Tag: customer service

Is Your Forest Too Dense? Part 3

Mike 1 Comment Expert Advice, Management Skills, Metrics , , , , , ,

Meteorological red white windsock in Himalaya airport,Nepal

Meaningful Metrics

Part Three

If you haven’t had a chance to read the first two parts of this series, please click here for Part One and here for Part Two.

As we continue on our path through the metaphorical forest of a busy supply chain organization, let’s look at how meaningful metrics can be an effective way to improve your company’s visibility. Most of us prefer to avoid unpleasant information. However, well-thought-out metrics will provide useful insights that can help teams improve performance, whether the news is good or bad.

To generate an accurate view of performance, there are a few basic metrics that every supply chain organization will need. The first group of metrics should be associated with Customer Service. The second set will show Inventory position and a third set will focus on Production reporting. A final consideration is for Management to openly share the metric results with the entire organization.

Customer Service –

Most manufacturing organizations make products and sell them to customers, who in turn sell them to their customers. A useful customer service metric is a measurement called ‘case fill’. This is the simple percentage of how much product was delivered divided by the quantity ordered. It is also important to know if the order was fulfilled by the promised delivery date.

Although this may seem like an obvious choice for a metric, attention must be paid to the details. This metric requires clear guidelines on what is considered successful order fulfillment to allow for useful insights into issues as they arise.

Inventory –

Having a visual representation of predicted inventory levels is extremely helpful. It should be based on production plans and forecasted shipments (to customers) for the length of the forecasting cycle. A ‘snapshot’ of the inventory level of multiple items can be achieved by using a spreadsheet with conditional formatting as shown below:

Mock DOH Chart 121514

Production –

Being able to obtain accurate information regarding production output is a key metric. There are a few aspects of this measurement that may not be apparent: It is important to know how much was produced and the quantity scheduled to be produced. Dividing the quality made by the quantity scheduled is called schedule accuracy and most companies would consider 90% to 110% of the plan to be acceptable.

Schedule accuracy is a metric that can provide valuable insights. For example, if the quantity produced is substantially lower than planned, understanding the root cause of this will help find gaps in other systems, such as inadequate maintenance. On the other hand, if more product was made than scheduled, then resources (with time being the most valuable resource) are being spent on items not needed at that time.

It is best to focus on a small number of meaningful and accurate metrics. Having too many disparate metrics will dilute the team’s focus. Team members may spend time generating reports instead of performing root cause analysis to determine why targets are not being achieved.

One last consideration is to publically post the key metric information in a common area and on-line where all employees can see how well the organization is performing. Even if the news is not always good, it’s best to communicate the information and create a sense of transparency. Discussing what the metrics indicate can open up a healthy dialogue amongst the workforce that can lead to improved problem-solving activities.

Meaningful metrics will display both positive and negative results regarding the performance of an organization. Facing facts and addressing issues identified as a result of using a robust set of metrics will make it simpler to guide teams through the thick forest of intense pressure experienced in today’s supply chain organizations.

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Is Your Forest Too Dense? Part 2

Mike 2 Comments Expert Advice, Management Skills , , ,

Depositphotos_35275163_xs

Goal Management for Success 

A practice that can help to thin out the forest is to have an effective process for reviewing and adjusting the organization’s goals and targets. Obviously it’s important for every organization to have goals and targets. It’s also important for Leadership to recognize changes in the business environment and allow teams to focus on what is important as conditions change.

Goals allow you to control the direction of change in your favor. – Brian Tracy

Here is a simple three-step process for managing goals and targets.

  1. Make General Organizational Goals Available to All Employees

         Leadership must establish a set of organizational goals that will be the basis for the individual goals for each employee. This set of goals for the organization should be available to all employees for their review. It is helpful for employees to see what is driving the activities of the company. Transparency around an organization’s goals will help generate trust in leadership. Building trust within the organization will create many long-lasting benefits.

