The scientific definition of calibration is to check, adjust, or standardize a measuring instrument, usually by comparing it with an accepted model. In a lab, instruments must be calibrated regularly if they are to yield accurate measurements.
The same holds true for supply chains. Regardless of how much effort is put into supply chain plans, systems or measurements, the plans, systems and measurements will have to be calibrated from time to time to keep them running smoothly. But when should you calibrate?
A recent article in Design News had some good tips on when to calibrate. Basically, you calibrate when:
- Measurement varies from observed results or results seem unusual
For example, your system records 90% on time delivery, but your warehouse staff are claiming the number is closer 70%. This could happen if your system only records day of delivery, and not time.
- A disruption occurs
After a significant disruption, such as a supplier going bankrupt, which forces you to shift to a new source of supply, you’ll have to recalibrate your measurements to the new mode of operations.
- A new high-value element is being added to the supply chain
When you start sourcing a new product or service that’s high value, you want to make sure everything is running smooth to insure you maximize your investment.
- A contract stipulates precise performance
Everything needs to be double checked, especially if there are corresponding penalties for non-performance.
- Too many imperfect orders
If the system allows a dip in perfect order performance, it needs to be calibrated to find, and fix, the failure.
Share This on Linked In
Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)
Here’s a headline supply managers don’t want to see about their own company:
Alcatel Blames Parts Shortage for Steep Loss
| (New York Times)
Alcatel Lucent, which makes network equipment for AT&T, Verizon and Sprint, said Thursday that the U.S. economic recovery was accelerating so rapidly it was unable to obtain enough basic electronic parts to meet the demand of U.S. operators.
Alcatel cites supply problems as the key reason their sales declined by nearly 10 percent.
There are so many high level, advanced efforts going on in supply chain integration that it’s easy to lose sight of the basics. The most basic element of a supply strategy is assurance of supply of proper quality parts.
I see a parallel between Maslow’s hierarchy of human needs and supply management needs. It’s also known as the Maslow pyramid. Maslow believed that unless needs at lower levels of the pyramid were met, higher level needs would not be considered or addressed. I\His most basic needs were physiological. His highest need was “self actualization”. To put it simply, he said it’s hard to worry about making friends if you can’t get enough oxygen. Similarly, it’s hard to develop advanced supply management programs such as collaborative R&D, technological road mapping, quality improvement programs or lead time reduction if you can’t get enough parts to keep your lines running.
I put assurance of supply at the bottom of the supply chain need hierarchy. What’s at the top? I believe it’s the ability of the supplier to see through your need pyramid and recognize they are part of your customer’s supply chain, and to cooperate with you on meeting your customer’s needs.
What went wrong at Alcatel? I can hypothesize based on my experience as an electronic component commodity manager. The industry is characterized by wild swings between a buyers’ market and sellers’ market that last for a few years. There’s about 20 minutes of equilibrium during the transition. A lot of the ability to maintain supply when demand increases depends on the relationship the buying company maintains with their supply base during the buyers’ market.
If I were a forensic examiner I would look at how Alcatel treated their suppliers during the downturn. I know what we did and it was successful: We put in place major improvements in our ability to forecast to suppliers. We pressed hard on quality improvement programs, something our good suppliers wanted to do anyway. We got strong commitments from our suppliers not to lengthen lead time in an upturn. We didn’t alter our price renegotiation schedule so we didn’t seem to be taking advantage of the suppliers’ difficulties. In hindsight, that resulted in paying more than we had to during a downturn and less than we would have had to during an upturn. Also, (did I mention this?) we had sufficient supply at short lead times when the market turned.
Share This on Linked In