Expert Advice: Three Key Organizing Principles for a Resilient Supply Chain
By Joe Velez, Service Delivery Manager
Since the onset of the COVID-19 pandemic, manufacturers have experienced unprecedented supply and demand chain upheaval. The question arises as to how “textbook” supply chain best practices fare in meeting the rigors of this new normal and providing the resilience needed. It’s critical to also ask: What additional supply chain practices must be put in place to provide the flexibility needed to accommodate shifting manufacturing strategies?
To provide a construct to understand how and where to make changes in your supply chain operations, start by organizing the process into three conceptual building blocks:
1) Book it right
2) Release it right
3) Flow it right
If an organization can organize its supply chain operations around these key principles, it will have cracked the code for supply chain resiliency.
Book It Right
The first principle is make sure your order management is aligned with order and material lead times, which must reflect the level of your order book and changing material replenishment cycles. The promise to deliver is critical as is the understanding of manufacturing capacity and clarity of status on the shop floor.
The key technology supply chain capabilities needed on the manufacturing side include capacity management and material resource planning (MRP) functionality to provide understanding of what needs to be bought to keep pace with order volume.
Tools that salespeople can use also are imperative. A salesperson needs to have the visibility to know what they can and can’t book at any given time. If a salesperson doesn’t have this visibility, and books the order even when the organization doesn’t have the capacity to handle a given order or block of orders, on-time performance will drop. An organizational discipline must be in place where sales will only book within the booking plan. This may seem rigid, but monthly and weekly review of the demand plan will allow for mid-course corrections with minimal impact to customers.
Reevaluate your reward and bonus system – make sure salespeople are compensated when the order ships, not when it’s booked. Proper performance measures play a vital role in helping the entire organization to book it right.
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Release It Right
The second principle is to be a customer-demand-driven organization that releases work onto the floor at the right time, as opposed to flooding the flow with orders that cannot be supported.
Pushing more work onto the floor indiscriminately when it’s already at full capacity helps no one, and can lead to slower manufacturing flows, excessive set-ups and, in some cases, poor quality. The reality is that if your manufacturing floor is overloaded, you’ve released it wrong.
In contrast, releasing it right means pacing work to the rhythm of the bottlenecks that control or dictate your flow. Take tactical control of the shop floor to ensure constraints to faster flow are properly accounted for when planning. Priority must be placed on the removal of bottlenecks – apply a continuous improvement mindset to equipment reliability, product quality, adherence to standard work, and other techniques that can deliver the gains needed to meet order requirements.
Key technology necessities include:
- Control towers that provide an end-to-end view of the supply chain in one place, with visualization capabilities to support improved on-the-fly decision-making and ensure that if a machine is down, work can be released to another cell that is underutilized.
- Tools to streamline material flow also are critical. Collaborative inventory management practices such as vendor-managed inventory enable organizations to always be whole in critical SKUs. A flexible supply chain design can adapt during disruptions to find the best solution to meet customer demand at lowest cost.
- Leveraging Internet of Things (IoT) devices and tools can provide insights on machine wear to enable organizations to conduct proactive maintenance to avoid costly breakdowns. Unplanned interruptions to flow are the enemy of a high-performing supply chain.
- BI and analytics can help organizations conduct demand planning that extends outside the four walls of their organizations to understand trends in the marketplace to drive demand. When managing tactical operations, lack of a single source of truth too often slows decision-making and impacts the ability to react to demand, process, product, or delivery variation.
Flow It Right
The third principle focuses on reduction of manufacturing and process flow time through lean manufacturing and continuous process improvement. Be forewarned: You can have an impressive lean manufacturing initiative but poor performance. This can occur when the overall company culture and sales are not aligned with manufacturing leadership. Only when there is a common vision and set of values and business strategies can the organization be fully aligned. For example, improvements made in booking it right will be circumvented if the flow is not there. In order to receive the material that is released right, the floor must be organized for reliable flow.
By using consistent practices to support sales, supply chain, planning, manufacturing flow and shipping, organizations can properly react to changes in the marketplace and determine the right course forward: Do I open a new warehouse, close a new warehouse, or ship direct to the customer? Do I realign my suppliers? Do I offshore or onshore?
Learn to innovate without losing sight of your market objectives. Having the right operating system and the right capabilities in place will align the enterprise for ultimate responsiveness and will help keep you ahead of the pace of change.
This article originally appeared in Thomas Insights, August 3, 2021.
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