Expert Insight:

Behavior 6 - He Listened and Read

from A Constant Feed of Information From All Source Points

by David K. Schneider

I was on the road again this week, at the CSCMP Atlanta Roundtable meeting and the Georgia Tech Supply Chain Executive Forum – both excellent events, containing a number of highlights I think are worth sharing. I have had a lot of feedback that our 40,000 readers like these reports; let me know whether you share or disagree with this position.

I’ll start by first noting that there is no question that the miasma that characterized nearly all of 2009 is starting to lift. Most companies, from my conversations, are clearly more bullish, and are starting to make supply chain investments to support growth and – frankly – to minimize headcount growth versus the expected increase in their top lines. Supply chain technology vendors are unquestionably incredibly more bullish than most of last year, and with the optimism that started to rebound at the end of last year now turning into real orders in recent months.

I won’t get to all of the highlights from the two days due to space constraints, and I am somewhat limited to what I can report at John Langley’s Supply Chain Executive Forum, but will do my best below.

Robert Martichenko, founder and CEO of LeanCor, as usual gave a very good presentation on Leaning the supply chain.

I could fill up the whole column on just this presentation, but key points included:

• By their very nature, processes tend to deteriorate (entropy) over time. You have to work very hard to “act on a process with more force than it is trying to fall apart” over time.

• Over-production is “the king of waste.” Lean efforts – across the supply chain – should be heavily focused on reducing production lead times which will usually have a huge impact on reducing on over-production.

• Companies adopting Lean quickly learn the Lean “map,” meaning all the Lean tools (value stream mapping, 5S, etc.) that are available. What companies more commonly lack is a Lean “compass” – the principles that are critical to supporting sustainable Lean initiatives and that drive those principles from the top down throughout the organization.

• “A3” documents, which boil down Lean opportunities to what can be fit on an 11x17 sheet of paper, often then run into trouble in a “PowerPoint-oriented culture.” He said clients often want him or the Lean team to convert the A3 plan to PowerPoint – undercutting the whole A3 Lean concept.

Not explicitly said, but implied, is that today’s accounting systems often cannot well calculate the economic value of increasing supply chain velocity.

Later, in a panel discussion on Lean and Six Sigma, Coca-Cola Supply’s Dennis Flynn noted that that a key decision fork is whether to rely on “professional” Lean/Six Sigma black belt types, train regular managers on Lean/Six Sigma principles, or a hybrid approach, as his organization has done.

Flynn added that while not necessarily “innovation,” it was amazing the power of making 15-20 small, incremental improvements in manufacturing and distribution, from upgrading scanners that allow a fork truck driver to stay on a vehicle rather than getting off, to taking whole non-value added steps out of a process. Each improvement incremental in itself, but which add up to “transformative” cost reductions before very long.

Flynn also smartly noted that is critical to avoid the tendency of Lean or process experts to think they can come in and quickly identify the “solution” to a bottleneck or process issue. That causes you to “start to build support for that solution rather than really well-defining the real problem and the full opportunity for improvement,” he said.

I will add as an aside comment that as widely promoted and adopted that Lean and Six Sigma principles have become, it was clear that most in the audience had very little knowledge/experience. We have a long way to go.

Procurement/spend management vendor Ariba made a presentation on opportunities in those areas, but what struck me was this: vendors like Ariba and others in this space have been able to electronically enforce very detailed interactions and workflow processes between buyers and sellers and within a company’s own procurement processes. Part of that is because the procurement cycle in the end is based on a “contract” that can be electronically modeled.

Could not that same type of approach be well suited to other supply chain interactions between trading partners and even within a company’s own supply chain functions, to ensure process consistency based on more informal “contracts?” Methinks Yes.

Brian Hancock, VP of Supply Chain at Whirlpool, noted that how well a company managed inventory during the Great Recession literally was often a matter of life and death. Commenting on the incredible dynamics of today’s supply chains, he asked how many in the audience would have predicted two years ago that growing protectionism and drug violence in Mexico would together create real risks to consistency of supply today. No one raised their hand.

“Supply chain simplicity and execution excellence win,” Hancock later said. “Persistency in pursuit of supply chain goals also wins,” he added.

As one of many examples, including a major supply chain network redesign, he recounted how Whirlpool was able to reduce damage by some 50% and achieve related savings of $100 million annually by a hard but relentless effort across product design, manufacturing, distribution, transportation and Whirlpool customers to address the damage issue. “The most rich supply chain opportunities and most difficult challenges cut across trading partner relationships,” he said.

Whirlpool has moved a tremendous amount of freight to rail/intermodal, and spent a lot of money to build rail spurs into its revamped network of 5 mega-DCs and another 5 DCs focused on high volume SKUs.

Intel’s always interesting Jim Kellso covered a lot of ground, but noted that today a company has to be great at both supply chain innovation and continuous improvement/operations excellent. When you get there, Kellso said, you are close to optimally managing supply, demand and new product introductions and lifecycle management. Not many are there.

Kellso said it is important to develop a culture in which a “WHAT” – a Wild Hairy A** Thought – is encouraged and valued in terms of potential supply chain innovation.

In what will clearly be a candidate for our Supply Chain presentation of the year, Chris Gaffney, president of Coca-Cola Supply, offered a powerful review of Coke’s efforts to become more “demand-driven” – still a work in process - and his efforts personally and throughout the Coke supply chain organization to reach more balance and happiness in life.

Coke was previously far too inwardly focused, Gaffney said. The dozens of production plants really “just wanted a forecast” to build to, he said. To get to a better place, in many cases, Coca-Cola Supply isn’t even really trying to get supply chain “nodes” thinking all the way towards end consumer pull, but just how to be more demand-driven to the immediate link after them, he said.

They are wild about supply chain “pilots.” Quickly analyze a potential opportunity and assess whether it is worth testing. If yes, develop a pilot to test real world results. If it looks good, roll out rapidly. Right now, the Coca-Cola supply chain is a perpetual motion machine, with initiatives following from this model by the dozens, which are delivering real results.

Given all that, Coke is trying to help everyone fine more balance – which Gaffney believes will result in better results for Coke in the end. Employees are encouraged to develop personal goals that are balanced across work, family and community – and Coke does its best to support those plans. Gaffney personally has largely put away his Blackberry each weekend, not only for himself, but also so he stops sending emails to his staff during that time that they naturally think requires a response.

I wish had another 1000 words, but I am out of space. I hope you get some value from the summaries of these excellent presentations. 

Any reactions to this latest “trip report?” Can a more balanced work/personal life actually lead to better supply chain results in the end? Is the lack of a real Lean “compass” a key factor when Lean initiatives fail to love up to expectations? Do more organizations need to encourage WHAT ideas? Let us know your thoughts at the Feedback button below.

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If you are building a five city US distribution network, what are the five locations usually cited as optimal in terms of reaching the US population at lowest cost?

Atlanta, Columbus, Dallas, Los Angeles, and Seattle.