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

Just About Every Enterprise is a Supply Chain Enterprise

I and ten million people in Manila have the same problem every day.  Mobile phone reception—it’s lousy. 

It would take several tries to call someone on my mobile phone and when I do, chances are the conversation would stop in the middle. 

Poor cellular reception is a norm in the Philippines.  It’s just so hard to get a decent signal to have a continuous conversation or get a text out. 

I’m sure telecom companies are doing all they could to improve their services.  I see it with their unrelenting investment in the set-up and maintenance of cell-phone towers as they continue to expand coverage and upgrade reception. 

If we think about it, the operations of telecom companies have similarities to those enterprises who manufacture and deliver finished products.  The good quality mobile phone reception we yearn for is not much unlike the supermarket products in how both are made available to consumers.  In short, both have supply chains. 

The supply chain is a model for enterprises that buy raw materials and produce & deliver merchandise for their customers.  Supply chain management has become a standard when it comes to managing the inventories and logistics of items, from chemicals to consumer goods.

Supply chains, however, aren’t limited to just physically tangible products.  They’re very much applicable to intangible items, such as electricity, health care, and business process outsourcing (BPO) services. 

Supply chains follow the flow of products from their start as raw materials to their conversion to merchandise and subsequent delivery to users.  Service and utility enterprises also follow a path of conversion and delivery not altogether different from product supply chains. 

In manufacturing industries, factories convert raw materials into products. 

In non-manufacturing industries, enterprises convert specific problems and issues into finished services.   Hospitals treat sick patients.  Call centres handle problems and questions.  Telecom companies provide mobile phone receptions resulting in uninterrupted conversations and successful sent messages.  Power utility companies make available electricity from energy sources. 

But It’s not just relating manufacturing and services.  It’s also the logistics behind both.  Whereas manufacturers rely on procurement of materials and logistics for transport and delivery, service enterprises depend on infrastructure and systems to ensure the flow of their operations.

A hospital needs not only ambulances but also the system of managing the dispatch of the ambulances for the assurance of fast turnaround for the benefit to patients needing immediate transport. 

One mistake I observe with service companies is that they limit supply chain management to stuff like spare parts and supplies. 

A large energy corporation for instance has a supply chain executive whose job is to buy equipment and components.  The energy corporation had no structure or strategy when it comes to power conversion and delivery.  The energy corporation, hence, had big issues in unreliable power delivery due to poor planning in energy generation and power plant capacities. 

The success of a supply chain model starts with its scope.  Does the supply chain manager of the enterprise handle the total flow from start (procurement/purchasing), to its conversion (production/service operation), and the logistics operations (transport/delivery/orders processing)?  If it misses on any of the aforementioned, chances are the enterprise’s business has a lot of room for improvement.

We consumers want good quality from the things we buy.  Not only the merchandise from the store but also from services such as mobile phone reception, electricity at the flick of a switch, and the best health care. 

The supply chain model is just as much applicable for intangible services as much as it is for tangible items.  Most if not all enterprises have supply chains for what they offer and deliver.  We just need to recognise that managing the operations with supply chains in mind can go a long way to bringing excellence and win-win results. 

If only the telecom companies can think like this, then maybe we’d get better service with our cell-phones. 

About Overtimers Anonymous

Four (4) Guidelines for Available Transportation

Many small business enterprises don’t put too much thought into deliveries.  For those who are into e-commerce and sell one or very few items via the Internet, the enterprise’s flow of work is typically receiving orders, preparing the items, and booking & delivering via a 3rd party service (e.g., Grab, Lalamove).

Many enterprises have seen their businesses grow thanks to e-commerce.  Some have seen their markets surge in terms of number of customers and deliveries.    

E-commerce has been a godsend to enterprises reeling from the coronavirus pandemic of 2020.  Some have not only survived but also made good money. 

As some enterprises grew, they expanded their product lines and gained more customers.  Some have seen demand for their products come with greater variability as they cater to customers with varying needs. 

