Politics aside, sustainable practices make good sense

Most companies today are taking steps to improve the sustainability of their products and processes in response to both consumer and public pressure and impending regulatory requirements. No matter where you stand on the issue of global climate change, there are good business reasons to reduce energy usage, cut down on waste and look for sustainable components and materials as substitutes for their non-sustainable counterparts. Operations management and supply chain professionals are increasingly involved in leading their respective organizations on the path to more earth-friendly operations.

Sustainability is defined as the capacity to endure. For humans, it is the potential for long-term maintenance of well being, which in turn depends on the well being of the natural world and the responsible use of natural resources (per Wikipedia). For businesses, this means two things: Reduce usage of any and all resources to the minimum necessary, and wherever possible, use resources that are renewable.

On the first point, the hierarchy of waste reduction is as follows: reduce, reuse, recycle or reprocess, and finally responsible disposal. The ultimate waste reduction is to not use the resource in the first place. Operations management has long been focused on waste reduction, so this is nothing new. Modern management programs like Lean Manufacturing represent today's best practices in this area.

Second on the waste reduction scale is reuse. This effort is most evident in a move toward reusable packaging and containers. Many companies now use more durable packaging materials (crates, cartons, pallets) that can be used a number of times instead of just once. Recycling is familiar to everyone today. Companies now consider recycling and reprocessing possibilities in product design, making sure that the products can be conveniently disassembled at end of life so valuable materials can be affordably recovered for use in new products and to prevent toxic materials from entering the waste stream.

The economics of waste reduction can be impressive. Using fewer resources inherently lowers costs. And most recyclable materials can be sold, generating revenue while reducing waste collection and landfill costs. In addition, some consumers are very concerned about environmental issues and actively seek out products from "green" producers and are even willing to pay a premium for products that are documented as sustainable or "earth friendly." Being "green" is good for your company's image even if you don't offer these kinds of premium priced products.

The other side of sustainability is the use of renewable materials wherever and whenever possible. Renewable materials (forest products and recycled materials as replacements for petroleum-based materials, for example, such as recycled paper burger boxes instead of foam plastic) often cost more and/or don't perform as well as the non-renewable counterparts, but companies are becoming more willing to pay the price for three reasons — regulatory pressure, consumer demand, and because it's the right thing to do.

Don't forget in all of this that energy usage is a prime concern for environmental sustainability. Electricity generation accounts for half of the carbon dioxide produced, and carbon dioxide is the definitive "greenhouse gas" that is the focus of so much attention among the environmental community. Other large sources of greenhouse gases are heating and transportation. Energy conservation must be high on the list of any company seeking to become more "green." In addition to energy conservation efforts in the plant, office and store, transportation management and optimization can significantly reduce the miles driven and fuel used in getting products through the supply chain. One such effort is the intelligent planning of "reverse logistics" for returning recyclables and bringing raw materials back to the plant in the same trucks that delivered the product.

Productivity is Down… Surprised?

Today’s headlines are bemoaning the sudden and unexpected drop in U.S. productivity after an exceptional run of increases in recent quarters. Why are they surprised? The increases in productivity were, in many cases, the result of fewer people working harder. Companies aggressively reduced the workforce as business declined, but have been slow to re-hire as sales have improved over the last six or eight months. Fewer people producing more goods and services equals increased productivity.

But the higher productivity levels were and are unsustainable. When a company reaches the point where the existing workforce just can’t keep up with increasing demand, they hire more workers. New people (or re-hired past employees) cannot, and shouldn’t be expected to, produce at the same rate as the overworked survivors that remained after the layoffs. We are getting back to more reasonable expectations as far as sustainable worker output levels.

In other words, the productivity increase we’ve seen over the past year or so was artificially inflated because of a general feeling of uncertainty that the recovery would have ‘legs’. Companies are understandably reluctant to commit to new employees if they are not confident that demand will continue to increase.

