Monday, July 26, 2010

SIOPS and the Gulf Oil spill

I have been lucky in more than one of my previous lives to be involved in the creation or overhaul of several Sales inventory Operations Planning Systems (SIOPS) I love being involved in this activity as it is what I like to do best; work with complex puzzles involving both processes and people.

Recently I saw a discussion posted on LinkedIn from a consultant asking if anyone has used SIOPS type tools to forecast the ability to meet a month end target. Clearly this guy had never been in a line management role in his life. After making a mental note never to engage this company's services, I pondered how many real deliverables are expected from this process.

Sr. Management expects this process to both protect the company and to optimize both revenue and inventory. However they are generally not close to the real compromises and risks taken in the process. The detail required to really understand the process is really not available to them, usually by design. They really have to take the recommendations they are given in most cases.

The real operating managers, people in Sales, Manufacturing and Supply Chain, have grown up in the pressure cooker of competing goals and objectives, insufficient resources and crazy time constraints. They are used to working in this environment and usually do an amazing job of keeping the race car in the lead of the race while overhauling it. SIOPS to them is the dashboard, Ouija board and a place to find whatever wiggle room is left after everything has been "optimized".

Folks at the working level expect this process to provide them with a workable plan. Given the dynamic nature of most operations, the plan agreed to does not generally survive intact too long, and they find themselves reacting to what is coming up in their e-mail in boxes, making decisions sometimes at odds with the plan.

This (finally) brings me to the Gulf spill. I keep imagining this same sort of a dynamic. Senior managers looking at data at a macro level, do not consider the crazy statistical outlier that is what happened in this case, and push on a macro level to reduce costs putting processes and incentives in place to accomplish this

From here, operating managers to try to save money on inspections, with all their data showing that this type of spill had never happened, and the models show risks are low (though consequences catastrophic) They find a way to keep hitting their targets, more with less, what they get paid to do…

Our lesson? Let remember that the models are just that and that they are still really just tools to aid human judgment.


 


 

Monday, July 19, 2010

The Incredible Shrinking Supply Chain

When I talk with colleagues, everyone talks about how long and complicated their supply chains are. Stretching across the globe, through multiple distribution nodes and stocking points, tracking and managing product flow can be a nightmare. While the game of “Who’s Supply Chain is Bigger” is fun to conduct over a beer, it is the opposite in terms of cost, lead time and overall value to the customer.


I recently conducted a 3PL survey for a client and I walked away amazed at the “Control Tower” war rooms at the major 3PL’s. Multiple flat screen displays can track shipments and point out trouble and potential trouble anywhere on the planet. Very impressive.

However if we want to be more competitive, we should be asking how we can be less impressive.

The Physical Supply Chain

I might be time to ask some “stupid” questions. Why is the company really operating in all of the countries and regions it is, at least on the supply side? Is it really necessary to be in 3 countries in Asia? Is it (heaven forbid) necessary to be in Asia at all? The State of Tennessee is touting itself as the New China, showing that with current levels of taxation and logistics costs it can be cheaper to manufacture there than in China.

Next, has anyone in Operations spoken to anyone in Sales about distribution strategy? I have seen product take several stops on the way to the customer from the factory that existed only to accommodate the organizational silos between Sales and Operations. Someone has to pay for those warehousing and logistics costs, and in the end it affects the company’s competitiveness.

The Virtual Supply Chain

Less obvious, and more insidious, is the process and data flow required to support this impressive supply chain. How many steps does it take to get an order from the customer to and actual order on an internal factory? How many people? How many approval steps? How about the same questions to status an order? In terms of cost and lead times this can be the biggest opportunity to improve.

In a recent study I was part of, a major B to B company, who’s name you would know, requires 3 approvals, 2 transcriptions of an order 3 emails and a phone call to enter an order. Statusing an order took a similar ordeal. We estimated that 25% of the headcount was caught up in non value added activity. Customer deliveries were 3 days to 1 week longer than required. Payback on the technology investment was measured in weeks.

The tools for simplification and process improvement have been around for a long time. Let’s use them to build an incredible shrinking supply chain.

Sunday, July 11, 2010

Are you ready for the upturn?


 

We all know how deep the cutbacks were at all points in the supply chain in the past 2 years. Inventories, headcount, system and upgrades have been slashed, made redundant and delayed respectively. We have all seen pictures or personally witnessed all of the decommissioned cargo ships and aircraft in Asia.

The good news is that in many sectors, business is starting to pick up. With this pick up of business come some of the problems we have not seen for a while. Delivery issues, missed commitments, stock outs at distributers and allocations. This of course comes at a time when staffing needed to deal with these issues is really not available. Here are some things to do that can help that don't take lots of extra time from your already stretched staff.

