Scorecards - another popular methodology when administered and nutured properly are very powerful, however, left to haphazardousness - can be debilitating to all those that are stuck filling them out, reviewing them and driving them.
Scorecards are meant to highlight areas of performance that directly indicate or support the success or failure of an important outcome, knowing when you've met the goal and time to sunset the tracking and celebrating milestones.
Some of my favorite include:
Delivery Timeliness
Order Accuracy
Quality
Paid on Time
These stand alone measures have many implications that must be understood, researched and documented. Let me give one of my favorite examples - "my supplier NEVER delivers on time" is the initial statement that leads to measuring supplier "on time". Seems simple - right? I want something on this date, your supplier says they can and a measure is born.
However, this is great if you exclude things like unforeseen forecast blips that trigger emergency orders, giving the supplier less than agreed upon leadtimes, output capacity greater than the agreed upon rates to mention a few "customer" induced issues - how do you understand the supplier limitations that put you in the "warning track" or worse asking the supplier for the impossible? Remember suppliers are trained to say "yes" to their customers - creating the relationship that allows them to say no or maybe with additional costs or expectations is an art!
To know for sure, let's dig deeper ... as I don't know many suppliers that do not want to meet your needs. Here on some questions I would ask:
1. Did we honor your firm or order timeline = many times we place emergency orders not checking if the supplier can honor the request.
2. Did we make any changes to the time or quantity
3. Were your feedstocks or manufacturing processes healthy - if not, why
4. Did another customer pull rank and consume my capacity - great to know where you are on the food chain.
5. Was the transportation or my unloading a contributor
You want your measures to be tight enough to drive improvement, but not impossible. When I say impossible I mean achievable within the next year. I can always put 100% on time for railroad or ocean delivery on time, but chances are this will be a huge disappointment and waste of time for all involved. However, targeting an XY improvement with the railroad or ocean freight may lead to some interesting discoveries for port inspection time or country specific delays, even what "class" of rail service you have purchases (cheaper is slower - but auto industry pays a premium and gets on time deliveries every day). Being selective on your choices is key. If you do not have the resources to drill and "help" - it's probably not a key priority. Ensure you have resources, tools and passion to drive the improvement - then go back and get the next in line priorities.
Remember the rule - you get what you measure - if you are willing to do the work :)
Wednesday, December 30, 2015
Friday, July 24, 2015
Overview - Supplier Accountability and Reliability
Inbound Materials – http://inboundmaterialsmysteries.blogspot.com
In a recent discussion about Supplier Accountability and Reliability, I was asked to define how you can make this happen with suppliers and give my experience of the last 14+ years working with inbound material suppliers.
My first discussion is always internal – WHAT DO WE NEED? I know, sounds so simple, but in reality we have many expectations from many groups or functions. Planning needs it now, Purchases and F&A want it at the lowest price, R&D and Quality want the best on the market, Inventory control wants the least amount possible, and Receiving just wants it during their operating hours. Each of these functions have goals and expectations that probably are not being coordinated. Hosting and internal meeting on these topics will generally net you a base line of internal alignment needs and a path to move forward with the supplier.
I’ve found over the years, I can get whatever and whenever I want if I ask for it from the supplier, however, the question becomes – can I afford it? Just like the local mail delivery vs Fed Ex, there are different level of services for different prices…knowing the above will help you decide how to get what you can afford or negotiate with purchases for something different than you have today.
Once you have a good idea of what you want and what you can afford, it’s time to invite the supplier in for a rich and in-depth discussion – remember to invite (or demand it) more than the sales rep – just like us each function of the supplier has a different role and you will need participants from Sales, Customer Service, Production and Shipping to ensure you have a full picture of what is really possible. Once the meeting has been assembled, you will need to go through expectations and limitations on your side and create an open an honest environment for the supplier to discuss what they can do. Once you have the data, you can create an action plan of next steps, and regular follow up meetings if necessary to get to the long term goal. Many times what both sides needs is not easily changed overnight and will take some diligence on both parts and follow up to make the ideal supply chain a reality.
