Three (3) Questions Supply Chain Managers Always Need to Answer

When it comes right down to it, supply chain managers have three (3) questions to answer:

  1. How do we get what we need when we need it?
  2. How do we make available what whoever needs them at when they need them?
  3. How do we deliver to whomever wants them when they need them?

When supply chain managers answer these three (3) questions, their responses must be relevant to their mission, which is:  Fulfil Demand. 

And when we say Fulfil Demand, it must meet the following criteria:

  1. It must be productive, i.e., at lowest cost to maximise profit margins and at minimal capital investment;
  2. It must result in competitive advantage, that is, the enterprise should come out better than that of its rivals;
  3. It must meet expectations not only of customers (i.e. quality, complete & on-time deliveries) but also stakeholders (e.g. shipment volume targets) and the communities they work in (e.g. compliance to laws, environmental sustainability)
  4. It must result in stronger relationships with customers, vendors, stakeholders. 

When supply chain managers answer the aforementioned three (3) questions to the satisfaction of the criteria mentioned, they would be deemed on their way to success. 

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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. 

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How Sales & Supply Chain People Can Work Together

Customer inquiries and quotations have long been seen as traditional jobs of sales professionals.  Field sales representatives visit customers and strive to get orders from them.  When customers inquire, sales professionals are expected to answer with accurate information. 

Trouble starts when sales professionals have no adequate answers to give.  Sales professionals may know prices, terms, and promotions.  But they may not know how much inventory is available to promise and when deliveries can be scheduled.  They also may not know how to cater to special requests and instructions regarding product specifications and deliveries. 

Sure, their superiors would have given field sales reps guidelines and information.  Sales reps may also have fixed allocations of how much they can promise to deliver.  But once they are in conversation with a customer, these guidelines and allocations may not be enough for a sales rep in discussion with a customer.

Sales reps have a lot of responsibilities.  They have territories to cover and targets to meet.  They promote products and negotiate contracts with customers.  They seek and open new accounts and they are expected to submit sales reports.  They also have to deal with complaints or worse, customers wanting to cancel orders or return products for refunds.

Sales representatives therefore expect their enterprise supply chains to deliver orders as promised.  The last thing they need is late, incomplete deliveries or pending orders that never get fulfilled. 

There’s a lot that’s been said about forecasting and managing demand, and a lot more about delivering orders.  But not a whole lot about what happens in-between: when customers inquire about products, what are available, and request for quotations (RFQ). 

In the many business meetings I’ve sat in, executives often ask what demand will be or how many orders are pending.  They don’t ask much about what customers are saying or asking.  Either they wait for their marketing people to mention anything or they just make conclusions on their own

In the retail business, store owners usually inquire from their suppliers about the availability of specific items, ask how much the prices would be, if the item can be delivered by what date, etc.  In short, the store owners inquire and expect the suppliers’ sales people to answer.

Whereas demand forecasts offer projected sales of items in cumulative numbers for an upcoming time period, inquiries from customers tell enterprises what they are looking for.  These inquiries can be and are valuable nuggets of information that can generate additional sales for an enterprise. 

But from what I’ve seen and heard, this information never really reaches the enterprise’s executives.  Either the information is forgotten or ignored.  What reaches executives are reports that have filtered the feedback from customers.

I’ve observed there are five (3) stages to demand creation and fulfilment:

  1. Inquiry
  2. Quotation
  3. Order
  4. Delivery
  5. After-Sales Service

Sales usually works exclusively on the first three.  The supply chain typically works on the last two. 

But the divisions of labour and accountability are more of formalities than realities in many cases. 

When customers inquire (1st stage), they ask not only about price, promotions, and product features, they also ask:

  1. How many items do you have available?
  2. How fast can you deliver?

And when the sales person gives a quotation (2nd stage), the customer will ask again:

  1. How long will it take you to deliver?
  2. When will the items be delivered after I place my order?

And when the customer decides to order (3rd stage), he or she will ask the sales person once again:

  1. When will the ordered items arrive?
  2. How many will arrive? 

It’s the same questions repeated at least three (3) times in those three (3) selling stages. 

