I Inherited A Supply Chain Grease Fire, Now What?

How do you optimize a supply chain grease fire?

Fix it now
Fix it now!. Getty Images

Let's say you've just been put in charge of a supply chain team.  And before Day 1, your hiring manager hinted, "You've got your work cut out for you."  But you didn't realize how much work was in front of you until you asked your team this question:

"Are we supplying our customers what they want, when they want it - and spending as little money as possible getting that done?"

If the answer you get is that slow, quiet blinking that's usually reserved for characters in the Men In Black movies (once Will Smith flashes one of those memory wipe thingies in their faces), chances are you've got a grease fire on your hands.

 

What's the first the step in putting out a grease fire?  I don't know.  This is a supply chain blog, not a fire safety blog. 

But what's the first step if you're supply chain is a grease fire?  The first thing you need to do is figure out how much your grease fire is consuming. 

Are you getting your customers what they want? 

If not, why?  And if you don't know, then you've got major customer service and customer fulfillment issues

Do you know what your customers want?  Are they providing forecasts prior to placing purchase orders?  Are they providing blanket purchase orders to lock in your capacity and to accommodate your lead times?  If not, they should be. 

When they want it?

Be careful with this one.  Because often supply chains are able to get their customers what they want, when they want it… but by expediting.  Overnight shipping.  Overtime.  Expedited production.  On-time delivery metrics should also be accompanied by the cost of on-time delivery.

 

And spending as little money as possible getting that done?

Getting your customers what they want, when they want it is crucial - but your supply chain isn't optimized if your not getting that done by spending as little money as possible.  

And a big part of supply chain cost is logistics and production costs (costs of goods and total cost of quality are other supply chain costs, in case you're wondering).

 If you're spending too much money trying to save time (those expedited shipping and production costs), you're going to bleed your company.  

Okay, Mr. "Expert" - what do I do?

One of the very first things new supply chain managers realize is that they really don't know what they have in their warehouse.  You can test this by conducting a cycle count on Day 1.  

Do this by counting sheet-to-floor and floor-to-sheet.  That means, check your MRP or WMS and it will tell you how much you have a specific product and which warehouse location it's in.  Look up a handful of those and then go check the warehouse.  Does what actually exists match what your system says? That's sheet-to-floor counting.  

Floor-to-sheet counting is the opposite.  Physically count what you have in the warehouse (in a handful of locations) and then compare that to what your system says.  

After your cycle counts, are you satisfied that you have 100% inventory accuracy?  That means that there wasn't a single error in either your floor-to-sheet or sheet-to-floor counts.  

And after you've done your cycle counts on Day 1, do more on Day 2 (count different parts this time).  And then again on Day 3 (again, different parts).

 And so on.  You get the point.  

And once you've got your team accustomed to cycle counting, you need to conduct a 100% physical inventory.  That means you count everything and compare it to what you thought you had on hand.  And then you reconcile the variances.  So that you know you have 100% inventory accuracy.  And that your team understands that's the new standard.  

While you're working to get inventory control, get your lead times managed.  That means that your customers should be ordering within the prescribed lead times that you've established -- or you can't commit to shipping to them on time.  

Your suppliers should be shipping to you within the lead times that they've established.  You are their customer, after all.  

So that's it.  The first steps in getting a supply chain grease fire under control are inventory control and lead time management.

 Once that's done, you can rest.  For about 35 minutes.  Because that's when the real supply chain work begins.