Productivity will continue to be higher than it was a year or two ago. We are not going back to the levels that were in existence before the recession and recovery. Those quarter-after-quarter increases will mostly remain after the dust settles on all of this. Just as the stock market doesn’t go straight up or straight down, there are healthy pullbacks from time to time. Look at any stock chart or index. I believe what we are seeing in this quarterly productivity measure is just such a pullback.

Manufacturing: Coming to America

A recent headline in the daily SME Executive e-newsletter proclaims “Some Companies Moving Manufacturing Jobs Back To America”. The story lead continues: “A small but growing band of US manufacturers - including giants such as General Electric, NCR and Caterpillar- are turning the seemingly inexorable off-shoring movement on its head, bringing some production to the US from far-flung locations such as China.”

This development is a good illustration of several key points of supply chain management. Above all else, supply chains must be flexible and agile. As conditions change, the supply chain must adapt ... and conditions certainly have changed. Labor costs in China as rising rapidly. Quality issues have come to the forefront recently. Shipping costs change rapidly and dramatically, and companies are ever more aware of the importance of lead time and inventory buffers required to accommodate longer lead times. That also points to another key supply chain consideration – risk.

Supply chain risk is the recognition that all elements of the supply chain are subject to disruption from any number of causes – natural disasters, labor unrest, political upheaval, pricing changes, and many more. The well-designed supply chain is built around certain assumptions that reflect current conditions. Savvy supply chain managers will anticipate all the ways those conditions might change and prepare contingency plans in case they do (change). Then, when the worst case presents itself, the company already knows what to do and can quickly execute on the contingency plans to keep the supply chain moving.

The reversal of the off-shoring trend is indeed good news for America and American manufacturing. So far, the manufacturing sector has been leading the country out of this recession and this trend promises to help continue that happy development.

Education is Key to Resource Management

To a great extent, business success is a result of effective management of operations and resources.  That is the focus of APICS — the association for operations management — an international organization with more than 40,000 members. 

APICS is focused on education and professional development. Offering certifications in production and inventory management for manufacturing and distribution specialists and supply chain management (Certified Supply Chain Professional) which is valuable to professionals in fields as diverse as health care, retail, insurance, services, and logistics, APICS is dedicated to helping members and their companies better manage operations and get the most from all resources — people, equipment and facilities, materials, funds and trading partners.

APICS chapters throughout the world offer a professional development meeting that consists of either a presentation on an operations management topic or a plant tour. Recent topics in our local chapter include lean operations and six sigma quality, "green" energy management, capacity management, and the logistics infrastructure in China, among others.

The group also tours local plants and discusses the products, markets, and operations. At each of these companies, members are usually given a tour of the production areas and warehouses, learn about the company business and operations, and discuss their challenges and successes.

As an education-oriented association, APICS also offers classes on a wide range of operations management topics. There are programs leading to certification for individuals and others focused on operational improvements such as lean manufacturing and global sourcing. CPIM certification classes are offered through local chapters and colleges, and all classes and workshops are available on-site at host companies in the area, and at public scheduled sessions.

APICS members come from plant and warehouse operations, procurement, customer service, general management, logistics, information technology, and other business areas. The association publishes a magazine for members and offers a weekly newsletter to all (members and non-members) highlighting operations management issues in the news. For more information and to sign up for the newsletter, visit www.apics.org Many local chapters also publish newsletters with local activity schedules and items of interest.

APICS offers business professionals the opportunity to learn best practices in operations and resource management, enhance job performance and career advancement through education and certification programs, and helps companies advance productivity, innovation and competitive success.


Dave Turbide, CFPIM, CMfgE, CIRM, CSCP, is president of the Granite State chapter of APICS and vice president for education.  More information can be found at www.daveturbide.com.

Up, Down, Turn Around

When the economy is in a down cycle, business professionals basically know what to do: Reduce production, thin out inventories, cut back on expenses, and so on. If they are slow to react to the downward trend, it will take longer to consume existing inventories, and costs will be higher than people would like until employees can get them back in balance with sales.

