Consultants urge predictability, simplicity in managing supply chain challenges
By Karen Hanna
Lean manufacturing consultants Rick Bohan and Ron Jacques have heard the criticism: Cost-cutting has gone too deep; a focus on reducing inventories has led to shortages.
“As you saw with something as simple as toilet paper when the pandemic started, even Lean cannot handle large swings in demand,” said Jacques, who advises businesses on employing Lean Six Sigma principles to achieve continuous improvement.
But Bohan and Jacques don’t believe business leaders should throw up their hands — and they don’t believe Lean principles are to blame.
Along with other consultants, Bohan said companies can experience benefits — even amid the current chaos — by getting a better handle on their processes.
“Many times when you just track orders through a system, whether it be you know, a PO [purchase order] or a customer order, when you track it through the system, you really see where the breakage points are, you can identify where something’s sitting, or a handoff didn’t happen in the value chain,” said Jade Rodysill, EY Americas chemicals and advanced materials industry leader.
He believes manufacturers can better protect themselves by investing in systems, such as enterprise-resource planning software, that provide market intelligence and allow insight into the forces acting upon the supply chain.
By mapping out their processes, companies can identify — and begin mitigating — variables, Rodysill and Bohan said.
An injection molder, for example, might itemize the steps a batch of resin takes, from how it is ordered, to what happens once it is processed, inspected, packaged and sent out of the plant as finished parts, Bohan said.
He encourages everyone at an organization to share ideas — quite often, the process works nothing like managers might envision, and the map reveals bottlenecks they had never considered.
With map in hand, companies can glean insights into how quickly parts and raw materials in inventory actually turn over, and what quantities they should keep on hand.
Most clients discover they don’t need as much — others, upon reflecting on volatility in a particular market, might decide they have too little.
“The goal is not to reduce inventory to zero and take it right from the machine and put it on a truck. If you get to that point down the road because you are so knowledgeable and your processes are so consistent, predictable, Lord, love you. But the goal is to improve processes, one of which is controlling and managing your inventory, so that customers are served,” Bohan said.
He gave the example of work he did with a steel company. He asked workers there how much lead time they quoted to customers.
Sixteen weeks, they said. They laughed when Bohan asked whether they ever met that target; so, he proposed examining and streamlining their processes so they could beat it.
“Suppose we were able to quote 12 weeks, 10 to 12 weeks, depending on the metallurgy, and hit that all the time consistently, predictably, and didn’t reduce .. our operating costs, not one nickel taken out of our operating costs, would that make a difference to the company?” Bohan asked the steel workers.
“And they said, ‘We’d control the market. Nobody would call any of our competitors. They would just call us to get that level of customer service. … I said, ‘That’s what Lean is all about.’ ”
But plastics processing facilities have an advantage over steel mills — they can transform their raw materials almost instantaneously, giving them more agility to re-prioritize jobs.
In one case, Bohan helped a processor identify what was slowing it down — two subcomponents from a less-than-reliable supplier in Asia. Because the supplier was the only source of the components, the best strategy was to buy in bulk.
“When it takes six weeks to three months to get these few components from overseas, if they run out of that component and everything shuts down … so, they necessarily say, ‘OK, we think we need this much of the component, but we’re going to order this much because, if we run out, it’s going to take another six weeks to get it,’ ” Bohan said.
Making peace with a bad situation, by creating predictability, can help a company run better, even when it operates at the whim of fickle suppliers and customers, supply chain experts said.
After all, companies can live with longer lead times — as long as they know what to expect, Rodysill said.
“We need to find ways to get these mostly disruptive parts of our value chains back in control, back where we can actually have a predictable lead time, a predictable cycle time. We [might] know that it’s going to take three days longer, but it’s going to be consistently three days longer; it’s not going to be three days or seven days,” Rodysill said.
Karen Hanna, senior staff reporter
Contact:
Chagrin River Consulting, Akron, Ohio, 216-409-9046, www.chagrinriverconsulting.com
EY Americas, www.ey.com
