Paul Childerhouse

Simplified Supply Chain Flows

Daniel Dumke — Mon, 25 Jul 2011 14:52:00 +0000

I have to distract myself a little bit from thinking about supply chain risks too much, so I thought why not use the chance to read a different article once in a while. Well, at least the authors are familiar: Paul Childerhouse and Denis R. Towill and their paper of 2003: “Simplified material flow holds the key to supply chain integration”

Pre-work

Childerhouse and Towill start with an historical analysis of applications of simplified material flows, starting in the 16th century with the progress made in the supply chain for war ships over to the description of the bullwhip effect all the historic examples are concerned with the simplification of the supply chain, where the…

…emphasis is on “clean” i.e. unbiased and noise-free information flows; time compression of all work processes; achievement of consistent lead times; choice of smallest possible planning period; adherence to the schedule i.e. elimination of pockets of “Just-in-Case” materials, selection by simulation of the “best” supply chain controls; and finally, matching the simulation model to the real work process via process flow and information analyses

In previous papers the authors already analyzed how supply chain simplification is possible and conclude with a list of simplification rules (Figure 1).

Figure 1: Twelve Rules to simplify the Flows within a Supply Chain (click to enlarge; Childerhouse and Towill, 2003)

Figure 2 shows symptoms of a supply chain, when the material flows are too complex.

Figure 2: Symptoms of overly complex Supply Chains (click to enlarge; Childerhouse and Towill, 2003)

Method

A case study with 23 value streams all across Europe have been analyzed and a degree of simplification has been calculated using a score for the above mentioned simplification rules.

Results

The authors present five hypothesis to test using this data:

The effectiveness of a supply chain can be measured by assessing the level of uncertainty for the four segments of supply, process, demand and control.
Conformance to the 12 simplicity rules reduces uncertainty and results in increased supply chain integration.
On average each of the 12 simplicity rules are adhered to equally.
The level of uncertainty in the supply chain can be determined from a set of dynamic behaviour, organisational, situational and process observations.
Companies that undertake major Business Process Re-engineering programmes via the application of the 12 simplicity rules reduce uncertainties in their supply chains.

The hypothesis one and two are supported by the data of the sample. Hypothesis three is rejected, since the authors find that in the sample some of the simplicity rules are implemented more often then others (figure 3).
The fourth and fifth hypothesis are validated as well.

Figure 3: Order of the implementation of the Simplicity Rules within the Sample (Childerhouse and Towill, 2003)

The authors conclude:

Practitioners are faced with a multitude of published alternative ideas and techniques to improve the performance of their supply chains. It can be seen that most of these proposals have their roots in simplified material flow.

Conclusion

So, what do I want to remember from this detour:

Uncertainty is a driving force behind supply chain inefficiencies and risk reduction therefore also a way to improve performance.
Supply chain simplification is according to the authors one of the most common, yet often renamed, ways to reduce uncertainty and improve performance

And I thought I would get rid of risks for now…

Reference:

Childerhouse, P. (2003). Simplified material flow holds the key to supply chain integration Omega, 31 (1), 17-27 DOI: 10.1016/S0305-0483(02)00062-2

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Effects of Process Maturity and Uncertainty on SC Performance

Daniel Dumke — Mon, 31 Jan 2011 16:16:00 +0000

Process orientation may or may not be a very hip topic right now. Nevertheless effective processes are a foundation for company performance. Lockamy, Childerhouse, Disney, Towill and McCormack (2008), analyze and explain the impact of process maturity and uncertainty on supply chain performance, the full paper can be obtained here free of charge.

In close collaboration with several businesses they conducted an empirical study on this topic, which I present in the following.

Business Process Orientation and Quickscan

Business process orientation can be described using the dimensions process management, process jobs and process view.

Process management & measurement means that the company is using metrics on aspects of the process such as output quality, cycle time, process cost and variability, in contrast to traditional accounting measures.

