I haven’t given problem solving techniques much thought in writing about the challenges with Supply Chain. However having lunch with one of my colleagues, a certified Black Belt, we started an interesting discussion. My colleague asked me the question what gets me excited in my job. Since this is not usually a lunch topic, I really had to think about what gets me excited when it comes to my role working in Supply Chain. I started out answering the question in a typical generic fashion focusing on the supply chain roles and responsibilities that I have held through my career but then I began to think about a specific challenge.
As I began to discuss this problem, I thought about the basic concepts and critical elements which were used to effect change in the process. What was interesting was while using the Lean Manufacturing techniques ultimately using a simple approach resulted in yielding the results that were needed.
The challenge was how to improve the order cycle time through our entire supply chain by 2X and as a subset how to improve the order cycle time through the factory. We then formed a Lean Six Sigma team to analyze the problem and provide recommendations to improve the order cycle times. The Green Belt team utilized the various tools and techniques to develop the recommendations and the solutions. The team used FMEA, Cause & Effect, SIPOC, Process Mapping, RACI Diagram and Pareto Diagrams.
Using all or most of these techniques provided some excellent information of which areas in the supply chain which needed to be improved to effect a positive change. Although the team could have stopped and provided a general improvement plan, the facilitator and the team decided to continue on the journey of improving the order cycle times but had not realized the 2X improvement goal.
The team then started to meet every day and began charting open orders on a histogram with the number of days open and not shipped The team began to work the open orders and isolate on those orders open in the system for 20 to 30 days, still in WIP. Specifically through the ERP, shop floors system, the team could then identify those orders by order numbers, have all the relevant details of the order and the status of the order. From that list the team started to work 20 orders a day to determine the root cause, assign one team member to take the action to fix the problem and then report back. The team continued to work on the open order report and select the highest or longest open orders. The team used the Six Sigma tools mostly the Pareto Charts to determine the root causes for delays in the supply chain. After the first ninety days the team reported their findings back to the Green Belt Steering Committee and the Executive Management. The improvements were focused on forecast accuracy, component delivery, testing, factory scheduling, and unit repair. The materials and forecast improvements would represent better than 60% of the order cycle improvement. As a result of the Green Belt project, the expanded use of Vendor Managed Inventory solution and an improved inbound logistics was utilized on key components company wide.
In the first six months of the project with several process changes implemented, the team realized about 50% or half way to the goal. In order to reach the project goal, we expanded the team members as well as extended the teams to other factories. The teams continued to work the open order reports and continued to take the step by step approach on working the oldest orders and solving the issues on those orders. The Team reached their goal achieving a 2X improvement on order cycle time in the supply chain in 12 months.
The lessoned learned by Green Belt the team’s patience, persistence, and working the details yielded the results.
Simple but Difficult!
Tuesday, May 25, 2010
Tuesday, May 11, 2010
Your ODM isn’t Performing Now What
Here is a scenario that is all too familiar with many of those in supply chain using an outsourced partner. You have transitioned all or part of your production or distribution and your ODM/3PL are not meeting your needs in the first 3 to 6 months. The ODM/3PL is not achieving the KPI’s that are needed to achieve your supply chain needs.
How is this affecting your supply chain and your customers? The more adversely this affects your customers the quicker that you and your supply leaders will need to respond and deal with these performance issues. KPI’s which can’t continue to be missed are typically missing the production requirements, quality, field and customer complaints, order cycle times or timeliness and quality errors in distribution.
In your contract agreement with the 3PL/ODM/Partner Contract should have a detailed outline with a well defined escalation process during the first year and specific expectations within the first ninety days of the agreement.
Managing an Out of Control Situation:
This will start with a defined “corrective” action plan that is initiated by the Partner Management team in your company. Partner Management will be the responsible group within your company to solicit the input from the other organizations, procurement, planning, partner management, quality and logistics regarding performance deficiencies. Partner Management will then develop a “corrective” action plan that is approved and supported by executive management prior to discussing the plan with the ODM management team. Here are the keys for a successful corrective action plan strategy.
• Ensure that both Executive Management teams are available to attend a face to face meeting.
• The meeting should be held at your site or neutral site not at the ODM’s site.
• The corrective action plan must be specific and provide details outlining the expected improvements which measurable and timed or phased improvement over a specific period of time.
