Friday, February 10, 2006

The Basics Its Only One!

The leaders of the supply chain, demand chain, value chain and other major descriptions of the movement , assembly, sales, & delivery of raw materials, work in progress and finished goods industries, have done a wonderful job of enhancing our knowledge in these arenas.

Association, cooperation, integration, partnering, communication and all the way to federation have defined and developed how we work together to leverage and deliver the definitions in the first sentence of this article.

Insourcing, outsourcing, rightsizing, offshoring, and on-shoring have given us some of the ‘how to’ of both previous sentences.

Technology has attempted to design and implement the capabilities, information and solutions for the three previous sentences through SCM, CRM, ABC, DP, BPM, BPI, WMS, TMS and other acronyms all of which deliver value in the right situations.

For all the terms, definitions, software, solutions, complexities or other descriptions of today’s global supply chains (I will use SCM, supply chain management the rest of this article) we don’t hear enough about SCM basics.

Operational excellence, optimization, leveraging, collaboration and connectivity are all considered ‘givens’ in the SCM world, but are they? Changing needs, demands, geographies and regulations are the standard fare. Delivering more for less is the mantra of the marketplace. Someone once said, that Customers expect a universe filled with lot sizes of one, cycle times of zero, no inventories and warehouses, and free transportation. Continuously trying to ‘half the distance’ to that universe should be the deliverable.

Having heard all of that what about the basics? What are the basics anymore? People immersed in the complexities don’t see the forest for the trees and the new entrants into the SCM industry have learned a lot but have not done a lot. SCM professionals, new industry entrants and executives from other disciplines all say they understand the importance of SCM and the basket of other names used to describe the same.

What is the core of SCM? When you peel the onion what do you find?

Ask 10 SCM professionals and you will get 10 answers. Ask 10 executives from other disciplines and many wont have an answer. The core is just one thing. It will let you down as a professional, you will say it’s a given, but nothing is a given in today’s environment. For all of you who are not professionals, but are trying to learn the basics one clue to draw you closer to the core and wraps itself around the foundations is the word systemic. Systemic means that you look or think end to end and take it all into consideration.

So, without further beating around the bush, what is the cornerstone of SCM? The customer’s order. Everything in your business should be about servicing that customer order or supporting someone or something who does service that order. The customer’s order is the most valuable asset in your company. Without it all your other assets and resources have no value.

Draw a line and call it your customer’s order. Then start to put points on that line that are raw materials, manufacturing, wip, finished goods, delivery, billing and collections. Then think of everything that is inbetween those points. Now you have a supply chain.

Do you think you know how your customer’s order is handled? How easy or difficult it is? In 1992 the Harvard Business Review published an article called “Staple Yourself to An Order” by Shapiro et al. to this day one of the most popular and purchased from their website. The article suggests that executives “Re-create the clients experience by following an order through your own plant.” Again, do you think you know how your customer’s order is handled, or do you know how it is handled. Follow one and see. It’s not what you think it is. It might be better or it might be worse, but it is NOT what you think it is. Those of you who have checked into your customer’s order, if you have not for a year or so, check again and you will find it has changed. Not what you think it is.

The order. So simple, but so meaningful. A given so given that it is most often overlooked. Many companies know how many orders they have, sometimes how many are coming, but do you know what happens with them as they go through your process?

How long do they take? Who owns them overall? Who owns which part of them? How easy is it to submit an order? How many are ‘perfect orders’? How many handoffs do they have, how many times are they sitting in an in-box or an email?

The order is the supply chain by any name. If you are trying to understand value chain, or you are building a demand chain, or you want to improve your logistics, start with the customer’s order and the findings there will drive you toward the operational excellence, the perfect order, the optimization that are the ‘givens’ and move you to the competitive advantage that today’s supply chain must deliver in today’s market place.

To be honest, the customer’s order is business by any name. No business is a business without them, no business will be successful without paying attention to them, and if your business is having trouble, check to see if it is focused on the customer’s order, your first sign of trouble and the first item to be fixed.

Turn the Key and Smile