Daily Archives: August 20, 2009

Supercalifragilisticexpialidocious … At Least One User Understands Decision Optimization!

Share This on Linked In

CAPS Research recently released their focus study on the role of optimization in strategic sourcing (summary) by Larry Giumipero and Philip Carter. I’ll dig into it in future posts (in the fall; I’ll let you enjoy what’s left of the summer before I get into the heavy stuff), but for now I’d like to say that I was thrilled to see this quote in chapter 9 on the future of optimization:

The vision is to push optimization to all buyers. The eventual goal is to run every item we buy through the system.

For those of you who are Christian, I urge you to shout Hallelujah from the rooftops! This is how it’s supposed to be. Every sourcing professional is supposed to be using decision optimization on every sourcing event … even if all they do is run an unconstrained scenario to understand what the lowest cost option is and how their preferred award stacks up. (While it’s okay to spend 10% more for 20% more value, unwittingly spending 20% more for 10% more value is not a smart move. Ever.)

I was also very pleased to see that at least one user thought that optimization could be used to optimize the entire supply chain (as it can) and that

We are always looking for international sources and new suppliers to run optimization.


Supply Chain Process: Art or Science?

Share This on Linked In

While browsing through a recent edition of the Harvard Business Review, I stumbled upon an article asking When Should a Process Be Art, Not Science? Naturally, this caused me to contemplate supply chain processes and ask if they should be art or science because it’s a good question.

The article notes that there are some processes that naturally resist definition and standardization — that are more art then science and that the idea that some processes should be allowed to vary flies in the face of the century-old movement toward standardization because process standardization is taught to MBAs, embedded in Six Sigma programs, and practiced by managers and consultants worldwide.

But maybe process standardization has been pushed too far, with little regard for where it does and does not make sense. Because sometimes it is output variation that creates customer value. For example, it is the job of the master winemaker to make the most of the distinctive qualities of each year’s harvest and not try to re-create last year’s vintage to a tee, when it may not even be possible.

Now, each supply chain process should be relatively standardized at a high level, as this allows it to be measured and repeated if it is successful, and we want our supply chains to be as lean and six-sigma compliant as possible, which leads us towards science, but is that the whole picture? For example, while a 15-point checklist, such as WalMart’s sustainability checklist, might be a necessary starting point in supplier selection — as you want suppliers who are financially stable, capable of meeting your demands in a timely fashion, responsible, and focussed on sustainability — it should not be the end point as well. After all, part of your job is to identify suppliers that add value and that bring more to the table than just cookie cutter contract manufacturing because that’s how you get an advantage over your competition. How they do that will be an art, and how you measure that will be an art.

So, supply chain processes are really a bit of both — science at the high level (and in the analysis of the details when you are doing a spend analysis or strategic sourcing decision optimization), and art in the middle … where you use your best judgement to find the best product and partner. Where you collaboratively work with your supplier to come up with a better and cheaper design and delivery system for both parties. Where you create value when none existed before. Science in management and art in the execution.

How do you manage the art?

You start with the three-step process outlined in the article.

  • Identify what should and shouldn’t be art.
    What shouldn’t should be “by the book”.
  • Develop an infrastructure to support art.
    Make sure your supply chain artists have the freedom to practice their art and create customer value.
  • Periodically re-evaluate the division between art and science.
    When your team strikes on something great that is repeatable, standardize it. When a process stops achieving the results it once did, put it out there to be re-created.