• The corrective action plan should show specific examples of how the ODM is failing to meet expectations. Also indicate to the 3PL/ODM the specific impact to your company is in either lost business opportunities or service level penalties. This will provide a baseline for activating the penalty clause in the agreement.
• The action plan should include any and all areas of concern including personnel, capacity, ERP system, general responsiveness to supply chain requests. You are now providing clear and direct communication without reviewing other concerns later.
• During the meeting you should define how the corrective plan will be reviewed; a written response with a specific action plan to correct each area or KPI, responsible person for the action plan. Also, develop meeting frequency for action plan and KPI progress reviews and required attendees for meeting attendance.
• The 3PL/ODM must have a complete understanding and agreement of the consequences of not meeting the corrective action plan including contract default per the contract terms.
• The 3PL/ODM should be asked to assign one single point of contact to lead the corrective action plan as well as the 3PL/ODM executive sponsor for the corrective action plan.
If the 3PL/ODM execute and deliver to the documented action and KPI’s, then your company’s supply chain move back to a normal partner relationship. If the 3PL/ODM does not meet expectations then the next step in the process must be determined with more corrective or a transition to another partner?
How is this affecting your supply chain and your customers? The more adversely this affects your customers the quicker that you and your supply leaders will need to respond and deal with these performance issues. KPI’s which can’t continue to be missed are typically missing the production requirements, quality, field and customer complaints, order cycle times or timeliness and quality errors in distribution.
In your contract agreement with the 3PL/ODM/Partner Contract should have a detailed outline with a well defined escalation process during the first year and specific expectations within the first ninety days of the agreement.
Managing an Out of Control Situation:
This will start with a defined “corrective” action plan that is initiated by the Partner Management team in your company. Partner Management will be the responsible group within your company to solicit the input from the other organizations, procurement, planning, partner management, quality and logistics regarding performance deficiencies. Partner Management will then develop a “corrective” action plan that is approved and supported by executive management prior to discussing the plan with the ODM management team. Here are the keys for a successful corrective action plan strategy.
• Ensure that both Executive Management teams are available to attend a face to face meeting.
• The meeting should be held at your site or neutral site not at the ODM’s site.
• The corrective action plan must be specific and provide details outlining the expected improvements which measurable and timed or phased improvement over a specific period of time.
• The corrective action plan should show specific examples of how the ODM is failing to meet expectations. Also indicate to the 3PL/ODM the specific impact to your company is in either lost business opportunities or service level penalties. This will provide a baseline for activating the penalty clause in the agreement.
• The action plan should include any and all areas of concern including personnel, capacity, ERP system, general responsiveness to supply chain requests. You are now providing clear and direct communication without reviewing other concerns later.
• During the meeting you should define how the corrective plan will be reviewed; a written response with a specific action plan to correct each area or KPI, responsible person for the action plan. Also, develop meeting frequency for action plan and KPI progress reviews and required attendees for meeting attendance.
• The 3PL/ODM must have a complete understanding and agreement of the consequences of not meeting the corrective action plan including contract default per the contract terms.
• The 3PL/ODM should be asked to assign one single point of contact to lead the corrective action plan as well as the 3PL/ODM executive sponsor for the corrective action plan.
If the 3PL/ODM execute and deliver to the documented action and KPI’s, then your company’s supply chain move back to a normal partner relationship. If the 3PL/ODM does not meet expectations then the next step in the process must be determined with more corrective or a transition to another partner?
Tuesday, May 4, 2010
Managing Your ODM Partners
Since there is such a high number of a high tech/electronic and consumer product companies using an “outsource” model for manufacturing their products, what is the best method to manage those partners and minimize risks in your supply chain? While there is no right or wrong strategy on how a company manages their partners the decision depends on the philosophy of the company and the confidence of how your partner can perform. Certainly, as your company works with an ODM partner there is confidence level of predictable performance will be achieved, the more likely that your management will be more independent style relationship.
Typically, a company/ODM business relationship will start with a contract full of terms and conditions, metric requirements with penalties included in the contract for failure to achieve quality and product or delivery targets. Once there a solid working relationship, a contract over the years will transition into more of a guideline, available only to ensure that the contract terms and conditions and metrics are adhered to.
In my experience there are three styles in managing these partner relationships.