Returning production and inventory to an up cycle often is the more difficult process. Once caught with extra inventories and expenses on the way down, people naturally are reluctant to ramp up costs during recovery. The impacts of this slow reaction time are shortages and lengthening lead times, which can lead to lost business. As existing customers become frustrated and seek better service elsewhere, more agile competitors can end up increasing market share.

The purpose of forecasting is to provide a view of demand against which team members can build an operating plan during the sales and operations planning process. If the demand projection is wrong -- in either direction -- the operating plan will not provide the right products, in the right quantities, at the right times. The business will be unable to deliver adequate customer service.   Consider these suggestions:

-- Weigh the risk of too much inventory and higher costs against the risk of losing sales and customers due to shortages and delays.  Measure or estimate the forecast error via a straightforward formula that calculates the proper amount of safety stock based on desired service levels and lead time (a factor of forecast accuracy).

-- Lead time is a critical element of forecast flexibility and having extra finished-goods inventory is not always effective. If an organization can make products on demand in a very short time, then the inventory buffer should be at the major assembly, module, or critical-component level.

-- Take into account your supply chain partners since their flexibility and responsiveness in the distribution network will have a direct bearing on your ability to respond to changing demand and forecast inaccuracies.

-- Finally, understand the risks associated with responding to an expected change in the business level and manage those risks appropriately. Keep a close eye on inventory, but don't ignore the impact of lead time on your ability to be flexible and responsive.

Read more about fostering flexibility and responsiveness during unpredictable times at www.daveturbide.com

A Capacity for Action

While this doesn’t seem logical, the “plan materials first, then check capacity” process has been with us since the 1960s, when MRP first was defined and computer resources were scarce and expensive.  Today, the computing power necessary to plan material and capacity simultaneously is readily available, as is the software to accomplish this feat in a relatively short period of time – mere seconds in many situations.  
...Keep Reading This Article on www.daveturbide.com

The Other ROI

When you bought and implemented your system, you were looking for (and hopefully measuring) the Return on Investment – ROI. Now that you have had the system in place for some time, wouldn’t you like to Re-energize Operational Improvements?   ...Keep Reading This Article on www.daveturbide.com

Cheaper, better, faster?

The subtitle of this blog is “…making products cheaper, better, faster”.  Not very elegant perhaps, but in line with the traditional mandate for manufacturing management. Of course, satisfying the customer is the ultimate goal, but manufacturers are driven to do so at the lowest practical cost; the highest quality within the limits of technology, equipment, budget and skill; and as quickly as possible to meet demand, reduce inventory, and increase responsiveness to changing markets.

Are there equivalent mandates for marketing?  Perhaps we should consider cheaper / better / faster here as well.
... Keep Reading This Article on www.daveturbide.com

“Indirect” Lean

Lean initiatives are not just for production and other ‘direct’ activities. Lean principles can be applied to ‘indirect’ costs and activities to good effect as well. And these efforts are definitely green.

At a recent meeting of our local APICS chapter, two gentlemen from BAE Systems here in New Hampshire presented on a “Lean Energy” program they conducted at multiple BAE facilities. The focus was on identifying waste and taking action to reduce or eliminate as much of that waste as was practical. Perhaps the most interesting aspect of their journey was the use of Lean techniques to make these improvements.

BAE had already applied Lean to their production processes and had a number of Lean-trained individuals to help in this process. They applied standard Lean tools like value stream mapping, A3, and Kaizen to the use of energy throughout several facilities, with great success.

This energy conservation initiative went beyond the typical steps of installing energy-saving light bulbs and beefing up the insulation around heated areas. They looked at all forms of energy usage and founds many opportunities to reduce waste and save the company a lot of money while at the same time improving performance in other areas.

One example concerned the compressed air system, which was used throughout the plant. They discovered that there were many, many small leaks that each individually was inconsequential but taken together constituted a significant misuse of the resource. They were able to avoid the purchase of a larger compressor and, in fact, reduce the load enough to extend the life of the existing system by several years – it had been needlessly overworked. The cost to fix the leaks was relatively minor.