Sales people naturally wouldn’t be able to answer those two (2) questions without foreknowledge of what the supply chain will do when the orders are received.  I’ve therefore observed that it’s common practice for sales people to call someone at the supply chain to get answers to those two (2) questions. 

That someone can be anyone.  It could be the one receiving the orders, the one who allocates items for delivery, the production planner, and any supply chain manager, or even all of these people all at once. 

In many cases, the supply chain people the sales people call don’t have the answers either.  And even if they did, they can’t or won’t guarantee the time and quantities of what would be delivered. 

Sales people would press whomever they’re talking to for some answers which they then can provide to their customers.  And in many times, the answers aren’t reliable or in the first place, aren’t authoritative. 

The easy way out of this quandary is to formalise the participation of supply chain operations in the first stages of selling:  inquiry, quotation, and order.  This can be done via:

  1. Assigning people from the supply chain who’d know the answers to liaison with the sales people;
  2. Establishing a system to already reserve items that customers want quoted and allocate them when the order arrives. 

It sounds hard and it will take quite some work to do #2 above.  But given that there probably is an informal system of allocation working already between sales and supply chain, the enterprise would do well to just get it set up and running. 

Note that in stages four and five, delivery and after-sales service, both supply chain and sales should still work together.  Even as the supply chain would have a higher accountability in serving orders and providing some after-sales services (e.g., warranty services), sales should be in communication with customers about the status of deliveries, getting feedback, and collecting payments. 

When sales and supply chain people work together in the five (5) stages of selling, they gain more confidence in responding to customer inquiries and requests.  They learn what customers need as much as they find ways to improve serving orders and fulfilling demand. 

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

Products & Services: What’s the Difference and How Do We Maximise Their Value?

What’s the difference between a product and a service? 

A product is an item of value that benefits a user. 

A service is an activity that leads to the benefits for those availing of it.          

Products are tangible, i.e., as in solid, liquid, gas, or energy, or as virtual (e.g. software, streaming videos, speeches, images).

Services are intangible; we can’t see, hear, smell, taste, or touch them.

Products are things which when used provide specific experiences or add value to activities such as materials for manufacturing.

Services are not only activities which also result in experiences but also are those that provide value to other activities such as freight services for deliveries.   

Products are mostly straightforward items we can easily identify with:  soap, food, metals, books, toys, cars, and movies. 

Services are not as obviously straightforward.  To experience a service, the service provider has to make us aware of it.  

Services are unseen but advertised

Products and services aren’t mutually exclusive, that is, they both can work as a tandem in what enterprises offer.  An appliance like a refrigerator (product) may come with a warranty (service).  A hotel offers rooms (products) and dining & housekeeping (services).  Shipping lines transport (services) containers of merchandise (products). 

Services are value-added experiences aimed at people for them to appreciate.  A fine-dining restaurant, for instance, would invest in air-conditioning and interior décor, and train waiters to be polite and formal to provide a service of ambience for patrons. 

Products offer value-added experiences from their usage.  The food of the fine dining restaurant, for instance, is the product that gives patrons that experience of excellence in taste. 

Supply chain managers sometimes swing their focus from service to product and vice-versa.  SCMs can sometimes become so process-oriented about the product and end up sacrificing service. 

A supply chain manager of an enterprise that makes floor tiles, for example, instils a policy in which freight trucks must be fully loaded before they will deliver to customers.  A customer who doesn’t order a full load of tiles would have to wait for the floor tile company to process other customer orders that would fully load the delivery truck.  The waiting customer wouldn’t appreciate the delay and wouldn’t rank the service as satisfying, never mind that she likes the product. 

It may not be beneficial if the SCM decides to put more stress on service than the product.  If the floor tile enterprise delivers less-than-truckload (LTL) to customers, the customers would no doubt be thrilled by the service but the enterprise would lose more from the cost and not turn a desired profit margin.  The enterprise may then raise prices which may erode their customers’ appreciation of the product. 

It is therefore important to have policies that consider both products and services.  Policies for products and services should govern the scope of supply chains, that is, they shouldn’t be limited to just deliveries or purchases.  The policies should be shared and owned by all who plan, buy, make, and deliver the products and provide the services. 

