The Many Questions Supply Chain Managers Are Asked to Answer

The following are questions customers typically ask supply chain managers:

  • “Why is it taking you so long to deliver my order?”
  • “When will you deliver?”
  • “How many of the items we ordered will you deliver today?”
  • “How much of an item do you have available?”
  • “Your items didn’t meet our specs; when will you replace them with the right ones?”

Executives also ask supply chain managers the following:

  • “How much did we ship today?”
  • “How much did we ship so far this month?”
  • “How many orders did we receive from Sales today?”
  • “How many pending orders do we have?”
  • “Why do we have so many pending orders?”
  • “When will you deliver the pending orders?”
  • “When will the items be produced?”
  • “How many of the items will we make?”
  • “Why does it take so long to produce?”
  • “When are the materials for production arriving?”
  • “How much will we pay for materials this month?” 
  • “Why are we getting customer complaints?” 
  • “How are you responding to the customer complaints?”
  • “Our costs are too high; how can we reduce costs?”
  • “What’s your plan to comply with government rules on sustainability?”
  • “How safe is our product?”
  • “What’s your plan to stop pilferage of our products?”
  • “Why are we wasting materials?”
  • “How can we reduce inventories?”

Vendors and 3rd party service providers also ask questions:

  • “How much of this material are you buying?”
  • “When are you ordering?”
  • “When do you need the materials that you’re ordering?”
  • “What are the specifications of the materials that you want to buy?”
  • “When will you pay me?”
  • “How much will you pay me today?”
  • “What is your company’s response to my bid?”
  • “How many trucks do you need tomorrow?”
  • “How long do my trucks have to wait before they get loaded at your warehouse?”
  • “Your bid is too low; can you pay me more?”

Supply chain managers encounter questions like these all the time.  Most who ask want answers immediately and supply chain managers feel the pressure to respond. 

The questions, however, lead to more questions.  And it leads to more searching for answers.  Supply chain managers sometimes spend the whole day (if not days) trying to answer questions than actually managing their operations.  

Supply chain managers work in a broad scope.  The questions they are asked would likely touch not only where there are assigned but also functions adjacent to theirs.  Logistics managers who are asked the status of shipments may find out there are issues with production shortfalls and materials shortages.

And because supply chains aren’t only limited to an enterprise’s internal functions of procurement, manufacturing, and logistics but also include the interactions with other enterprises upstream (vendors), downstream (customers) and branches (e.g. service providers, parts suppliers), the questions that supply chain managers are asked would also lead to issues outside the borders of the enterprises they work for. 

Supply chain managers, therefore, are in that unique and unenviable position of dealing with questions that go beyond their job descriptions. 

Supply chain managers should welcome questions, however, not dread them.  Not only they should anticipate them, they should seek them out. 

Questions like the ones above offer windows to opportunities as they indicate what executives, customers, vendors, and other stakeholders find important.

Questions are not problems.  But they together are the first step in figuring out what and which important problems need to be addressed and solved. 

Questions unravel the problems we need to solve.  Seeking them out and defining the problems behind them are proactive methods for supply chain managers to not only answer pressing questions from stakeholders but also open avenues of opportunities which lead to lasting benefits. 

About Overtimers Anonymous

Pursuing Perfection Beyond the Acceptable Quality Level (AQL)

An ad promotes an Internet Service Provider’s (ISP) subscription plans.  On the bottom in small fine print is written “30% minimum speed at 80& reliability.”

The Philippines’ National Telecommunications Commission (NTC) in a memorandum in 2011 mandated that ISPs should provide at least 80% service reliability to customers: 

An ISP therefore should be able to provide an internet connection to its customers at or more than its minimum internet speed 80% of the time.  Or to put it another way, the ISP’s customers should be able to experience the minimum internet speed they signed up for 24 out of 30 days in a month.  If a subscriber does experiences the minimum speed six (6) days or faster in a month, the NTC considers the ISP’s service acceptable. 

