• Operations Rx

It’s Really that Simple

Updated: May 4, 2020

The supply chain industry is obsessed with optimization, as it should be.  The job is to get A to B as quickly as possible and as inexpensively as possible.  The only issue is that this obsession has attracted people with little to no supply chain experience in an effort to mathematically solve problems that are not really the core issue.

Supply chain excellence comes down to execution – executing the sales forecast, executing the procurement strategy, executing the logistics plan, executing the manufacturing schedule, and executing distribution.  Achieving excellence in these processes is what minimizes variability, and failure to reduce variability is what drives people to seek the magic button that solves all their issues.

Supply chain theory is so simple but execution so difficult that people try to over complicate the theory in order to compensate for executional issues.  It’s really as simple as right product, right time, right place, right quantity.  In order to do that you need to match your supply to your demand, and if you knew exactly what your demand was and exactly what your lead time is, that’s very simple – but obviously unrealistic.  So the question always becomes, how do you compensate for not knowing when your demand is coming and if your supply will be delayed?

The answer is to keep it simple and focus on solving the root cause.  Statistical formulas that require math degrees to understand cause the everyday buyers and planners to not know when and how to react to changes in the supply chain.  “When do I pull this lever?” or “When do I push this button?” are important questions that supply chain teams need to understand.  After all, they are the gears that enable every part of the business to work and if they don’t know which way to spin and when, the business gets itself into a lot of trouble.

In a global economy, supply chain has been brought to the forefront, where it was once looked down on in many organizations.  Unfortunately, the solutions market has become more and more marketing focused. Blockchain, AI, and 100+ statistical forecasting methods are being marketed as solutions to what really boils down to execution.

How do you really plan for the unplannable?  You give your business what it needs to respond to change faster:  shorter lead times, more visibility, better vendor relationships, and better customer relationships.  Supply chain can enable all of this, and it’s really simple.

  1. Strategically place inventory where it reduces lead time to the customer and reduces overall investment. We call this lean inventory planning and buffer management

  2. Provide succinct KPI’s that give early warnings and indicators of what’s going right and what’s going wrong. We provide these insights through the CloudAnalytics platform.

  3. Work on your supplier relationships and let them know what your ordering strategy is. Oftentimes, when a business reacts to protect itself, they often make their supplier issues worse by “spiking” their demand.  Let them know your batch quantities and frequencies.  We provide this through supplier forecasts and scorecards

  4. Identify what demand you can’t predict and work with your customers to understand their buying patterns. And very importantly, open up a two-way line of communication between sales and the rest of the organization.  We call this SIOP and Demand Planning.