07 June 2001
Many companies are searching for improvements in the supply chain, but it takes more than implementing best practice to mark the leaders out from the pack, writes David Arminas
Supply chain awards are, for the most part, gala affairs full of pomp and ceremony for the finalists in some exotic location. Due respect must be given to the winners, as they have risen above the fray to reach levels of performance than many companies will never attain.
The second annual Global Excellence in Operations (Geo) awards for manufacturing companies run by consultancy AT Kearney - held last month at the Ritz Hotel in Paris - was no exception. The top award was carried off by Brembo, a family owned Italian leading manufacturer of high-performance automotive braking systems.
Increased supplier participation in factory processes was the key to winning the award, Roberto Vavassori, Brembo's director of business development, told SM. "The hardest part of re-engineering our processes was getting all the suppliers involved."
Brembo reduced inventory by 34 per cent and lead times by 44 per cent, noted Vavassori. Much of its stock is now vendor-managed and only two hours' worth of material is held on the assembly line. "Our suppliers' first reaction to changes was a fear that it might be just a trick to squeeze them another way. But we managed to keep all of them on board."
Winning an award is a morale boost for any company. It proves that management can implement the right best practices.
This transfer of best practice is fast becoming a major benchmark for the awards, Earle Steinberg, vice-president of AT Kearney's North American operations, told delegates at the conference. As best practices move from country to country and factory to factory, they are "becoming a commodity" for supply chain improvements.
However, implementing best practice is now only the entry ticket for achieving excellence. So what exactly is it that the winners do better than even the runners-up that appear to have the same best practices? How can you attain supply chain excellence as more and more companies improve their supply chain operations?
A lot of it is co-ordination of supply chain tactics, according to Tony Fowler, AT Kearney's Geo co-ordinator. "Brembo's synchronisation of best practices was one of the things that most impressed us," said Fowler. "And they had a culture where best practices were easily adopted by suppliers."Seamless commitment
Reducing the stock-holding time to two hours requires intense commitment with both supplier and buyer taking ownership of the final result. In essence, a seamless supply chain requires a seamless commitment. If that degree of commitment is achieved, the company should be well on its way to beating the competition.
But this commitment is not easy to attain, even with all the best practices in place, according to Group Captain Glenn Morton, assistant managing director of logistics at the Defence Export Services Organisation.
Co-ordination of logistics services to the military requires a degree of commitment second to none, as there may be only one chance of getting it right. Failure, in often a life and death situation, is not an option. One way to maintain the highest commitment from people is to ensure those involved in military support know the importance of their performance, said Morton, a member of the CIPS senior practitioners' think-tank and a central figure in setting up the armed forces' new logistics support body, the Defence Logistics Organisation (DLO).
This has also helped oil producer Conoco, where the purchasing department began an "education" of internal customers about why it needed to have accurate forecasts of anticipated requirement of spare parts. If employees can see where they fit into the supply chain picture and how doing their bit assures cost savings further up the line, commitment is easier to achieve, said Gordon Melville, commercial co-ordinator at Conoco UK and a member of CIPS's oil and gas committee. The oil producer has greatly reduced stock levels of spares as a result.
While public recognition in the form of an award is good for corporate morale, there is also a slightly more fundamental method to keep people focused. Suppliers can have performance-related monetary rewards and employees can have bonus-related schemes.
Either way, the benchmark for excellence of supply chains will increasingly be determined by the depth of commitment from employees to the belief that their performance matters.