Category Archives: Supply Chain

Have We Reached the Supply Chain Plateau? Part I

Last week, Lora Cecere stated over on Supply Chain Shaman that she believes we have reached the supply chain plateau.

I believe that, while we have been in a bit of an innovation dry spell the last few years relative to the early noughts, there is still innovation to come and mountains to climb, but Lora’s evidence is pretty damning: while analyzing the balance sheets of process companies over the past decatde, she discovered that the average process manufacturing company has reached a plateau in supply chain performance. Specifically Lora found that:

Growth has stalled. To compensate and stimulate revenue, the companies increased SG&A margin by 1%. However, the conditions were more complex; the average company, over the last ten years, experienced a decline of 1% in operating margin, and an increase in the days of inventory of 5%. While cycle times have improved, the majority of the progress has come from lengthening of days of payables and squeezing suppliers.

And delaying payments and squeezing suppliers is not progress!

This is scary! Really scary! And before I discuss this any further, you need the facts and you need to read Lora’s post.

SI’s post is going to end my here today so you can go read it and dwell on it. We’ll discuss this more in SI’s next post.

The UK Needs To Realize There Are Some Arms Races You Don’t Want to Win!

Less than two weeks ago I asked if The Air Force’s Billion Dollar Flop [is] the Biggest Supply Chain Failure in History. I thought it would be years before we saw another contender for the biggest supply chain failure in history. Years, not days. But after reading this article over on Supply Management . com on how “major defence project costs ‘balloon’ by £6.6 Billion” over in the UK, it seems we have a new candidate.

In US Dollars, that’s over 10.5 Billion dollars! And, as per the article, that’s on the 16 largest Ministry of Defence (MoD) projects alone! What about the projects that constitute the other 75% of the MoD budget? How much are they overrun? I shudder to even attempt the math!

I’m sure the UK is still holding a grudge that America revolted back in 1774 and started the revolutionary war (in 1775) which America won when they gained their sovereignty with the Treaty of Paris in 1783, but there are some challenges the UK should just let them win. Beside the fact that it has been 230 years and the UK should just let it go, do they really want top the supply chain failures list?

Customer Service That Takes No Action is Not Customer Service

And if you have no customer service, your supply chain performance metric could be significantly lower than you think! It doesn’t matter that the product ships on time, it only matters that the end customer receives it on time and defect-free. And if the product doesn’t reach the customer on-time and defect-free, your supply chain performance is ZERO unless customer service does something to actively resolve the situation.

It seems that Customer Service is Still Going to Hell and Supply Management hasn’t learned anything yet, as per this recent blog post over on the Supply Chain Management Review that points out that A Disgruntled Customer [is] the Last Supply Chain Link. In this post, the author, Rosemary Coates of Blue Silk Consulting describes her recent experience with Target.com’s customer service and their refusal to do anything when the customer not only clearly pointed out the problem but also pointed out the resolution (which is not the customer’s job).

In summary, the author ordered a gift for Christmas from Target.com, well in advance of Christmas, but when the package didn’t arrive in 10 days, she went online to track it. She discovered that it was scanned at the Target.com warehouse, but never recorded in the UPS system. She then confirmed with UPS that they never picked it up. At this time, she contacted Target.com customer support who refused to do anything, stating that she must wait 10 business days just in case, by some miracle, the package left the warehouse, to be delivered long after Christmas. And then they still did nothing. Target.com didn’t even offer a refund until the author complained about the problem on their Facebook site and Tweeted about it. Were they trying to outdo Best Buy in a race for the customer service Razzie?

This story is absolutely ridiculous. The problem could have been solved with a simple UPS lookup, to confirm the author’s complaint, and a simple call to the warehouse to inquire why the package hadn’t been shipped yet. This would have resulted in a “we don’t know, let’s check” followed by a call-back a little later along the lines of “we misplaced it, it will go out in the next pick-up” or “we can’t find it — it’s obviously lost, we can re-package and re-send or you can give the customer a refund”. And within 24 hours customer service could have called the author back on the open trouble ticket with either a “success, it’s going out” or “it’s been lost, would you like a replacement shipment or a refund”. It shouldn’t take multiple complaints for something a simple phone call can fix. That’s not customer service. It’s customer contempt, and it’s contemptuous in a modern supply chain!

Wanna Get Lean? Get Mean About Wasted Time, Effort, Production, and Transportation!

