The Disconnecting Point

How is it possible that you can’t see my point of view?

It doesn’t matter if you’re in upper management or deep in the trenches, neither side seems to be able to see the perspective of the other. Is the gap between these positions just too great? Is one side or the other incapable? Are we attempting to achieve opposite goals? Or are we speaking different languages?

Sometimes it feels like we just can’t get the other side to understand. But in that sentence is perhaps a key to the problem. “Other side”. When we are on the same team, why do we constantly view our colleagues as on our side or “the other side”. Aren’t we on the same side?

Let’s follow a typical disconnecting point discussion.

Upper management wants to manage the inventory numbers for year end (or month or quarter). So, planners and buyers are told to manually look at our Material Requirements Planning system and determine which parts that right now, if nothing changes, we can push out the purchase orders from December into January. The objective is to make the December 31st number low (inventory) and then who cares what January inventory looks like. Managing to these numbers makes sense to some because their measurement of success is based on low inventory dollars at this particular snapshot in time.  

And though this process has worked to reduce that inventory number for the last day of the year, it has never, ever actually improved the important business metric of Return on investment.

Now, those in the trenches are dismayed. Why? Because they have been put into a lose-lose scenario. Because customers are not willing to wait, and because the requirements change with little visibility, pushing to have low levels of inventory will have a negative impact to the company on some parts. The friction shows itself because Planners and Buyers have to guess which parts will cause them trouble due to this variability. So, they are forced to choose. And this conflict (internal to the buyer/planner) causes great stress, because they know that no matter what they choose, they will be wrong. And, they will be blamed for being unable to correctly guess between the impossible choices. They know that what MRP shows as a good decision today, may show as a bad decision tomorrow.

Imagine using a GPS while driving. And your GPS is run by your MRP while you are driving a car in a bit of a hurry (you’re late). What would the GPS directions look like? Here’s a sample.

GPS: Continue straight on this road until reaching the interstate. Oh, I see a faster way. You should have turned left about 500 yards ago.

You: Geez, come on. You have to let me know ahead of time.

GPS: The information got to me late. I told you as soon as I processed the new information.

You: Heavy sigh. Okay, I’ll stop and back up.

GPS: No, I see another way. And perhaps that isn’t the fastest route. Turn right this time.

You: Opposite direction from last time?

GPS: Yup, this time I’m sure. Turn right up ahead one block. No, two blocks. No, now!

You: You gotta be kidding me.

GPS: I’m sorry, I didn’t understand that. What did you say?

You: Nothing.

You can imagine the rest. The conversation could have also been the opposite. Where the driver chooses to not follow directions and the GPS gets exasperated. 

We should all have the same goal. To improve Return on Investment. Does anyone believe that manipulating the month end numbers to achieve a low inventory number for one particular day is improving ROI? Of course not. So why do businesses continue to push this practice?

Two possible answers. First, neither Management nor workers understand how to behave such that ROI is maximized. Second, they get measured with metrics that do not result in an improvement in ROI and therefore, in order to succeed, they make decisions that can negatively impact the business.

Improving systemic flow is how we can improve ROI. Think about driving in a residential block. Do you think it’s better to stop at the stop sign and then get up to 90 miles per hour, slamming on the brakes for the next stop sign? Perhaps my journey will be faster, but risk of accidents and wear and tear on the car will increase your costs due to chasing a metric that isn’t really relevant.

If we align our metrics to Flow and train our people to understand how to improve flow, then and only then will we achieve success.

Become Demand Driven

John Melbye, President, APICS Twin Cities