Category Archives: Supply Chain

Leaders vs. Laggards in Lean

Earlier this year, SC Digest published a comment from Mike Loughrin, CEO of Transformance Advisors, on Designing a Lean Transformation Program that not only covered four key indicators of success in a lean transformation, but also covered the differences between leaders and laggards that deserve a second look.

According to Mike, the four key indicators of success are:

  • Methodology
    Lean is the systematic elimination of waste by way of the five principles of value specification, value stream identification, flow creation, leverage of pull, and the continual strive for perfection.
  • Measurement
    While lean is the top priority, measurement is second as it is necessary to determine the status of the transformation.
  • Community
    Lean succeeds when best practices are shared and people collectively improve upon them.
  • Coaching
    Lean succeeds when mentors coach novices so that they can grow into future mentors.

So how do you distinguish leaders from laggards? According to Mike:

Indicator Leaders Laggards
Methodology Very systematic in the approach to lean. Adopt a couple of techniques from the lean tool box and apply these hammers to every problem whether or not it mimics a nail.
Measurement Assess all of their value streams and focus attention on those areas that need improvement the most, getting to the root causes of the issues. Focus on the symptoms in an effort to identify quick fixes that may or may not address the root causes.
Community Leaders take an active part in the lean community and are very visible at educational and networking events. Laggards don’t have the time, or money, for attending lean educational and networking events.
Coaching Leaders understand that techniques from the lean tool box are systematic and most effective when people are coached on how to use them correctly. Laggards learn by skimming articles and viewing a few webinars. They have a very cursory understanding.

Lean transformation takes discipline not shortcuts. Great article, Mike!

Don’t Confuse Centralized Sourcing with a Centralized Sourcing Model

A recent article over in S&DC Executive on “The Four Vs of Fixing a Decentralized Procurement Model” noted that implementing a centralized model from nothing is no mean feat and then presented the Four Vs” as a good starting point to begin their path forward to centralization of selected spend categories. Centralization of spend is a necessary step on the path to a centralized sourcing model, but that’s all it is – a step.

In order to have a centralized sourcing model, you have to centralized:

  • Talent,
    all of the Sourcing and Supply Management Personnel have to be in the same business unit
  • Technology, and
    all of the operations, even if they are decentralized all over the world, need to run on a common base technology platform
  • Transition,
    all of the processes need to be migrated to common sourcing and supply management processes, with local sourcing only taking place on categories that are truly local (otherwise, sourcing should be center led)

Now, when you are transitioning processes, you should start with sourcing and procurement, as this one-two punch will give you the biggest bang for your buck. The application of good advanced sourcing techniques to categories never sourced this way, or to significantly larger spend volumes, will typically identify savings opportunities in the 10% to 12% range. Then, good procurement systems will make sure that the savings are captured by preventing maverick spend (if the spend has to go through the system and appropriate rules are in place) and making sure the invoices match the POs which will need to match the contracted rates.

And the first step in a good sourcing process is spend analysis, which, if you want to get it right, does require:

  • Visibility,
    into all of the spend in the category being sourced
  • Variance,
    on the spend between sites (which will give you a quick estimate of savings potential)
  • Velocity, and
    to savings which results by choosing categories where contracts are expiring or have expired and where there will be little resistance
  • Value.
    generated from the process in a way that can be measured, tracked, and reported to the CFO.

The four V’s covered in the article are indeed a good starting point on your journey to centralized the sourcing process, but that’s just one aspect of transition, and it doesn’t even address technology or talent, two key factors in the centralization of a Supply Management function.

Squeezing the Most Out of Your Supply Chain

Supply chain investment is finally on the rise again, but many companies are finding that effectiveness still declines over time after the introduction of a new solutiould be n, be it technology, business process, outsourcing, or some combination thereof. Why is your average supply chain, which, by now, should be powered by best-of-breed technologies, still not operating at peak efficiency? I’d argue that there are a number of reasons, including a continued lack of proper visibility, a continued lack of proper monitoring processes, and a continued lack of proper training, but a classic article in Supply and Demand Chain Executive takes a different twist. In “Squeezing the Most Out of Your Supply Chain”, the author, who notes that it is likely that your average supply chain is not operating at peak efficiency, indicates that a supply chain opportunity assessment can help you you determine if, and where, this is happening. This would imply that one of the reasons your supply chain is still not efficient, five years later, is that your average company probably doesn’t know where it should be focussing and that the systems it is employing might not be the right systems or the systems the company needs the most. Given that very few companies do detailed assessments before deciding what they need, instead waiting for a major disruption or fiasco that needs to be dealt with reactively, SI has to agree.

