I attended the S&OP Innovation Summit put on this week in Seattle by IEGroup. There were many fascinating presentations and great conversations. A comment in one of the presentations reminded me of a very important fact about supply chain risk management. We often focus on "the big event" when we talk about risk. But often there is as much risk in the cumulative effect of the many small events that take place every minute of every hour of every day; A customer moves an order in. A part is scrapped. A supply order is late. These are the types of small events that companies deal with every day. If managed well, these events will have little impact on the bottom line and can even become opportunities. However, if these events are not handled well, over time, small impacts can add up to a very large impact. To combat the death of a thousand cuts outcome, companies need to develop a culture of fast response. What is a culture of fast response? What does it mean? Put simply, it’s about giving those on the front line the tools, knowledge and information to make the right decision. The front line in the supply chain are those planners, buyers, schedulers and analysts that make the many small decisions every day that impact your business. If they make the right decision, your customers are happy, money is saved and your business is profitable. If the wrong decision is made...well there is one of the thousand small cuts. These front line decision makers need information, tools and knowledge. To make the right decision, you need information. Note I didn't say data; data is noise, information is that noise arranged, summarized and highlighted so that the important pieces are presented to the decision maker in a manner that can be used to drive a decision. The information needs to be complete. One of the challenges we face is that information often exists in different systems that don't communicate with one another. Different sites, even those running the same ERP system often can't share data. Front line decision makers need visibility to this information in a single system regardless of the source. Front line decision makers make many decisions every day. They don’t have time to scan mountains of data to find the real problems. In other words, these decision makers need to manage by exception when they are alerted to them. Alerts needs to be based not on the event, but on the impact of the event. For example, if a supply order is going to be late but it doesn’t actually impact an order, it isn’t worth acting on. However, if the alert is triggered because that late supply order is going to cause a customer order to be late, that is something the decision maker is going to want to action. Once the decision maker has the information, they need tools. In the case of the front line decision maker, the tools we are talking about are the ability to understand “what-if”. What-if I take that order?.....This supply is late….So then, what-if I use this other source? To be able to do effective what-if, you need three key things;
- First - very fast analytics so that when a change is made, the operational and financial impact can be calculated instantly.
- Second – the ability to create scenarios so that various resolution options can be explored. Providers of optimization tools may think that they can give the “best” answer. But these systems need a doctorate to set up, an engineering degree to use, and take hours to run…but they give a very precise answer (that may or may not be feasible). Scenario simulations can be used to try several different possibilities in seconds and come up with an optimal answer that you know can be implemented, because you came up with it by modeling live data and relating your own insight as it may apply to the issue at hand!
- Finally, visualization tools are needed to help understand what impact each of the resolution options will have. If there are multiple resolution scenarios, specific dashboard views can help determine which scenario best meets the needs of the organization.
The frontline decision maker needs to have strong supply chain knowledge and skills. The best tools and the best information are useless if it is put in the wrong hands. Think of a woodworking shop with top of the line tools; with a trained woodworker, that shop can create beautiful cabinets. Put someone in there that has never used a saw and you’ll get firewood. Even with the best tools and the best information, if a front line decision maker doesn’t understand how supply chain works they can’t make the right decision. This is about getting the right people in the job and technology can’t really help with that. So, hats off to the front line decision makers. If empowered with the tools and information they need…and if they have the knowledge, they can make the right decisions for the company and drive to a positive bottom line. If not, the company could suffer from a slow and painful death…. from a thousand cuts. How do you empower your front line decision makers? How do they make the day to day decisions? Comment back and let us know.