“If you go to a hospital and a nursing station in a hospital, there may be 2 or 3 nurses, managing 30 or 40 patients. Each patient has a pulse, and the nurses are monitoring all the patients by exception. When pulse goes wrong, they react. We need a pulse center to manage supply chains by exception, not monitoring everything that is going well. In general, 98% of operations in supply chains are running well. We need to focus on the 2% that go wrong. In the human interface world, we have to have humans and software that enable us to make decisions in real time and improve the effectiveness and efficiency of the supply chain.”
– Tom Linton, former Chief Supply Chain Officer, Flex
This comment by Tom Linton occurred back in December 2019 in an interview we conducted at Hunt Library , on the Centennial Campus of NC State University. This was before the horrible impact of COVID and the national riots we are now facing. It seems like a long time ago, but the interview is still very relevant, especially as we consider how important it is to understand the disruptions that exist in our global supply chains.
Tom shared with me a bit about his background, and one of the first teams for the first PC produced by IBM, where he was sourcing parts. He was told that it was a “toy” project, and that the mainframe was where all the action was! But it literally became a “rocket ship”, which required him to move to Japan to source parts.
Tom’s comments reflects the important nature of the human-machine interaction, and the delicate balance of how to design supply chains with information that flows. Information that is useful must flow clearly between parties in the same supply chain, allowing them to collaborate instantaneously. Information flows allows material to move more quickly, and allows quick response to problems. A supply chain in the product industry is about material in motion. If it is not moving, it is inventory, and the goal is to o move material raw material stages through finished goods as fast as possible. It is about speed as the “theory of everything.” And supply chain is all about time – weeks, hours, minutes. If we think of supply chains as time and material moving efficiently, as cost effectively by design and tools – you can get a very good handle on how much better you can get performance. And to ensure the flow of material, the flow of information is needed. Not all information is needed – but rather oinformation that allows visibility of material, that enables managers to “de-frag” their supply chain, and reduce the barreirs that cause material to get “stuck”. Such barriers are like “eddies” in a river where debris accumulates, and includes stock rooms, hoarding stashes of material, obsolete and excess inventory, slow-moving inventory that is expired or out of date, or warehouses where material tracking does not show what is available. Thus, information allows people to see what is happening in supply chains.
There is another important law here that is worth mentioning, that we covered in our upcoming book “The Physics of Supply Chains”.
Physical Law 8: Electric current is the ratio of charge and time. A series circuit is a circuit in which resistors are arranged in a chain, so the current has only one path to take.
Supply Chain Law 8: Material and demand visibility results in demand sensing and response between parties in the supply chain, creating aligned actions and responses with a common objective, that promotes common decision-making, improved execution, and optimal levels of inventory in the system.
The nodes in a supply chain are like resistors in a circuit. Each upstream action has an impact on its downstream result. Likewise, a disruption in a supply chain upstream impacts it downstream. To ensure that all entities are aware of what is going on simultaneously, people need to be flowing together in their decision-making, and not working at odds with one another. At Flex the concept of visibility in supply chains became paramount on the assumption that “you can’t fix what you can’t see”. A complex supply chain will never run without some conflict creating a point of decision”. For example: a flight is delayed or a port is closed and action needs to be taken to redirect the circuit – the flow of the goods to optimize its time of arrival. Thus, visibility is an a priori condition to supply chain effectiveness. This is a very simple concept, but one that is much more difficult to anticipate and execute in the day to day world of supply chains. Lack of visibility will prevent the current from running through the desired circuit, and will disperse it in different ways, leading to a short circuit or the lack of a circuit altogether (and no power being transmitted to the desired location).
Unfortunately, most of our supply chains are completely mis-aligned. Most of our supply chain designs today are extremely “clunky”, and ill-suited to the uncertainty, random events, spikes and lulls in demand, and other seemingly unexplained behaviors that suddenly “come out of nowhere” in most supply chains. This means that buyers, planners, and expeditors spend most of their 12-hour days fighting fires, rushing orders, on the phone with suppliers, begging and pleading with them to expedite a shipment, postpone a shipment, or cancel an order. These interventions often occur on a daily basis, and sometimes can shift in the course of the same day! These problems are not because of the randomness of events, but because the supply chain has not been vaccinated against the possibility of disruptions and changes in demand and supply. To immunize your supply chain, you need to begin with the concept of demand sensing.
The idea that information flow (data) is critical to creating velocity of action and decision-making is an important concept here. There are often resistance layers that form between companies which prevent information from flowing seamlessly to key managers. This may include firewalls to ensure cyber security mandates are followed, or restrictions on the size of data files exchanged between companies. There are also regulatory and legal policies that may interfere with the free flow of data. However, as information flows more fluidly between enterprises, our hypothesis here is that velocity and performance benefits will increase.