If you are looking to, and who doesn’t want to:-

It isn’t going to be achieved by running your businesses as you have done for the past 30 years.

Whether we like it or not most of us are part of a global supply chain network and we need to learn the new rules if we want to successfully play the game. We must stop regarding our company in isolation, but as part of a supply chain that will only be successful if the end product, to which we contribute, is actually sold to a consumer. We see that there is a trend developing that integrated supply chains will compete with supply chains as opposed to the old thinking that companies compete against individual companies.

Supply chain management is considerably more than a handful of people in your organisation applying a few tools, it is going to be a company wide effort from, initially the top, and then down to the bottom.

So what is Global Supply Chain Management?

Simply, Supply Chain Management is concerned with the uninterrupted stream of information flowing up the supply chain, pulling material continuously down the supply chain with the constant flow of money flowing back up the supply chain the replace the material. In addition, and this is likely to increase greatly in the future, the return of material back up the supply chain for re-use, re-manufacturing or recycling.

All material flows start with the earth, the ‘gatherers’ dig, pump, fish, pick materials from the earth and they pass through primary processing plants and through many convertors, distribution networks and retail outlets until they are sold to the final consumer. Traditionally we have preferred to work in batches pushing this material down the supply chain in huge piles, infrequently. Today we realise that this is wrong and we need to adopt a fundamental paradigm shift that only moves material down the supply chain as and when it is required by the next person in the chain and preferably on a continuous basis in small lots or ideally one at a time. In other words, the ideal product, in the future, will be made instantly, daily, with no waste and be consumed in the next process immediately. In most cases we are light years away from this ideal, but some industries, namely auto and electronic, are leading the way and showing us that this is possible as they desperately work towards this ideal.

This sounds like common sense and relatively easy, no so. There are many barriers to the implementation of good supply chain management best practices in our organisations, let’s look into a few of them.

Barriers to the implementation of supply chain management best practices.

We see four key barriers to the implementation of supply chain best practices:-

1. Management
2. Management
3. Management
4. Management

Seriously though, we are right!

1. Generally we find management ‘doesn’t know what they don’t know’. They haven’t exposed themselves to new thinking. They haven’t attended courses in supply chain management and they have not attended the conferences that abound on the subject. They sent their minions to these events but end up having no real knowledge of how they should change their organisations to take advantage of these best practices, and the resulting benefits.
2. Management is very reluctant to change the organizational structure of their organisations to support supply chain cross functional thinking compared to the old silo mentality. “It’s worked for us for the last 30 years, why change” we hear them say as they complete their last few years before retirement.
3. Often the barrier to change is the way that people in the organisation are measured and this promotes the wrong behavior that goes against supply chain management best practice. We need to relook all our old traditional KPI’s, particularly the financial ones, and implement balanced scorecards.
4. And lastly, there is generally very little political will and fear from senior management to ‘upset the apple cart’ and do something different in case they fail. Better the devil you know!

So where do we start in order to change?

If you analyse your company you will probably find more than 70% of your employees are working in your primary supply chain. So, they all need to be educated, maybe at different levels, but ultimately have some qualification, or professional certification, in this complex subject matter. People will only change if they can see the benefits and what-is-in-it-for-them.

More recently at conferences we have been hearing the term the ‘T’ shaped person. This means that we all have a great depth of knowledge in some part of the business which forms to vertical line of the ‘T’. So, if you are in Manufacturing, Distribution, Finance, HR, Procurement, Sales / Marketing, etc you should have a high level of expertise in that function, and may be certified from your professional body. In planning for example we would expect people to have their APICS CPIM (Certified in Production and Inventory Management) certification. But, this doesn’t give us an appreciation of the other roles in the organisation and the Supply Chain and how we should be working together cross functionally to promote best practice in our supply chains.
The more recent certification program from APICS, CSCP, Certified Supply Chain Professional, gives anybody, wherever they work in the supply chain, a good indication of how a supply chain should operate and their role in the cross functional organisation. This provides the horizontal line on the ‘T’.

Without having ‘T’ shaped people in your organisations cross functional operations and supply chain management are going to be extremely difficult, if not impossible, to implement successfully. In reality, your most valuable asset is your people and you need to fill your organisation with highly educated, trained and empowered people to take you forward into a highly successful future. Finding these people and hiring from outside the organisation is difficult as there is a tremendous shortage of people with the right skills, we need to build within.

What’s Next?

Well you have done the education and qualified people abound in your organisation itching to get started. Our advise is now to become a member of the Supply Chain Council and adopt the SCOR model as your framework for your supply chain management implementation. There are two 2 day workshops that show you how to make sense of, and use the SCOR model and how to implement it within your organisation and ultimately out to your suppliers and customer. All the hard work has been done for you, don’t re-invent the wheel just follow the model and implement.

The SCOR model looks at the attributes you are looking for in your supply chain, suggests the right processes and best practices to put in place at each point in your supply chain, and lastly what the correct metrics should be to promote the right behavior by your employees to achieve your supply chain objectives. It is almost a paint-by-numbers, no-brainer.

And Now?

Well after implementing SCOR you will probably not have your supply chain working at its optimum, so after mapping the processes we need to determine where we have bottlenecks and apply the Theory of Constraints. More education is required at this point. Buy everybody a copy of ‘The Goal’ by Eli Goldratt, watch the video, and assemble your management team and work your way through the Eli Goldratt satellite video series. Eli puts forward some very controversial issues in this excellent series which can promote a great deal of useful discussion in your organisation.

