When it comes to supply chain professionals, most of us like to think we know the best way of doing things. Starting off with the best of intentions, we work under an unproven premise that our little supply chain foibles are typical in organizations like ours. Ignoring some consistent fault lines, however, will eventually expose costly cracks in the supply chain process, leading to lost sales, a decline in morale and the loss of talented personnel.
By normalizing day-to-day chaos, we may be avoiding a hard truth—some of our entrenched behaviors are, in fact, sabotaging our everyday and long-term goals. Consider these bad behaviors so that they can be squashed before they integrate themselves into your business processes.
1. Allowing Customer Service to Pass Judgment on Available-To-Promise (ATP) Data
Our ability to commit to customer orders begins with our statement of product availability through our ATP. This ATP is based on the culmination of many demand planning processes. The longer-term demand forecast drives the planned procurement of materials and production of finished goods. These plans reflect the prioritization of that demand, which is based on the corporate objectives and financial goals of that organization.
These plans also reflect the supply chain’s capability and constraints – lead times, cycle times, manufacturing planning parameters, and level-loaded capacity consumption over time, just to name a few. At any given point in time, this plan—which serves as the foundation for the ATP—is truly the best product availability signal. When customer service arbitrarily second-guesses or doubts ATP—overriding a commit date to the customer—the only logical result is a potential false commit to that customer. Do this enough times, and you will lose customers.
2. Allowing Executive Management To Circumvent The Process
Controlling the actions of our executive management is not our responsibility. It’s their prerogative to take action, and as an organization, we’re generally compelled to comply. But, for example, how many times have we seen an executive return from a customer review meeting which resulted in a one-off, special action on that customer’s orders? This kind of decision—which overrides all the careful planning preceding it—has a very good possibility of creating a disruptive ripple effect on the balance of the business. We can’t control that executive’s action, but we can provide them with the necessary data to make an informed decision. Understanding the full impact of their request may not change their decision but may get them to think before requesting the next one.
3. Hiding Available Inventory Or Capacity
Transparency in a supply chain is critical. Why? Because transparency is what enables very quick response times to the demands of a dynamic market. A sudden upside request from a customer can only be supported by inventory on-hand or projected inventory from future production. In a constrained environment where product is limited, an exception process may be invoked as an attempt to close on the upside opportunity. When inventory is hidden, sometimes asking a second time, or asking louder, can cause a sudden appearance of product availability. All this achieves is unnecessary internal chaos, which elongates the time to respond and creates additional frustration with the customer. While lack of inventory visibility may be a symptom of system capability, if it’s due to forecast mistrust, manufacturing capability doubts, or just plain sandbagging, this kind of sabotage can and should be avoided.
4. Allocating A High Percentage Of Supply Capability
In a perfect world, the supply chain is driven by a statement of demand that, through the S&OP process, has consensus from all organizations. If we thought that forecasted demand was 100% accurate, reserving or allocating your supply capability—including inventory—to support that demand would not be a problem. We may turn away a customer order because those resources are being held for another customer. However, it’s accurate to say that forecasts are less than perfect. If these reserved resources are not used for their intended purpose (i.e. the forecast was off), we could find ourselves with no orders. Reserving our supply capability to perfectly align with the forecasted demand can result in self-inflicted, lost opportunities. There are certainly business reasons to support reserving supply capability, such as contractual agreements with our customers or internal strategies, for example. But these reasons must be balanced with the total demand to provide flexibility that can react to a volatile, less-than-correct, forecasted demand.
5. Allowing Conflicting Metrics Across Organizations
Internal organizations within a large enterprise can best be described as semi-autonomous fiefdoms. We all want our own fiefdom within the larger enterprise to succeed. Toward this end, we design our metrics to ensure that, on paper, our organization is performing successfully. By neglecting to consider how our internal group integrates with the bigger picture, our success may be at the expense of other business units, or even at the expense of the entire enterprise. For example, if our Sales organization is measured on orders received, regardless of product availability, that’s great for Sales. But if there is no product available to fulfill those orders, as an enterprise, we have failed. Metrics should be designed to work in concert across all organizations to ensure success for the greater good of the entire organization.
Break Out, And Stay Out, Of Bad Supply Chain Habits
Whether your organization has just completed a significant process improvement effort, or you’re about to embark on one, keep in mind that business processes across various organizations within a company are ultimately executed by people. Technology can support a process and enable speed and accuracy, but that technology needs direction from each of these organizations. It’s human nature to doubt the ability of these systems to make the right decisions, so results are often second-guessed. Don’t let these kinds of bad habits creep back in to cripple your planning processes—by being mindful of the harm these behaviors can do, all internal organizations can more collaboratively create opportunities for positive business gains.