Forecast:

We all make them; how well have we communicated them? Of course we have been talking to our key suppliers, but the funny thing is that the product cannot be built if it is missing even one part. Your friends in IT can help sending out an e mail to every supplier with a forecast. Show them your optimistic one and ask them to respond with information regarding their ability to meet your needs. You may actually flush out issues, or at the very least, you have let them know your intentions.

Supplier Checkup

Those of who will admit it will tell you that there are suppliers of current material that they have not placed an order with for more than a year (sometimes longer). In some cases tooling will be disposed of, or worst case the supplier is no longer in business, a victim of the recession. How many PO's will you have difficulty placing? These suppliers need a little extra attention right now. Get a list of these and other low volume suppliers as well as those with historical delivery issues. These should be contacted with some specific questions. Have any products gone obsolete? Plants shut down or consolidated? Locate your tooling at these suppliers. Suppliers with issues here merit a visit, as there is nothing better to gain visibility and priority than this.

Internal Review

Most companies have been working with a mind set of, "how can we get by with as little as possible". Some have no doubt pushed a lot on their current people with the bet that business would be slow and they could cope. The best and the brightest are most vulnerable here; as they probably have the biggest loads and are most likely to get offers from other companies as the business comes back. These will be even more tempting if they fell overwhelmed and unappreciated.

It is time to look at how work is allocated and review processes. Let keep in mind folks are already working hard and may not take kindly to a lot of new projects or meetings. Instead, a lunch meeting or 2 to ask for ideas on work simplification and process improvements. Meet informally with individual to understand workload and get ideas on better distribution, as well has hiring ideas for that magical day when hiring is possible again. This may bring some issues into the open in time to more easily address them. It will also help your team to feel appreciated and listened to. This is something that also may have been in short supply due to your overstretched work life.

Upturn? Bring it on……

Thursday, July 8, 2010

How to make an American job before its too late - Andy Grove

Please see the link below for words of wisdom from an American icon. His focus here is on start ups, but it applies everywhere.


I have spent a big chunk of my career sending things overseas. Each one of the decisions to do so made perfect sense in its own right. In the end, thousands of guys just like me ended up each making small individual decisions to eviscerate the US manufacturing infrastructure

http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html

Friday, July 2, 2010

Is China the new Saudi Arabia?

How China may have the US over a rare earth barrel... Read this!

http://online.wsj.com/article/SB10001424052748704898504575342663977842890.html?mod=e2tw

Global Logistics - Supply Chain Management - Manufacturing and Distribution - Six Sigma - Lean Systems - Process Improvements - Product transitions - Global Sourcing - Asian Manufacturing - Developing Effective Teams - ERP - MRP Implementation - Kanban - Reverse Logistics - Consulting - Organizational Development - Six Sigma - Contract negotiation - Product Development - Change Management - Quality Management, Facilties Management Medical Devices

Thursday, July 1, 2010

Changing the addresses of comfort zones

It is a truism that stagnation is the one sure road to irrelevance and failure. Today’s supply chains would be virtually unrecognizable to procurement people even 10 years ago, and change is coming even faster today. So why is that that is can be so difficult to create change in an organization?


One of the many reasons is that despite folks understanding of the above, they like the way things are. They have their comfort zones. Even if their relationships are less than effective, they understand and can manage within them. I once started work at a new company to find that my Materials manager made our sales forecast each month because she could not get one from Sales.

When I found this out I immediately went to work with our Sales group to get an effective forecast that they could be accountable to. After some time we established a SIOPS style group process to have Sales, Marketing, Product Development and Ops agree on a monthly material plan for the company. After going through this process, I discovered that my Materials Manager still made her own forecast! She claimed that it “helped her to understand the demand” I was dismayed at the time wasted, and even more dismayed when she tried to load the MRP with it.

So how do we get folks out of the comfort zones? We don’t, we move them. People at all levels need to have a clear understanding of how their actions affect the bottom line. If we are advocating change it should be in alignment with company objectives. If not why are we changing? In effect if we do not change, our company’s objective will not be met and that can be very “uncomfortable” for everyone. In each case, we need to spend the time at all levels to help people to understand that “why’s” of the change and how this is both necessary and beneficial. In the process we can see that the “new world order’ is actually the comfortable place to be.

This process is time consuming and sometime difficult, but is can be the difference between success and failure in your next change initiative, When the comfort zone is moved, the team is pulling the direction of the change, adding ideas, insights and energy to the change process, and owning the result!


Global Logistics - Supply Chain Management - Manufacturing and Distribution - Six Sigma - Lean Systems - Process Improvements - Product transitions - Global Sourcing - Asian Manufacturing - Developing Effective Teams - ERP - MRP Implementation - Kanban - Reverse Logistics - Consulting - Organizational Development - Six Sigma - Contract negotiation - Product Development - Change Management - Quality Management, Facilties Management