         It is also helpful for Leadership to publish periodic updates on how the organization is performing with respect to the goals. Organizations sometimes use a stop-light system (Green / Yellow / Red) to indicate if the goals are on track to being achieved.

  1. Set Tangible and Measureable Goals for Individuals

         Managers will need to establish tangible goals and targets with realistic timelines to make it easier for their team members to understand their role in achieving organizational goals. Stating goals in a few sentences that can be easily understood will help team members to keep them in mind. For example, making a statement such as ‘increasing net sales 20% in 2016’ is better than saying the goal is ‘to ‘double sales over the next 5 years’’. In this example, if employee performance is evaluated on a periodic basis, the goal must be broken down into quantifiable pieces for each period and the sales target clearly stated when results are to be measured.

         In general, the goals and targets must be stated in terms that everyone can measure and at some point in time determine whether they were clearly met or not. In contrast, goals and targets that require the manager to use subjective measures to determine if the goal was satisfied will most likely create angst and will not be as effective. Subjective goals can make team members feel like they are trying to hit a moving target.

  1. Review and Adjust Goals as Needed

         Even though goals and targets are generally established on an annual basis for the upcoming year, a periodic review of the goals should take place. Business conditions can change quickly and the current goals may not accurately reflect a mid-term change in the direction by leadership. For example, a new client/customer places a large order that must deliver quickly to help them gain a competitive advantage. Meeting their delivery date may be achievable, but due to production capacity constraints it will delay shipments to other clients. Accepting the large order may result in higher overall sales and opportunities for the additional business in the future, however it may lower overall customer service results in the short-term.

         In the example above, Management decisions may be problematic for employees who are evaluated on annual customer service metrics. Sales growth may be a goal for upper management, however the rank and file should not be penalized if they don’t reach their customer service goals because of Management’s decision. To keep everyone motivated, the goals may need to be adjusted to account for Management’s decision to accept lower overall customer service levels, even if it is a temporary situation.

From a general management perspective, it is very helpful to have periodic reviews of performance against the goals. A meeting between the employee and manager should take place at least every 6 months to keep everyone up-to-date on their performance compared to current goals and targets. As shown in the example above, a formal mid-year review can be a good time to make any course corrections due to changing business conditions.

Utilizing a formal process to set and publish organizational goals will keep the organization aligned for success. Employing a process to make periodic adjustments to goals and targets will enable the organization to adjust to rapidly changing business conditions and ‘control the direction of change in their favor’.

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Are You Painting a Clear Picture?

mcalisterts 0 Comment Business Forecast, Case Studies, Expert Advice, Uncategorized , , , ,

Woman standing in the gallery

As my department worked through a crisis several years back, I discovered that the information we needed was not available in a format that would help us resolve the issues. Due to the nature of the crisis, and the need to communicate information inside the company and to our customers, I found a way to assemble a large amount of data into a single, concise communication that made sense to everyone, not just supply chain people.

“Every now and then one paints a picture that seems to have opened a door and serves as a stepping stone to other things.” ― Pablo Picasso

I have a feeling that Picasso wasn’t thinking about customer service when he said this, but I like his sentiment. If painting ‘pictures’ can serve as stepping-stones, then they can help us move on to bigger and better things.

I was the Supply Chain manager when a production issue necessitated a massive recall for half of the existing inventory in my category. The production network was running at 100% capacity when the problem occurred so we all knew it would take time to recover. The million dollar question (literally) was how long would the situation affect our customers? A few weeks? Several months? As you might imagine, our customers were not going to accept an answer of ‘we aren’t sure when you will get your product.’ I asked my planner for a report that would show the weekly inventory position for every item for the next 13 weeks, and I was told the planning system was not able to generate such a comprehensive view.

Since a problem of this size was new for me, I asked my compatriots for examples of how to manage such a major problem. Unfortunately, I was only greeted with kind words of support. It turned out that nobody on the staff had dealt with a problem this large before and no template was available.

It was clear that we needed to develop a method for communicating the status of the inventory, and here are the steps my team and I took to ‘paint a picture’ that would generate useful information for Management and ultimately our customers.

