Supply Chain Management – Going Beyond Reliability Excellence
By Doug Wallace, Life Cycle Engineering
As global economies continue to be sluggish, customers are demanding even greater agility and flexibility from their suppliers. The pressure to reduce delivery lead times is more intense than ever as businesses try to reduce their inventories while maintaining high levels of customer satisfaction.
As a producer, one way to address these concurrent objectives is to implement Reliability Excellence (Rx) as a firm foundation for Lean Manufacturing and/or Operational Excellence (OpEx). Rx, Lean, and OpEx are extremely powerful tools for increasing productivity and reducing Total Cost of Ownership (TCO). While these initiatives all extend beyond the plant walls to corporate entities, equipment and spare part suppliers, contractors, etc., for the most part they “start at the plant, and end at the plant.” Work management, materials management, reliability engineering, and operator care processes and best practices are all primarily designed to increase throughput, increase production capability, minimize cost, and optimize the effectiveness and efficiency of plant labor and other resources.
But this is not a single-point challenge. As you reach out to engage other entities to help you improve your own internal operations, the same influences are being exerted upon you from your own customers. How can these bi-directional forces be managed in parallel without simply “squeezing the balloon” and passing the problem downstream? One solution is to reach out beyond the factory in both directions of the overall supply chain at the same time and ensure that the entire end-to-end process is managed from a larger perspective.
So what does managing the supply chain involve that these other initiatives don’t? One major difference – the Customer (with a capital C)! Supply chain management “starts with the Customer and ends with the Customer.” After all, manufacturers are in business solely because of their Customers. No rational business plan is founded on the principle that “we will make as much as we can make, regardless of whether anyone wants to buy it.” You can have the leanest, most reliable, lowest cost manufacturing process in the world, but without Customers, you’ll still go out of business – fast!
Here are just a few examples of things that you could (and should) consider doing under the umbrella of supply chain management, at the very least FOR – and preferably WITH – your Customers:
- Help design reliable products that you can manufacture in a cost-effective way in the shortest throughput time possible.
- Look for opportunities to standardize products that can be used in multiple applications at your Customer location(s).
- Forecast product mix and projected sales levels, and measure the accuracy of demand data.
- Prioritize Customers based on their strategic importance to your business.
- Balance optimal lot sizes for yourself and your Customer.
- Identify opportunities to reduce order entry and order processing times.
- Look for ways to shorten agreed-upon order-to-receipt lead times.
- Manage order fill within stated capacity allocations.
- Expediently resolve letter of credit, export compliance or other issues that could prevent timely shipment of completed product.
- Dedicate/allocate part of your plant capacity to a specific Customer or product and communicate allocations to each affected Customer.
Material Requirements Planning (MRP)
- Involve Customers in all discussions regarding raw material, piece part and production material changes and substitutions.
- Develop standard packaging methods and materials.
- Investigate kitting of multiple products shipped at the same time and/or used in similar applications.
- Communicate accurate expected product delivery dates and update immediately as circumstances change.
- Negotiate and measure mutually agreeable metrics for on-time delivery, including early arrival and late delivery windows.
- Agree on transportation routings and costs ahead of time.
- Understand any particular import/export regulations that may hold up delivery of international shipments.
Not surprisingly, many of these are the same things that we find perfectly acceptable to ask or even demand of our suppliers, and we get frustrated when they don’t comply. Ironically though, when our Customers place the same expectations on us, we find them unreasonable! The key to effective supply chain management is to ensure that everyone is treated equitably, with a set of common goals and shared expectations, and in a spirit of partnerships (rather than Customer-Supplier relationships) so that when one link in the chain is successful, the others will be successful as well.
In addition to these externally-focused aspects that deal more directly with the Customer, there are other integral elements of supply chain management that can often be managed effectively within the plant itself, for example:
- Production planning
- Master production scheduling
- Shop floor control
- Quality assurance
- Cycle time reduction
- Inventory planning
While these are managed internally, involving the Customer at both ends of the supply chain will help to ensure the loyalty and continued business that every manufacturing operation needs to remain viable. And make no mistake – this is not a one-time activity. It is a continuous process that truly “starts at the Customer and ends at the Customer.” In fact, some might even argue that the supply chain is not truly a chain at all, but rather a closed loop.
© Life Cycle Engineering
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