Another striking example was efficiencies in the use of an oven. They added insulation, changed procedures to minimize heat loss and scheduled the oven more intelligently to maximize throughput and reduce the number of hours the oven had to be kept up to temperature, saving considerable energy.

They summarized their efforts this way:

• It was the right thing to do
• There was a definite direct pay-back
• It was virtually free with an immediate ROI
• It was a ‘fairly easy’ way to reduce energy costs and decrease demands on facilities and maintenance
• The Lean approach worked great – “If you know lean, this is easy. If you don’t know lean, it’s still easy.”
• It was unprecedented – not being done anywhere – but would be duplicated and expanded throughout BAE

Past Articles

For those of you who may not know, there's lots of additional editorial that I've written for APICS magazine located at "Past Articles" on http://daveturbide.com/consulting-services/past-articles/

Most recently I wrote a two-part article on reverse logistics entitled Round and Round and a second one called Gold-Medal Reverse Logistics on achieving a winning supply chain program. Let me know what you think ... 

Living on the Edge

Just about everyone has heard of the "leading edge," that mythical place where technology is changing the way business has always been done. While it may be an exciting place to be, there is considerable risk in being a pioneer. After all, the guy out front in the battle is the most likely to collect bullets. Or, as a friend of mine likes to say, "The lead dog has to eat a lot of rocks." But, then, if you're not the lead dog, the scenery never changes. In the spirit of our ever-evolving language, here are several variations on the leading edge theme that may become commonplace as we head into the second decade of this century:

bleeding edge - not so new, but perhaps more accurate than ever. Yes, it's dangerous out there at the head of the pack. Many pioneers have found that the technology isn't really as advanced as they thought it was when they committed to the project. Unfortunately, most of the blood on the ground belongs to the poor customers who believed the engineers and sales reps. To be fair, the engineers sure thought it would all work. The sales reps trusted the engineers because they really didn't understand the technology, only the commission plan.

feeding edge - High-tech market leaders have to stay ahead of their competition. New technologies generate the high margins that feed the research and development that develops more new technologies. Once a product is no longer alone on this edge, margins drop as me-too products compete on price. The me-too’s don't have to fund the research that developed the product in the first place, so they can afford to sell for less.

fleeting edge - Now you see it, now you don't. It looked great in the ads and the press releases but by the time you call the vendor, it (either the product or the vendor) doesn't exist any more. Count your blessings. Someone else took the bullets.

greeding edge - From the customer's perspective, the high margins demanded for new-technology products may seem excessive. This is an edge vendors want to avoid.

needing edge - If there wasn't a need (at least in someone's mind) there wouldn't be any advancement in technology. If the technology doesn't develop quickly enough, there could be potential customers out there who can't get what they need at any price. Here's where greed (or enthusiasm) may overtake prudence, and hype overtakes reality. See bleeding edge.

pleading edge - Often associated with many of the other conditions mentioned above, the pleading can go in both directions. Customers beg for promised function, announced improvements or fixes, and implementation help. Vendors pray for miracles, understanding or more time.

reading edge - This is a first cousin to vaporware: you've read about it, but it doesn't exist yet. Maybe vendors have started promoting the product but are still months or more away from release. This is particularly common in the medical arena, where promising research results are published years before the necessary validation and approvals can be obtained.

weeding edge - It's rough being in the forefront. One misstep and the whole enterprise may go down the drain. High-tech companies come and go with alarming frequency. This Darwinian weeding out of the weaker contenders is also hard on the brave souls who put their trust in new products that end up as orphans. See bleeding edge.

No Longer a Need to Forecast?

With the evolution of tighter supply chains, shorter product cycles and shorter lead times, along with dramatic reductions in inventory throughout the supply chain, one might be tempted to conclude that planning and forecasting are a lot less important today than they were in the pre-Internet world. Don’t you believe it!
...Keep Reading This Article on www.daveturbide.com  

Did He Eat the Steak?