I’ve created a more detailed discussion on the how-to’s if you are interested – it’s located at:
Supply Change -
Thursday, June 25, 2015
HOW WELL DO YOU KNOW YOUR CUSTOMERS NEEDS?
Do
you get frequent emergency orders?
How
does your customer really feel about your performance?
How
do you feel about your customer? (Please
don't give me the “customer is always right” speech)
Are
there opportunities for you both to save money and inventory?
Do
you and the customer agree on the goals and objectives – do you know what they
are?
Do
you understand how your customer operates?
Do
they understand your operations?
Seems
simple right? Well I’ve spent the last
14 years trying to perfect the best tool to drive this kind of discussion. Some call it the SLEA (Site Level Executional
Agreement) a tool meant to drive rich discussions for both the customer and the
supplier, documenting all the actions that are efficient (or driving towards “no
touch”).
In
this document we begin with detailed segments:
Feedstock strategy, production and inventory philosophy, quality
requirements and expectations, ramp up and down plans, planning lead times,
communication expectations, business continuity plans, downtime schedules and
broad spectrum contacts. All of these segments help both parties understand each other's position and flushes forward any risks or outages to be detailed on an action plan summary.
This
tool requires pre-work, coordination and generally lots of post work to ensure
you can answer the above with confidence and drive sustainable improvements. It also requires a multi-functional team
internally and externally to drive the best results. Post meetings generally summarize to the
leadership the outcomes/finds, watch-outs and potential needs for alignment for cost, risk
or inventory changes.
Being
a good practioner of this type of communication document is generally enhanced
by – industry knowledge, openness to hear the hard truth, and willingness to probe
the “sacred cows”. You have to be
willing to challenge internally as well as externally. Sometimes what you want is impossible or
costs too much and people are apprehensive to put the moose on the table.
These
types of meeting are generally driven with select relationships that fall into
a few categories for me personally:
Large/Complex with Risk; Relationship/Reliability Issues; or a New
Relationship. Staffing and experience
will really determine how many of these critical discussions you can have, as
even with the well established relationships – inefficiencies will arise out of these
meetings that will drive follow up work.
Action
planning – so really critical to keep this a living document. Too many times I’ve witnessed the massive
amount of work and time to coordinate and execute the above discussions for
them to fall into a computer file and not to be opened again. This is a complete waste of time and effort –
if you cannot follow up, don’t have the meetings.
Personnel
changes – a huge opportunity of this kind of documentation – with the rapid change
of personnel in most companies this process creates a historical roadmap of why
and how things are done and also provides a great opportunity to be used as a
training document for new members on either side of the supply chain.
Know
when to say “when” – when you have achieved your desired goals and feel you
have the optimization down – move on.
Ensure you have some maintenance communication and some results
indicators to let you know if the process is failing, take your resources and
begin to expand your horizons of new supply chains to optimize. Many make a critical mistake of trying to do
this process with “ALL” – your staffing and results will suffer if you attempt
this strategy. Tier your supply
relationships and make a 5 year plan!
Wednesday, June 24, 2015
Synchronization - let's talk about materials and how they are effected from upstream choices...
Material, while usually the most expense part of your Total Manufactured cost, a huge contributor of your inventory totals and generally the longest leadtime in your end to end supply chain - so little is known or designed to ensure reliability and efficiency is guaranteed.