  1. Determine what information is available from the planning system, and how to download it into a spreadsheet.
  • Weekly production plans were available in the supply planning system, however a complete view of the inventory position was not available in a single report. This was a quirk of the system, and getting individual items to aggregate into a single report was something I.T. was not willing to tackle, regardless of the circumstances.
  • We found that the individual item information could be downloaded from the planning system, however, this report included raw data showing the current inventory and planned production quantities along with other pieces of extraneous data. Using an ‘intermediate’ spreadsheet, we extracted and formatted the information needed for the next step.
  1. Once the data is in a spreadsheet, determine how to format the information to accurately tell the story
  • Within our company, most people understood the inventory position in terms of ‘days of coverage’. For the purposes of communication, we needed to put several of the items on a single page, to see the overall effect of the production plan. The most accurate way to calculate the inventory coverage was to develop a formula that used 1) the inventory available at the beginning of the week, 2) the production plan, and 3) the demand forecast, in order to calculate the theoretical days of coverage in the inventory each week going forward.
  • Once the formulae were set up to calculate days of supply for the next 13 weeks, we determined it would be helpful to color-code the information to generate a way to identify issues more easily. This is where the ‘stop-light’ formatting for each cell was used; with green being considered ‘good’ inventory levels, yellow considered ‘risky’ or potentially problematic, and red being ‘bad’ or definite customer service problems. We also used blue to indicate if the inventory was above target.
  1. Develop a view that provides information for driving decision-making.
  • Once the data was verified and the color-coding applied, we assembled a view to show the ‘days of supply’ for all items for the upcoming 13 weeks. It indicated that it would take over two months for the inventory to completely recover. (The chart below is a simulation of the initial inventory positions we discovered. It does not use the actual data.)
  • With the inventory projection view finally in place, we could discuss various production options, such as delaying the production of less popular (slower moving) items, and risking some case fill issues, while producing larger volumes of the more popular items. A few scenarios were presented to management for their review and decisions were made regarding the information to be shared with customers. Now we could show our customers when they could expect the product back on their shelves.

Mock DOH Chart 121514

Prior to developing this methodology, we were making educated guesses about the timing of the recovery. For the most part, these guesses were inaccurate, frustrating management and our customers alike. Having much more accurate and comprehensive days of supply information available was extremely helpful to the Sales team and our customers. Armed with this information customers could find ways to work around the gaps on their shelves.

At the end of the day, a clear picture of bad news was better than not knowing when customer service would recover. With a chart like the one above, we were able to have meaningful and honest discussions with our customers. Sharing accurate information, even if it is not good news, is the key to building trust between organizations.

Picasso was certainly correct about a picture serving as a stepping-stone. We found a way to move forward with our customers once we generated a clear picture of the situation.

 

Photo credit: depositphotos.com image:26852525 by: semisatch

Water Chestnuts Only Come from China? Really?

mcalisterts 0 Comment Case Studies, Expert Advice, Management Skills, Preparedness , , , , ,

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“There’s no harm in hoping for the best as long as you’re prepared for the worst.” Stephen King, Different Seasons

Although Mr. King is not known for his supply chain expertise, he could have written a thriller based on a situation that took place in our supply chain a number of years ago.

About a month after our company had launched a new product line using water chestnuts, we immediately saw signs of sales exceeding the forecast. After confirming this with Sales, I performed analysis on the raw material inventory to determine if we were at risk. It had already been a long day when my spreadsheet revealed that we would run out of water chestnuts in less than 6 weeks. I gave Procurement a quick call to let them know we would need to move up a shipment or two.

After a few minutes of discussion with Procurement, what I learned was a little shocking: the supplier was in China and they didn’t have any ‘safety stock’ in the US. This meant that there wasn’t any extra material readily available and we were likely to run out of material before the next shipment.