SCMs have to take care that the policies are people-oriented as much as they would be customer-oriented.  Airlines have made strides to avoid forcing passengers out of planes because of overbooking of flights; it doesn’t look good when one sees uniformed security personnel hauling a hapless passenger off a plane.  On the other hand, airlines also have made progress in supporting their pilots and attendants such as ensuring the latter have rest days between flights and the authority to discipline misbehaving passengers.  Policies are for people, whether customer, employee, or stakeholder. 

The overall value of products and services, whether done individually or in tandem, is always a result of people (workers) doing their jobs and people (customers) appreciating (and paying for) them. 

Products and services are different from each other but both add value for the enterprise.  Supply chain managers play an essential role in how products and services become realities.  They should take care that the policies they develop for each not only cover the scope of all activities behind them but also are centred on the people who are instrumental in bringing and appreciating value to those activities.  

About Overtimers Anonymous

The Death Industry’s Supply Chain

Dying is a complicated business.  No one really plans for it in advance.  For those who are charged with the affairs of the ones who pass away, there is always so much to do and limited time to do so.

Funeral service providers have become more than just parlours where proprietors prepare the deceased for burial.  They have evolved into invaluable assistants in helping bereaved families retrieve the remains of loved ones from the hospitals, prepare legal documents, and make available facilities for relatives and friends to get together. 

Many funeral providers also offer cremation services, which instead of burial, the deceased’s remains are burned and the ashes placed into urns or vessels.  Families would then inter the urns in niches at a columbarium, the final resting place for cremated remains often located at the grounds of religious churches. 

Cremation has become a popular option due mainly to economic reasons if not for the expediency it provides.  Many families do still opt for the traditional interment of late loved ones at cemeteries and funeral providers do help in the paperwork and burial assistance.

Cemeteries and columbaries are typically separate entities that funeral providers and the bereaved of the deceased deal with.  On top of needs such as urns and coffins, funeral providers also procure materials (e.g. chemicals) for the preparation of the remains either for cremation or burial.  They also supply paraphernalia, such as flowers, guest books, cards, and placeholders.  In some Asian countries, these paraphernalia include banners, streamers, incense, ceremonial clothing, and paper money.

The business of sending off the dead is a complicated one that requires a supportive supply chain. 

Demand first of all is not certain.  The dying do not arrive in steady predictable numbers one day to the next.  Funeral service workers may be idle one week with few arrivals only to find themselves working overtime the next due to a surge. 

A friend of mine who works in the funeral business says that arrivals are few in number usually before Christmas but many towards the end of a calendar year.  “It’s as if those close to death are scheduling when they will go,” she said. 

Funeral providers by experience keep stock of coffins and urns in anticipation of those surges but they sometimes still run out.  Coffin makers would always be busy even if their market share has dwindled due to the growing preference for cremation and urns.  Churches and private groups have invested increasingly in constructing columbaries to make available more niches.  And funeral supply shops always make sure they have enough paraphernalia for the traditional rituals families would hold for their departed loved ones. 

During the coronavirus pandemic of 2020 to 2021, funeral providers were challenged.  Health protocols forced the temporary closure of chapels but caused a spike in demand for cremation. 

Funeral providers who already had cremation facilities didn’t feel fortunate; they had limited capacity on how many can be served in any one day.  Service crews were also not allowed to report to work every day to avoid risk of infection. 

The queues for cremation grew as a result and so did the demand for coffins to temporarily safe-keep remains while they waited their turn.  This surprised the coffin makers who believed their businesses were becoming a sunset industry.  They found themselves busy when they thought they would no longer be needed. 

Funeral providers lengthened operating times to accommodate the continuous arrivals.  They did so carefully.  Cremation furnaces needed to cool off and rest for at least a few hours a day.  And one cannot speed up the burning.  The process had standards to follow to ensure completion and thoroughness. 

What funeral providers gained in cremation revenue, they lost in the drop in the demand for venues and paraphernalia.   But for my friends in the funeral business, that didn’t matter.  As the pandemic raged on, they found no time to reflect. 

The dead just kept coming.  They had to keep on working. 