*****
Forecast vs Variation - always one of my favorite conversations and one that is least liked by my purchases agents, leadership or planning organizaitons. Forecasts for most large companies of consumer goods underwent a transformation of their shoppers and their habits during the economic down turn. Consumer came back, but not at the same size, venue or brand. This has shook the foundation of my forecasting systems since the are heavily weighted to the past use. This conversation is needed to discuss what I like to call "variation insurance"....how far above and below can the supplier meet my needs - most contacts state some mute 1.3 c:d ratio - what if my forecast goes 2-3x or fails to produce expected sales? All critical discussions to have with your leadership - as options are expensive at times, but out of stock is worse. Packaging used to be the critical area for these discussions (I would have my suppliers provide me with the top 10 over and under performing materials for discussion), but in today's chemical industry complexitities with acquisitions, choices slimming on available items and asset utilization - these chemical materials need a thorough discussion and review (oddly the smallest and most restricted materials are generally the most critical in a formula and at most risk with the lowest visibility)
Promotions - the sales force generally has booked these events with the customers months in advance, why is it generally a surprise for the supplier? How do we communicate the sale, in forecast, as a stand alone conversation or a shake of the "crystal ball". What happens when we oversell, is the supplier committed or is it additional costs, or not at all - what if you do not consume the forecasted amount - do you have to take it? is there a restocking charge? do you leave the supplier holding the bag (wait til negotiations come around again).
Changes in Formulation (you or the supplier) - do you meet with R&D to understrand what is happening in the near and distant future. Researchers are not supply chain experts - we make a beautiful pair of knowledge when fused. We can teach them about the industry as supplier experts, they can teach us about the changes they are thinking about.
Lead times to consider congestion - regionally and now especially with the port situation and customs requirements and governmental changes. I mentioned some synchronization tools in an earlier blog on responsiveness you can reference.
All materials are NOT equal - especially in packaging, but also in terms of critically to your formula or brand equity (consumer noticeables). I mentioned above the beauiful relationship between R&D and Material Managers - this is also true when it comes with criticality to the formula or equity. Knowing which materials can be substituted in like or % of inclusion can be powerful. Also knowing which materials are critical with no substitution is game changing during a crisis.
Purchasing Materials - what is going on with the supplier or the industry? Knowing these things can allow yourself and planning (including leadership) smart decisions on buy ahead, price bracket improvements, or multiple supply sources. Knowing where the heat map is gives you a step up on your competition.
***************
So when you think synchronization and end to end design - don't forget the impact of materials on your process and the supplier's ability to meet your vision - especially when looking for low cost options to save or inventory reductions to hit goals - understand the impact so you don't disappoint the customer!
*****
Forecast vs Variation - always one of my favorite conversations and one that is least liked by my purchases agents, leadership or planning organizaitons. Forecasts for most large companies of consumer goods underwent a transformation of their shoppers and their habits during the economic down turn. Consumer came back, but not at the same size, venue or brand. This has shook the foundation of my forecasting systems since the are heavily weighted to the past use. This conversation is needed to discuss what I like to call "variation insurance"....how far above and below can the supplier meet my needs - most contacts state some mute 1.3 c:d ratio - what if my forecast goes 2-3x or fails to produce expected sales? All critical discussions to have with your leadership - as options are expensive at times, but out of stock is worse. Packaging used to be the critical area for these discussions (I would have my suppliers provide me with the top 10 over and under performing materials for discussion), but in today's chemical industry complexitities with acquisitions, choices slimming on available items and asset utilization - these chemical materials need a thorough discussion and review (oddly the smallest and most restricted materials are generally the most critical in a formula and at most risk with the lowest visibility)
Promotions - the sales force generally has booked these events with the customers months in advance, why is it generally a surprise for the supplier? How do we communicate the sale, in forecast, as a stand alone conversation or a shake of the "crystal ball". What happens when we oversell, is the supplier committed or is it additional costs, or not at all - what if you do not consume the forecasted amount - do you have to take it? is there a restocking charge? do you leave the supplier holding the bag (wait til negotiations come around again).
Changes in Formulation (you or the supplier) - do you meet with R&D to understrand what is happening in the near and distant future. Researchers are not supply chain experts - we make a beautiful pair of knowledge when fused. We can teach them about the industry as supplier experts, they can teach us about the changes they are thinking about.
Lead times to consider congestion - regionally and now especially with the port situation and customs requirements and governmental changes. I mentioned some synchronization tools in an earlier blog on responsiveness you can reference.
