LIFE SCIENCE SUPPLY CHAIN SOLUTIONS BY STEVE CLARKE

This week we’ll take a break from excerpts from my book to focus on how to manage commitments made to your customers.

Challenge

In this shortage economy, many of you will be struggling to maintain on time shipments to your customers. However, I’m going to go out on a limb here and say that most of your supply issues are very much within your control, so it is time to take the bull by the horns!

Solution

Here are 5 techniques that I have repeatedly utilized to improve on-time shipment performance:

1.  Have you clearly identified your “low demand” items?

Typically, 50% of finished goods items account for only 5% of demand, so if you are trying to maintain stock of all items, you are working too hard. Talk to your commercial team and negotiate that these items are changed from Make to Stock to Make to Order.

2.     Do you know what ACTUALLY causes shipment delays?

Get a list of late customer orders, and ask your team to explain why are they late, order by order. I can guarantee that you were oblivious to some of the key issues, and many could be easy to fix.

3.     Do you have Level 2 metrics?

In other words, are you measuring the drivers of on-time shipments found in your previous analysis? For example, if you found that production delays are a key contributor to late orders, then production plan adherence should be one of your Level 2 metrics. Improve the Level 2 metric performance and the Level 1 metric (on-time shipment) will take care of itself.

4.     Inventory availability versus Order Management

It is operations’ job to ensure product is in stock by the commit date, and it is order management’s responsibility to enter commit dates for customer orders based upon agreed upon policies with the operations group. It is a good idea to understand how many later orders are due to order management. You might be surprised! One client has had poor on-time shipment for years, and when we did a deep-dive, we found that a full 66% of orders were deemed as shipping late when it had nothing to do with inventory availability. For example, many of the orders were placed by internal departments, and were picked up weeks after the commit date, but this was still dinging the on-time shipment metric. After a meeting with the order management team, these issues were addressed immediately, and on-time shipment performance was transformed overnight. 5.     Daily Management It is critical to regularly review customer order status with all the groups responsible for shipping on-time (planning, purchasing, manufacturing, logistics, quality etc.) A “Reason Code” should be applied to any delayed order, which will quickly enable your team to understand the chronic problems that separate your operation from supply chain excellence.

Results

Several clients have asked me to help them improve their on-time shipping performance. Each time I have taken the same approach including some of the practices described above, and each time performance has been transformed. At first, I wasn’t sure that the approach would work in all situations, but now I have successfully leveraged the technique in multiple different environments, I’m highly confident that it will work anywhere. Generally, by meeting with the team on a regular basis, on time shipment is transformed within about 3 months. Generally, performance has started out at 50-70% on-time, and within 3 months it has been improved to above 90%, and then 95-98% within another 1-2 months.

Testimonial

“Very strong supply chain leader. Delivered strong customer service performance using lean six sigma methodologies”

~John Buckley, Consumer Products Industry Advisor