Process jobs focus on processes as opposed to functions, and are cross-functional in responsibility.

Finally, process view is the cross-functional, horizontal picture of a business involving elements of structure, focus, measurement, ownership and customers.

Relationship between Process Capabilities and Maturity (Lockamy et al., 2008)

The authors used the Quick Scan methodology with over 20 different supply chains. It consists of the following four methods: questionnaire analysis, process mapping, semi-structured interviews, modelling from numerical data.

Each quick scan took about two weeks at the site of the client and resulted in: a current status of the organization and the supply chain, evaluation of the maturity of its practices and processes and its ability to meet current and future customer needs, furthermore details on the management of uncertainty and interfaces beteween these areas.

Supply Chain Maturity and Uncertainty

Supply chain maturity is described here using five cumulative levels:

Ad Hoc, marks an unstructured supply chain with badly defined processes. Typical are no process measures and few “process jobs”.

Defined, stands for a level where processes and the supply chain has been defined. Process performance is measured sometimes.

Linked, describes a level where supply chain management jobs have been established and performance measures are conjointly evaluated with clients and vendors.

Integrated, traditional functions beginn to disappear, supply chain measures and management is embedded into the organization. This leads to reduced SC cost.

Extended, collaboration is routine, competition is based on a multi-firm supply chain.

Supply Chain Management Maturity Model (Lockamy et al., 2008)

Supply chain uncertainty is defined similar to Christopher and Peck (2004) and devided into process, control, supply, demand uncertainty. Based on other empirical study it can be stated that:

Supply chain uncertainty significantly contributes to poor customer service levels, excess inventory, long lead times, increased quality inspections, and bureaucratic decision-making processes.

Results

After collecting all data during the quick scan on the process maturity and experienced supply chain uncertainty levels the author drew the following conclusions:

Reductions in supply chain uncertainty can be achieved by increasing the maturity levels of processes employed within the supply chains

By increasing supply chain maturity levels and by correspondingly reducing uncertainty, firms can improve overall supply chain performance

Levels of maturity in the area of process structure and jobs can significantly reduce the level of control uncertainty within supply chains

Reductions in demand and control uncertainty can be achieved by increasing the maturity levels of process measures utilised within supply chains

Process Maturity vs. Supply Chain Performance (Lockamy et al., 2008)

Conclusion

One would think that better processes lead to better supply chain performance. But it is hard to objectively measure the maturity of a specific process. How do you grade them. For example maybe a process is documented, but to which level of detail and how are current is it? There are processes that work perfectly without having a process chart available which documents the exact interfaces.

So evaluating processes is always an extremely subjective task. I trust the reputation of the participating author that they used all due diligence necessary. Nevertheless it would have been great to see more details on how the evaluation has been conducted.

Reference:

Lockamy, A., Childerhouse, P., Disney, S., Towill, D., & McCormack, K. (2008). The impact of process maturity and uncertainty on supply chain performance: an empirical study International Journal of Manufacturing Technology and Management, 15 (1) DOI: 10.1504/IJMTM.2008.018237

Christopher, M., & Peck, H. (2004). Building the Resilient Supply Chain The International Journal of Logistics Management, 15 (2), 1-14 DOI: 10.1108/09574090410700275

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Managing Supply Chains with multiple Pipelines

Daniel Dumke — Mon, 10 Jan 2011 15:42:00 +0000

Companies offer a smaller or larger range of products serving different markets, depending on their history and primarily the respective business model.

From a supply chain management point of view this poses the question if it is ok just to use the same supply chain strategy for all those products.

Pipelines vs. Supply Chains

Aitken et al. (2005) make a convincing argument against this approach and instead suggest the “pipeline” to describe

the specific operational mechanisms and procedures that are employed to service specific product/market contexts

within one supply chain.
So one supply chain usually contains several different pipelines.

Case Study

The authors conducted a case study with a lightning company producing a range of lighting products for diverse markets.
During the four year project there were two major phases: first the introduction of lean production, and second increasing the responsiveness of the plant.