All materials are NOT equal - especially in packaging, but also in terms of critically to your formula or brand equity (consumer noticeables). I mentioned above the beauiful relationship between R&D and Material Managers - this is also true when it comes with criticality to the formula or equity. Knowing which materials can be substituted in like or % of inclusion can be powerful. Also knowing which materials are critical with no substitution is game changing during a crisis.
Purchasing Materials - what is going on with the supplier or the industry? Knowing these things can allow yourself and planning (including leadership) smart decisions on buy ahead, price bracket improvements, or multiple supply sources. Knowing where the heat map is gives you a step up on your competition.
***************
So when you think synchronization and end to end design - don't forget the impact of materials on your process and the supplier's ability to meet your vision - especially when looking for low cost options to save or inventory reductions to hit goals - understand the impact so you don't disappoint the customer!
Saturday, May 30, 2015
Outsourcing or Changing Suppliers - Things to consider:
Outsourcing or Change in Supplier Checklist for a Flawless Material
Supply
Tickler Questions to start a rich conversation to ensure a flawless
transition:
For each manufacturing site consuming this material:
1.
What is your production Strategy – Produce to
Demand, Produce to Buffer, Produce to Inventory Level
2.
What is your promise to your customers – how do
you handle spikes in demand
3.
Do you keep finished product inventory and if
so, how many average days on hand
4.
Do you keep material inventory on hand, and if
so, how many average days on hand
5.
Is this material shared across multiple sites,
businesses
6.
Is this a critical material to production – is
there a substitution plan if not available or issues arise
7.
Are there special or inventory restrictions for
each site
8.
Is there a storage plan for temp controlled
materials
9.
Do you have a transportation strategy
10.
Are there receiving restrictions – QA,
Hours/Days, Space
11.
What are your QA requirements – stand
forms/procedures
12.
Do you have e-communications available
For each supplied material – supplier to provide:
13.
Is this material constricted in demand or
availability
14.
Are there multiple suppliers available and
qualified for this supply
15.
What is typical lead time to replenish supply
16.
What is your average days of forward coverage
available to the customer versus your supply strategy
17.
Are there environmental or temp restrictions in
need of consideration
18.
Is there an upcharge to expedite
19.
What is the preferred transportation method and
does it impact availability (rail vs truck – ocean)
20.
Is there a limitation of time to unload – impact
to supply chain
21.
Can you get in larger or smaller increments if
needed – cost impact
22.
Can you manage any of the quality needs to
reduce time in schedule
Wednesday, April 22, 2015
Supplier Responsiveness - Let's Explore What this means to you....
Supply Responsiveness - what does it mean to you....
If I asked you to respond to a question - does it mean NOW, today, this week or this month??
Defining what you mean by responsivness could be:
Normal Lead Time
Order processing time + Manufacturing Production Lead Time + Manufacturing Time + Curing or Tesing Time + Transportation Time (potentially including port or border time) + Receiving Time + Quality Inspection = Total Order Time
You can also plot out what it means for "expedited or emergency vs normal lead time"...
Understanding and investigating each of these components will help you understand what's involved today as well as what is possible on the supply side or your receiving time...we can investigate some of these things in more depth:
Order processing time - how long does it take YOU and your supplier to input an order - I love this discussion, especially when you are requesting your supplier to be more "responsive" yet you only place an order once per week/month - sometimes responsiveness needs to happen on both sides :)
Manufacturing Production Lead Time vs. Manufacturing Time - this is very confusing for some suppliers - as I want to talk about how much time it takes to "make" the product without including their "production scheduling time". Both are very important discussion points, but I need them to be separate for some really good reasons that can be discussed (it may involve the role of safety stock in your supply chain and who it is there to protect).
Is there a testing, curing or quality time needed? Yes, a most important question to understand especially if you are expediting materials that may become damaged due to a push before they are ready to ship (test results or physical condition - this will drive a discussion on liability).