To improve your supply chains, identify and eliminate waste in your processes then Lean, and all its tools, is the next education path on which to embark. APICS have put together an excellent Lean Enterprise Program, which the author has used several times, to build a Lean Team in your organisation which goes forth, conducts Kaizen events and spreads the word and education to others in the organisation. We believe that every manager and supervisor in your organisation should have the KPI of conducting at least four Kaizen events per year, one per quarter, in their departments.

All processes, whether in the factory or in the admin departments, have variation. This variation must be measured, understood and reduced. To assist us in this endeavour you need to investigate the concept of 6 Sigma. By adopting this philosophy you will be able to reduce variation in processes and thereby improve quality of your products and services. Measure the process, not the product!

Back to ERP Basics

All of the above will not work if you do not have a fully implemented successful, accurate and real-time ERP planning and control system within the organisation. Many of us have been sold an ERP system and it is not providing us with a competitive weapon out there in our supply chain. You need to have all the following working well within your organisation if you want to be successful in

Supply Chain Management:-

• A reasonable consensus demand planning processes. If you don’t have a reasonable demand plan in place, how can the organisation plan the supply to satisfy the companies demand? Investigate what the Institute of Business Forecasting (IBF) has to offer in the form of their Certified Professional Forecaster (CPF) certification.
• A Sales and Operations Planning process that aligns the company into its supply chains and provides a ‘game plan’ to guide the business.
• A qualified Master Production Scheduler, creating and maintaining the anticipated build plan for the business and ensuring it is executable by using a Rough Cut Capacity Planning process.
• A Materials and Capacity Planning process that provides accurate information to planners and buyers to perform their tasks. Here you will need to focus on the accuracy and real-time of data in Bills of Materials, inventory records, works and purchase order as well as planning information in the Item Master. You will need to have a Technical Change Committee that oversees the accuracy and relevance of you three manufacturing databases Item master, BOM’s and Routings.

In order to run a successful ERP system you will also need to focus on policies, procedures and computer work instructions on how this highly complex integrated system is run and managed. In addition, the correct metrics will need to be in place to ensure employees behave in the correct manner to support the objects of the organisation and of your supply chains. Use the Oliver Wight ABCD Check List to see how you measure up. You will need to be at least a “B” Class before you can consider moving into a successful supply chain management environment.

Collaborating in the supply chain

A lot of what supply chain management is about is trust. Far too many of us have adversarial relationships in our supply chains. We are in fact in lose-lose situations trying to put each other out of business instead of working together to find clever and innovative ways to reduce inventory, cost and lead times in out supply chains.

The procurement department should be spending 80% of it time on relationship building with its suppliers and collaboration rather than just placing orders. A Company is only going to be as good as its suppliers.

Our sales and marketing departments should be spending the majority of their time discussing demand and improving forecasting accuracy, rather than just taking the customer to lunch.
Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) are concepts that need to be embraced within an organisation.

The ultimate is to develop alliances in the supply chain where there is a great deal of trust and where costings can be shared and lead times and inventory reduced significantly in the supply chain with the savings being shared equitably by the supply chain partners.

What is in the future for Supply Chain Management?

The future is advanced planning and optimisation. Over the last few years the power of the computer is now allowing us to run the millions of scenarios to optimise our businesses to maximise profit and minimise cost. This is providing some companies with incredible benefits in their supply chains. However, you can’t just jump in and implement these tools without first having implemented your ERP system successfully.

MRP relies on accurate, real-time information to carry out its task effectively, advanced planning systems require a degree higher accuracy to enable them to do the job properly. Your ERP an MRP system plans materials and capacities on a sequential basis and when problems arise this sequential planning cycle needs to begin again from the top. Advanced Planning systems are able to plan the whole supply chain concurrently and in the next few years it will be possible to do this continuously on a real-time basis.

The concept of planning will then be a central operation, planning the complete supply chain, rather than having Demand Planning team, a Sales and Operations Planning team, a Master production Scheduler and Shop Floor Planners and Buyers performing planning functions, it will happen at a high level by one supply chain planning department.

Summary

So, in summary; you need to make your company a force to be reckoned in your Global Supply Chains and we need to make the South African manufacturing sector something to be admired in competing emerging markets.

So, Mr Manager it is up to you. We are relying on you to be one of our leaders with a supply chain vision, and to help you along here is a 10 point plan for guidance:-

1. Educate yourself and your staff in good supply chain best practices and make sure you have highly qualified ‘T’ people within your organisation.
2. Restructure your organisation properly to suit not only your ERP system but good cross functional supply chain processes. Don’t build a structure around the people you have, develop your people to fit into their new roles and organisational structure.
3. Seriously look at all your KPI’s in your organisation and make sure that the KPI structure supports the goals of your organisation and attributes you are looking for in your supply chain.
4. 'Upset the apple cart', even if you are about to retire shortly, and get a culture of continuous improvement into you organisation.
5. Subscribe to the Supply Chain Councils SCOR model. This will save you a considerable amount of time ‘re-inventing the wheel’ and it can help you considerably with your business process re-engineering, identifying best practices and put in place the correct metric to support the attributes of you supply chain strategy.
6. Find your constraints and start working on them. Research the whole concept of TOC (Theory of Constraints) find out how it can improve your throughput.
7. Get Lean Teams going in your organisations with regular Kaizen events - everywhere – it’s fun and rewarding!
8. Ensure your ERP system is operating at least at an Oliver Wight “B” level and that it continues to operate at this level, with regular annual assessments, if not improves to an “A” level.
9. Get into collaborative relationships with your key suppliers and customers and learn as you go along on the way to forming strategic alliances.
10. Start researching those APS/O (Advanced Planning and Scheduling / Optimisation) systems and make sure they are on the budget for implementation not too far into the future.

Ken Titmuss, CPIM, CFPIM, CSCP, SCOR-P, CPF