Do we practice what we preach? We can talk all we want about best practices and green resource management, and few will ever know if we have achieved success in that area. Nor should they. The improvement programs you undertake are aimed at better performance, lower costs, and becoming more competitive, and as long as the result justifies the effort and expense, it doesn’t matter what you call it or who knows about it.
...Keep Reading This Article on www.daveturbide.com

2 Big Questions

Sometimes, it’s helpful to step back and ask the ‘big question’: Why do we have xxx? Or why do we do yyy? It’s easy to get wrapped up in the details and lose sight of the overall objective. Let’s look at a couple of answers.
...Keep Reading This Article on www.daveturbide.com

Do You Get It?

I placed an order with Staples on the Internet the other afternoon and there was an email waiting in my in box the next morning saying that the order had already been shipped and I could expect my merchandise the next day.  I placed an order with a different company two weeks ago and I'm still waiting for that shipment to arrive. Whereas that might have been acceptable, or at least expected, a few years ago, my expectations have certainly changed. Staples gets it. The other company is headed for trouble.

This is a really obvious example of how a market has changed dramatically. Market changes are not always that dramatic and not always that obvious. What worked for the last ten (or twenty or fifty) years may not continue to work in the future. The Internet has played a big role in changing markets but it’s the companies that have exploited this technology that have made the difference, not the technology itself. Who would have ever thought that a retailer could make a thriving business just selling coffee, and charging several times the going rate for it as well? Who could have predicted that someone could build a multi-billion dollar business delivering letters and small packages overnight – competing with the established, relatively reliable and very inexpensive postal service – charging eight or ten dollars to deliver a letter in one day that the post office would deliver in a couple days for less than a dollar? And the list goes on.

It should be pretty obvious that change is coming and possibly from an entirely unexpected direction. Every business must be continuously aware of market forces and competition and be ready to adapt to meet the challenges head-on. Or, better yet, think far enough ‘outside of the box’ to be the one driving its competitors out of business. Best-in-class benchmarking – looking outside of your own industry for best practices – can sometimes be the source of game-changing ideas.

Companies that don’t ‘get it’ – don’t recognize the changing landscape at the earliest opportunity and take positive action to counteract it – are doomed.

Do you ‘get it’? Are you willing and able to recognize the first signs of change? Are you willing to abandon long-held ideas, processes, products, methods, and marketing approaches?

The Hot Dog Vendor

Once upon a time in a town not unlike this one, there was a hot dog vendor. He had a good cart, and every day, he bought the freshest hot dog buns and only the very best hot dogs. The hot dog vendor was up early and worked until after dark making sure everything would be spic and span for the next day. Once the cart was loaded with all the essentials, he would make his way down the intersection that had good traffic, there, he would display his wares for sale, he even had a small sign that read “The Very Best Hot Dogs”.

As time went on, his customers told friends and neighbors about his hot dogs, and every month, he sold more and more. Eventually, he found that his cart was no longer big enough to handle the volume of business that he was doing, so he made a deal with the land owner at the intersection and built a hot dog stand. The day before the stand opened, he cleaned his cart, wrapped it tightly in plastic, and put it into storage.

The stand was a hit, business kept growing, and the stand got bigger too. The hot dog vendor decided to put up bigger signs, one to the west of his stand about a 1/4 mile, and one to the east of his stand the same distance, and once again, business grew. He increased his bun and hot dog orders, hired some help, and was quite prosperous.

While all of this was going on, his son was away at the University, studying economics. When his son returned home, he was distraught with his father, “Father” he said “Don’t you know that the economy is a mess, the dollar is weak, our country is in great debt, you’re risking everything you worked for with this silly expansion!” His father responded, “Son you must be right, after all, you’ve studied at the University”!!

The hot dog vendor proceeded to take down the big signs, and soon he realized that business was slowing down, he cut his bun and hot dog orders, laid off the extra help, and sold half of his stand. Over the next few months business got even slower, so he sold the other half of the stand and dusted off the old hot dog cart. When his son visited some time later, he said ...“You were right my son, the economy is a mess, thank you for setting me straight”.

