My Year of Supply Chain Fails

Supply Chain Fail
Supply Chain Fail. Getty Images

My true on-time delivery never even caught a glimpse of 100 percent. My physical inventory revealed that my inventory control was a joke. Customers complained. 

My supply chain had a great year. Sort of.

Can missing your supply chain goals mean you had a successful year? No or yes, but probably maybe. 

No, It Wasn’t a Success

The “No” answer is based on the fact that my supply chain goals were to optimize my processes.

I had set out — at a high level — to deliver to my customer what they wanted, when they wanted it, and accomplish that by spending as little money as possible. I had set my sights on 100 percent on-time delivery, 100 percent inventory control and 100 percent customer satisfaction. 

My overall annual on-time delivery penciled out at 96 percent. My inventory control turned out to be 92 percent. And even though my customers weren’t calling morning, noon and night to complain — those 4 percent late deliveries and the returned goods meant that not all my customers were happy all the time. 

How could any reasonable person assess this as a successful supply chain year?

Yes, It Was

How, indeed. My glass-is-half-full team would point out that we launched several new products this year. The ramp-up challenges and fits and starts associated with new product launches and the aggressively related go-to-market goals we were given contributed to those on-time delivery misses.

 

Also, overall, my small business met its revenue goals. We even showed higher profitability (in terms of percentages and raw numbers) than last year — so our revenue went up while our cost of goods did not go up as high. Yay, supply chain!

That means that we were successful managing multiple sourcing programs — finding new suppliers for existing products.

And those new suppliers helped to drive our cost of goods down. Our sales team was able to sell our existing products at the same prices, while it cost us less to make those existing products. 

Through those multiple sourcing programs, we also consolidated our supply base, which meant that we had fewer suppliers to manage. That meant that when Jessica in marketing decided to work part time so that she could spend more time with her kids, we were able to slide Mario (one of our supply chain buyer/planners) into marketing. And we didn’t back fill Mario. Alexis, who had been a junior supply chain analyst, took on Mario’s duties.

And successful sourcing program activity and supplier consolidation made all of that possible. 

So, indeed, some would say, Yes, I had success with my supply chain this year. 

But Probably Maybe

You may look at all those names — Jessica, Mario, Alexis — and think, Hey Mr. Supply Chain Expert Guy, do you really work at a small business? And I would say that I’ve listed nearly half the employees here. So, yes. 

The Small Business Administration would agree.

The real question of whether my year of supply chain fails was a really an unmitigated failure or an unqualified success falls into the gray area that we all really live in.

 

Life is not a point in time. Life is a continuum. And what else have we learned about life? That’s right, it is a metaphor for supply chain. So what if I ran that first mile in five minutes, if I’m running a marathon. 

Those metrics I used to measure supply chain performance captured all the percentages I needed, but how were they derived? The foundation of those metrics needed to be adjusted and that’s what I did in the middle of my year.

Before we ended up with that 94 percent on-time delivery, we bragged about our 99.7 percent on-time delivery. Then we double-clicked on that 99.7 percent figure. And what we found, we didn’t like. 

My inventory control was perfect before we actually started performing physical inventories. Then we learned that — while we pretty much knew what we had (the key here being “pretty much”) — that we didn’t necessarily know exactly where it was.

 

On-Time Delivery

I have said repeatedly that 100 percent needs to be your small business’ on-time delivery goal. If you’re not shipping your customers what they want, when they want it — you may not know about the next time they order what they want. Because they might be ordering it from someone else’s small business. 

That’s a hard metric to capture — lost future business due to late deliveries. Most customers won’t tell you that they’ve left you or given some part of their overall business to one of your competitors. It’s better that you strive for 100 percent on-time delivery. 

Before we adjusted how we measure on-time delivery, we were riding pretty high. If you round 99.7 percent, you’ll get 100 percent — so if I squinted really hard, I could fool myself into believing we were good at on-time delivery.

But fooling yourself isn’t one of the cornerstones of success. What we learned is that if we knew we were going to be late on a delivery to a customer, we would reach out to the customer and ask if it was alright if we shipped late. If the customer acquiesced, we would adjust our promise date to the customer and count ourselves on-time, if we made the adjusted date. 

This process masked problems. Because we were fooling ourselves into thinking we had achieved nearly 100 percent on-time delivery, we didn’t realize that we had a supplier that was often late in its deliveries to us. Or what the true impact of those late deliveries were. 

We sat there in our ignorance and believed we were servicing our customers in a way that met their needs. Once we adjusted our on-time delivery metric to match when our customers actually wanted their deliveries, our on-time delivery dropped into the 80 percentiles. Red flags suddenly started waving. 

As part of our sourcing program, we were able to drive our supplier’s on-time delivery back up. The flip side of our egregiously wrong on-time delivery measurement was that our supplier didn’t realize that its performance was unacceptable. The sourcing program helped highlight that so we were able to keep the incumbent supplier — while increasing its performance.

The overall failure of 94 percent on-time delivery doesn’t tell the whole story. We’re trending in the right direction. On-time delivery has reached 100 percent in 3 of the past 4 weeks. And we have a tighter control of the supply chain.

Inventory Control

We only have a handful of products that we ship to our customers. So it was relatively easy to know where everything was. Then we started launching new products. And it became more and more difficult to keep track of it all. 

Except that — when you’re optimizing supply chain — you don’t have to keep track of it all. Your inventory control systems do that for you. To get your inventory control system up and running (whether it’s a full-blown WMS or a spreadsheet or a whiteboard), you need to make sure the data is accurate.

My first attempt at a physical inventory resulted in a weekend lock down. I counted products we thought we’d shipped two years ago. I went to a box that was “full of” one of our key products — only to find there were three left. 

Before our physical counts, I would have said we had six viable part numbers and two real warehouse locations. We now have over thirty part numbers that reside in a dozen warehouse locations. 

We do weekly cycle counts. We compare what we have on our inventory control spreadsheet (we’re not ready for a full-blown WMS) to what we physically have. We go count what we physically have and compare that to our spreadsheet. 

My 96 percent inventory accuracy tells me that for the year, not great. But — again — we live on a continuum.  Today we have 100 percent inventory accuracy, so when we tell a customer we can ship a product today — we know we have it (and we know where it is). 

This year might look like an inventory control fail — but next year won’t.  We have repeatable processes in place to guarantee that.

Customer Satisfaction

We were struggling and didn’t realize it. We had unhappy customers but our metrics wouldn’t have told that story. 

Now, we ship our customers what they want, when they actually want it — and because we have control of inventory and our suppliers — we spend as little money as possible getting that done.