I interviewed Martin Hogan who discussed The Importance of Dynamic Performance Appraisal.
Can you first provide a brief background of yourself?
Well, I spent 13 years in procurement supply chain, watching primarily supply-side engineering with design companies and manufacturing companies. What I've noticed over that period is that design manufacture sales are no longer joined together. They are often separate companies, separate operations. Economically, useful as separate. By losing the joined up line between them you end up with a disconnected process. You lose touch with what you're actually trying to do.
You'll notice over the years, we've had problems with companies using slave labor, child labor, with poisonous chemicals being used in their finished products. And it comes back to not actually having a joined up supply chain from the concepts, the idea that we want to manufacture our products, through to actually supplying that to our customer.
I see that as a significant problem that we have at the moment. The companies are saying we have complex supply chains when in fact they actually built in that complexity. I don't know if you've heard of some of the, for example, the food struggle that's scare that we've had over the past few years, where you have an animal being bred for slaughter, for meat, that then goes through half a dozen different companies—literally half a dozen different companies—for feeding, slaughtering, meat stripping off, packing into different types of food stuff, making it into different shapes, putting it into different label, packaging it, etc.
It is a decision by the end supplier to the customer, that they want to bring their supply chain up that way. I see that as a significant problem that we do need to overcome and revisit as we start to look at our supply chains over the next few years.
What would be the root causes of this problem?
At lot of it, as I said, there's been a financial concern where somebody has looked at a cost of doing some work and said it's too expensive to do in-house. We can get this other company overseas to do it more cheaply. But there's a catch. When they do that, they lose the technical expertise to carry out the job that's core to their industry.
If I design and manufacture a product, for example, I can't, at some state, say, well, that part of the design is too expensive. It's too complicated. I'll give it to somebody else. Because it was actually a core part of my business. The fact it's expensive is unfortunate, but if I release the skills on how to design it and how to assemble it and manufacture it, then what am I actually doing?
So, it's looking at things as a whole rather than saying, that particular process is expensive. We have to understand how it fits into the final product that we're manufacturing. And this is a problem having a deregulated global market. You end up having to chase the lowest price, even though you know it's not necessarily going to be good for you sometime.
Do you have any specific recommendations for how to create this holistic way of seeing the supply chain?
Well, part of it is a government thing. As I said, because of the massive deregulation that we've seen since the 70's. That includes things like exporting pollution to China, because we are not allowed to use chemicals over here. But we find we can in China, India, and parts of Africa. So, we export the industry. And we don't actually clean up our act.
So, internationally, we need governments to cooperate to stop that sort of offshoring of work, simply because there's a financial savings. We need to look at as a whole.
Within an industry, they need to be very careful about just letting the accountant decide on something that's going to happen. Financial control is obviously vital for companies, but they do need some supply chain people look at the quality and the expertise that they require to do that job. If they've got [inaudible] for their companies, they're saying the supply chain or something else is getting very complicated, then they need to have particular senior management staff that are responsible for making sure that all the processes—internal and external—that the company are involved in, that those processes don't become too complicated.
I think it's an internal drive that makes it complicated. It's not somebody outside the company that says I'm going to make it complicated.
And if you look at something like [inaudible 00:06:58] that problem keeps recurring. That comes down to a number of suppliers not knowing who their customer is and what's required of them.
Now because of the quality requirements of the auto industry. That shouldn't happen, because it's me as an auto maker would authorize particular supplies to do things. So, if somebody down the line doesn't know that [inaudible 00:07:30], that's my fault. I should have had a supply chain manager and director through the supply chain, authorized all the supplies within my supply chain, right down to the nuts and bolts and electronic components. I should have those design in and authorized by me. They shouldn't be done by some third party, because it's got my name on it.
Toyota had a huge problem with their airbags and their car sales stalled because of it. You can't turn around and say that it be your supplier that did it wrong, because it's got your name on it. That's my argument, but I think that's the way companies need to focus in the future.
Have you seen any examples of making progress in dealing with the problem?
Unfortunately, no.You've got companies like Apple, where they have that sort of micro-control, because they dominate the marketplace. But I find a lot of companies are still interested in passing the buck, as it were, meaning it wasn't an internal problem, it was somebody outside. And even where they've got serious problems, such as the problems in Bangladesh with the factories collapsing, there hasn't been a drive to actually sort that out.
There are being people put in place that are supposed to sort it out, but if you look behind that and look at the work that they carried out to improve conditions, there's very little work actually being done. And it is disappointing that they're not really taking ownership of the work properly.
Thanks, Martin, for sharing today. Do you have any final recommendations?
I think companies do need to look seriously at their supply chains and how they're managed. There are changes that will take place. There are environmental problems that we face that we'll see change in supply chain. There are consumer changes in the way we look at the products we're buying, both mechanical, electronic stuff, as well as food stuffs. People are starting to question what's happening there. And the companies that are responsible for those supply chains do need to start to looks at what they're doing and be much more proactive, I think.
Thanks again. I look forward to staying in touch if you have additional updates on this topic or further topics.
About Martin Hogan
Supply Chain Surveyor at Lockheed Martin