@ Supply Chain Management


Achieving Continuous Improvement in Complex Supply Chains Today – Part 1

Global Logistics & Supply Chain Strategies magazine has an article about Achieving Continuous Improvement in Complex Supply Chains Today at their site. The author Robert Bowman contends that:

Has the march toward continuous improvement come to a halt? Far from it. The idea lives on, under new labels.

What? No one told me that.
Robert continues:

Remember continuous improvement? A decade or so ago, it was all the rage. Companies were rushing to embrace the concept under a trendy Japanese term, kaizen. Continuous-improvement techniques were applied with some success to manufacturing, as part of the quality craze.
More recently, the term has faded from management playbooks. The very notion seems to have left companies exhausted. Some have turned instead to finite projects with clear objectives.

He’s quite right that a decade ago, they were all the rage and perhaps also right that today it is not uhmmm fashionable (?) to sport such terms in polite management talk. First of all, quality should not have been a craze and neither should kaizen have been one. I’d surmise that it is precisely because kaizen was a craze that it is not one today – crazes have a shelf life because those who adopt something crazy are quite likely to be taken up by another craze just as easily. It is the latter half of his contention that has me in splits – “Some have turned instead to finite projects with clear objectives”. Is it really true that kaizen has no clear objectives?
I suspect the main reason that the idea (or craze) of continuous improvement has died down is elaborated on by Robert Bowman below:

The move away from continuous improvement, at least under that name, is understandable. The idea isn’t tied to a single set of technological tools. It can’t be reduced to an easy series of steps for implementation. Continuous improvement isn’t a program; it’s an attitude. Some might view that as a shaky foundation for a comprehensive quality initiative.

Continuous Improvement begins from the top, is driven from the top etc etc which means that those who do not engage in the continuous improvement process as a long term problem solving project where in you’ve got to continually come up with innovative ways to solve problems and then rexamine those very same innovative ways again and again. However, whatever else that it might be, it cannot be a “shaky” (of any kind) foundation for a comprehensive quality initiative. So what has taken its place?

On closer examination, though, continuous improvement hasn’t really gone away. It thrives today in concepts such as Six Sigma and Lean. It covers a wide range of software applications, including executive dashboards, supply chain event management systems and other business intelligence tools. And it has transcended the original goal of eliminating waste in the assembly line to involve nearly every aspect of the supply chain.

At the cost of looking very foolish, I must say that I find the above difficult to parse. Exactly what it is it about Lean or the plethora of applications that it could be applied to that has transcended the integral notion of eliminating waste?

Most of all, it is focusing on the ever-important goal of pleasing the customer.

To take an example, in Lean thinking, elucidating value added and non-value added activities in a firm’s value stream implies that a firm must obtain the customer’s perspective of a firm’s activities and processes. Here a firm is not directly engaged in pleasing a customer but actually using him to identify waste within its own processes and activities. Perhaps, if waste within a firm’s processes are indeed eliminated, that might result in a better product or service but that is subject to a whole host of competitive concerns as well. Similarily in Six Sigma, attaining a six sigma level of defect reduction might please a customer in the fact that a product so produced doesn’t break down while the customer uses it or that the customer is able to notice a perceptible drop off in failure rates with products etc. However, often, the customer doesn’t even know this. How pleasurable might it be for a customer to know the thousand things that could possibly go wrong with a particlar product but doesn’t? Would such knowledge be a catalyst for customer’s product choice?
An interesting example is offered in the article – that of P&G’s supply chain execution problems:

One of P&G’s many projects addressed the issue of on-time delivery. The company’s performance in that area had slipped from 96 percent to 94.5 percent—an unacceptable level for one of the world’s largest producers of consumer goods. Lost sales were the result.
The problem, P&G knew, lay in its inability to seamlessly track a load from order placement all the way to proof of delivery. Multiple legacy systems and manual processes were needed to follow goods through the various stages of the supply chain.
Considering that P&G was shipping around 1,200 loads a day from 35 plants in the U.S. and Canada, that was no easy task. What was needed was a means of achieving shipment visibility through a single system.

So let’s begin by asking the pertinent questions:
1. Why did the on-time performance slip from 96% to 94.5%?
Even if it is not possible to discuss what particular event or sets of processes led directly to the slip of on-time delivery performance, it leads to the secondary question of how improving supply chain visibility addressed the causes that resulted in the loss of performance. That is the next question.
2. How did the introduction of supply chain visibility improve the on-time delivery performance?
Its quite clear from the description of the events that led to the adoption of supply chain visibility software within P&G that a set of events had to have occurred that led to a sudden drop in performance. Perhaps, it was the loss of a reliable transportation carrier on some key lanes or a software glitch in their transportation tendering process. Even though I am big on Lean thinking, the one thing that I cannot attribute to Lean is magic. Part of the problem of how Lean (or for that matter every craze or fad) is recounted is through the lens of a magical transformation. Instead, if the real story of Lean is told, wart et al, one would be able to bridge the gap that exists between the above two questions.
And here’s the kicker in the story:

Prior to implementation of SCM, about half the glitches that occurred were the fault of P&G’s carriers and other external partners, while half were internal in nature, says Stiles.

So we’re lead to believe that these glitches began to appear in a system with 96% on-time delivery performance and it was the application of lean thinking that turned things around. While it might have been lean application that did indeed improve the situation, P&G has still to account for why the system did work so well in the first place before it broke down. Why did it break down?
In the next post, I want to look at business intelligence and its application in today’s supply chain management space.

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Category: Lean, Logistics, Supply Chain Management


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August 2006