Category Archives: Supply Chain

Have We Reached The Supply Chain Plateau Part III?

In Part I, we noted that Lora Cecere discovered, while analyzing the balance sheets of process companies over the past decade, that the average process manufacturing company has reached a plateau in supply chain performance as noted in a recent piece over on Supply Chain Shaman which stated she believes we have reached the supply chain plateau.

In Part II, we noted that growth has stalled, and asked why it has stalled. Lora conjectures that while complexity has increased, many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system. This means that even though individual projects are getting great results, departments as a whole are not performing as well, and being managed even worse. Why? One conjecture, as implied in Lora’s post, is the current state of supply chain technology and ERP (and forecasting) systems in particular. And while there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again, SI does not agree this is the core problem. The core problem is manpower capability. Not only do most executives not understand the supply chain from a holistic perspective, but neither do the function managers … who often do not even understand the best practices associated with their job because of the lack of education (and training).

But is this the whole picture? Robert Rudzki, of Greybeard Advisors, recently ran a 4-part series on the SCMR blogs where he summarized the results of a survey last quarter which asked “has our profession advanced, or regressed?”, which was administered as a result of anecdotal evidence that Procurement and Supply Management has regressed at some companies during the past 3 to 5 years. The survey, which was primarily filled out by Supply Management function leaders or direct reports and which drew interest from better-performing companies, produced some interesting results:

  • Only 38% of the respondents agreed with the statement that their “top management really understands and appreciates the enormous potential of modern supply management”, which is lower than the 47% who agreed with the statement in Greybeard Advisors’ 2008 survey
  • About a third of respondents indicated that they developed and presented a business case, also lower than the original survey
  • Not surprisingly, less than 30% of respondents indicated that “top management strongly supports the supply management organization with sufficient resources and budget”, also lower than the original survey.

And led Bob to conclude that overall, based on the companies that participated in the survey, we cannot show that our profession has advanced during the past four years; in fact, at some companies, there has been a return to more tactical approaches and objectives. Ouch! Why is this?

Have We Reached the Supply Chain Plateau? Part II

Yesterday, we noted that Lora Cecere discovered, after reviewing balance sheets of process companies over the last decade, that the average process manufacturing company has reached a plateau in supply chain performance. And, moreover, that the majority of progress improvements over the last decade came from lengthening days of payables and squeezing suppliers. That’s Not Progress!

So have we reached the supply chain plateau? SI doesn’t think we have, but agrees that growth has stalled. But why has it stalled?

Lora conjectures that while complexity has increased, many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system. So, while individual projects are getting great results, departments as a whole are not performing as well, and being managed even worse. SI has to agree.

Why? One hypothesis, as implied in Lora’s pot, is supply chain technology, and ERP (and forecasting) systems in particular. As Lora notes, the current state of supply chain technologies is such that, in an average company, the greatest gaps are in the areas of the greatest importance. Gaps in supply chain planning are high, and the ability to use the data from ERP and order management remains a gap.

This is true. And SI has to agree with Lora when she says that there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again. But SI doesn’t think this is the core problem. The core problem is manpower capability. Not only do most executives not understand the supply chain from a holistic perspective, treating each step as its own function (and disassociating NPD/Design from Sourcing (a manufactured product) from Logistics and Distribution, when they all have to be examine and managed as part of an integrated supply chain, but neither do the function managers. Moreover, these function managers often do not even understand the best practices associated with their job.

Why is there a manpower capability issue? A lack of education. These people generally don’t leave college or university with a solid supply chain background, as few institutions offer such programs, and they haven’t been properly trained. Year after year training budgets are slashed and leaders are run ragged fighting fires and dealing with tactical issues instead of being given time to focus on long-term strategy, how the supply chain works, and how it should work for optimal performance and optimal corporate gain. Where supply chain is concerned, not only do we have the reality that you can’t manage what you don’t understand, but you can’t even manipulate what you don’t understand with any level of success. People have to be educated and trained at all levels of the function, and until that happens, up-to-date technology or not, there is not going to be any progress.

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!