John P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP | May/June 2014 | 24 | 3
Creating a culture of performance
There are three broad management approaches that companies use to respond to today’s increasingly challenging global supply chains: continuous improvement efforts; real-time information technology solutions; and enhanced collaboration, both on the front and back ends of the supply chain.
Let’s consider typical continuous improvement efforts—statistical process control, six sigma, lean manufacturing, and just in time, to name a few. While such initiatives generally help improve quality, streamline operations, and increase efficiencies, they still can become rather ineffective when saddled with shifting customer demands. Such a situation can seriously hinder the smooth flow of orders—in some cases, even rendering continuous improvement efforts moot.
In response to these shortcomings, supply chain and operations management professionals move their production planning strategies away from reliance on continuous improvement and statistical forecasting systems and toward more demand-driven techniques. With such strategies in place, these businesspeople hope to reduce costs via greater efficiencies, improve the flow of information in order to better connect operations to the rest of the supply chain, and mitigate untimely delays and the inevitable resequencing of orders.
Then, to solve this dilemma, business leaders often choose to invest in real-time information technology (IT) solutions. Some describe these tools as important, maybe even essential, for responding to demand shifts. But are they really the key? Granted, providing instant updates to sequence changes, priority shifts, and flow disruptions is vital. However, despite having these techniques in place, organizations still see too many suppliers making expensive reshuffles to production plans while scrambling to meet last-minute changes.
Even at businesses that have achieved sequenced processes and the increased productivity and better quality that sequenced order flow provides, all is not rosy. In many cases, the supplier becomes increasingly locked in a downward spiral of higher costs while being pressured to lower selling prices.
If sequencing is so beneficial, why are many businesses still saddled with too much inventory, slow response time, and low productivity? Being good at sequencing is no longer enough. Today, a manufacturer must be a good sequencer and be flexible when the sequence changes.
An article in the Wall Street Journal 10 years ago stated that, for every $1 spent on technology, $5 must be spent on the organizational side of things. The message is clear: For collaboration to work in a supply chain, it first must be an integral part of the organization’s culture.
Many businesspeople still focus too much on the implementation of tools and not enough on a holistic strategy. Effective collaboration with customers and partners across the supply chain requires focus, training, and structure. Before placing emphasis on the technology that manages information to drive a sequenced supply chain, company decision makers must be organized around the collective benefit that faster response, lower costs, and better quality will bring. Doing this in a structured way will expand the dividends received from any system implementation.
John P. Collins, CFPIM, CSCP, is president of Sustainable Solutions. He may be contacted at firstname.lastname@example.org.
Eric P. Jack, PhD, CFPIM, CSCP, is dean of the School of Business at the University of Alabama–Birmingham. He may be contacted at email@example.com.