About Overtimers Anonymous

Problems are Doorways to Opportunities

Since the start of 2021, semiconductor chips, which are used in cars, trucks, computers, and smart-phones, have been in short supply.  Supply has been so short that automotive companies have shut down assembly lines and consumer electronics corporations have delayed roll-outs of new products. 

Bloomberg reported in its September 22, 2021 Supply Lines newsletter that the gap between “ordering a semiconductor chip and delivery is still growing.” 

But four years before in 2017 (see chart above), it was already taking at least 10 weeks to deliver a semiconductor chip from time of order.  So, while businesses in 2021 anxiously wait up to 20 weeks for their chips to arrive, why were industries tolerating long order-to-delivery times of up to 10 weeks in the first place?

The dictionary defines a problem as an “unsatisfactory situation.”  It is a “state of difficulty that needs to be resolved.” 

Many of us equate problems with crises and disruptions, that is, we see a problem only when it hurts us such that it becomes urgent to address it. 

Hence, we tend to avoid them or try to resolve them as quickly as possible.  The fewer problems we have, the better, we usually say. 

The dictionary, however, also says it is a “a question proposed for solution or discussion.” 

Problems can be doorways to opportunities, in which if we think of them that way, we should seek them out and solve them for the ideas that would benefit us. 

Enterprises and even governments are scrambling hard in 2021 to fix the semiconductor chip shortage that has crippled factories and caused supply shortfalls of many products, from cell-phones to computers.  Most saw the problem when order-to-delivery lead times extended from 10 to 20 weeks.

If enterprises in 2017, however, proposed the “question” of shortening the supply lead time of 10 weeks, and found a solution, would industries be undergoing a crisis in 2021?  Wasn’t there a way to bring the number of weeks of lead time down to 4 weeks or even less? 

It was obvious that since 2017, company executives had accepted the 10-week order-to-delivery cycle and adjusted their inventories and production schedules to cover for the waiting time.  Executives managed the 10-week lead time into their financial forecasts.  The 10-week lead time was not considered a problem. 

If one enterprise in 2017 had seen the 10-week lead time as a problem rather than as an acceptable fate, and in the process of “discussion” found a “solution,” one wonders how much of a competitive advantage that enterprise would have in 2021. 

It’s never really worthwhile to ask “what-if” questions especially after the fact of a crisis.  But in the process of problem solving, as a question becomes clearer, it would have been likely that a solution would have addressed future adverse situations. 

As companies see their businesses compromised by the semiconductor shortage of 2021, it becomes more sensible to seek out the problems and pose the questions for “discussion” and “solution.”

For the pain many had been experiencing in 2021, it would have been worth it if they had only sought and solve problems then. 

It’s never really good to dwell in the past unless we learn something from it. 

About Overtimers Anonymous

Solving the Supply Chain Mystery

I once met a regional sales manager of a large consumer good company at Davao City, the biggest city on the island of Mindanao, 978 kilometres (608 miles) south of Manila, Philippines. 

As I was introduced, the RSM looked at me for a moment and smiled broadly.

“You’re a supply chain consultant?”

Before I could say “yes.”  He says: “I’ve seen marketing consultants, sales consultants, and organisational development consultants, but this is the first time I’ve ever met a supply chain consultant!”

“Welcome, welcome!”  He shook my hand vigorously.  “I hope you can help us.” 

“You see,” he continues, “the supply chain is a mystery to me.” 

“Every time I submit a customer order, I never know what happens after,” the RSM said. 

“I don’t know when stocks would arrive.  I don’t know what and which products would arrive. And I don’t know how many would arrive,” the RSM said. 

He pointed to a few shipping container vans just outside the warehouse office where we were meeting and shared: “container vans like those would just show up and I wouldn’t know what are in them.” 

“I wouldn’t know if the containers have the products I ordered.  At the end of the month, five or more containers would arrive at the same time and I wouldn’t know which container would have the products I need the most.” 

“I’d spend much of my time calling the logistics office in Manila to tell me what’s coming and when but I never get a clear answer.  I spend a lot of time following up the deliveries of products I need when I should be using the time selling to customers.”

