Season Three, Episode Eight
What is missing in the Supply Chain Visibility discussion?
I often feel like we are starting at the wrong point as we try to find solutions. We assume that the systems and metrics that exist today are perfect and if we can just improve from that point forward, we’ll be fine.
Supply Chain visibility is such a discussion. The fact that we’ve been chasing this elusive creature for years (if not decades) should be enough to say we’re going about it wrong. The assumption is we just need to tweak what we have, maybe pull it together into a dashboard or control tower and we can then see everything (visibility) and take it from there. Bring me my Super Suit.
An illustration: My cars gas gauge isn’t working. I implement a system that alerts me when I have 10 miles worth of gas left in the tank. Sometimes it is enough, but sometimes I’m more than 10 miles from a gas station. The visibility doesn’t prevent disaster. So, I implement a system that alerts me when I have 100 miles worth of gas left in the tank. But, no further warning. Now, I need a separate system to tell me when I have travelled say 50 miles from the point of the warning. Much better to have a gas gauge that shows a relative amount of gas in the car (quarter, half or full) and an additional system that counts down how many miles are remaining before I reach empty. That’s what most cars have today.
In supply chain, knowing that a shipment is not on schedule is not sufficient. Knowing that I have run out of stock on an item is not sufficient. Knowing that I will miss the shipment to the customer is not sufficient. Knowing that the snowstorm stopped all scheduled deliveries is not sufficient. MRP telling you that you should have ordered parts a week ago is not sufficient (or funny anymore).
We are trying to improve visibility at the wrong point, with insufficient time to react appropriately. Let's explore what that means.
1. Binary systems. MRP (Material Requirements Planning) is a binary system regarding visibility. You are either fine or you are really not fine. There is no relative degree of fine. Hence the constant fire-fighting, schedule changes, and general chaos. It doesn’t matter what you do, the system reacts precisely to the input of an imprecise world. So, we duct-tape it, hoping to find that one simple adjustment on the complex system that will finally resolve all problems.
2. Too late. We make sure to communicate what has already gone wrong so people can react to the rest of the breakdown. If you are alerting me that a problem has occurred, it is too late for me to prevent it. I can only react. And in my reaction, I should try to not destroy any of the other schedules and plans that are all interconnected with the original problem.
3. No further sharing. Once the problem is communicated, choices and decisions must be made accordingly. A little reschedule here, a little expedite there, a few changes to customer orders, and some begging for forgiveness from customers. Now, we must wait for MRP to run again (tonight) and tomorrow we will see what other problems have been created.
Let’s change the conversation about Visibility.
First, Flow (Systemic Flow) is a measure of visibility. When visibility breaks down, flow will break down. So now we have a kind of measuring stick. Which system focuses on Flow? Demand Driven Material Requirements Planning.
Second, implementing Demand Driven MRP gives us smaller pockets of precision and a warning system for strategic points of inventory. If we maintain those strategic points, the rest will work well.
Third, Demand Driven MRP also shows the relative priorities compared to other strategic points of inventory, so we don’t create a new emergency as we attempt to fix the first emergency.
Fourth of all, Visibility needs to be redefined. It is not just visibility to the forecast or visibility to all of the things that are currently going wrong. But visibility to understand that the actions I am taking are having the intended impact. Visibility to the symptoms that allows a root-cause analysis, not a knee-jerk reaction (increase safety stock) that actually causes more chaos the next day. Visibility in time so I can do something besides yell at my suppliers and employees to hurry up, for crying out loud.
There is one final visibility that is allowed when using Demand Driven MRP. The visibility connecting our strategic plan to our operational capability. What should a person on the shop floor do today in order to have an impact on the desired strategic metric?
The CEO wants an increase in Return on Investment. Return on investment is impacted by systemic flow. If the machine operator maintains the strategic point of inventory, then flow will improve or be maintained. That is how the machine operator can have an impact on Return on Investment.
Visibility, and its measure of success, exist. We need to re-evaluate our starting point.
John Melbye, DDLP, DDPP, CSCP.
Supply Chain Educator at www.BecomeDemandDriven.com