Re-posting an excellent article on Supply Chain essentials.

Supply Chain Learnings from the Olympics

Lora Cecere

Founder at Supply Chain Insights

August 7, 2024

I am an avid fan of the Olympics. Watching it fills my evenings. I relish in the stories of athletic accomplishment.

I Will Never Be an Athlete

When I was a chemical engineering student at the University of Tennessee in the mid 1970(s), I passed by academic labs studying athletic potential on the way to the pool. (I love swimming.) As I passed the department doors of the athletic department, I laughed wondering, "Will anyone ever see this stuff as a serious study?" As an engineering student, I gravitated to studies with academic rigor in math and science. Obviously, I was wrong.

If anyone has ever "bonked" on a run or a cycle, you know that the capabilities of the human potential are not endless. Better training, nutrition, and equipment drive performance, but there is no substitute for the right DNA and grit/determination. Training builds stamina, but form and strategy are learned skills. The athlete needs to want to win. Age is an undeniable factor.

In sports, we quickly also learn that a runner is not a runner. The athlete winning the 100M in track is not the same as a marathoner. The build of an 800M swimmer is distinctly different than that of a pommel horse gymnast. (Yes, I loved STEVE!)

I will never be an athlete, but I make myself move with a purpose every day. I swim a mile three times a week, take ballet 2X a week, build core with Pilates 2X a week, walk a mile each day with my dog, and play pickleball twice a week. I am not good at any of my athletic endeavors. For me, the goal is healthy aging, but the process of training is humbling. My seventy-year-old body is less flexible, and my muscles are aging. I feel the effects of time. My potential is much less today than when I was sixty.

Applying the Learning

The process of training has helped me to better understand supply chains. Each year, I write the Supply Chains to Admire report. This is my current focus. I will publish the new report--an analysis of the performance of 556 public companies for the period of 2013-2023 this month. The research and analysis take me 4-5 weeks. I liken it to a root canal. So, why do I do it? In the process of the research, I learn from the patterns. I am reinforced by the fact that the report is read by 5K readers.

One of my greatest insights this year is that a supply chain does not have unlimited potential. Like the human body, supply chains are a series of complex, non-linear systems. They need to be designed for purpose. One design does not fit all needs.

In the mid 1990s, I worked for a supply chain planning technology provider. My job was to build business use cases for the sales teams. Using a data base of balance sheet reporting, I would write a case of how the technology we were selling could improve inventory turns and reduce costs. I made several mistakes. The goal of this blog is to share the mistakes I made to help others. The mistakes I frequently see are:

1). A Supply Chain Does Not Have Unlimited Potential. Continuous improvement efforts need to be bounded by understanding the effective frontier. Network design analysis helps to define what is feasible at the intersection of margin, inventory, growth, customer service, and asset utilization. You can use whatever metrics you want in these categories, but you quickly find that these metrics in supply chains are inter-related with undeniable trade-offs. (It is not as simple as customer service/inventory, and cost trade-offs.) Increasing potential requires the management of complexity, design of buffers, implementation of push/pull decoupling points, and building organizational competency. I find that this is true for every supply chain within a corporation. Companies have five-to-seven supply chains. I define supply chain types by an analysis of forecastability, order cycle requirements, and volume. (I don't care how you segment to drive the design; in the analysis you will find a frontier or boundary of feasible/reliable results.) The problem is that most technologists and consultants advocate projects without understanding the capabilities/potential of the supply chain. A supply chain design does not have unlimited potential.

2) Clarity of the Goal. The training for a 1000-meter dive is very different than the 100-meter sprint. Few supply chain leaders that I work with are clear on their goal. Functional excellence focused on cost does not serve anyone well. This focus creates waste destroying the planet and denigrating corporate results. (Unfortunately, this is the objective function of most traditional supply chain planning technologies.) Metrics like OEE (Overall Operations Efficiency) throw the supply chain out of balance. High scoring performance on OEE does not translate to margin. As companies became larger through M&A and globalization, the issues of goal clarity became more paramount, but few were equal to the challenge.

3). The Impact of Non-linear Relationships with Rising Complexity. Did you know that a 1% improvement in demand error translates to a 2-3% improvement in inventory levels, but that in 8 out of 10 companies that I work with, traditional demand planning processes degrade the forecast (measured by forecast value-added analysis)? Or that the average company has a bullwhip of 3.8 in the translation of a demand signal to a buying strategy? Few companies measure and manage the bullwhip. <Sigh> Companies deploy "best practices" without measuring the impact on business outcomes. We have a lot of gray-haired leaders/consultants that think that they know the answers.

4) Form and Function. A Company Does Not Have One Supply Chain. Few companies, less than 5%, actively design and manage supply chain flows. For me this is job one. The crazy, zealous behavior to buy and implement technology using vague terms like digital transformation, end-to-end planning, and the autonomous supply chain drives me crazy. The starting point is designing the supply chain and training the organization for the race that they need to run. Defining outcomes and potential are essential to win.

5) Surprises Happen. Adaption is Essential. Teams don't Just Happen. At the end of the day, the potential of the supply chain is defined by organizational capabilities. I love the team sports in the Olympics. Each team has a different set of rules and goals. A 400 Meter swimming team operates with a much different definition than a volleyball team. When supply chain leaders talk about teamwork, I always ask how do you define the team? What are the expectations, required training, and coaching requirements? Few can answer my question.