Unfortunately, it got worse. Digging further, we determined that the amount ordered and in-transit was not going to be enough to cover the rapidly rising requirements. We needed to ship incremental material quickly or we would jeopardize the product launch. This situation emphasized one of the unwritten rules of planning: If you are about to run out of a material, demand for the product will invariably increase.

My next question for Procurement was about an alternative supplier that could cover the potential shortage. After an uncomfortable pause on the phone, my contact said, “Water chestnuts are only sourced out of China, and because of our unique specifications, the supplier is the sole source of supply for the material we need for our product.” Really?

Rosemary Coates’ ‘The Risk of Failure.’  addresses rising supply chain risk due to materials being routinely sourced from far-reaching geographies. Speaking from experience, the risk is very real.

If we had to do it over again, we would certainly do things differently. It is the business team’s prerogative to ‘assemble’ the best product they can with the materials at their disposal. It can always be debated whether a unique material is ‘necessary’ to make a desirable product, but this discussion will focus on a proactive approach to managing long lead-time materials.

“Prepare for the unknown by studying how others in the past have coped with the unforeseeable and the unpredictable.” Gen. George S. Patton

There were a few days that felt like we were in the Battle of Bulge along with General Patton. In other circumstances it would be good news that sales of the product line were exceeding the forecast, but in this case, the supply chain was raising flags saying we may experience a shortage of water chestnuts (among other ingredients) making it difficult to produce some of the items. Putting it mildly, this is not what the business team wanted to hear.

Based on the trials and tribulations we experienced as we worked out the situation, here are three broad areas to consider when sourcing unique materials from distant geographies:

  1. Carefully estimate the transit time and the time it takes to move items through Customs. What is the typical shipping time? Does it take 3 weeks or more to get across the ocean? How long does it take to get through Customs. Does your company have experience clearing materials through Customs. How long does it take to transport the material from the entry port to your location? Hiring an experienced import resource to manage the paperwork at the port and subsequent transactions can be very helpful. For this particular item, we allowed 6 weeks from the time the boat left the port in China until the material was in our facility ready for use.
  2. Understand the vendor’s options if their primary source is depleted or the demand outpaces the rate of supply. Does the vendor have an alternative supplier or additional production capacity? If the demand for the material unexpectedly doubles or triples, can the vendor keep up? If not, what are the alternatives? Will a slightly different material work for short periods of time? Knowing the answers to these questions prior to being in a panic situation can be very helpful.
  3. Develop a conservative inventory policy for high-risk materials. A conservative policy in this context means ‘extra’ inventory. Obviously it is necessary to be fiscally responsible, however the risk of suffering customer service issues (no product available) must be weighed against making sure 3-4 months of inventory is always available in a local warehouse. A key to making this plan work is requiring the vendor to have ‘safety stock’ readily available at all times. It is extremely important to ensure this agreement is being upheld and the inventory confirmed on a frequent basis. Having this stock locally available (in country) on short notice can greatly improve the chances for success of a product launch.

Perhaps you are wondering how our ‘thrilling’ situation worked out. We had to air-freight some of the material from China to the US. Suffice it to say this was very costly. From the beginning of the product launch, our customers were extremely excited to have the product on their shelves. The initial success of the product line led the business team to justify the expense.

After this incident, one of the activities that proved to be helpful was setting aside a day to conduct what we called ‘War Games’. The idea behind this activity was to get all of the key players (Sales, Marketing, Procurement, Planning, Quality, etc.) in one room for a day to go through all of the possible issues that could jeopardize the launch of a product. This brainstorming session would take place soon after Management decided to launch a new product and everyone had a chance to discuss possible upcoming challenges to the new business. All aspects are discussed, including competitive market challenges, distribution problems, supply chain concerns (such as the one discussed here) and any other concerns the team may uncover.

Planning conservative raw material inventories can make a significant difference in ensuring product is available during the critical stages of a product launch. Turning Mr. King’s quote around, “Preparing for the worst will let us hope for the best.”

 

Photo credit: Depositphotos.com 53476899 thinglass