A supply chain opportunity assessment gives your company a complete look at the overall state of one of its most critical functions and provides your company with a comprehensive list of opportunities for improvement. With this knowledge, your company can define a set of actions to improve its operating efficiency and ensure that its supply chain is properly designed to support growth and flexibility to prevent supply disruption.

A supply chain assessment is a straightforward process, which, as per the classic article, can be boiled down to a succinct series of steps.

  1. Define the scope.
    Business Unit or Entire Operation? Subset of processes or full spectrum? Although you should assess your entire supply chain, it’s often best to start small, focussed on key areas, to generate some initial improvements and wins that will fund future assessments.
  2. Examine the ongoing challenges in your business model.
    Document how information, materials, and financials flow through the organization and review the metrics that are being used to evaluate effectiveness. This will help to reveal the challenges.
  3. Identify key issues impacting performance and perform a root-cause analysis.
    Also be sure to compare the company’s existing processes to industry best practices. This will help you zero in on the real improvement opportunities.
  4. Identify and prioritize opportunities.
    Determine the potential business impact of each opportunity and the relative ease with which they can be realized. Then select the most valuable ones and start with those.
  5. Develop a solutions roadmap.
    Once you’ve identified the appropriate improvements, develop a roadmap that outlines the project plan, estimated timelines, and expected costs. And follow through!

Still great advice, and advice every Supply Management organization should take.

UPS Has An Awfully Simple View of Supply Chains

A recent article over on Forbes.com presented 3 Ways to Manage A Global Supply Chain from UPS. The article focussed on how to ease the transition when a business is going global for the first time. It gave three pieces of advice:

  • Look to Local Experts
    When expanding internationally, find a partner that is a local market master who can guide you in developing the brand in that market. Whether it’s taking the time to seek out the right suppliers, or contracting with a skilled business consultant in the area who can do the same, there’s no replacement for local expertise.
  • Invest in IT
    Managing a global supply chain means a constant interaction with data. Furthermore, while a variety of supply chain best practices are available, but some can be ineffective if companies don’t select the IT solution that best meets their specific supply chain requirements.
  • Diversify and Appreciate Suppliers
    Developing good relations with all partners in your global supply chain will benefit everyone and lead to better negotiations, production, and delivery.

This is all valid advice, but it’s not how you manage a global supply chain. It’s how you improve a global supply chain. To manage a global supply chain, you have to first:

  1. Design a global supply chain.
  2. Create the technological infrastructure to manage and run it.
  3. Create a management framework.
  4. Staff up the management team.

then you find the local experts, work with suppliers, and make use of your IT and management assets. You can’t apply best practices if you do not have any best practices to apply them against.

Supply Chain Security Pays – Why Are You Still Not Doing It?

Recent studies have show that just one in six organizations have continuity plans in place 1 and that of the 43% of organizations that implement supplier codes of conduct, only 25% of these organizations perform even minimal monitoring 2. In other words, organizations are not implementing proper security-based risk management plans, even though they have a 98% chance of experiencing a major supply disruption in the next 24 months. And of the one in six organizations that are implementing security plans, only one in four of these organizations are making the effort to make sure their suppliers are conducting business in a proper, low risk way.

This is despite the fact that we’ve had hard data for over seven years that demonstrates the solid cost reductions for those organizations that invest in supply chain risk management and security. As outlined in this 2006 Sourcing Innovation Post on Quantifying the Value of Supply Chain Security Investments, the benefits of investments include:


  • Improved Product Safety
    38% reduction in loss; 37% reduction in tampering

  • Improved Inventory Management
    14% reduction in excess inventory; 12% increase in on-time delivery
  • Improved Supply Chain Visibility
    50% increase in data access; 30% increase in data access timeliness
  • Improved Product Handling
    43% increase in the automated handling of goods
  • Process Improvements
    30% reduction in process deviation
  • More Efficient Customs Clearance
    49% reduction in cargo delays; 48% reduction in cargo inspections
  • Speed Improvements
    29% reduction in transit time; 28% reduction in delivery time windows
  • Resilience
    30% reduction in problem identification, response, and resolution times
  • Higher Customer Satisfaction
    26% reduction in customer attrition; 20% increase in new customers

Just do it already!

1 The Weakest Link, UK Plc’s Supply Chain; Zurich
2 Safe Supply Chains Help Produce Sustainable Business, Zurich and Rockwell Automation, 2012
3 Innovators in Supply Chain Security: Better Security Drives Business Value, Stanford Global Supply Chain Management Forum and IBM, 2006