“As this is the first time I’m meeting a supply chain consultant, maybe things can change.  Maybe you can solve the supply chain mystery!”  The RSM said.

On the surface, the problem had a straightforward answer.  The consumer goods company’s logistics office just had to share shipping schedules with the RSM to tell him what’s coming and when.  That would right there solve the problem.

The problem, however, goes deeper. 

Why isn’t logistics sharing the information in the first place? 

Why is logistics not communicating with their sales counterparts? 

And aside from logistics, are other departments even communicating with each other?  Do the consumer goods company’s executives communicate with vendors, customers, 3rd party providers, and stakeholders?  Or are they too preoccupied with other problems they consider urgent?

Communication has always been a problem with companies, especially big companies.  Departments hardly talk to each other as they pursue pre-set goals or put out fires within their work boundaries.  If there would be any communication, it would be in the form of phone calls, memos, reports, or hours-long meetings.

Communication in the management sense, however, does not consist of meetings, memos, or phone calls.  Communication in the management sense is about rapport, i.e., active two-way connection between boss and subordinate, between peers, and between people from differing departments and separate enterprises. 

Communication enhances the flow of information in which individuals and groups constantly share pertinent important information with the purpose of meeting communal objectives for the mutual benefit of all concerned. 

So why aren’t companies doing that?  What’s the problem?  Why does a consumer goods regional sales manager have trouble getting in touch with people he sends orders to and waits for deliveries from? 

Communications within and between enterprises require support structures and systems.  Many companies, however, don’t have adequate structures and systems.  This is because these companies have been brought up on a culture of silos, in which managers and employees work in places that have goals and targets of their own. 

In the consumer goods company where the RSM works, there are performance measures and strategies assigned for every department: 

  • Finance seeks higher profits, more cash-flow, and higher rates of returns;
  • Marketing wants brand leadership, strong geographic distribution, and positive consumer acceptance;
  • Sales wants higher turnover, record-breaking selling volumes, and a high level of retail presence;
  • Manufacturing wants continuous uninterrupted production;
  • Logistics wants fewer pending orders and lower freight costs;
  • Purchasing prefers bulk purchases with large discounts on prices.

The consumer goods company’s organisational chart shows a hierarchy of managers and employees working in different functions with different scopes of work each with specific roles and goals.  The chart in itself lays out a plan of silos where individuals and groups work separately.

Separation means differences in priorities and interests.  What’s mine is mine, what’s yours is yours.  Each to our own.  I mind my business; you mind yours.  These become the thoughts of people within the company. 

What more for those who are not from the company.  We’re inside; they’re outside.  Enterprises might as well be islands in an ocean and many are just like that. 

Organisational development trainers and executives have recommended and implemented many ideas to bring people within and even between enterprises together.  They’ve introduced radical solutions such as “flat” org structures that eliminate many layers of authority and they have encouraged “campus” work ethics where individuals from different disciplines work together in open-plan shared work spaces. 

The consumer goods company the RSM worked for had “brand teams” which had marketing managers lead groups consisting of representatives from sales, manufacturing, finance, and R&D.  The brand team would “own” a particular brand of the company and be accountable for its success.  It was a way to break down barriers between functions. 

Unfortunately, these OD and brand team initiatives have only shown limited success.   At the end of the day, the functional employees and their managers go back to their familiar places of work and focus on the priorities of their departments.  The gates of their workplaces close once again as they resume pursuing their own urgent individual targets.   

Supply chains offer a way out of silos.  Supply chains are grounded on relationships.  Relationships, in order for them to prosper, require communication. 

In supply chains, operating functions work with each other to transform and move materials and merchandise from one point to another, one process to the next, one step at a time.  Connections and communications are what makes a supply chain tick.  And for a supply chain to work, it must tick with every part in clockwork synchronicity. 

When the RSM doesn’t know what’s coming and when, the communications and connections aren’t working.  The supply chain link from the transportation of the product to the receiving warehouse is broken.  The supply chain in this sense is not working. 

