|
|
Handling Supply Chain Emergencies in Production Workshops
Learn
how to handle supply chain emergencies effectively and minimize their
impact on your production workshops and overall operations.
by Bernard Milian
In a production workshop, with a supplier, in transport, there are always going to be supply chain EMERGENCIES.
In my career, I’ve seen all kinds: red, bright red, dark red, and even black.
At a car parts manufacturer I once worked for, you were never to raise
your hand if the boss came into the office and asked “Who’s
got an up-to-date passport?” It wasn’t to offer you a
vacation in sunny climes or an exciting mission abroad: that very
evening, you’d be on a transatlantic plane to collect a
“hand carry” and return immediately.
At another supplier, during a severe crisis, we delivered via a
squadron of helicopters – the carmaker’s workers wondered
if it was a remake of Apocalypse Now!
I also remember waking up the supply chain manager of one of our US
plants at 5 a.m. on Thanksgiving to find a way to ship parts the same
day by private jet to a premium car manufacturer in Germany. We did it,
though it was a bit costly!
For automotive suppliers, a line stoppage caused by a supply failure is
unthinkable, so effective emergency management costs can be
considerable. Even in other industries, emergencies are nonetheless an
extremely widespread plague – they occupy a large part of the
day-to-day work of supply chain and operations teams. It takes much
longer to find a solution to an emergency, than it does to plan normal
flows.
Let’s face it, when you make a career in the supply chain, you
expect those situations. There’s a lot of action. You have to
make quick decisions. We enjoy that little shot of adrenalin,
don’t we? However, this urgency has a deleterious effect on the
P&L. The “premium freight” item is a drag on the bottom
line, not to mention the disruption that we put our workshops and
suppliers through.
What causes emergencies? How can they be dealt with effectively? What is a reasonable level of emergencies?
From my observation, emergencies are sometimes caused by real
extraordinary incidents – we’ll say they’re
legitimate emergencies – but too often they are
self-inflicted. The overriding cause for emergencies is that our
operating model design is not up to standard.
Let me take the example of a factory I know. Finished products are made
to order, with a lead time of 2 to 3 weeks in a B2B flow. The main
client generates his schedules, probably via his own MRP. The requested
dates and quantities change every week. As this flow is deemed to be
make-to-order, we are constantly trying to change priorities to match
the latest demand. In make-to-order, you don't keep stock of
finished products. However, we generate enormous hidden costs by
constantly shifting priorities, which create emergencies… and
the paradox is that we end up with finished product stock, because if
some dates are brought forward, others are put back and can't be
shipped or invoiced.
When we analyze this finished goods stock, 30% of part numbers,
representing more than 70% of the workload, are highly recurrent.
Positioning a stock buffer (DDMRP or Min-Max) for them will help to
stabilize the flow – without significantly increasing stock
compared with what is currently being experienced.
If the percentage of production or purchasing orders you have to
process urgently exceeds 5%, you probably have a problem with the
design of your operating model. When everything is urgent, nothing is.
The priority is therefore to reduce the number of emergency
occurrences, by rethinking the operating model.
Despite this, there will always be some emergencies, because there are
contingencies that exceed what our operating model can reasonably
manage. For those legitimate emergencies, make sure you have
collaborative digital tools that allow you to handle them by exception
and consistently throughout the flow. Spreadsheets aren’t the
right tools for the job. If you are planning in Excel™, get in
touch with us. We can sort you out…
In some companies, there is no consensus on what is urgent or not
– and in this case, the Pavarotti effect takes over (the one with
the biggest voice wins!) Execution alerts, visual signals on
workstation schedules, dark red priorities on buffer boards –
what’s important is that there should be no ambiguity about
priorities and that no emergency should get lost in a meander of our
physical and IT flow.
For more information, contact KenTitmuss.
About the Author
Bernard
Milian has more than 35 years of experience in developing agility
within industrial and distribution supply chains. He has more than 25
years of experience in Supply Chain Management and Continuous
Improvement / Lean 6 Sigma transformation. He has served as a Supply
Chain Director within French subsidiaries of world class corporations,
in the automotive, electronics, medical devices, furniture and
metallurgy industries, B2B, B2C, manufacturing and distribution
environments
|
Archived Newsletters