Nevertheless, most e-commerce enterprises have done well despite the growing demand.  They have had no issue delivering versus demand (customer orders), thanks largely to sufficient capacity and availability of transport providers.     

But as businesses expand even more, they can begin to encounter issues. 

Transport availability and operating capacities show their limits when business multiplies.  Enterprises realise e-commerce becomes more of a supply chain issue, than just an adoption of an app. 

Some enterprises end up turning away customers when they lack the capability to deliver. 

Turning away customers means turning away opportunities.  When times are tough, enterprises can ill afford to turn away customers. 

Which is why it’s wise to study and pinpoint where one can invest in capacity and allow the business to grow. 

There are means to determine how to increase operating capacities.  It’s another story when it comes to transportation availability.  How does one procure more transportation?  Should the enterprise buy more trucks or source more 3rd party providers? 

The following are some suggested guidelines:

A. Own Vehicles for Demand Surges

Most enterprises experience demand surges.  Food shops sell more during the Yuletide season and not much afterward.  Gift & flower shops sell a lot before and on Valentine’s Day.  Convenience stores sell plenty of beverages and snack foods during long holiday weekends when most people stay home. 

An enterprise can assess its transportation needs for demand surges.  It might be a good idea for an enterprise to have its own transportation to pick up the slack when 3rd party providers may not be available, such as during holidays when many drivers and riders go on leave or are fully booked.

B. Have Back-Up Drivers

Nothing is more frustrating than to have a delivery ready to go but no one to drive the vehicle to transport it. 

Enterprises usually train several people to operate equipment such that if the operator is absent, another can take over. 

The same should apply for delivery vehicles.  Even if a shop relies almost 100% on 3rd party riders to deliver, it not only may be a good idea to have one’s own vehicle on standby but also to have more than one employee who knows how to drive it.  It’s not worth the risk of having no transport available to deliver all because there was no one to drive the vehicle that’s already there. 

C. Get to Know the Riders

They’re not your employees but it may be nice to get to know the riders who pick up your products and deliver them to your customers. 

Some riders come back again and again to deliver for an enterprise.  One reason is because some of them live nearby so they’re readily available every day.  It’s therefore nice to establish a professional rapport and even share contact information. Having a rider that you’d know and who’d you know will surely be there for your business every day adds a plus to ensured availability.

D. Take Advantage of 3rd Party Promotions & Programs

Some 3rd party services offer programs wherein client enterprises can not only avail discounts but also provide greater priority for package pick-ups and deliveries.  The enterprise can estimate the packages it will ship daily and see how a 3rd party’s offered program fits in terms of price and available transport. 

Pandemic or no pandemic, enterprises are growing through e-commerce.  They are seeing exponential growth and so far, many are coping well and making profits. 

Growth at a point, however, reveals the limits of enterprises.  When it comes to e-commerce, it usually shows not only in operations but especially in transportation. 

It may be good for enterprises, therefore, to invest in one’s own transport especially for demand surges, have enough back-up drivers, and establish relationships with 3rd party providers, like with the riders and/or availing programs & promotions 3rd party services may offer.

Better to be ready to deliver than to be unable to. 

About Overtimers Anonymous

Ten (10) Examples Towards Building Better Supply Chains

For years, experts have cited the urgent need for supply chains to adapt and get better.  In 2005, Paul Michelman via the Harvard Business Review wrote:

“Threats to your supply chain, and therefore to your company, abound—natural disasters, accidents, and intentional disruptions—their likelihood and consequences heightened by long, global supply chains, ever-shrinking product lifecycles, and volatile and unpredictable markets.”

Fifteen (15) years later, amid a pandemic that has wreaked economic havoc, executives are hearing the need even louder.  Supply chains must become resilient and robust in a new normal of constant disruption.  Supply chains must change

Experts have urged enterprises to map their supply chains, identify risks, review their networks, and innovate via technologies such as robotics and automation.  But what does an enterprise do when it’s got the maps, identified the risks, and has the network review results? How does an enterprise innovate via technologies? 