Apparel Magazine just ran a great article on “developing leaner product development and sourcing operations” for anyone looking for an easy to understand no-nonsense common sense introduction to going lean. Focussed on correcting the six-lean sins of the product development process in an average organization, the article did a great job of pointing out that if you are wasting time, effort, production, or transportation, you are not lean.

More specifically, a lean organization does the following.

  • Optimizes Time Utilization
    A lean organization identifies those parts of the cycle that take the most time or that tend to run out of control and reins them in with proper processes and controls. In supply management, if the longest part of the process is identifying suppliers who can meet certain needs, then, even before a product design is finalized, the process to identify suppliers with the requisite technical capabilities and production processes is begun. Then, when the design is finalized and the components need to be sourced, the organization simply needs to select the most appropriate supplier from a small pool.
  • Optimizes Effort
    As highlighted in the article, a lean process does not include unnecessary milestone meetings, [a] lack of communication between departments that leads to a re-creation of plans, [the] development of too many designs that do not get adopted, or the creation of unneeded samples. The requirements for a project are clearly identified and all efforts are aligned with meeting those requirements.
  • Optimizes Production
    There are three optimizations here. First of all, the organization avoids producing more units than are needed (in a given period of time). If the known demand is 100, 1000 are not produced in the hope that the need will magically appear. Secondly, the organization does not add features or functions that are not required by, or do not add value to, the end customer. Third, the organization avoids the creation of process silos to insure that one individual or group doesn’t over-engineer a part or value-add service that goes (well) beyond need or cost control requirements.
  • Optimizes Transportation
    This applies to all steps in product design, development, and distribution — not just the final distribution process. For example, sending partial products back and forth needlessly in the design and development process due to poor process design is waste. In production, if raw materials are transported from Africa to South America for refinement and then shipped to China for component production and the components are then shipped to the US for final assembly, that’s just inefficient, especially if the final products are then sold in Europe. That’s losing sight of the supply management forest while focussing on the old cost trees.

Lean is not a mystical, magical, chimera. It’s the systematic elimination of waste by taking a holistic view.

If You Think You Have Supply Chain Problems, Think About Poor Santa! (Repost)

Santa, who has to travel 2,860 miles per second in order to visit 1,700 homes per second to deliver over 2 Million Tonnes of gifts to boys and girls around the world, has supply chains and logistics challenges that put even the logistics challenges of the largest multi-national or US military (that has to support almost 1.5 Million people on active duty around the world that need everything from food and clothes to jeeps, tanks, and aircraft to do their job) to shame.

Reviewing a few simple stats, that we can compile from this article on The Science of Christmas in the Telegraph, this article on Santa’s Logistics Challenge in the Bangkok Post, and this article that asked What if Santa Had a Supply Chain Problem over on Open Kitchen, we find out that:

  • There are approx. 1.9 Billion children in the world.
  • Approximately 33% of these children have Christian parents.
  • The majority (defined as 90%) will be deemed nice by Santa.
  • In total, about 570 Million children need gifts.
  • If there are 3 children per household, on average, about 190 Million households will need to be visited.
  • Since Santa likely cannot start delivering gifts safely before 9 pm in a household, and since some children will not sleep more than 7 hours (on Christmas Eve), Santa has only 31 hours to make his deliveries.
  • This says he must visit almost 1,700 homes per second.
  • Since Christianity pervades our planet, he’ll have to cross most of the 510,000,000 kms of the planet’s surface.
  • Assuming the houses are equi-distant (which is a fair approximation as they’ll be dense in the city are far apart in rural areas), Santa will have approximately 2.7 km to travel between households.
  • That’s 513 M kms of travel in 31 hours.
  • That’s equivalent to 4,600 kms per second.
  • But this is just the delivery. He also needs to acquire the toys to deliver.
  • Let’s assume 2 toys per child, or 1.04 Billion toys.
  • Assuming a distribution where popular toys are distributed to
    tens of thousands, hundreds of thousands, or millions of children and where unpopular ones go to thousands, or hundreds, of children, we are probably looking at 10 Million toys.
  • While some vendors may produce 100 types of toys, others will produce one, and we can settle at about 10 toys per vendor.
  • That’s 10 Million vendors to manage!
  • If they are scattered all over the earth, and if each toy can go direct or through nearby 3PLs, and if each toy can go by a mix of truck, rail, sea, and air, that’s probably between 2 and 20 lanes per vendor, with 5 being a good number.
  • That’s 50 Million lanes by which goods could be arriving.
  • No wonder Santa needs a Super Spaceship and an army of elves!