Four Steps to End-to-End Supply Chain Success

DuncanKlett

End-to-end supply chainSupplying products to customers is clearly important. If you can’t satisfy the needs of a prospective customer, that prospect can easily buy from someone else who can deliver what they want, when they want it. Lost sales and additional expediting costs hit your bottom line.

At one level, end-to-end supply chain success is simple: get the right stuff to the right place at the right time. So, what’s hard about that?

The answer is “lots”. Products change. Customers order at the last minute and change their orders. On-line customers expect their product to be shipped, if not delivered, on the day they place the order. Supplies don’t arrive as expected. Supply chains typically use several layers of companies, manufacturing sites, and warehouses between raw materials and customer delivery. The number of products and the number of units of those products produced are enormous: 5 million integrated circuits a day, 35,000 vehicles per day, 3,000 major appliances per day.

I recall a visit to an electronics manufacturing facility in Juarez, Mexico. Every week, amongst other products, they made about 200,000 units of a consumer electronics product. They did this despite having to manage an average of 30 production changes to that product every day! How did they do it?

1. Communication

Every insight you can gain regarding potential changes and disruptions will help you manage your supply chain to accommodate them:

  • Be sure your staff knows what to do and how to do it in order to keep product moving smoothly.
  • Establish relationships with your internal or partner staff responsible for developing product and production methods. Seek advance notice of any changes you might need to handle.
  • Establish relationships with your suppliers and their suppliers through as many layers as possible. Track projected supply availability and limitations. Collaborate with them so they also know what you are likely to need.
  • Establish relationships with your customers and their customers through as many layers as possible. Collaborate with them so you are more prepared for demand changes and other drivers which might change your requirements.

2. Focus on Flow

Keep material flowing. Items sitting on a shelf are not making you any money. Stock only helps you to the extent you need it to cover variations in your supply or demand. Everything else should be progressing towards delivery to your customer. This is one of the basic concepts of a “Lean” process.

3. Invest in Data Quality

As your operation grows, the volume of data you rely on grows exponentially. That data can be your key to success. It can also lead to disaster unless it is accurate and consistent. For example, if the name for a part in your supply data is ABC but A_BC in your demand or customer’s data, or worse, XYZ, then you will have more and more trouble recognizing which supply you can actually use to satisfy which demand. This might seem to be obvious and unlikely. However, it is common for large (and even small) companies to have different part numbers for the same part. As you migrate towards being a digital operation, that system can only operate if you have accurate and consistent data.

4. Segment Your Products and Processes

Recognize that different products have different characteristics within their supply chains. Often, even the same product sold into different markets will require different supply chain strategies. Therefore, although management principles are the same, actual execution practice should be quite different. Categorize your products and then align your supply chain management processes to match the characteristics of those products. For example, some of your products might have steady demand over long periods of time. Others might have ready supply on short notice. On the other hand, some of your products, such as seeds, might only be produced over a short time frame, yet might have demand over a similarly short time frame – but at different times of the year. Clearly, your strategy for managing these products must be different.

Segmentation ties back to the Mexican factory I mentioned earlier. Production in the Juarez plant was allocated to products with highly volatile demand and rapidly changing designs so the company could respond immediately to changes for the North American market. A sister plant, in the Far East, produced steady volumes of stable products where seven weeks crossing the ocean would not be a problem.

People, Processes and Tools

These four steps might sound simple. In reality, they are anything but simple! Supply chains are difficult to manage because they must operate despite constant change.

Your challenge is to establish a team of supply chain professionals who can navigate the changing environment. You then need to equip them with tools and processes so they can execute strategies to deliver products while handling all manner of changes and still keep your costs under control.

DuncanKlett

Duncan Klett co-founded Kinaxis in 1984, at the time called Cadence Computer Corporation. Throughout his time at Kinaxis™, Duncan has focused on product innovation. Acting as the interface between manufacturers, the Kinaxis design team, and executives, Duncan has led the successful fulfillment of customer requirements.

In his current role as vice president, analytics research, Duncan draws on more than 30 years of experience with analytics and software solutions to design the next generation of Kinaxis product features to help brand owners, manufacturers and their entire supply chain network — from customers through to suppliers — gain a competitive advantage.

Prior to starting Kinaxis, Duncan held various positions with Bell Northern Research where he worked in the development of real-time software, and Mitel Corporation where he was Manager of IC Computer Aided Design.

Duncan is an OMN (Ottawa Manufacturers Network) advisory board member and regularly gives lectures at universities and industry events. Duncan holds a Bachelor of Applied Science and a Masters of Applied Science in Electrical Engineering from the University of British Columbia in Vancouver, Canada. He is also a certified Professional Engineer.

More blog posts by Duncan Klett

Discussions

  1. Greetings Mr. Klett,

    Thank you for this awesome article. So clearly packed with value added practical advice to follow. I love this stuff, and can do this for anyone who needs it! Some, hopefully most are doing this well, but as you point out, it’s not rocket science, but it takes diligent effort, and paying attention to detail, no matter what system you’re using. Check, follow-up and make sure. Things get missed, and they are always noticed by the customer, even if not fully captured by your metrics reported.

    Really good stuff!

  2. Dear Mr. Klett,
    have a nice day ,

    thank you for this valuable article , i think the strong elements for the supply chain you have mentioned in your article is the Communication & segmentation , if we can know very well our customers needs & suppliers abilities & limits & products segments we can ensure faster & more effecient response to the market and keeping lean processes.

  3. Mark and Kamelia, thanks for your kind comments.

    A big challenge for every “transformational” project is getting the three pieces in place: People, process, tools/technology. Pretty much every discussion I have seen about making such projects successful is “top management leadership”. That means getting the vision (direction) right, then empowering and supporting the team to drive the change. The “supporting” piece is often overlooked. That means top management must continue to drive the vision, encourage the team, and counter the “detractors”, especially during inevitable “rough spots” in the project. Management must also participate in “celebrating successes”.

    Not rocket science, but surprisingly difficult to do!

  4. Very much thankful to you for such an informative article on supply chain success factors.The way you explained was simply understandable.
    I would like to ask you about 3. “invest in Data quality ” is it related to information technology to improve the data records for tracing material status ?

  5. i also curious to know about , What quality or lean methodologies can apply to drive the supply chain management efficiently ?

  6. Teja, thanks for both your comments. I will try to give a few thoughts to respond to your questions.

    I think all data ultimately comes from an action (almost always driven by a person). For example, someone type data into a system, someone scans an item to create a data record. Some of the processes can be automated (so when an item crosses a point on a production line, it is scanned automatically and thus a data record is created).

    My point #3 is that supply chain planning, analysis, visibility all run from data. If records are missing, duplicated, or are incorrect, then all the software will report incorrect information. So, it is necessary to “invest” in processes to be sure the data is captured/entered correctly. I have found that when people start to use data elements, there is a natural tendency for those people to correct data that they discover to be incorrect or missing.

    About Lean. Yes, lean methodologies can really help supply chain efficiency. Lean can give excellent results in execution (and, Lean principles can be applied to any process – eliminate waste at all levels). But, lean production does not provide forward-looking guidance of projected problems. Lean/quality improvement is also an excellent approach. The more predictable/stable a process is, the easier it is to manage (variability is the enemy of smooth/efficient operation). Results of lean programs to improve quality, reduce variability, shorten setups and change-overs, etc are all excellent steps towards supply chain efficiency.

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