I have just listened to another excellent webinar by Hau Lee on SCMWorld. What is really interesting is the way in which he balances supply chain design, principally through postponement, with the need to respond rapidly and effectively to mismatches between demand and supply, encapsulated in the concept of “extreme information exchange” stated by Dr Lee. The combination of all these capabilities result in breakthrough performance. At the risk of violating copyright laws, below are some key graphics. I encourage everyone to view the replay on the SCMWorld website.
At the heart of the concepts promoted by Hau Lee – Agility, Adaptability, & Alignment – is the uncertainty of supply & demand. This drives all the behaviour and design criteria, and the need for extreme information exchange. Implied, but not called out explicitly, is the need for timely information exchange, but even more importantly is the need for extreme responsiveness to the information exchange, which in turn requires the need for extreme information analytics and extreme collaboration between trading partners and internal organizations.
Lastly, Dr Lee refers to “interface activities” as being some of the greatest barriers to supply chain efficiency. Of course at the heart of this is the need to remove barriers in doing business with trading partners, or alignment of objectives and measures, and the sharing of risk.
This webinar is only one of a number of articles and webinars that focus on the issue of the blurring/blending of planning and execution.
Where do you think the next breakthrough will come from? Planning better or responding to plan variance better?
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Tags: demand response, Demand-supply balancing, Operations performance, Response Management, Supply chain flexibility, Supply chain planning
Posted in Best practices, Supply chain management
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Let’s face it a plan is little more than an educated forecast on what’s going to happen in the future and where a company thinks they want to go in the future. All forecasts are wrong to varying degrees; they deal with probabilities not actual resource implementation. So responding or adjusting to that variance in probability is where the rubber hits the road, bringing the plan back to reality. Most companies do a terrible job of adjusting quickly to the signals, partially due to senior management multiple levels up the hierarchy wanting to put their spin on any response. The decision to enact adjustment then becomes dependent on how many management levels there are and how much spin each level puts on the original adjustment request. The next big breakthrough will come from sophisticated systems for monitoring and analyzing variance and the reality of responding by putting resources into play and as well organizational restructuring or flattening to slice through that managerial spin faster.
Response to variance will always be the challenge.
Some comments on the chart(s).
Information Integration – Disparate systems within a company, it’s customers and suppliers. Software systems that are not designed for the ‘planners’ and management to understand. New planners and management that do not understand what the consultants do when setting up the software and in so doing falsely execute against the wrong set of assumptions. This has changed in the last 10 years with more complicated software packages where now planners truly do not understand how to take advantage of the software. Sometimes using the old Excel workbooks was best though time consuming because planners knew every calculation and step to arrive at the plan.
***A new block to the foundation chart below***
Increasingly Sophisticated Skills of Planner/Supply chain managers
In order for companies to respond to variability in forecasts a significant need for multi-talented planners and supply chain managers is needed. Many companies do not have the right organizational structure and/or talent pool of people to respond adequately to the companies needs. For example a combination of heavy IT skills, finance, engineering, logistics, purchasing skills are all needed in one person in a decentralized decision making capacity to effectively manage the software and all the groups of management to respond to planning changes.
As a software and business consultant these ‘talent’ individuals have either been eliminated or are spread across multiple people and organizations within a business so as to cause complete business paralysis since each portion of the business has its own management concerns.
One comment on the supplier integration piece aside from tool enhancing platforms and the people operating and setting these up is the locality of key suppliers for a product. Outsourcing has greatly diminished the ability to respond to significant changes in forecast. So agility in this case has been reduced across most companies where a significant portion of product components are weeks away without an alternate and local/regional supplier. This is where Lean concepts become starving ones when significant demand in a seasonal environment picks up and local product inventory does not exist (a problem we all probably would love to have again). Of course one downstream effect realized in the last recession was bullwhip inventory where the plan was too large and then cancelled within lead time (it’s on the boat what do we do with it now?).
I like the high level concepts but think the execution of these ideas/blocks is really highly dependent on companies reevaluating the talent pool of those doing the actual execution. I also agree that a look at modifying the organizational structure so the fewest possible managment levels can stall the variance decision making process is at the root of most delays. Fix the quality and authority of the people and fix the IT and analytic tools they use and then you will have some real agility.