Season Two, Episode Five
Updated: Oct 5, 2020
Visibility, but not the usual.
Years ago, at one of our APICS meetings, we had a meteorologist from a local television station as our guest speaker. I figured it would be interesting, but I never figured that her first words would be like a beacon in the darkness and a goal for which I have been striving ever since.
“When we arrive at the (TV) studio, the first thing we do is check the current (weather) conditions,” she said.
Read that again, with a hint of supply chain. Wouldn’t it be cool if, “When we arrive at the office, we could check the current status (health) of our inventory.”
And ever since then, I’ve been acutely aware that visibility is not just a better forecast. Here are four types of supply chain visibility that I think are vital to success.
1. As stated above, relative health of inventory levels. Raw materials, Finished Goods and everything in between can all have inventory targets based on the information that we have today. If we compare our actual on hand to our target, we can arrive at a percentage measure of the health of that component or finished good. I’ve settled on the Demand Driven MRP method to perform this calculation. Once we have the relative health, we have our task list for today. And we know which parts are likely to give us trouble tomorrow. If I can see the trouble coming, I have a chance to act and prevent disruption.
2. Action effectiveness. I need a method to test if my attempts to prevent disaster are successful. Are my actions having the desired impact? Or am I following procedure without regard to its effectiveness? Do I even have the tools to measure the impact of my actions? Demand Driven MRP helps in this regard as well.
3. Employee well-being. Are your employees happy and therefore fully protecting the interests of your company? Generally, I see employee surveys once a year or once every two years. Is this enough? What if we create an Employee Frustration Index? Every week, at the end of Thursday, employees must answer one question: How frustrated am I at work (1-5). Establish a baseline and then work to improve it.
4. Flow. Make sure your business metrics relate to measuring systemic flow and reveal the impediments to return on investment. Cash to cash cycle time, inventory turns, on-time delivery, adherence to schedule, and frequency of expedited freight are all examples of flow-based metrics. Producing what the customer can and will buy is important. Producing the highest quantity per minute of something that the customer does not want is not important. Improving flow always reduces cost and improves ROI, reducing cost is not always tied to improving ROI.
All of the above visibilities can be improved by implementing a Demand Driven Operating Model like Demand Driven MRP. Yes, there is a better way.
Quick review: My four important visibilities are 1. Do I have a method to prioritize the urgency related to inventory levels? 2. Are my corrective actions having the intended results? 3. Are my people drowning in the storm or are they thriving in the calm? 4. Is Systemic Flow improving?
John Melbye, DDPP, DDLP, CSCP