The ISP is also required to tell its subscribers what the minimum internet speed is. In the ad mentioned above, the ISP informs customers that its minimum speed is 30% of what it advertises.  Thus, if a subscriber applies for a 300 Mbps plan, the ISP will guarantee a minimum speed of up to 90 Mbps.  An ISP is obliged to give only up to 30% of what the subscriber signs up for. 

Just imagine if this kind of advertising is applied in the fast-food industry.  A customer orders from a fast-food restaurant and the restaurant is guaranteed only to serve 30% of what’s on the menu.  If we order a 10-piece bucket of fried chicken, for example, and the fast-food gives you only up to three (3) pieces and the government allows it, we would surely be angry but we won’t be able to do anything about it. 

What the ISP advertises and what it actually serves evolves from the concept of the Acceptable Quality Level (AQL). 

The United States military adopted the Acceptable Quality Level (AQL) as a standard for inspection during the Second World War.  The idea is to set a level of what would be considered acceptable from a batch of items received from a vendor or a factory. 

For example, the US Army may accept a lot of 10,000 bullets if only up to fifty (50) of the bullets (AQL of 0.5%) are defective.  The US Army would be willing to pay for all 10,000 bullets even if it really would be able to use only 9,950 of them.  That doesn’t sound so bad unless you’re the soldier who ends up with the fifty (50) bad bullets. 

How AQLs are set varies from enterprise to enterprise, industry to industry.  Vendors would plead for higher AQLs if customers are buying items in very large lot sizes.  Sellers of small parts manufactured in large quantities like nails, wires, screws, and welding rods would ask for high AQLs as they would argue that defects are unavoidable and impossible to sort & separate all unconforming items. 

Customers, however, would discriminate what items deserve higher (looser) or lower (stringent) AQLs.  Customers would insist that how AQLs are set should depend on what the items would be used for.  For construction of a large warehouse, for instance, having a higher AQL for a large number of nails may be tolerable.  For owners of residential homes, however, they may not welcome a high AQL for nails or any construction material as this may result into a badly built house that can bring inconveniences if not hazards (e.g. a bad nail that leads to a collapsing ceiling). 

Food product manufacturers may accept higher AQLs for not-so-critical items like packaging materials but won’t welcome allowances for defective raw materials.  A food enterprise may accept a few imperfect boxes but I doubt it would accept even a few bad apples out of hundreds. 

And pharmaceutical firms won’t probably be too tolerant for high AQL’s for ingredients for medicines.

Utility firms apply AQLs in their services.  Electricity firms negotiate contracts with communities and try to convince consumers to accept a minimum level of power un-reliability, such as allowing for a number of days for a power plant to not supply electricity so that it can undergo maintenance.  Water companies try to get customers to agree on an acceptable quality of potability, to the extent notifying customers that the water they supply will not be fit for drinking anytime.    

In exchange for higher AQLs, enterprises sometimes offer discounts or defer price increases, from which they can position themselves as low-cost suppliers versus rivals.  In other words, customers can get products and services cheaply but they won’t get 100% quality. 

ISPs try to out-compete each other via this latter scenario.  Some offer the cheapest rates, advertise maximum speeds, but in the fine print guarantee only a minimum speed at a fraction of the time that is compliant to the law. 

Some ISPs will try to outdo the other such as by bumping up the minimum speed to 40% versus a rival’s 30%.  To the subscriber, however, he or she will never really get what they wish for from the advertising.

When ISPs advertise their maximum speeds, they reveal what they are capable of supplying to their subscribers.  But they also are insecure that their operations won’t run perfectly and reliably all the time.  Hence, they build in allowances to attain what they believe is an attainable level of performance which they can realistically provide to their subscribers. 

The problem with this kind of thinking is that it encourages complacency. 

The ISPs over time will won’t feel the need to improve the uptime of their broadband connectivity and to lengthen the time of their maximum service speed since they have the government’s blessing for an 80% reliability and a minimum speed that only requires notifying customers.  And they will continue to do so as long as rivals don’t try to up the game.

