OVERVIEW

In March 2014, SSA & Company partnered with HAVI Global Solutions (HGS) to host a roundtable on Applying Continuous Improvement to Supply Chain Services. The roundtable and simulation exercise featured HGS representatives Scott Saunders, SVP of Supply Chain Services, Ken Shearer, SVP of Sales & Business Development, Eli Carmeli, SVP of Packaging Technology Integrated Solutions Operations, Cherryl Choi, Senior Manager of Global Supply Chain Integration, and Liz Harada, Director of Business Process. John Rodgers, Senior Managing Director of SSA & Company, moderated the discussion.

BACKGROUND

HAVI Global Solutions is the supply chain management firm that partnered with McDonald’s to manage its replenishment and supply chain performance and bring McDonalds’ supply chain to #2 in the world, after Apple and ahead of Amazon. HGS’ view of a global supply chain is not linear.  Instead, a global supply chain strategy takes an integrated look at a business – a web of interdependencies – that begins with front-end consumer insights and incorporates knowledge about what producers make, how it gets to distribution centers, and how it can be timed and controlled for quality to make customers happy. Additionally, the supply chain must accommodate expected and unexpected pricing shifts while maintaining continuity of brand equity through uniform packaging and ensuring the right products are always in stock. Finally, the supply chain ends with sustainability – an outcome, not just an option – of a well-run supply chain. HGS is committed to deepening their current customer partnerships while also establishing new value-added relationships with new customers. HGS helps their customers grow smarter through operational excellence, risk management and strategies for success.

SIMULATION EXERCISE: EFFECTIVELY SYNCHRONIZING A SUPPLY CHAIN

To simulate the challenges of supply chain management, HGS engaged roundtable members in the “beer game,” initially developed at MIT’s Sloan School of Management. Teams represent beer retailers, wholesalers, distributors, and brewers, and the object of the game is to minimize total cost without making the mistake of minimizing one team’s cost at the expense of the others. As order backlogs develop, players unintentionally force their teammates further down the chain into more serious backlogs. The ensuing avalanche is termed the “bullwhip effect”: decisions made by individuals along the supply chain actually worsen problems, and teammates end up blaming each other for their failures. Roundtable participants reported wanting to “fire their customers,” feeling overwhelmed by the uncertainty they were managing, and being surprised by how much small shortages were magnified as they rippled through the supply chain. Through this game simulation, we discovered the importance of visibility to data across the supply chain and of collaborative behavior between supply chain partners.

HGS’ SUPPLY CHAIN MATURITY MODEL – CREATE “ONE VIEW OF DEMAND” ACROSS YOUR SUPPLY CHAIN

HGS evaluates supply chains based on the extent of synchronization between all links in the extended supply chain. Depending on the level of development of a set of key attributes – Collaboration, Employee Roles, Information Systems and Data, and Demand and Supply Planning – a company’s chain may fall into one of five “levels” of maturity:

1. Siloed Entities: Business units operate individually.
2. Functional Siloes: Teams and individuals have clear roles within the wider supply chain.
3. Supply Chain Management: A partially cohesive chain is interrupted by misaligned data
4. along the value chain or a failure to use systems to create the right information.
5. Extended Collaboration: Areas of the chain are strongly aligned.
6. Shared Value Creation: The firm enjoys unison internally and with external partners. Decisions are made for the whole system rather than individual parts.

Gaining Efficiencies: Process, People and Information Flow

HGS asks its clients, “What do you need to use now to meet your company’s future objectives?” The company continuously improves by demanding the same from its internal operations – enhancing execution and performance based on where it needs to be tomorrow, not today.

Process

• The system should have one set of business rules and policies that starts from how the customer looks at the world. Set clear expectations based on that.
• Don’t irrationally fear inefficiency. In supply chain, what may seem inefficient for one team or section may actually be most efficient for the system as a whole.
• Decrease variability at any step in the supply chain to reduce costs.
• Increase visibility for each partner; doing so can increase savings by 5 – 10%.
• Manage end-to-end inventory as one (e.g. if each player holds a certain amount of inventory, find the best place for that inventory to be). If two brands sell the same product, store them in the same center and wait to label them until orders come in.

People: Collaboration and Integration

• Bring the front line of your business – those out in the field – into problem-solving meetings, and make it safe for them. Otherwise, they will not help you solve problems in the future.
• Make sure all the parties in the supply chain understand demand and supply in the same way and from the same perspective.

Information Flow and Data Quality

• Transform and align the data you use across the system rather than optimizing specific sections of the value chain. That way, information used for business decisions is aligned all the way across your business.
• Understand the interface of data/information between departments (often a “gray zone” for companies) and who needs to manage that information with customers at different process points. People from different departments can look at the same data completely differently based on their jobs.
• Streamline information flow in a way that improves collaboration and decision making.