Measurement & Mastery: 7 Principles Leading to Supply Chain Optimization

June 28, 2016 Dennis J. Trchka

 

manufacturing-measuring-601504-edited.jpg
As Bob Weston and I outlined in Process Mapping: The First Step in Unlocking Supply Chain Value, Process Maps visually document the actions and decisions required to move a product or service across its supply chain. The next step in supply chain optimization is measuring each action against relevant targets to verify completion or success, followed by mastering those steps to create incremental value.

Measurement and Mastery first restore stable, predictable operations that reliably deliver the original intent of the process under examination. From there, opportunities for both topline and bottom line growth become apparent.

During my 40 years in supply chain operations at Procter & Gamble, I led measure and master initiatives in every P&G business unit, with co-manufacturers and suppliers, and as part integrating newly acquired businesses. Across all these situations, I found the following seven principles led to meaningful process improvements and generated double-digit returns.

If you can’t measure it, you can’t manage it.

1. Identify the metric. Every step in a process map is either an action or a decision, both of which have quantifiable, measureable outcomes. Identify the appropriate metric for each step. If it is not immediately obvious, think in terms of time, cost, cash, or customer service. These metrics ultimately become the levers of control for the operation.

For example, I worked with many packaging lines where well-cadenced timing of individual operational steps was critical. When out of sync, unnecessarily high material inventory built up and down-time increased. Both negatively impact cash flow. Time and money are great starting points for measurements within a process.

2. Set the target.  See the gap. All measured steps require targets directly linked to the supply chain strategies and priorities of the business.  Comparison of actual versus goal reveals quantifiable gaps that, if closed, will improve supply chain performance.

In the above example, comparing material inventory levels under optimal line speeds with actual on-hand inventory quantified the financial impact of the out-of-sync operations. This led to specific, measurable action plans to resolve the issue, which had an immediate impact on the bottom line.

Watch On-demand - Process Mapping: The First Step in Unlocking Supply Chain  Value

3. “No gap, no yap”: prioritize to prevent analysis paralysis.  While every step has a metric and a target, not all steps are equally important or relevant to achieving the necessary improvement. Identify, monitor, and report on only those steps and gaps with the greatest impact on overall performance. Then, within those key drivers, prioritize the order in which you will tackle the critical gaps. I’ve found that focusing on one opportunity at a time is more efficient and effective than trying to take on everything at once. Follow the money. Where are the bottle necks? What are the greatest constraints? Who is clamoring for what data? What is within your control and what is not? Start there. Set a glide path to success based on select operational alerts and focus only on the deviations from this path.

So What, Now What? Master it!

Metrics, targets and benchmarks identify and quantify opportunity gaps. But once gaps are identified and prioritized, the heart of the work begins.

4. Execute. Achieve. Sustain. And move on. Plan, do, check and act on the steps to close the gap.  Be realistic about the amount of work and time it will take. Measure, measure, measure to confirm and quantify progress. Once achieved, set controls and routine checks into place to consistently and reliably sustain performance. Helpful tools include those associated with Run-To-Target and Six Sigma process control approaches. Then move on to the next opportunity.

5. Confirm return to ground zero. After all critical gaps are closed, and before taking any steps to optimize, verify that you improved operations such that the original base operation is restored. For example, in the packaging process described above, conduct several runs to confirm that each step is reliably timed and that material inventories are being reduced. Now begin to look for opportunities to optimize…time, material, labor, yield, cash, customer service, etc.

6. Leverage legacy, passion and pride for inspiration and implementation. Engaging outside experts in process redesign injects fresh perspectives and new approaches. But don’t underestimate the value of in-house experts who know the current operation inside and out. Involve them in the optimization process. Listen to their insight. Often, their understanding of the original design intent and intimate knowledge of daily operations serve as the cornerstone of change. Take this opportunity to document invaluable tribal knowledge for training and succession planning. Keep in mind, these experts will be the owners of implementation. Use the new process map to help everyone understand where they fit and the impact they have on total supply chain performance. Make sure they clearly understand their decision space, what they can and cannot control, and the “givens” of the newly optimized design.

Not long ago, I led the integration of an acquisition into an existing supply chain. I will never forget the impact of an employee who had spent over 50 years running a particular operation within the acquired company. His insights and knowledge extended far beyond his specific role. His contributions were more immediate and valuable than any model or simulation that we might have developed. As a result, the two supply chains came together with minimal disruption, and he became a champion of the new operation.

7. Engage suppliers and customers.  Solicit input from the suppliers who input to the process and those who are customers of it.  What are their requirements and constraints?  Consider the connections into and out of your facility…where can you reduce cost and/or improve efficiency? Are there opportunities to reduce inventory, increase turns, or otherwise improve working capital and cash flow? Can dual inventories be eliminated by improved product/supply chain designs or operations?  Think broadly about where the “start” and “finish” line is…can an end-to-end optimization reduce losses for all?  Are there mutual benefits through further process integration?

These seven principles provide practical guidance for the significant work required to achieve operational excellence. The money is in how rigorously they are followed for existing processes and what choices are made to advance.  The more experience and capability involved, both internal and external to the business, the better the result. Once optimized, focus can shift to leveraging the supply chain for competitive differentiation and top-line growth.

About Dennis J. Trchka: Dennis spent over 40 years in Global Supply Chain Operations and Business and Supply Planning at Procter & Gamble. He was one of the original creators of what is now Supply Network Operations within P&G, one of only four Business Planning and Supply Planning Masters in the Company, and a certified Class A MRPII Professional. As a YourEncore Expert, Dennis helps consumer goods companies and their suppliers and co-packers leverage the supply chain for competitive advantage. 

 

Previous Article
Need Revenue Growth? Try Looking at Your Supply Chain From the Outside In
Need Revenue Growth? Try Looking at Your Supply Chain From the Outside In

Next Article
Process Maps: Turn-by-Turn Directions That Lead to Supply Chain Optimization
Process Maps: Turn-by-Turn Directions That Lead to Supply Chain Optimization

  Last week, Dennis Trchka laid out Four Steps to Unlocking Supply Chain Value. The first step,...