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Continuous Improvement Best Practices
Where the Software Solutions Fit
To achieve specific improvements identified though the benchmarking activities and DMAIC process [discussed in previous articles], companies can leverage the traditional supply chain software that has been available for some time. This software differs from the supply chain process management solutions in several important respects. While the newer supply chain solutions play a role in every step of the DMAIC process, the traditional software, such as supply chain planning and execution suites, focus largely on the model's improve and control components. Further, these software packages can be implemented independently of one another.
Traditional software typically improves and controls supply chain performance on one of four key characteristics: average performance, variability in performance, synchronization, and responsiveness to change.
Justifying Software Solutions
While the very concept of the supply chain assumes an integrated systems approach, many companies still evaluate supply chain improvement programs with a silo perspective. They seek to optimize the source, make, and deliver operations individually in the belief that achieving superior local performance will naturally generate the best overall performance. Under this strategy, improvement programs are measured only on return on investment (ROI) for the specific activity, not for their system impact. Measuring returns across the system is not easy. But it's the key to justifying many improvement programs that might otherwise be considered marginal if viewed solely from a local perspective.
Inventories are a good example of how local improvements have ripple effects throughout the supply chain. Inventory levels reflect the fact that there are real lead times in the source and make processes. Companies typically ship products to customers as soon as an order is received so as to avoid lost orders and maintain customer satisfaction. Inventories enable sales operations to do this despite the real lead times involved in producing and shipping products. But the longer the production lead time, the more inventory required to satisfy customer orders. If there is variability in lead times, additional safety stock is required to achieve the target service levels.
Companies also often underestimate the impact of improvements that focus on supply chain synchronization. A late shipment of raw materials to a factory, for example, clearly affects the adjacent manufacturing process. But it also may affect the efficiency and cost effectiveness of several downstream processes such as warehousing and outbound transportation. Lack of synchronization, in particular, results in a need for larger safety stocks to maintain a given service level. When lack of synchronization is coupled with poor responsiveness, the problem is magnified.
Supply chain operational excellence is a long-term strategy that brings important business benefits. But if those benefits are to be realized—and the journey is to be successful—you need constant vigilance, an openness to new ideas, and a true dedication to continuous improvement.
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