Today's organizations are striving to move to a more effective demand-driven supply chain. Not only must it be more resilient and cost-effective but, also be able to respond directly to continually shifting customer needs, and be able to reduce lead times. HP has been able to take a considerable step toward this by moving from a vertical manufacturing model to an outsourced manufacturing model. This has created the world's largest IT Supply Chain, which manages 64 percent of HP's annual revenue ($51 billion of $80 billion in 2004).
Although we may perceive the concept of a demand-driven supply chain as relatively modern, history presents a lesson in how one was established back in May 1940, far earlier than envisaged, to respond to the demands of a nation in crisis. A look at Britain's armed forces, under the direction of Prime Minister Winston Churchill, demonstrates how, within an incredibly short time frame, the concepts of Supply Chain agility, Just-In-Time (JIT) Manufacturing, and Zero Inventories, were introduced to offset a pending disaster.
A Supply Chain in Trouble
In the last 2 weeks of May 1940 the Royal Air Force (RAF) sustained massive losses of close to 500 operational fighters in the air battle over Flanders and France. Winston Churchill was now facing the prospects of an imminent invasion. With 620 operational fighters the RAF was well below its set target (in 1939) of 1,200 fighters, thought to be the minimum number to win an air battle over the United Kingdom (U.K.). The fighters were outnumbered by a ratio of 2:1, and the RAF was about 50 percent under strength with very little time to increase manufacturing output. The fighter production rate was still struggling to meet targets of 200 fighters per month. Even a new Spitfire fighter factory had failed to produce anything in six months, plagued by the complexity of the Spitfire's elliptical wings.
Churchill had to respond to the invasion threat and jump start fighter production immediately. The problem was the U.K. economy was, in spite of everything, on a civilian footing: Household goods and new automobiles were still being built and diverting critical manufacturing resources and raw materials. Churchill had to prioritize fighter production over everything, even bomber production, which the Air Ministry had been prioritizing.
So how did Churchill address this situation? He wrestled fighter production out of the control of the Air Ministry by creating the Ministry of Aircraft production and appointing Canadian Lord Beaverbrook as its minister. Churchill gave him a clear mandate to transform fighter production. Beaverbrook, a Canadian newspaper magnate, was a no-nonsense man who could cut through the red tape. Beaverbrook's goal was to accelerate production, improve the supply chain and lock-step it to the daily demands of RAF Fighter Command.
Steps to Efficiency
Beaverbrook introduced the concepts of supply chain agility: standardization, simplification, modularity and integration to improve the efficiency of the supply chain. The supply chain was revamped to improve agility and speed up delivery output. Production of fighters was limited from five to two proven types, the Hurricane and Spitfire, which were already in quantity production. Also, fewer aircraft types left in production eliminated some business processes.