Transportation Time - this needs to include how much lead time needed for the carrier to position equipment as well as the legal number of hours a driver can travel in a day to create the total lead time requirement.
As reminded from my friends in Cairo (Thanks Walaa) international border crossings have their own unique time impact - understanding norms for a port/border, impact of paperwork on the transition from one country to the next, and a plan if the materials are held in customs will impact not only your time boundaries, but also your inventory strategy.
Receiving Time - this is a tricky question for some manufacturers - while you may run 24/7 - is your receiving staff available 24/7 or less than that - can the transportation company drop and hook at your facility - this will also impact your supply lead time...
Do you have any quality holds for your inbound materials? This can significantly impact your lead time and responsiveness if you have quality release time...
There are many ways to use electronic systems to reduce these leadtimes and improve "responsiveness" like:
Replacing email/fax orders with electronic portals
Understanding your planning organizations order cycle - my rule of thumb is if you use materials daily, you should be ordering them daily - you need to follow your consumption pattern with replenishment.
Including the transportation in the electronic interchanges
Using tools like electronic Certificate of Anaylsis for quality impacts
These calculations can all be reviewed and improvements identified -
First, though you have to understand what makes up your leadtime in the current state ... safety stock and it's use can also be a great way to reduce time, but again - you must undernstand the cost/value of each decision.
If I asked you to respond to a question - does it mean NOW, today, this week or this month??
Defining what you mean by responsivness could be:
Normal Lead Time
Order processing time + Manufacturing Production Lead Time + Manufacturing Time + Curing or Tesing Time + Transportation Time (potentially including port or border time) + Receiving Time + Quality Inspection = Total Order Time
You can also plot out what it means for "expedited or emergency vs normal lead time"...
Understanding and investigating each of these components will help you understand what's involved today as well as what is possible on the supply side or your receiving time...we can investigate some of these things in more depth:
Order processing time - how long does it take YOU and your supplier to input an order - I love this discussion, especially when you are requesting your supplier to be more "responsive" yet you only place an order once per week/month - sometimes responsiveness needs to happen on both sides :)
Manufacturing Production Lead Time vs. Manufacturing Time - this is very confusing for some suppliers - as I want to talk about how much time it takes to "make" the product without including their "production scheduling time". Both are very important discussion points, but I need them to be separate for some really good reasons that can be discussed (it may involve the role of safety stock in your supply chain and who it is there to protect).
Is there a testing, curing or quality time needed? Yes, a most important question to understand especially if you are expediting materials that may become damaged due to a push before they are ready to ship (test results or physical condition - this will drive a discussion on liability).
Transportation Time - this needs to include how much lead time needed for the carrier to position equipment as well as the legal number of hours a driver can travel in a day to create the total lead time requirement.
As reminded from my friends in Cairo (Thanks Walaa) international border crossings have their own unique time impact - understanding norms for a port/border, impact of paperwork on the transition from one country to the next, and a plan if the materials are held in customs will impact not only your time boundaries, but also your inventory strategy.
Receiving Time - this is a tricky question for some manufacturers - while you may run 24/7 - is your receiving staff available 24/7 or less than that - can the transportation company drop and hook at your facility - this will also impact your supply lead time...
Do you have any quality holds for your inbound materials? This can significantly impact your lead time and responsiveness if you have quality release time...
There are many ways to use electronic systems to reduce these leadtimes and improve "responsiveness" like:
Replacing email/fax orders with electronic portals
Understanding your planning organizations order cycle - my rule of thumb is if you use materials daily, you should be ordering them daily - you need to follow your consumption pattern with replenishment.
Including the transportation in the electronic interchanges
Using tools like electronic Certificate of Anaylsis for quality impacts
These calculations can all be reviewed and improvements identified -
First, though you have to understand what makes up your leadtime in the current state ... safety stock and it's use can also be a great way to reduce time, but again - you must undernstand the cost/value of each decision.