Hence, the first thing I urged for the consumer goods company is communication.  Fix the link, establish the connection, make active the communication not only between logistics and the regional sales manager, but also between logistics and other RSMs, logistics and transportation providers, manufacturing and logistics, the inventory planners and logistics, manufacturing and inventory planners and logistics, purchasing to planners to manufacturing, purchasing to vendors. 

There has to be rapport.  Not memos.  Not meetings. Not once-a-month reports.  Not emails or text messages.  But active two-way communication of shared information, shared planning, shared direction, and shared implementation. 

It doesn’t take a world-class detective to solve the supply chain mystery.  Just taking the initiative to communicate would provide much of an answer.

About Overtimers Anonymous

What is a Supply Chain, Really?

The first time I heard about supply chains was when I was working as a production planner at P&G Philippines in 1989.  P&G’s top management had just reorganised the multinational consumer goods corporation’s operations worldwide, integrating manufacturing, purchasing, and logistics under one group: the Product Supply Organisation or PSO, for short. 

The aim of the PSO was to streamline the flow of materials and products from vendors to customers.  Executive leadership emphasised customer service, lower costs, and reductions in working capital, especially inventories. 

Top management at P&G Philippines pushed a comprehensive information technology project as the centrepiece to integrate the various functions, with focus on MRP 2, or Manufacturing Resource Planning, the precursor to Enterprise Resource Planning (ERP).

When P&G moved me to manage the shipping department at the company’s Tondo Plant in 1990, I arrived just in time for the implementation of the newly installed MRP-2 software.

It didn’t start well.

The software couldn’t keep up with the pace of orders coming in and the loading and dispatch of trucks.  The system would hang often or users from other departments weren’t updating inventories to allow us to pick items for shipping.  We ended up overriding the system which earned me the ire of the IT project leader.   Marketing brand managers and field sales came after my department as pending orders piled up and the General Manager even had me sat down in a whole day meeting to explain the snafus in the system.    

The shipping and IT department people worked nights, holidays, and weekends to get the system to work and ship orders.  We finally were able to deliver and the company saw its sales hit record highs. 

A lesson learned from the experience was this: 

Managing a supply chain doesn’t start with reorganisations or putting in a fancy computer system.  Managing a supply chain starts with establishing relationships between the people who’d be running it.  

The supply chain is a representation of operations and their relationships not only within the organisation of an enterprise but also with other organisations of other enterprises, especially the ones the enterprise does business with, such as customers, vendors, and 3rd party providers. 

A supply chain isn’t an organisation nor is it a system of operations.  It isn’t a flowing stream and it is not an ecosystem.  (Ecosystems are communities of biological organisms that eat each other). 

The supply chain is a model, a paradigm that shifts us from seeing work not as the jobs we do on our own at a work-station, cubicle, or vehicle, but as jobs that connect us with others in getting what we need, producing what are needed, moving to where they’re needed, and delivering to who needs them.    

A more-to-the-point definition for supply chains would be:  supply chains are operational relationships that make available products and services. 

Supply chain management is the management of those operational relationships

It’s not a system.  It’s not an organisation.  Supply chains are about relationships―relationships consisting of people working together to deliver products and services. 

About Overtimers Anonymous

Why Should We Care?

Silos

When we get a job in an enterprise, we generally assume it’s for work the company advertised and interviewed us for.   We would find it kind of funny if the company assigns us to do something we didn’t get hired for.   

But it happens.  We sometimes are given work that are not on our original job descriptions.   

Some organisations include “any additional jobs the company may assign” to the list of things to the position we are employed in, but we would push back if the “things” our bosses tell us to do are far from the kind of work we are supposed to be doing.  One does not assign advertising work to an accountant, for instance. 

But it happens.  Like a bookkeeper who the boss treats as a secretary.  Like a plumber who ends up repairing electrical circuits.  Or an engineer who doesn’t do any engineering work at all but becomes a supervisor of an assembly line. 

We also hesitate when an enterprise gives us work in another department or to a “sister company.”  In the Philippines, some firms set up “sister companies” or “subsidiaries” that are totally different legal entities but have almost identical ownership.  The owners would ask their best-performing personnel working in one enterprise to do jobs in another.  An accountant would end up bookkeeping for several different firms or a technician would find himself repairing machines at several different workplaces. Each would, however, be earning just one pay-check from just one company. 

