Increasing the Productivity of Your Supply Chain

[DHowardell]

How do you increase the productivity of supply chain personnel?

Supply Chain Digest and Gartner Research recently released the results of their annual survey of Supply Chain Digest’s readers. See Supply Chain Digest Survey. According to their survey, the number one supply chain initiative in 2010 is to “improve efficiency and/or productivity.” Productivity increases moved up from number four in 2009. It looks like that after heavy cut cost cutting and plenty of layoffs companies are now looking at how they can participate in the recovery without growing back to the headcounts that they had before the recession.

This productivity focus is seen in the tremendous increase in the number of SKUs each demand planner is now managing at most companies. The SKU per planner count has grown several fold over the past ten years.

The survey did not address any particular ways companies were using to increase productivity but it’s clear you can’t get the desired level of productivity improvement doing things the way you have always done them. To keep up with and surpass their competition’s productivity improvements companies must use new methods and new tools. New methods and tools can help improve the efficiency of the supply chain in three ways:
• Improve inventory performance - Reduce inventory carrying cost and obsolescence.
• Drive operational efficiency – Make it faster and easier for supply chain professionals to execute analysis and actions.
• Enable financial planning – Set inventory goals and track progress against those goals.
Again, while not addressed in the survey one method used by hundreds of companies worldwide to increase productivity of the supply chain is the Inventory Quality Ratio (WWW.InventoryPerformance.com). IQR was developed by 35 purchasing and materials managers. They have been using the IQR method for 20 years to manage inventory levels and increase turns, while avoiding shortages and improving working capital positions.

The inventory reduction methodology embedded in IQR is designed to:
• Improve inventory performance by using demand-driven logic, and dynamic ABC codes to see exactly which actions are needed to make rapid reduction in inventory carrying cost and working capital requirements.
• Drive operational efficiency by putting a dollar focus on inventory instead of showing part quantities to buyers and planners making it easier for them to rapidly reduce inventory levels while improving customer service.
• Enable financial planning by highlighting how the bottom line is impacted by inventory reduction goals based, making it easy to track progress against those goals and giving instant access to the actionable information that will ensure you will meet those goals.
IQR is an example of one tool that can be used by companies to increase productivity in the supply chain. Regardless of the tool, more and more companies are choosing to make the one time investment in new tools and technology instead of hiring more people. I’m looking forward to next year’s Supply Chain Digest / Gartner survey too see how this strategy pays off.

[dreck]

As stupendous as this sounds , this is another band-aid to two issues.

One, inventories can be best managed by lean...real lean not lean as misguidedly executed (LAME).

Two, if companies had real supply chain professionals on staff, they would not have to worry about hiring consultants to fix issues that are best managed day-today. Nor would you have to rely on ANOTHER purported software miracle fix...as IQR claims to do.

Plain old inventory basics will work if done consistently and this just seems to be another consultant come-on.

Also, productivity is an often mis-guided and mis-used term, as is efficiency. Doing more with less is pretty simple but again requires professionals not amateurs – the type of clowns you see at a lot of companies…no training, work 8-5, not APICS/ISM certified, don’t keep up with industry trends, etc. It is tough be be productive/efficient if you have a lot of bozos managing inventory. The best systems in the world are no help if you have bozos using them...again lean moves away from system dependence to visual management.

S&OP is used to manage inventories at a financial/high level but SKU rationalization is used to manage/control at the SKU level. S&OP is typically not used or has become another system dependent process that doesn't work...just like most ERP systems. The biggest issue, is that bozo run MRP doesn't control or manage inventory very well…that is why lean works better.