Monday, April 13, 2015
SUPPLIER ACCOUNTABILITY, CAPABILITY and RESPONSIVENESS
Aren’t these quite the “buzz words” today….besides being a
mouthful of words….what can it mean?
1.
What do you need and when – seems simple enough,
right?
2.
Does your supplier understand your expectations,
have you talked about it?
3.
Ask the supplier – can they, would they, does it
cost more or less?
4.
Is your strategy aligned with your planning
needs (finished goods and materials), purchasing and inventory control?
5.
Feedback – do you give and receive feedback
regularly and share with other organizations (and in an open and honest fashion
– what could bemore scary than telling your client they are killing your
production schedule)?
6.
Educate others in your company on materials –
receivers, warehouse, quality, planning, purchases, leadership
7.
Create an action plan to close the gaps on both
you and your suppliers needs
Let’s explore these concepts in some detail:
1.
Sounds so
simple – what do you need? My experience
is every group has a different answer and rarely do they all get together to
discuss the concept…
a.
Finished goods wants everything and anything to
satisfy the customer order, no matter what the pain or cost
i.
What is an acceptable forecast variation or lead
time from your supplier’s perspective
ii.
What is your customer fill rate expectations –
does your safety stock program allow for the space to satisfy the variation of
needs
1.
What % of variation is right 1.3; 1.5 or do you
expect the supplier to meet any variation
2.
Do you know what your standard deviation is, do
you know highest and lowest and why
iii.
What can you afford – yes there are different
prices for different services (like a USPS letter versus Fed Ex)
iv.
What is the inventory goal – can it accommodate
the above?
2.
Does the
supplier understand your internal restrictions?
a.
Space constraint
b.
Unloading times (Monday-Friday only 8-4)
c.
Goals – inventory reduction/cost
savings/responsiveness goals
d.
E-Commerce goals – going to ERP orders versus
email or portal
e.
What happens if their materials don’t arrive on
time or as specified
3.
Does your supplier know? Shocking concept, I know, but I’ve so many of
these “ah-ha” moments with a supplier
a.
Do you meet with your top group of important
suppliers – spend, complexity, importance to your product – and YES – New to
service your company
b.
Does the supplier have the right input from
their home office – manufacturing, customer service, transportation to agree to
your needs
c.
Are there price differences for the type of
service you require (short lead time, expedited services, emergency production)
4.
Do you
have internal alignment meetings with your own groups that have a vested
interest in materials?
a.
Does Purchases understand what kind of
responsiveness you need or quality so that they can negotiate it for you?
b.
Do you understand the transportation and
warehouse strategy – how much can you bring in when?
c.
Do your material planners understand the
“requirements” of the supplier (feedstock or inventory) – do they know when to
call and ask versus just drop an order?
d.
Is there an inventory reduction strategy – if
so, can it impact customer service on the finished product or manufacturing
side?
5.
Feedback – do you regularly give and receive
feedback from your top suppliers? I
always tell people, you cannot meet with every supplier, but here is how I
would pick:
a.
Large spend or complex supply chain
b.
Relationship or Reliability issues – I always
started with the most hated supplier – it will be magical what you find out and
how you can quickly become the hero when you work this supply chain.
c.
New to your company – think about starting as a
new employee – just learning the terminology… new suppliers experience the same
bewilderment – make new suppliers a flawless start up – teach them the right
way the first time!
6.
Educate others in your company on materials
a.
Have regular educational sessions or invite planning,
purchases and R&D to your meetings to meet and begin to understand supplier
structure and potential partners to help solve issues
7.
Create an action plan to close the gaps on both
you and your suppliers needs
a.
Document every item that isn’t up to par with
every participant
i.
As you clear these items with actions, your
service and satisfaction escalate
b.
Continue these meetings and actions until you
get the results you design and want
Just start with these steps – where there is smoke and fire
– there is money and inventory to be saved!!!
Kindra Murphy
Inbound Materials Expert
Subscribe to:
Posts (Atom)