And it does happen.  And often.  Especially in corporations that have diversified holdings in various enterprises. 

We of course want to do just the jobs we are hired and paid for.  “It’s not my job” and “I don’t care” have become favourite mantras in most workplaces.  But just as much as our peers avoid asking us to do things we’re not supposed to do, we find it difficult when our bosses tell us otherwise. 

Our bosses, however, also do get their share of extra work.  Their superiors as well as executives of other departments at times ask them to do things that’s not on the scope of the departments they run.  As much as they resent the additional assignments, many have a hard time saying no. 

And it happens again and again.  Despite what bosses have on their plates, superiors would pile on more.  And we employees get more work too as a result. 

So, we build walls.  What some so-called experts would call “silos.” 

Silos literally are those large towers we find mostly at farms.  They’re storehouses farmers typically put their bulk harvests in before sending them off to markets.  They are usually built with strong materials such as steel or cement.  Silos are designed to isolate stock they store from the outside world, to keep out pests, provide protection from the weather, and preserve freshness.    

Silos have become the best figures of speech for departments in an enterprise who don’t interact with other functions.  And they apply to individual enterprises as well. 

Many enterprises have a culture of looking more towards within than without.  The entrepreneurs that start them have a tendency focus a lot on the activities of their enterprises as they make the effort to boost sales and control costs.   Organisations are conditioned from day one to look inward.  How do we sustain cashflow?  How do we improve our products?  How many sales people do we need?  How much training is enough? 

They ask less about:  how did my customer do with my product?  Did he or she like it?  How has my vendor reacted to my purchase order?  Is she making the effort to ensure the best quality of the items we asked for? 

These latter questions don’t address the interests of our enterprises, so why ask?  Why should we care? 

We should care because the world is changing.  And supply chain management has become more applicable if not more essential in this changing world.    

It’s not only because of the pandemic.    

When the coronavirus (CoVID-19) pandemic hit in 2020, enterprises saw their supply lines fall apart.  Merchandise didn’t arrive or orders were cancelled.  Hospitals didn’t receive needed personal protective equipment (PPEs).  Ocean transport stalled, tying up containers at ports.  Factory production stopped; food deliveries were disrupted.  It was chaos. 

And it didn’t end there. 

Governments have lifted restrictions only to repeatedly put them back again as the virus returned in second, third, and even fourth waves.  Ocean-going vessels ran short of shipping containers for clients and the clients scrambled to build inventories as their customers rushed orders.  Factories stopped and started due to uneven deliveries of critical materials ranging from semiconductor chips, coffee beans, cotton, and chemicals. 

Some politicians trumpeted recovery but realities on the ground were that supply chains have buckled under the stress of whipped up demand and limited supply and capacities. 

Supply chains aren’t in a crisis because of the pandemic.  The pandemic just aggravated what has been holding back supply chains. 

Silos. 

Many businesses had built walls and had focused only on what’s happening within; they ended up at the mercy of outside forces.  They faltered from disruptions that became more frequent this past decade, culminating with the global coronavirus pandemic. 

The concept of the supply chain, since its introduction in the 1970’s, requires managers and executives to not only interact with each other’s functions but also relate with parties along the supply chains they link to.

A butcher must take into account the origin of the meat he procures. 

Chemical companies must assure the lasting efficacies of its products from deliveries to customer to succeeding tiers of trade to the final consumer. 

We cannot not care.  We need to realise we are participants in a supply chain that runs through enterprises, not just within enterprises.  The bottlenecks our vendors face whether it be in material shortages or traffic gridlocks are our business as well as theirs.  The effects of how our deliveries cascade down from buyers to consumers are for our best interests to know and even be involved.    

We should mind the business of others, as we no longer can mind our own alone. 

This is what supply chain management teaches us.  A supply chain’s greatest strength lies in its links, in the connections we make with others. 

It’s a hell of a change in mindset. 

The good news is that many if not most enterprises we compete with are still stuck in the mindset of silos. 

The bad news is that they’re getting the picture too and they will soon be change to become better themselves. 

About Overtimers Anonymous