Tight Management:
Typically, at the beginning of a business relationship with a partner, a “tight” relationship constitutes daily communication of some type in addition to onsite presence of one or more of staff members. For example, in the aerospace industry direct oversight of an ODM partner in the production or design functions was quite common many years ago. The definition of daily communication would consist of a daily meeting with the partner to review attainment commitments in the factory in addition to other material, quality or engineering issues that could impede achievement to the build plan. These daily meetings would then integrate into more formal reviews with weekly scorecards with a dynamic list of action plans using the LEAN Manufacturing/Six Sigma strategy. The review meetings would then roll up to monthly and eventually to quarterly or semi- annual reviews with executive management. Other disciplines, like engineering will also mimic this style in managing the partner as well. The benefit of the “tight” management style is the ability to quickly identify and correct the delivery or quality issues in your supply chain. The challenge with a tight style is that it is resource intensive and expensive to maintain.
Oversight Management:
Your company has developed enough confidence in your ODM partner to oversee the performance of your partner. The tactical approach in this model is much less intensive usually without any daily communication, meetings or onsite oversight. There would typically be weekly scorecard reviews along with monthly meeting reviews however dynamic action plans with improvements may not a requirement but supplied only if needed. The formal reviews with the ODM partner would be limited to once a quarter. This strategy would also be used with other disciplines within your company. The advantage to your company is there are fewer resources needed to support the “oversight” model so less costly however correcting quality or supply issues could be longer depending on the ODM response.
Open Management:
Your company has developed high confidence in your ODM to deliver products while there is also little change to product’s design. In this model, relationships with your ODM are very casual, formal metric scorecards and meetings are held more infrequently, maybe once or twice a year. Formal reviews may be held only once a year with a contract renewal. Since the relationship is so well established, there are only a few resources in your company that are required to support the ODM relationship. The “open” model is the least responsive to issues in the supply chain however also the least costly to support.
Of the three strategies described, today the most widely deployed strategy is the “oversight” management style.
Typically, a company/ODM business relationship will start with a contract full of terms and conditions, metric requirements with penalties included in the contract for failure to achieve quality and product or delivery targets. Once there a solid working relationship, a contract over the years will transition into more of a guideline, available only to ensure that the contract terms and conditions and metrics are adhered to.
In my experience there are three styles in managing these partner relationships.
Tight Management:
Typically, at the beginning of a business relationship with a partner, a “tight” relationship constitutes daily communication of some type in addition to onsite presence of one or more of staff members. For example, in the aerospace industry direct oversight of an ODM partner in the production or design functions was quite common many years ago. The definition of daily communication would consist of a daily meeting with the partner to review attainment commitments in the factory in addition to other material, quality or engineering issues that could impede achievement to the build plan. These daily meetings would then integrate into more formal reviews with weekly scorecards with a dynamic list of action plans using the LEAN Manufacturing/Six Sigma strategy. The review meetings would then roll up to monthly and eventually to quarterly or semi- annual reviews with executive management. Other disciplines, like engineering will also mimic this style in managing the partner as well. The benefit of the “tight” management style is the ability to quickly identify and correct the delivery or quality issues in your supply chain. The challenge with a tight style is that it is resource intensive and expensive to maintain.
Oversight Management:
Your company has developed enough confidence in your ODM partner to oversee the performance of your partner. The tactical approach in this model is much less intensive usually without any daily communication, meetings or onsite oversight. There would typically be weekly scorecard reviews along with monthly meeting reviews however dynamic action plans with improvements may not a requirement but supplied only if needed. The formal reviews with the ODM partner would be limited to once a quarter. This strategy would also be used with other disciplines within your company. The advantage to your company is there are fewer resources needed to support the “oversight” model so less costly however correcting quality or supply issues could be longer depending on the ODM response.
Open Management:
Your company has developed high confidence in your ODM to deliver products while there is also little change to product’s design. In this model, relationships with your ODM are very casual, formal metric scorecards and meetings are held more infrequently, maybe once or twice a year. Formal reviews may be held only once a year with a contract renewal. Since the relationship is so well established, there are only a few resources in your company that are required to support the ODM relationship. The “open” model is the least responsive to issues in the supply chain however also the least costly to support.
Of the three strategies described, today the most widely deployed strategy is the “oversight” management style.
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