Over the past two years, manufacturers have experienced unprecedented supply and demand chain disruption. How have supply chain best practices performed in meeting these rigors of this new normal and providing the resilience needed? And what additional supply chain practices must be put in place to provide the flexibility needed to accommodate shifting manufacturing strategies?
To understand how and where to make changes in your supply chain operations, start by organizing the process into three conceptual building blocks or overarching rules: 1) Book it Right, 2) Release It Right and 3) Flow It Right. By organizing supply chain operations around these key principles, you can greatly improve resiliency.
Book It Right
First off, start by ensuring your order management is aligned with order demand, manufacturing and material lead times. The resulting lead times should be dynamic – reflecting changing customer demand and changing supply status. Available to produce and available to deliver are critical metrics that must be informed by an understanding of manufacturing capacity and clarity shop floor status. Failure to achieve this alignment will results in low customer service and excessive supply cost (due to need to expedite as a tool).
From a manufacturing perspective, key supply chain capabilities include constraint management, asset utilization models, finite capacity management, Material Resource Planning, and Control Tower approach to increase visibility of end-to-end health. These provide visibility of what you’ll need to buy to keep pace with order volumes and provide a clear understanding of supply chain risks that may be threatening your ability to meet customer needs.
Sales tools are also vital. A salesperson needs to be aware of what they can and can’t book at any given time. If sales doesn’t have this visibility and/or books the order when the organization doesn’t have the capacity to handle a given order or block of orders, on-time performance will drop.
The necessary organizational discipline must be in place where sales will only book within the booking plan. This may seems rigid – but monthly and weekly review of the demand plan will allow for mid-course corrections that can be allowed with minimal impact to customers.
Consider reevaluating your reward and bonus system; it’s best when sales is compensated when the order ships, not when it’s booked. Performance measures play a vital role in helping the entire organization to Book It Right.
Release It Right
This second building block ensures organizations are customer demand-driven by releasing work onto the shop floor based on the status of critical processing constraints as opposed to flooding the flow with work that cannot be supported.
Pushing more work on to the floor indiscriminately when it’s already at full capacity is detrimental and can lead to slower manufacturing flows, excessive set-ups, and in some instances, poor quality (due to double handling). If your manufacturing floor is overloaded, you’ve released it wrong.
To Release It Right means pacing the release of work to the rhythm of the bottlenecks that control or dictate your flow. Managing constraints to faster flow requires taking tactical control of the shop floor to ensure these constraints are properly accounted for in planning. The organization must work to remove bottlenecks to flow – by applying a continuous improvement mindset to equipment reliability, product quality, adherence to standard work and other countermeasures to meet order requirements.
Key technology capabilities here include:
- Control towers provide an end-to-end view of the supply chain in one place with visualization capabilities to support improved on-the-fly decision making. So, for example, if a machine is down, work can be released to another cell that is underutilized. In cases whjere incoming raw material supply is disrupted, a Control Tower can proved advanced warning and give insights on actions that may be possible to prevent the disruption from interrupting your flow of end product to your customers.
- Business Intelligence and analytics can help organizations conduct demand planning that extends beyond their four walls to understand marketplace trends to drive demand. When managing tactical operations, lack of a single source of truth slows decision-making and can impact the organization’s ability to react to demand, process, product, or delivery variation.
Flow It Right
The third rule focuses on reducing manufacturing and process flow time through lean manufacturing and continuous process improvement. Be forewarned; you can have an impressive lean manufacturing initiative but still have poor performance. This can occur when the company culture and sales organization is not aligned with manufacturing leadership.
Key technology capabilities here include:
- 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. When supply chain disruptions occur, a flexible supply chain design can always adapt to find the best solution to meet customer demand at lowest cost.
- Internet of Things devices and tools can provide insights as to machine wear enabling proactive maintenance to avoid costly breakdowns. Unplanned interruptions to flow are the enemy of a high performing supply chain.
Having a common vision and set of values and business strategies is imperative; only then can the organization be fully aligned. For example, improvements made in Booking It Right will be circumvented if the flow is not there. To receive the material that is released right, the floor must be organized for reliable flow.
By having consistent processes for 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, ship direct to the customer? Do I realign my suppliers? Do I manufacture off-shore or on-shore?
Organizations that embrace these three rules of resiliency will be able to move forward, making course corrections as needed without losing sight of their market objectives. Having the right operating systems and the right capabilities in place will align the enterprise for ultimate responsiveness and agility to operate confidently in the face of and at the pace of change.