We cannot just manage supply chains to make them better.  We need to build them. 

It’s like a house.  When we manage our houses, we do things like fix a leaky roof, replace lightbulbs, and unclog drain pipes.  But we can only do things ourselves up to a certain extent. 

When the job gets too big to handle, we seek experts.  Civil engineers help us replace the roofs and retrofit the foundations.  Electrical engineers help re-wire our electrical circuits. 

The analogy applies for supply chains as well.  We can manage supply chains only so much.  When we need to make significant improvements, when we can no longer just manage them, when we need to rebuild them, we’d seek engineering help.  The most qualified to do so are Industrial Engineers (IEs), or more specifically, Supply Chain Engineers (SCEs). 

How can SCEs help rebuild our supply chains? 

The following are examples:

  • Developing the Digital Supply Chain.   

With the advent of Industry 4.0, enterprises, more than ever, are investing in new technologies that marry data and process productivity.  SCE’s can help enterprises implement state-of-the-art technologies into their supply chains which will provide the means towards real-time operations visibility and automated process improvement. 

  • Setting Up Flexible Manufacturing Systems (FMS)

SCE’s can help integrate flexible manufacturing systems (FMS) into supply chains.  FMS is an alternative to traditional production systems in that it focuses on short-run small-lot-size manufacturing versus long continuous mass production.  SCE’s can build in flexible systems into supply chains via integration with logistics, production planning, and procurement. 

  • Improving Inbound & Outbound Logistics

Supply chain engineers can streamline the flow of goods coming into and out of storage facilities.  They can identify and ubblock bottlenecks, and recommend how manpower and facilities should be laid out such that merchandise can flow continuously and smoothly.  SCE’s can also study the economics of procurement and delivery practices that underlie their impacts on logistics flow. 

  • Simplifying Storage & Handling

Storage and handling are very high on the list of many supply chain managers’ preoccupations.  Enterprise executives don’t like them because they connote cost and they’re seen as not adding value.  But with the SCE’s help, enterprises can turn them into the assets they really are. 

  • Tuning Up Transportation’s Last-Mile Productivity

SCE’s can offer options that would boost the productivity of last-mile freight deliveries and services.  These include recommending changes in transportation structure, improving route planning & scheduling, and balancing loads maximisation with delivery turnarounds.

  • Perfecting Order Fulfilment

SCE’s can come up with order fulfilment systems that seamlessly connect anticipated customer demand with available-to-promise (ATP) inventories.  The goal is perfect orders: deliveries that meet 100% of customers’ service requirements 100% of the time.  

  • Factoring the Worker in the Workplace

Enterprises want efficiency but need to be mindful of the welfare of their workers.  Popularly known as ergonomics, SCE’s apply human factors engineering to improve labour productivity by adopting the workplace to the person, rather than adopting the person to the workplace. 

  • Re-Implementing Total Quality

It’s an old buzzword from a bygone era, but Total Quality still serves as an applicable approach to ensuring supply chains deliver what they’re supposed to.  SCE’s provide the in-depth tools and means to make sure processes work right the first time. 

  • Re-Defining Cost Engineering

To many enterprises, it’s a glorified clerical function that estimates job expenses and checks the billings from vendors and contractors.  But it’s more than that and SCE’s can show how cost engineering can not only tame the expenses but also provide competitive value for supply chains.

  • Pruning the Value Stream

Value-Stream Mapping (VSM) is the basic tool of Lean, and it tells us where the non-value added and value-added activities are.  SCE’s show how to optimise the value stream after we know the results of VSM. 

Enterprise executives have heard the need to reform their supply chains.  But they can do only so much managing them.  Enterprises would need the assistance of Supply Chain Engineers to build in better structures and systems. 

The ten (10) examples described above illustrate how SCE’s can help enterprises change their supply chains for the better.  And given the ever increasing clamour for change in these challenging times, we could use all the help we can get. 

About Overtimers Anonymous