Many enterprises have over time accepted the AQL and said all right to accepting so many defects in the items or services they buy.  It becomes a standard that sometimes no one bothers to see if it can be improved.  If a factory is getting 95% acceptable product and its rivals are getting just the same, executives may not see the incentive to improve; after all, the factory is competitive at least for now. 

Up-and-coming competitors challenge established companies by bucking the AQL standard, by taking advantage of the complacency that take hold in established companies.  A new ISP company for instance may offer guaranteed minimum speeds of 80% (though they may lower the maximum speed advertised) at the same price as rivals.  

Competitors, the successful ones anyway, will claim to do better by offering better quality that improves from an industry’s AQL.  The real good ones would adopt continuous improvement that lead to zero defects. 

Acceptable Quality Levels (AQLs) were established to provide some reasonable standard in the inspection of items.  They weren’t meant to set the standards of quality; doing so only inspires complacency and encourages stagnancy. 

In a world where competitive disruption is more likely than ever, perfection in quality, via zero defects, is what we should pursue. 

About Overtimers Anonymous

Weighing the Benefits of Quantities, Streaks, and Trends

People put a lot of weight on numbers, especially those that show significance in terms of accomplishment:

  1. 100 days in political office;
  2. 10,000 followers for a social media influencer;
  3. 100,000 likes for a viral post on the worldwide web;
  4. 1,000,000 units sold;
  5. 1 billion customers served by a fast-food chain.

But as much as we pay a lot of attention to quantity, we seem to pay less notice to quality.

  1. What percentage of constituents were satisfied with the politician’s performance during his 100 days in office?
  2. How frequent did followers visit the social media influencer’s website?
  3. How many likes did the viral post author get for his other posts? 
  4. How many of the 1,000,000 units sold were defect-free or without complaints from buyers?
  5. How many of the billion customers served were satisfied with the fast-food’s service? 

We seem to have it in our human nature to celebrate quantity over quality.   

Maybe it’s because quantity is easier to grasp and recognise. 

It gets complicated if we say we sold 1,000 good quality items out of 1,050 produced.  People will ask what happened with the 50 that didn’t make the cut?  We’d end up explaining what we did wrong with 50 items rather than what we did right with 1,000 items. 

It’s our nature to see the bad more than the good.  Hence, just being one-dimensional, just by citing one simple number in quantity makes our achievements more tangible and easier to brag about. 

We also like to celebrate streaks and trends.  In sports, we take pride in winning so many games in a row.  During the CoVID-19 pandemic, nations would tally how many days they had without a single infection and cite it as a reason to loosen restrictions, at least until one comes along and causes another lockdown. 

We take what we can from quantities, streaks, and trends.  But we will hesitate to appreciate ratios and quality statistics. 

We’d prefer a manufacturing plant manager report employees worked 1,000,000 hours cumulatively without an injury rather than say there was one injury out of 2,000,000 man-hours registered.  People would ask what was the injury and how and why it happened. 

Still, we should ask ourselves:  what are the benefits of reporting quantities, streaks, and trends?  Is it to boast, make us look good, and build our reputations?  Will it increase our influence resulting in something positive and tangible in return?

We sometimes focus a little too much on what’s it about for us when maybe we should be asking what good will it also be for them—the customers, the likers, the readers, and stakeholders. 

This is my 100th blog post.  Though I rather prefer the few readers who visit my site like what I wrote than how many I posted.    

About Overtimers Anonymous

How Control Charts Can Help Get Things Done Correctly and Consistently

How can enterprises better control their supply chains?  How does one know if the supply chain is under control in the first place?

A soy sauce manufacturer bragged about its wonderful customer service numbers.  The manufacturer showed charts that it was delivering 98% of orders on-time and complete.  There was no problem with quality as there was barely any rejections from customers.  

Customers, however, were telling a different story.  The manufacturer’s largest buyer, a supermarket chain, complained that orders were arriving at merely 65% of the time.  Fill-rates or order completeness was averaging 50%, i.e., the corporation was delivering only half of the supermarket’s orders.

It was even worse with product quality.  Soy sauce sachets were leaking at the supermarket’s shelves.  The supermarket chain was pulling out damaged sachets every day.

