Death of Supply Chain Management in 4D The 4 Daggers

Explore Death of Supply Chain Management in 4D

PurchTips Edition #414

A Supply Chain is a system composed of Technology, Processes, Suppliers, Customers, Employees, Culture, Machines, Metrics, Net Works, Risk Factors and Facilities. The cumulative interaction of these parts dictates the caliber of outputs that are yielded as products and services. The concept of Global Supply Management as we know it is facing monumental challenges from shifts in thought leadership, disruptive technologies, cultural shifts, shifts in customer requirements, Piracy, Cyber Terrorism and Trade Wars.

The Supply Chain Mandate: The Management of the Procurement, Purchasing, Production, and Logistics Functions. In other words, it is the total set of activities ranging from the translation of customer requirements, selection of suppliers, acquisition of raw materials to conversion to finished products and services that are delivered to customers.

Supply Chain Leaders must possess a wide range of talents including the sciences of Environmental Scanning and Scenario Planning.

  1. Socio-Demographic Trends
  2. Competitive Intelligence and competitor Trends
  3. Ecological Trends
  4. Economic Trends
  5. Political Trends, Trade Wars
  6. Technological Trends, Cyber Security, Blockchain, Big Data, Artificial Intelligence
  7. Industry Trends
  8. Customer Trends

Supply Chain Managers must manage the above trends by:

  1. Determining if the trends are positive, negative, or stagnant
  2. Then understanding their organizations’ ability to respond to the above trends
  3. Deploying effective and prioritized strategies in response to the above trends.
  4. Deploying effective Risk Management strategies where required

The Modern Supply Chain faces many challenges but four of them are like Daggers.

The 4 Critical Daggers at the throat of Modern Supply Chain Management:

  1. Degree of Systemic Waste – Supply Chain Systems Waste is rampant today. On average 90% of activities in the modern supply chain do not generate value. A definition of Value is essential at this point. Value has 3 components: I.) There is a physical transformation from one point to the next. II.) The products or services are delivered right the first time) Customers are willing to pay for the products or services.

Supply Chain Waste is derived in 8 forms, all posing significant threats:

  1. Transportation Waste, caused by unnecessary transportation of people, materials, and information.
  2. Inventory Waste, too little inventory causing loss of sale and too much inventory build up
  3. Waiting Waste, waiting for materials, information, instructions, approvals and equipment
  4. Over-Production Waste, producing more than necessary, consuming unnecessary resources
  5. Over-Processing Waste, touching a product or service too many times
  6. Defects generated by producing products and services that do not meet customer specifications
  7. Skills Waste, inappropriate utilization of human capital

Solution: Conduct regular Waste Audits to identify and quantify the 8 waste elements. Re-engineer Supply Chains to reduce waste.

Tools: Waste Audit Matrix (see Figure 1), Spaghetti Analysis and Pareto Charts

 Figure 1, Waste Audit XYZ Café

waste-audit

Source: USA LEAN Management Consulting, permission granted for use

  1. Degree of Delays – Delays and “Waiting” work in tandem. Delays can be considered as the late delivery of products or services because of waiting for information, materials, instruction, clearance, inspection, rework to be performed. Supply Chain delays create staggering cost drivers and waste of resources.

Solution: Conduct regular Audits to identify and quantify delays Re-engineer Supply Chains to reduce Delays.

 Tools: Value Stream Analysis (see Figure 2), Network Diagrams

 Figure 2, Value stream Analysis

value-stream-analysis

  1. Degree of Inflexibility – In the Modern Supply Chain Management we often witness the inability of businesses to rapidly respond to shifts in customer tastes, and demand requirements. Many firms struggle to balance demand and supply constraints. Many supply chains struggle to effectively meet customer demand that is outside of the domain of contracted products and services (Outside Flexibility).

Solution: Conduct regular Audits to identify organizational inflexibility. Re-Engineer Supply Chains to increase Upside and Outside Flexibility. Simplify Product Families, Product Designs, and Product Platforms.

Tools: Upside and Outside Flexibility Matrices. Design for X, Design for Six Sigma (DFSS), CTQ Matrix, Customer Requirement Matrix, Design FMEA, Process FMEA (Failure Mode and Effects Analysis)

  1. Degree of Deviation – Rampant variation or deviation from customer specifications is the order of the day for products and services flowing through the modern supply chains.

Sources of Supply Chain Deviation:

  1. Machines, varying settings, tolerances, speeds
  2. People, varying work practices and manners of executing workflows (See Figure 3)
  3. Information, varying timelines and quality of information
  4. Process variation
  5. Materials, variation of quality of raw materials and other inputs
  6. Measurement System Bias and Variation
  7. Suppliers, variation in raw material quality and delivery

Solution: Conduct regular Audits to identify and quantify deviation. Re-Engineer Supply Chains to reduce Deviation.

Blockchain, Artificial Intelligence, Robotics, Supply Chain Scenario Planning

Tools: Control Charts, Pre-Control Charts, Sigma Calculation Matrix, DPMO Matrix, CP, CPk, PP, PPk Indices, Regression Analysis and Design of Experiments.

 Figure 3, Pre-Control Chart

pre-control

Notes:

  1. Service Performance Levels in the Red Zone do not meet Customer Requirements of Speed of Service. This is NOT ACCEPTABLE
  2. Service Performance Levels in Yellow are dangerously close to the Customer Requirements of Speed of Service. This is ACCEPTABLE
  3. Service Performance Levels in Green are meeting to the Customer Expectations of Speed of Service. This is ACCEPTABLE

key

How are the critical elements of your supply chain performing?

Source: USA LEAN Management Consulting, permission granted for use

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Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By David Millington, SPSM, SPSM2, SPSM3 - Director of Education (Next Level Purchasing Association)

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