We are heavy into the Fall 2010 conference season, and I will be on the road for several weeks, trips from which I hope I can share some supply chain insight for SCDigest readers.
I will take the first stab here, having been earlier this week at the annual Material Handling and Logistics conference in Park City, Utah. The event is sponsored by HK Systems, a materials handling company, which has been recently acquired by former competitor Dematic. HK does a nice job both of creating an agenda that addresses a wide range of supply chain and logistics topics that go far beyond materials handling, and in keeping the event very non-commercial. I hope it continues under the new Dematic regime.
From my view, this year's presentations were especially good, starting with one by Terra Winston of inTerract consulting on a topic that you rarely see at these kinds of events - how PepsiCo has put together an aggressive program to develop its supply chain talent.
She noted that the recession really had changed how Pepsi and many companies thought and operated, which included leaning out staff that in the end resulted in decision-making being pushed down to lower level managers not used to making those decisions.
An analysis also showed that the company had a lot of "gurus" or technical experts, when they needed more "general managers" capable of broad supply chain thinking. Softer skills in terms of influencing and collaboration were also needed on the team, noting that virtually everything at PepsiCo involved cross functional teams these days. Interestingly, Winston observed that the technical functionaries also tended to be more resistant to change than more broadly skilled supply chain managers.
There were also problems in such areas as succession planning, which wasn't done well, and often resulted in the same talented person being suggested as the successor for a wide variety of positions. The bench for many higher-level positions was thin.
So, the company has been on a journey to change all that. I don't have room this week to detail it all (will soon), but the program includes much more robust talent evaluation and succession planning processes, formal plans for moving managers into new areas where they needed to build skills and experience, and - very interestingly - titles, pay grades and promotions based on experience and competencies that are clearly defined and cataloged for each manager. Also implemented was a new "Supply Chain Associates" program that took similar concepts for new college grad hires. This is very advanced talent management.
Dr. Mahender Singh of MIT gave an interesting presentation on supply chain strategy. The first questions, of course, are what in fact is a supply chain strategy, and does a company really have one? More on that someday soon from SCDigest, but Mahendar used the familiar phrase that "if you don't know where you are going you will surely get there" to remind the audience of the importance of strategy.
A supply chain strategy is a plan of action, and the key is that it must specifically address trade-offs and choices, Mahender says. This is a component usually missing from such plans, he says. Of course everyone wants lowest costs, highest service, maximum responsiveness, etc. - but you simply can't have it all. A strategy should be clear about those trade-offs, and why, Mahender says.
He added that strategy needed to go beyond "best practices," not only because they may not be right for your company, but because they can be "brittle." Mahendar noted, as we have here as well. that Dell's make-to-order model that seemed invincible for awhile (he noted Michael Dell once said something close to "Selling PCs through retail is archaic.") but now the company is singing a different tune.
Even more interestingly, Mahendar noted your real supply chain strategy is not what you say but what you really do - the often disconnect between what's on paper and what is happening on the ground. He also showed some interesting work where he analyzed what activities a company was really doing in the supply chain, and whether they contributed or not (or were even contrary to) the stated strategies and objectives.
He also noted that companies too often fail to understand that business or market strategies can usually be changed much faster than the physical supply chain - and that companies ignore that reality at their peril . For example, one company whose CEO announced plans for mass outsourcing, without understanding there were $30 million in DC lease commitments.
Changing gears, consultant Jack Kuchta gave an interesting presentation on ways to increase distribution center space - though he acknowledged that most companies would be happy to have that problem in today's low demand environment.
It may sound basic, but Kuchta said it is important to understand whether the increased space needs are moderate (say under 15%) or large (say 25% more space needed), and whether it is temporary or permanent. This gives you four quadrants on a matrix, and there are often different approaches that should be considered depending on what the scenario is. As a simple example, relatively small and temporary space constraints should usually be addressed with little or no capital investment.
He also noted that logistics managers must make it clear there is a direct, inverse correlation between increasing storage in a DC and the level of throughput/productivity. "It's just true," he said.
He made some interesting points, for example the cost of walking/driving past excess and obsolete inventory, and how at some point the costs of old inventory outweigh the value of the goods. At that point, get rid of the inventory any way you can, from tent sales to exporters to donation or scrap if necessary.
Kuchta actually has a book with 153 ideas for saving space (up from 144 ideas a few years ago), and he went through a number of them in his presentation. A couple I liked were rethinking floor storage and the number of keys or rows for each SKU, as Kuchta illustrated how doing that can increase total storage capacity - but in the end often at the cost of some loss in fork truck efficiency.
He also said the goal is to "look for air," which may lead to building storage areas over floor office space, dock doors, etc. Another idea I liked was changing beam lengths from say 96 inches to 108, putting three instead of two pallets in a section. That eliminates enough uprights such that over a 75-foot long run of racking, you get a whole other section of storage. Who knew?
Dr. Toni Doolen of Oregon State University presented some very interesting insight - and highly practical, versus what too often comes out of academia - on what accounts for success or lack thereof of "Kaizen events" in manufacturing. Kaizen events are a Lean technique that involves short (3-5 days) exercises in which generally a cross functional team tackles and actually implements a solution to some focused problem or goal (such as reducing set-up time by 50%.) They are designed to involved little or no hard dollar investment ("Creativity before capital.")
While the research, which analyzed many dozen separate Kaizen events across eight companies, found about 80% of the events were successful in meeting goals, an important percentage did not achieve their goals in the short term (after the 3-5 day event) and in the long term (initial improvements were lost over time).
Again, there was a lot more than I can do full justice to here, but Doolen found that the level of clear management support and the level of planning for each event by the facilitator were closely associated with initial event success. That may sound obvious, but an insight not so obvious was that as companies have more of these events - and in some case mandate a given number of events per year per work area - managers can become less engaged and leaders have inadequate time to well prepare. More can turn out to be less.
Long term success was in part driven by institutionalizing the processes, such as performance reviews, that should occur after the Kaizen events - steps some companies let slide. Also key was the team in the work area itself feeling like it really owned the results in a "shared sense of responsibility."
There were several other goods sessions - including I hope my own - that we don't have room for here. We will summarize the above sessions and some other ones in our On-Target newsletter over the coming weeks.
I am headed out to CSCMP and San Diego Sunday night - would love to meet SCDigest readers while I am out there. Summaries and highlights coming as always next week for those of you that aren't headed to San Diego.
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