The Supply Chain Moves Up

At the Extended Supply Chain Conference in London recently (as reported by AMR’s Kevin O’Marah), an informal poll indicated that 62% of highest ranking supply chain professionals report to the president/CEO/GM. This is up from 51% last year. While not a scientific survey, this indicates a growing recognition of the importance of supply chain management to the health and success of the organization. An additional indicator: only 8% report to the head of manufacturing – down from 15% last year. I think this second data point is equally significant. In Kevin’s words: “Looks like companies are steadily migrating away from an old-school industrial model, where supply chain serves the factory, toward one where supply chain includes manufacturing”.

My heart is in manufacturing but we can’t let ourselves focus only on our own issues and challenges. No factory is an island – suppliers and customers are critically important to everything we do in manufacturing and Supply Chain Management is the mechanism for coordinating, collaborating, and working effectively with those trading partners.

This blog is focused on Lean and Green concerns and those most certainly extend beyond our four walls. Most manufacturers have made significant Lean improvements within the plant but fewer are working toward a Lean supply chain. Supply chains link co-dependent entities.

Anything we can do to help our partners get leaner helps us and vice versa. The same goes for green efforts. Concerns like recyclability and the reverse logistics of getting products and materials back up the chain to where they can be reprocessed, re-used or properly disposed of all require joint effort and planning and are more successful when all parties are cooperating in the effort.

The supply chain doesn’t work for manufacturing; manufacturing is one link in the chain. While the bulk of an organization’s internal resources might be dedicated to production equipment and labor, in most industries materials are by far the larger portion of cost-of-goods-sold. By the way, everything we do is focused on making what the customer wants and needs, isn’t it?

Who does your head of supply chain management report to?
Visit www.daveturbide.com for more articles on Lean, manufacturing and Supply Chain.

Green Collaboration

A recent local newspaper article told the story of a small group of manufacturers in Athens, GA that has started getting together on a monthly basis to brainstorm how they can help each other improve in the areas of waste reduction, energy conservation, water conservation, carbon footprint, etc.

This is a really good idea. Because the companies are likely in different industries, they can approach the issues from different perspectives and bring new ideas to the table that will benefit the other participating companies.

Since they share a local presence, by joining together they can have more influence on government agencies and other resources (recycling contractors, trash collection and landfill, etc.) through their larger collective voice and buying power. There could be some common suppliers, especially for indirect materials and supplies that can be approached as a buying group or consortium. They could encourage carpooling or vanpools among neighboring plants rather than just company-by-company. They might even share facilities that are not in constant use like conference rooms or meeting facilities.

It’s possible that they may find ways to more directly help each other. Scrap or by-products from one company might be useful to another. They may be able to share resources like wastewater processing facilities or power/heat cogeneration.

By sharing ideas across different industries, energy and resource saving practices can ‘cross-pollinate’ much in the same way best-in-class benchmarking can bring innovative breakthroughs from one industry to another.

Not all of these ideas are strictly ‘green’ – some are just about saving money. But that’s another kind of green that companies are always interested in.

Plus it’s so easy – traveling from one local company to another for a face-to-face meeting is a short walk, not a plane ride.  Read similar articles at www.daveturbide.com

Do You Miss Trade Shows?

Microsoft Dynamics has scheduled a virtual user conference for May of this year. Infor held a similar event for its user community last fall. While this a great opportunity for users to catch up with product changes and plans, learn more about software functions and processes, and hear about other users’ successes and experiences, it is not really a suitable substitute for an actual in-person conference.

While better than nothing – in these days of greatly reduced budgets and travel restrictions – I’ve always felt that attendees learned at least as much, and often much more, from the informal discussions that take place over lunch, in the aisles of the trade show, and in the lounges and hallways around the conference venue.

While both companies feel, justifiably, that their virtual events were successful (Dynamics did a virtual conference in 2009) if you talk to insiders privately, they generally share the same sentiment. Face-to-face really is a superior and more beneficial experience.