This is a true-to-life story and one that is repeated countless times not only at supermarkets but across industries.  An enterprise boasts outstanding sales numbers, excellent customer service, and second-to-none product quality.  Customers in the meantime grumble about poor service and unsatisfactory quality and frequent out-of-stock.  Who’s right and who’s wrong? Clearly there’s conflict and something should be done. 

Supply chains are product and service streams in which materials flow, transform, and advance in value from their origins (sources) to their final stage as finished goods.   A supply chain’s aim is to deliver products and services correctly and consistently.  Correctly means delivering the right products and services that match customer demand and expectations.  Consistently means delivering products and services correctly all the time

To do things correctly and consistently, there has to be control.  Control is the influencing and regulating of activities, the critical ones especially, to attain discipline in desired results. 

Many firms, particular those that do manufacturing, utilise statistical methods to keep operations under control.  One prominent method is the control chart. 

Control charts makes visible the actual behaviour of operations versus what we would normally expect of them.  The theory behind control charts is that results of most operations would follow a standard normal pattern, what statisticians call a normal distribution.  Products as they are made would have characteristics that tend toward an average result.  The variations between individual products would also follow an expected range, which statisticians measure as the standard deviation. 

The Normal Distribution

If items exhibit results that stray far from the average, that is, beyond the normal distribution curve, then chances are the operations making available the items have become erratic, or in other words, they are going out of control. 

In the case of the supermarket chain and the issue of leaking soy sauce sachets, control charts can track the number of leaky sachets: 

x̅ chart
R Chart

The control charts above are examples of what the leaky sachets can be like at the supermarket’s shelves every day of the week for sixteen (16) weeks.  The control charts track the weekly average percentage of damaged sachets as well as the range or widest difference between daily samples. 

The x̅ (average percentage) control chart shows close to an average 7.4% in leaking sachets while the R (range) chart shows an average variation of 0.4% between daily samples from each week. 

Right away, management of both the supermarket chain and the manufacturing enterprise can see that at least 7 out of every 100 sachets are leaking on the shelves every week.  For the soy sauce manufacturer’s executives, who pride themselves on their company’s reputation for zero defects, this is unacceptable. 

But the point of the control charts wasn’t just to indicate how many sachets are leaking.  The control charts showed that the percentage of leaking sachets was averaging 7.4% to 7.8%.  The range (R) chart illustrates this variation, as differences between items varied at an average of 0.4%.  This meant daily damaged sachets kept to a steady range between 7% to 8% of total.  

There was an instance where one week’s average dropped to 7.2% and fell outside the control chart’s limits.  Even as a drop in damaged sachets was a welcome sight, it was more of an exception.  It wasn’t normal and the damaged average was not in normal control. 

There were two (2) weeks in the R chart where variations spiked or narrowed outside the statistically set limits.  This indicates samples on those two (2) weeks may have been gathered and computed differently or that operations in each of those two weeks were being done differently. 

To put it as simply as possible, sachets are leaking daily at more than 7% average.  From the consistency of the damages, one may speculate that the source of the damaged sachets is an operation at the soy sauce manufacturer’s facility. 

It was later found that the manufacturer’s sachet packing machines weren’t sealing the soy sauce sachets 100% effectively.  The sachets’ seals were deteriorating and opening as soon as the products left the soy sauce manufacturer’s premises.  It was recommended the manufacturer refer the problem to their product research department to review packaging specifications and sachet production protocols.  It was also suggested that the manufacturer and supermarket chain come up with common quality and service measures. 

Control charts can be intimidating given the requirements to compute statistical numbers.  But as much as one needs familiarity and initiative to set up control charts, they are not that difficult to make.  The hard part usually is in identifying what specification or performance measure to chart.

But once they are established, control charts can be very useful as they provide instant feedback on how consistent and correct operational results are. 

The whole point of supply chains is to deliver products and services correctly (matching customer expectations) and consistently (all the time).  Being consistent and correct begins with being in control of the supply chain. 

About Overtimers Anonymous

How Do We Define Quality?

