Sunday, June 14, 2009

The Significant A to Z Challenges of SCM

The significant A to Z challenges to effective SCM

When Toyota Production System has been used as the foundation for Lean Manufacturing, many companies begin to learn how to go lean. After some years of transformation, people begin to get tired of the many challenges. Some of the issues are listed below for general discussions:

a) Top management not walking the talk due to excessive supply chain issues, IT project creep, resistance to change, and problematic planning and control systems
b) Top management get stressed due to mis-information
c) KPI’s and performance measurements look good but the primary objectives of SCM have not be addressed effectively
d) Management and staff turnover resulting in the inability to sustain a consistent corporate culture and value system
e) Difficulties in achieving level production strategy due to high product mix and long set-up time
f) MPS performance has been erratic because time fences were set to zero planning period
g) Bill of materials accuracy problems
h) VMI cracking up due to the bullwhip effects and inventory inaccuracy
i) ERP system not providing accurate visibility and inventory accuracy
j) Cycle counting programme is not able to improve inventory accuracy
k) Customers not happy with the delivery services and quality
l) Lack of effective integration or synchronization of people, processes and IT
m) Over usage of raw materials and components due to scrap
n) Inconsistent quality even after ISO certification, Six Sigma, Lean Six Sigma, TQM or other initiatives
o) Project consultants do not understand the actual business issues and rushing to implement a wrongly configured ERP/SCM systems
p) The HQ insist in rolling out a standardized configuration for all branches and subsidiaries throughout the world, ignoring the significance of local business practices
q) We have the managers and they are paid to ensure effective and efficient SCM
r) The critical mass have their own islands of information and Microsoft Excel spreadsheet, so we need middleware to integrate the IT solutions. The end result if the weak accountability when there are discrepancies
s) The customization of ERP solution at US$12,500 per man-day is not solving the SCM problems, and it is creating a significant project costs over-run. It is creating more problems than solutions
t) The people with Six Sigma black belt, Lean certification, SCM certification and some fanciful certifications are not able to help to mitigate the day-to-day SCM problems. A lot of fire fighting but the problems do not seem to go away
u) People become very defensive during any SCM meetings, and a lot of finger pointing. The leaders seem to be lost in charting a correction direction forward
v) Nobody seems to be addressing the root cause of the SCM issues resulting in a very stressful working environment
w) There seem to be a number of teams working on enhancing financial performance, business process improvement, customer focus, as well as learning and innovation, so that it can satisfy the Balanced Scorecard. Unfortunately, the alignment and integration have been very lacking
x) Everybody seems to be working longer and longer hours, so much so it does appear to be short-handed.
y) If Toyota is losing billions of dollars in this economic downturn, does that mean Toyota Production System or Lean Manufacturing have inherent deficiencies that need to be addressed to avoid any future mishaps?
z) Is there a perfect SCM solution out there?

The A to Z SCM issues are a collection of the challenges faced by the top management, middle management and operations management. They are the opportunities if we can address them effectively.

It is not the job of CEO alone, but the top down management direction and bottom up execution and implementation. The need to integrate and synchronise cannot be played down because of the inherent resistance to change.

In the next economic upturn, the masters of SCM are the ones to reap better profit and organization dynamics.

Time to change.

Sunday, June 7, 2009

Challenges of supply chain management during a recession

The recent recession starting third quarter 2008 has been drastic, and many enterprises have been hit hard due to the deep plunge in the sales revenue.

What started as a sub-prime debacle had created a chain reaction similar to a domino effect. The oil price dropped drastically thanks to the consumer panic and restraint on spending.

It was not easy to manage the supply chain strategic planning if the decision support system or the business intelligence were highlighting a transient decline in sales, but without any other data to justify a potential economic tsunami. Maybe a thorough regression analysis and the extrapolation could point towards a downward spiral, but top management was finding it difficult to establish the quantum of the likely damage in terms of the level of decline of sales revenue.

This made demand management a real challenge as to what should be a reasonable realistic demand for the next 18 to 24 months. This is probably why level production strategy, of producing a fixed volume month in month out, became a financial nightmare if no timely decision were made. On the other hand, the chase strategy would be able to adapt to the situation with greater ease resulting in massive costing reduction measures. With the inherent hiring and firing tactic associated with the chase strategy, many people were retrenched in order for the corporate survival. It is not easy to conclude whether level or chase strategy can be more effective, although it may be better to have hybrid strategy with multiple supply chain strategies for different products and demographics.

This “Bermuda triangle” shock has compelled us to be agile, flexible, responsive and adaptable in order to survive.

The agility methodology that has been evolving has always been advocating that PEOPLE are the most flexible, responsive and adaptable facet of a competitive enterprise. It is timely to develop the people to have the holistic knowledge and skills to innovate and improve the supply chain processes continuously to be enabled by IT solutions that can be re-configured to suit the requirements.

Education and training must be on-going to ensure the thinking process of the people do not stagnate or become complacent. There must be that “hunger” for new challenges, knowledge and skills to make human capital competitive.

Extended enterprise business model has been seen as a viable corporate strategy, more so with the unavoidable globalisation with the notion of making products andywhere by anybody credible