This is not intended to criticize Infor and Microsoft for doing their conference virtually. While many of the other software suppliers just canceled their conferences altogether, these companies are making a sincere effort to reach out and communicate with their user community in a cost-effective and efficient manner. Bravo!  I hope that when the economy recovers to the point where we can get back to reasonable business travel, these companies will hold a real in-person conference. You (and your user community) will be glad you did. And for those vendors that canceled and did not try the virtual approach ... maybe you missed an opportunity to connect with your user community despite the current economic realities.

Is it Supply Chain or Value Chain?

In this week’s AMR Research First Thing Monday email (February 8, 2010) Kevin O’Mara discussed the term “Supply Chain” versus “Value Chain” and whether the latter may be more appropriate these days. Specific terminology like this is intended to enhance communication and define specific ideas, processes, or programs. This kind of hair-splitting, however, might have the opposite effect. I’m reminded of the transition from MRP to ERP as the suppliers tried to position their products as newer and more modern than traditional MRP which, at the time, was already decades old.

After the release of elaborate definitions by analysts and the expenditure of lots of marketing dollars by suppliers, the new term came into common use. The truth, however, is that ERP was just a new term for what already existed – an evolutionary descendent of the technology approach of combining business applications to include more of the enterprise in a synergistic, collaborative whole. It appeared for a time that “Supply Chain” might replace ERP as the standard term for this kind of system but it doesn’t seem to have gotten the attention and backing of a critical mass of marketers.

In any case, the APICS Dictionary (11th edition, available online for members at www.apics.org) defines the two terms this way:

SUPPLY CHAIN: The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.

VALUE CHAIN: The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.

Given these definitions, I believe that supply chain is a more appropriate term to describe the systems and processes. I don’t even object to using Supply Chain or Supply Chain Management (SCM) as a replacement for ERP to describe the systems we use to keep all this together and functioning effectively. Personally, I have been using the term “Enterprise Systems” to try to side-step the whole acronym debate.

Nevertheless, Supply Chain professionals are focused on enhancing the value-adding activities within the chain and eliminating those that do not add value.  Most people view that as a “Lean” focus because the term Just-In-Time is considered hopelessly passé.   Read more articles by Dave Turbide at www.daveturbide.com

9 Priorities for 2010

Recently, Chain Link Research held a webinar in which they discussed the results of recent research on goals, challenges, efforts and impediments for the supply chain in the coming year. The results were interesting but not surprising.

1.  The top priorities are customer satisfaction and responding to changes in the market (flexibility and agility).

2.  The biggest challenge is forecast accuracy. Efforts are (and should be) focused foremost on the forecasting process, which was also cited as the most difficult challenge.

3.  The top impediments are all people-related – organizational inertia, a reactive (fire fighting) culture, lack of manpower and corporate politics.

4.  Perhaps the biggest surprise, and the best news in these survey results, is that cost reduction is not at the top of the list of goals. Respondents did, however, mention difficulty in meeting cost reduction goals as the number two challenge (presumably they’re already set and ongoing).   Cost cutting, while necessary in challenging times and always a high priority for resource managers at any time, is reactive and does nothing, in-and-of itself, to promote the growth and long-term health of the business. An all-encompassing focus on costs often leads to deterioration of skills and capabilities (lack of investment in training, education, process improvement) and short-term actions that end up costing the company far more at a later date to remediate the damage done.

Better forecasts, shorter lead times and greater agility, a more effective planning process, improved customer satisfaction, and all of the other priorities listed in this research all contribute to an improved bottom line either through higher revenues and/or direct and indirect cost reductions.  These are permanent, systemic improvements that continue to pay back year after year.

It takes an investment to achieve these kinds of improvements – money, surely - but also an investment in time, effort, and emotional energy.  That can be difficult when the challenges of everyday business are overwhelming. But it’s an investment that is absolutely necessary and does deliver an outstanding return on that investment.

Read more articles by Dave Turbide at www.daveturbide.com or click here 

NOTE:  Dave Turbide is listed on the ChainLink Research Advisory Board but did not participate directly in this study.