In operational excellence, however, signaling with suppliers should be a little different. Signals should be sole sourced, meaning there should only be one person in the organization who is authorized to send the signal to the supplier and only one person at the supplier end authorized to receive it. In addition, the signal should be binary, meaning that it can only communicate one of two things: send or don’t send.
Once it’s established who sends and receives the signal and what they do when they get it, the next step is to use a standard set of signals to communicate with suppliers. Used correctly, three examples of a signal include kanban; sequence list; and visual min/max (no signal sent).
There can be other signals as well, but the point is to have a chosen standard signal to use as a way of communicating with each supplier that they fully understand and know the respective reaction needed.
Physical Pathways—The second component of a connection is a physical pathway. While there are a few options for physical pathways, it’s important to have only one defined physical pathway with each supplier. Some of the physical pathways available include:
- Predefined established routes and timing along these routes
- Sequenced milk runs
- Cross dock milk runs
- Bread runs
When a signal is combined with a physical pathway, a supply chain connection is created, i.e., one signal plus one pathway equals one supply chain connection. When connections are created, a supplier receives a signal that tells them send/don’t send. If they send, they do so along a preset, established pathway. A few types of connections that establish this are:
- Sequenced FIFO
- Single supermarket
- Dual supermarket
- Rolling kanbans
The connections listed are presented in a distinct hierarchy. The first connection has the most flow and each successive connection has less flow than the one before it. Therefore, a sequenced FIFO would be preferable as the supply chain connection over rolling kanban. Similarly, if a single supermarket can be used, it should be over dual supermarkets.
Standard work equals business growth
By establishing supply chain connections, normal flow through the supply chain is created. The supplier will know what to send next and when, as well as how and exactly where. In addition, by establishing normal supply chain flow, the organization can begin to see abnormal flow. When flow breaks down, the connection is trouble-shooted to resume normal flow. While an organization will still have to work with suppliers in the interim to make sure customers receive their product on time, it’s critical to understand why the connection failed and how to ensure it won’t again.
By starting to develop standard work for abnormal conditions in order to get supply chain flow to “self-heal,” the need for supply chain “management” is eliminated—a central concept in operational excellence. Only when management is free from running the day-to-day operation can they focus on activities that grow the business. Instead of making operational improvement a continuous process, perpetual business growth becomes one—and that’s the difference with operational excellence
Kevin J. Duggan is the Founder of the Institute for Operational Excellence and Duggan Associates, an international training and advisory firm. He is the author of three books on the subject of applying advanced lean techniques to achieve operational excellence: “Design for Operational Excellence: A Breakthrough Strategy for Business Growth;” “Creating Mixed Model Value Streams;” and “The Office That Grows Your Business – Achieving Operational Excellence in Your Business Processes.”