I’m catching up on my summer reading, but unlike most of us I often don’t take the latest mystery to the beach. I’m reading about supply chain management. Am I crazed? Probably so.
I just got done reading “The Wall Street Diet for a Lean Enterprise,” by Charles “Chuck” Poirer of Computer Sciences Corp. (along with co-authors Michael Bauer and William Houser). I was inspired by seeing Chuck again at a recent conference, where we had a conversation about the book (he’s an excellent speaker, BTW). Many of the thoughts and themes in the book are worth sharing.
As the title indicates, the recommendations are couched in terms of a diet. Though part of that is just a handy metaphor, it makes sense. Why? Because like individuals trying to shed excess pounds, companies and their supply chains are plagued by two related challenges: building a total “health” program, not just focusing on one specific element, and “keeping the weight off” after the initial improvement. Personally and corporately, many fall off the wagon not far down the road.
“Building peak and lasting performance in terms of cost, productivity and quality is the greatest challenge facing organizations today” the book I think summarizes correctly. It notes, for example, the almost amazing, enduring ability of the Toyota Production System to continue to drive competitive advantage. Why? Because it wasn’t an initiative, but rather a way of life that fosters continuous improvement year after year.
The book offers something of the usual formula in these kinds of books for making recommendations: for example, a “maturity model” and accompanying diagnostic that allows you to analyze your supply chain fitness, but there is some interesting insight here. The inter-related elements of the “diet” are as follows:
- Create a “Lean” Enterprise – using Lean principles beyond manufacturing to drive out waste and improve efficiency
- Achieve “Advanced” Supply Chain Management (more in a moment).
- Adopt Six Sigma type quality principles across many business processes to achieve a “quality-focused” enterprise
- Improve metrics to track progress
- Expand use of “smart” outsourcing as a function of really looking hard at what functions and processes could be better performed by someone else.
- Take a new, more enlightened focus on customer satisfaction
There are some sub-elements of the diet I found particularly interesting. For example, the goal of “full network connectivity,” in which your supply chain network looks more like a “virtual enterprise,” with near total information availability and transparency among all the members of the network. While noting it is more theoretical than actual at this time, making this the goal will move some companies down the path more rapidly than others – with corresponding competitive advantage. This is in large part what characterizes “advanced” supply chain management – SCM becomes a total business system.
A related concept is that of the “federated keiretsu,” an improvement on the Japanese keiretsu model (where supply chain and financial partners literally own stakes in each of the companies). In the federated model these ties are “loosely coupled,” but still enable all the oars to be pulling in the same direction.
I am going to come back to this concept in a future column soon, focusing on the challenges when members are part of “competing” value chains, but Poirier offers some excellent prescriptions for making the collaboration work, focusing on the upfront arrangements and “governance” principles. Perhaps more challenging is the recommendation that the best of everything within the network be shared and adopted by all the members. For example, if a given vendor has the “best way” to do collaborative product design, that approach should be replicated across all the chain.
I think there are several challenges to that notion. First, “one size” rarely does fit all. Second, for all the theoretical benefits of the keiretsu concept, the practice/technology may not be something the originating company wants to aggressively share – and frankly from an objective perspective maybe it shouldn’t.
The theme of collaboration runs strong throughout the book, not only with trading partners but also internal to the enterprise. “We found a large number of companies who did a lousy job of sharing ideas and technology even within their own enterprise,” Poirer told me, and my experience has often found this to be true as well, though in fairness it’s as often the reluctance of the other side to accept a new idea as it is a failure to share.
I also liked the idea of “productivity profiling” to measure opportunity and progress. Greatly simplifying, it’s very similar to value-stream mapping, but also incorporates the notion of comparing a perfect state (no waste, total quality, etc.) to the current condition. Understanding that gap, even if it can never be completely closed, can drive substantial improvement.
There’s a lot more, including the opinion, backed by experience, that adopting the diet can lead to substantial impacts on the bottom line and shareholder value. In the end, I’d summarize it like this: supply chain transformation really does require a lifestyle change, and companies are just as challenged as individuals to make that leap.
Do more companies need to go on a “supply chain diet?” Is true supply chain improvement similar to a “lifestyle” change? Is deep collaboration the real key to advanced SCM? What are your thoughts on the elements of this diet?
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