Quality is a strange subject.  It’s strange because people talk about it a lot especially when they have a complaint or an admiration about a product or service.  At the same time, people don’t seem to take it seriously especially when they settle for a cheaper product or service because they don’t have the budget to spend more for a better one. 

Over the years there has been so much said and written about quality.  A very long time ago, it seemed to mean something done well for a very reasonable price.

But as time passed and people produced a lot of all sorts of stuff, quality has seemed to become doing things just right.  The price might go up but that’s because stuff became scarcer and not because it was made better.

Things of luxury would equate themselves as things of quality.  Brands that price themselves higher than others would market themselves as brands of higher quality.  Things that were made via a precisely painstaking process would consider themselves better quality than those made on a cheap assembly line.  A Swiss hand-made timepiece would market itself as superior to a Japanese mass-produced watch, for example. 

Quality lately seems to be influenced by the level of technology involved.  A state-of-the-art mobile phone with a bigger, high-pixelated screen and a camera that can take breath-taking photos would be touted as the best in the market. 

What should quality be, therefore?  Some would say it should be about what customers want.  It should be what customers specified.  It should be what customers value.  It should be in how it performs versus what it’s supposed to do. 

The problem with these definitions is it would mean quality is about satisfying everything for every customer.  As in everyone who buys the product.  But can a product satisfy everyone?

In the first place, not all products are for everyone.  All customers do not necessarily mean everybody.  Products cater to a group.  It can be a big group or a select group, but a group nonetheless. 

Quality then means meeting specifications for that group.  It means tailoring a product to a target market group.

I bought a bag of instant coffee sachets from the supermarket a few weeks ago.  One morning, when I picked out a sachet from the bag to prepare a cup of coffee, I noticed that the notch where it says “Tear Here,” wasn’t there.  There was no notch.  I had to get a pair of scissors to make a notch of my own in order to tear the sachet open to pour the instant coffee to my cup.

Did the sachet fail in product quality?  The coffee tasted fine.  Would I still buy the coffee sachets next time?  Yes, I would.  The lack of a notch was a minor inconvenience.  But it won’t prevent me from picking out the sachets again from the supermarket shelf.  The price was within my budget and the coffee tastes better than the other coffee brands I tried before. 

Other customers may do mind, however.  They may find the experience of seeing no notch to tear as a major annoyance.  What if a customer bought the sachet at a roadside cafe and as he looked forward to having a nice cup of coffee, he couldn’t tear the sachet because the notch wasn’t there?  And because there wouldn’t be an available pair of scissors, he’d be stressed trying to tear the sachet open.  The annoyed customer may swear he’ll never buy that coffee brand again.  He’ll buy a competitor’s sachets next time to avoid a repeat of that stressful experience.  He’d tell his friends and family members that he thinks the multinational corporation that marketed the coffee isn’t worth the trouble of buying products from.  All because a tiny notch was missing where it should have been. 

The perfect quality product is perhaps one that satisfies all of the customers’ needs and wants.  But nothing is perfect.  And how does one define specifications based on wants and needs of many customers?  And how does an enterprise balance the attainment of the ideals of customers’ wants and needs with whatever capabilities it has at the moment?

The answers to these questions would be never-ending.  But if there are to be working answers, they’d may be:

  1. A product’s specifications are manifestations of the enterprise’s perceptions of what customers want.  Therefore, enterprises should always be listening to customers for what they value from the products the enterprises sell.  This is where market research is important.  How a product sells over time would indicate how it’s meeting what customers want and need;
  2. An enterprise should always maintain consistency of its product’s quality by keeping control of the operations that make and deliver the product.  Consistency not only indicates control but also capability.  How a product consistently meets its specs would naturally tell the enterprise what it’s capable of. 

For the enterprise, quality is about meeting specifications.  Specifications are the features that an enterprise translates from what it believes customers want.  How well an enterprise bridges that belief with what customers really want determines its products’ quality reputations.  The specifications should match customers’ values, the product should consistently meet the specs, and the customers prove both when they choose what to buy. 

About Overtimers Anonymous