Four different pipelines were identified by clustering the products. The clusters were defined by considering the trade off between economies of scale, economies of scope and the diseconomies of averaging.

Cluster 1: low volume products
Cluster 2: high volume, low variant products
Cluster 3: multiple variants of standard products
Cluster 4: customized products

Pipeline Strategies

Different pipeline strategies were identified and are listed in table 1.

Table 1: Categorization of Pipeline Strategies (Aitken et al. 2005; click to enlarge)

Conclusion

Pipelines are a useful way of differentiating supply chain and selecting the right strategies depending on the market and product properties. Aitken et al. describe a normative scenario, in practice differences in supply chains are often due to missing integration of different parts of a company (eg. after a merger). But especially in those cases it is necessary to develop an approach for reintegration without loosing sight of the different needs of the customers.

Reference:

Aitken, J., Childerhouse, P., Christopher, M.G., & Towill, D.R. (2005). Designing and Managing multiple Pipelines Journal of Business Logistics, 26 (2), 73-95

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Acting on Supply Chain Disruptions

Daniel Dumke — Thu, 22 Apr 2010 07:43:33 +0000

Supply Chain Risk manifests itself in many ways. Today the German airlines restored their regular flight schedule again after six days of no or limited air traffic, after the latest eruption of the Eyjafjallajökull vulcano on Iceland.

The consequences of such events only rarely become evident, but in the background emergency plans have to be executed (or developed).

Case

10 years ago a disruption affected the supply chain at Ericsson, luckily the effects of this event on Ericsson have been published. Its about the so called “Albuquerque accident” in 2000, which was documented by Norrman and Jansson (2004).

Disruption

The Albuquerque accident was a small (30 sqm area), short (10 minutes) fire within one of the clean rooms of a supplier at Ericsson. The supplier was responsible for a important RF-chip for the cell phone production. The consequences therefore were very severe. It took the supplier three weeks to get the production running again and after six month the yield was only 50% of the pre incident rate. The cost for Ericsson were estimated at $200 million (which was compensated by insurance companies).

Analysis

A review in the Wall Street Journal concluded that Ericsson

took too long to take action after the incident
its reporting to upper management was flawed
had no alternative suppliers for this component
has not been prepared for this kind of accident

So how did they react?

Results

The goal was to minimize the risk exposure within the supply chain.

To achieve this they took action on two sides:

Organisation
Assigning clear responsabilities and establish a matrix organization
Processes
Reinforce processes for risk identification, risk assessment, risk treatment, incident handling & business continuity planning

Business impact

Since the financial consequences of the disruption were carried by the insurance companies it was at first harder for Ericsson to renew the insurance policies, but just the other way around after implementing those strict SCRM program mentioned above. As a result Ericsson was paying less afterwards.

It is noteworthy, that after experiencing this disruption Ericsson percieves that the concepts of agility, responsiveness and leanness are inducing higher risks.

Conclusion

The article seams strongly influenced by Ericsson and the objective research and presentation might be questioned. I am definitively missing some more insights on the a priori analysis, since it is one corner stone of the design of the measures. Within the article only a short excerpt from the WSJ has been quoted.

Other authors (as Lockamy et al. (2008)) find a much more positive connection between business performance and supply chain risk management, so this should be further analyzed.

Reference:

Norrman, A., & Jansson, U. (2004). Ericsson’s proactive supply chain risk management approach after a serious sub-supplier accident International Journal of Physical Distribution & Logistics Management, 34 (5), 434-456 DOI: 10.1108/09600030410545463

Lockamy, A., Childerhouse, P., Disney, S., Towill, D., & McCormack, K. (2008). The impact of process maturity and uncertainty on supply chain performance: an empirical study International Journal of Manufacturing Technology and Management, 15 (1) DOI: 10.1504/IJMTM.2008.018237

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