doing processes like CPFR collaborative planning for customer requirement; sales and operation planning, by definition, looking at stock levels we’re holding; and also things that are collaborative and incorporating rule number one. We can see the real evidence for actually doing this.
This whole bag of worms, of course, once you get into the inventory side. The net result generally is often if it’s not being managed properly that throughout the supply chain, more inventory is being held than is actually needed, so too much inventories being held. I’m thinking of things like the forest for the trees that come into it and illustrate those aspects. This is something we need to be looking at very, very closely. That’s number two.
3. Number three, obviously, what we’re about is trying to get the right kind, the optimum, if you like, custom-service balance.The rule: The optimal ideal custom-service balance will only ever be found by working and collaborating with all the players in the supply chain.
The other key is taking, if you like, win the home games first collaboration out into the supply chain and looking at ways of working with people and trying to tap into all the different kind of aspects that come through there. One that’s going to come out from that, that is rule eight, around reducing lead times and starting to look at that. To do this, we need to go beyond the actual first tiers and start to look into the network, the supply chain, rather than just looking at, say, the first level of supply end. This is a big area still for a lot of people going into suppliers and starting to look at it that way.
There are some sub stories, really, where that focus is often brought home where something goes wrong in supply chain that’s perhaps far removed in thinking about things that have gone on if you like supply chain risk area, I guess, where there’ve been problems in factories in third-world countries that have been publicized very, very well and then backed down and reach our companies there. It’s more than just looking at the interim processes here; it’s looking at mutual interest and trying to get open relationships. Again, that’s quite a big one there.
4. Number four is coming through to the time element. Obviously, all activities taking place in time, so the actual flows, but also the cash flows and the information flows are important. The big thing on the lead time for us, people often, I find, get this wrong. It’s very, very nice if we could get short lead times.
Obviously, if we’re able to do that, it’s going to reduce on the inventory side, but the major aspect is to actually have reliable lead times. If lead times are reliable, then we know that something is going to happen within that lead time; then we can plan that it. As is often said on inventory, it’s actually uncertainty that’s the mother of inventory. Uncertainty is the mother of inventory.
The length of the lead time is importance to the variability and uncertain-ness in lead times. Knowing what the lead times are and spending time working on trying to find a reliable way of maintaining those lead times so we’ve got certainty coming through is critically needed, but it’s all too rarely done, actually. Most discussions you see on lead times understandably are talking about short lead times, but if we’re buying something from the other side of the world, we’re not going to get a short lead time, are we? But if we have it reliable and we can plan for it, that’s the important aspect that kicks in.
Okay, those are the four, and I would say definitely the top four. The next ones go into things like, which I’ll go through. Obviously, we’re looking at the customer side of things, looking at flow and movement, concept of tradeoff, and looking at the information flows. Those are where we’re headed for. The first four that I’ve gone through I would say are probably prioritized as being prime ones to actually look at. Okay, just get through the balance four ones a bit quickly, Dustin.
5. Number five, I call it the customer is the business, isn’t it? It’s the demand from the customer that’s driving the whole supply chain so that finding out what it is the customers value and trying to deliver that is what’s critical. It may be low-cost, it may be more reliability, it may be both things together. It’s a different balance to be found, isn’t it, with customers.
The big thing on this one, of course, is as well just to reach the customer, and within that as well, I just want to drop in that there are things called internal customers, and that’s taking me back into the win the home games first and go there as well. There we go. Simply, if everybody looked at the next person they pass something on to as being the customer and thought about them as that way, then things are going to change in the way things are going to get done. That’s a straightforward one perhaps on customer.
6. Number six: It’s all about movement and trying to maintain flows. If you stop the flow of goods and materials generally, you are not only increasing time, but, of course, we’re adding cost to it. It’s all about getting the movement and keeping the movement going. Agility, those kinds of words spring into mind when we talk about that one.
7. Rule number seven, this nice idea; trade-off, looking holistically at a supply chain and deciding overall how we can get the best, which may mean paying off a transport because that reduces inventory holding, just a very, very simple one there. I remember coming in the early ’90s actually, when we had a large manufacturer of confectionary products here in the U.K. set up a supply chain department inside the business to coordinate things.
They became—it was a good title, actually—they became known not as supply chain, but they became known as the department of tradeoffs because that’s what they were doing. They were trying to look at the overall and manage that so that it broke down some of the internal style and management aspects again. And then the last one not mentioned, really, in detail but it is very important.
8. Supply chain rule number eight: it’s information flows that actually lubricate the supply chain, isn’t it? The big development in supply chain in the past 20, 25 years has been the growth and information and communication technology.
All trade and activity that we know of supply chain has been done for many, many centuries now, certainly in the West, is pretty well-known, but it’s the ITC side that’s enabled us to have visibility, enabled this connect, et cetera, et cetera. And, of course, development is still going on there. We need to have, I’ve just copped out by saying “the appropriate” ICT, isn’t it? It needs to be something that is looked at. And I also purposely don’t mind having that as last because I think we’ve got to, or we’ve gone against the fact, I do come across it a lot in certain areas of the world, where people are looking to solve problems by buying some software and, of course, they’ll always find someone who’s willing to sell the software.
The danger is, it may not be right for them, they don’t understand the basic processes in buying something that’s being programmed for them, but in one or two years’ time, when things change, there are some dangers within that scenario. We really need people to understand and have some knowledge about what goes on behind the screen. Please, please, please, let’s use appropriate systems, then, to take away all the number crunching, take care of some of the simple decisions and flag things for people to come, people’s knowledge to actually use and take the right decisions. Okay? There we go, sir. That’s a very, very quick summary of my eight supply chain rules. Over to you.
Thank you, Stuart, for sharing today. Do you have any final recommendations?
Yeah, just do them. They’re very simple to state. I do accent the devil’s in the detail when you apply them in particular situations, but adding a clear focus on just what it is we need to be looking for I think sometimes helps in so doing, which is why I put the rules together in the first place; it gives you some kind of structure to start to have a look at how we can make improvements. That’s it, really.
Thanks for sharing today.
About Stuart Emmett
International Master Trainer and Award Winning
Author covering all Supply Chain topics