In a production workshop, with a supplier, in transport, there are …brrr, it’s a bit scary… yes, yes… 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 bring a “hand carry” to port and to catch a return flight on arrival…
At another supplier, during a severe crisis, we delivered systems via a noria 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. It was a bit costly…
For automotive suppliers, stopping a manufacturer’s line is out of the question, so effective emergency management costs can be considerable. Less spectacular 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 like those situations. There’s a lot of action. You have to make quick decisions. We like 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 permanent disorganization 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 overwhelmingly they’re because we’ve got our own feet stuck in the carpet.
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 programs, probably via his own MRP. The requested dates and quantities change every week. As this flow is deemed to be made-to-order, we are constantly trying to change priorities to match the latest demand.
We are on a make-to-order basis, so we don’t keep stock of finished products – that would be an illegitimate investment. However, we generate enormous hidden costs by constantly shifting priorities, making emergencies… and the paradox is that we constantly carry finished product stock, since if some dates are brought forward, others are put back, and the products just sit there…
When we analyze the finished goods portfolio, 30% of part numbers, representing more than 70% of the workload, are highly recurrent: positioning a stock buffer (DDMRP or Min-Max) for them helps 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.
However, there will always be emergencies, because there are contingencies that exceed what our operating model can reasonably be designed for.
For those legitimate emergencies, make sure you have collaborative digital tools that allow you to handle them by exception and consistently throughout the flow. Uh… no, don’t insist, Excel or Google Sheets 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 many cases, when we talk to different people in the company, they don’t all agree 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 flows…
