An Operations View of SCM

Much of the talk about supply chainmanagement (SCM) emphasizes “silver bullet” software systems that promise aseamless pipeline from source to sale. While information systems are very important toSCM, they shouldn’t overshadow your company’s focus on its basic ability toexecute operations effectively.

If your operations are not functioningeffectively, implementing new systems and equipment is like turning up the water pressureon your garden hose when there is a kink in it.

Consider the following example: A few yearsago, Jones Apparel Group experienced considerable pipeline pressure when it was faced withrapid growth, increasing customer demands and chaotic operations. In the words of DougMeans, vice president of distribution: “Sometimes it felt like we had two choices:Change … or explode.”

Through efforts focused on standardizingand improving not only systems but also operations, however, Jones began to gain greatercontrol over its business, improve the productivity of its facilities and deliver bettercustomer service. As Means emphasizes: “Systems and operations must be engineered inparallel. You must constantly redefine both of these variables around some fixedparameters.”

Within your company, it’s likely thereare operational improvements that would: increase throughput by 30 percent to 50 percent;improve the accuracy, quality and thus the value of orders; reduce labor costs by 25percent to 40 percent; and delay the need for capital expenditures.

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To achieve these benefits, operationsimprovement must be approached as a many-faceted SCM endeavor, including the followingsteps:

  • Define the right methods, procedures and layout for each job within the area of the company that is the focus of the operational improvement.
  • Set goals that are specific, measurable, challenging and achievable for this area.
  • Establish a system that holds associates accountable for the goals, and provides feedback and rewards when goals are achieved.
  • Keep the continuous improvement cycle going. Managers and supervisors should constantly look for better ways to accomplish operations, always considering existing methods and procedures as works in process. Better systems and equipment should be continuously evaluated and implemented.

If you’re not sure of whether yourcompany needs to tackle operational improvement as part of its SCM strategy, consider thefollowing 10 questions. Unless you can answer “yes” to all 10, you need to makesome operations changes to achieve SCM success.

1. Are there standardized,documented methods and procedures for each operation? For example, does the associatechecking in freight on the receiving dock have a step-by-step procedure for doing his orher job within arm’s reach?

2. Is there a standardizedtraining program for both existing and new employees? Does it specify the length of thetraining and how the results of training will be measured?

3. Are there performancegoals for each job? For instance, do packers know how many cartons or units they areexpected to handle per hour?

4. Are performance goalsfair and accurate, taking into account different types of work? For instance, has thecompany evaluated the level of effort needed to yield a certain level of performance indifferent departments?

5. Are service, qualityand accuracy weighed equally in measuring performance to meet goals? For example, are theresults of accuracy audits included in performance reviews?

6. Do associates receivedaily, objective feedback about their performance, including quantitative measures oftheir levels of efficiency, accuracy and quality?

7. Are such quantitativemeasures used as an important part of the review process? Do performance reviews reflectwhat each associate has been told through daily feedback?

8. Are there rewards tomotivate associates toward goals? For instance, does the company offer extra money,recognition, days off or other perks as positive reinforcement?

9. Are there appropriatemeasures of accountability and documented methods of discipline that are consistentlyadministered for poor performance? Does each associate know his or her minimum acceptablelevel of performance and the consequences of falling below that level?

10. Are managers andsupervisors trained to effectively continue the operations improvement cycle? For example,could each supervisor orchestrate an operational improvement program, leading a smallgroup of associates through the implementation?

Remember that improving the execution ofoperations is a cornerstone of SCM, and that a kink in a section of the supply chain canbring the best systems and equipment to their knees. With effective operations, on theother hand, the possibilities of SCM can be endless.

by Jane Griesinger, Kurt SalmonAssociates

Jane Griesinger is a manager in KurtSalmon Associates’ Logistics practice, specializing in helping clients improve theirsupply chain performance.