Thank you Covid-19
Jean-Marc S.
Sr. Consultant @ Transition Management Consulting | Driving Cost Reduction with Six Sigma | Managing Director
No I am not happy with this terrible pandemic situation and dramatic human impact.
Now to get people, corporations and governments to adapt to change is the hardest thing, harder than cold fusion, next to impossible.
So this crisis and the shortage of masks and other critical medical supplies is another opportunity to bring attention to basic supply chain principles.
In my career, I faced so many crisis (year 2000 steel scrap shortage with price x3 in 1 month, 2003 an automotive iron foundry collapse when the WIP was 2 hours production and we shipped by helicopter, 2004 the avian flu with localisation projects stopped and automotive customers not supplied, 2009 collapse seeing April the best sales ever and December ZERO, 2014 China construction bubble explosion with country sales going NEGATIVE within few months and cash running out....) but what hit me most is the total inability of top management to understand basic supply chain principles, limits and associated risks.
This includes many supply chain professional spending most of their time chasing the next truck instead of installing LEAN systems such like milk run, kanban, one piece flow and pull system.
Only crisis are sometimes forcing this adaptation and I am thankful of this one for the eye-opener.
Below the 2 golden rules in supply chain and sourcing management and 2 guidelines.
- Local for local: a: produce where you sale, b: source from your main suppliers (80% of your volume) where you produce and, c: maximum distance between 2 points being 2 days trucking
- Secure supply globally: if you are a global corporation having sales, production and sourcing points across the world, secure your main supplier in a region by introducing another region supplier (for maximum 20% of your volume). Same logic applies if you are a regional corporation with balancing your volume between other countries sources on the same region. This is to be done by segment.
- Training: the Beer Game should be a mandatory training to understand the supply chain operation and most important, the bull whip effect. Understand that, the smarter you are the harder you will crash it, only simplicity is working and is both resilient and efficient.
- Gemba: problems happen in the field, switch off your computer and get there.
By the way, again, this principles are know to automotive and applied since Taichi OHNO mapped his production hall back in 1950.
That is why I am happy the current Covid-19 crisis will force CEO's, Sourcing and Supply Chain professionals to work on their personal development in the area of supply chain and, may be, finally understand that supply chain management is not like strolling in a supermarket and picking up goods on shelves. It takes professionals to do it and it's not about placing orders and chasing deliveries. The same way purchasing is not about negotiating a discount, that's bargaining, but about developing a strategic plan based on technical segmentation.
Failing to understand this will kill your business in an even more efficient way than Covid-19 in a retirement house in Wuhan.
"Globalization is dead, long live localization !"
One book to read during the confinement: The Toyota Way.
On Solving problems by author