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SCM and LSS Convergence IV APICS Supply Chain Management and Lean Six Sigma

How does your organization stack up on the continuum describing best practices in the convergence of Supply Chain Management (SCM) and Lean Six Sigma (LSS)?

In this fourth in a series of progressive articles on this topic, I will continue expanding on the blending of current and future best practices in SCM and LSS with a little exercise I invite you to try, on your own or, for more fun, with a team at your organization. Aligning critical supply chain activities with corporate strategy, establishing the basis for cooperation, collaboration and “co-opetition” across the supply chain is a critical organizational skill set. This is already differentiating certain organizations today and will be a hallmark of leaders in the future.

In seminars and classes I teach, I use a continuum exercise to get folks thinking about important issues–and how their organization stacks up today in a ranking. Once you have your baseline, you can then examine each of the categories and determine if there is a gap–a need to move your placement on the continuum to a higher level. The gaps are important because they help us to focus on where we need to exert more energy in future learning and development.

Here is how this works: First is a general statement or topical area related to the convergence of SCM and LSS. Then you must decide what ranking you will give your organization on a scale of 1 to 5. To save space, I offer three possible responses, from which you will pick the one that is most like how your organization operates in the current state (today). The first choice correlates to a score of 1 point, the second is in the middle (correlating to 3 points), and the third is at the end of the continuum (correlating to 5 points). If you think you are in-between any two of these, give yourself a “2” or a “4” value.

This is not a game to win. It is a self-assessment of your current state in the first round. Try to be brutally honest with yourself.

Let’s take a look at the first one:

Statement #1:

The degree to which upstream suppliers are engaged with you in product and services design. Examples include Design for Six Sigma (DFSS), Design for Logistics (DFL) and design for serviceability, recycle and reuse.

Column One (1 point)

Virtually all of our suppliers are involved with product and services design to build in quality, serviceability and recycle/reuse. We are the benchmark in our industry in this area of supply chain.

Column Two (3 points)

Some key suppliers are involved in collaborative design efforts as part of a formal program to involve them.

Column Three (5 points)

There has been little or no effort to integrate our suppliers in design.

On a piece of paper, you can write a line for Statement #1 and record your current-state ranking for your organization–a number between 1 (if you agree most with the first statement), a 5 (if you agree most with the third statement) or a number in-between as you see fit. Don’t over-analyze this–just go with your gut!

Done with the first one? Great! Then you can cruise through the following, making a list as you go–creating your current-state assessment scores.

Statement #2:

The degree to which you engage in advanced financial information sharing with trading partners including target and kaizen costing, establishing and tracking supply chain costs and trade-offs; ABC costing analysis/techniques, TOC-based costing and value chain cost analysis integrated across the supply chain.

Column One (1 point)

We seamlessly share cost information, and we typically look to establish rolling long-term contracts of three years or more with annual cost-down targets. We trust our suppliers like we do our key employees and our CPAs. We are open to any type of financial analysis that provides an advantage.

Column Two (3 points)

We have some partnering with long-term agreements in place with about 10% of our suppliers―the key suppliers―including sharing of cost information. We have been beginning to look at alternative financial analysis approaches.

Column Three (5 points)

The relationship we have with most of our suppliers is best described today as acrimonious with very little trust or cooperation. We don’t share financial data. Dealing with our suppliers is one of the most unpleasant things we do.

Statement #3:

The degree of IT integration of information across the supply chain–Supply Chain Management Systems (SCMS) from POS to warranty/replacement lifecycle data management, including CRM, POS, SCMS, SCP/O, ERP, APS, DRP, TMS, WMS, etc.

Column One (1 point)

We have achieved a seamless “Networked Supply Chain” up and downstream with suppliers, channels, and customers. Our event-driven exchange allows everyone in the supply chain to react at the same time electronically, regardless of the source of information. We are the global benchmark for managing demand, engineering, market needs and other operating data across the supply chain.

Column Two (3 points)

When it comes to the ability to operate a seamless “Networked Supply Chain” up and downstream with suppliers, channels, and customers, we are in the middle of the pack. We are keeping up with our industry in this area.

Column Three (5 points)

We operate pretty much in the dark ages with respect to electronic exchanges of information with essentially only paper-driven exchanges of information with our suppliers, trading/channel partners, and customers. Actually, we like it that way…

Statement #4:

SCM and LSS as a key organizational competitiveness strategy―the degree to which these are seen as strategic in your organization.

Column One (1 point)

SCM and Lean Six Sigma together are clearly in the top five specific core competencies and differentiators for our organization. These functions report directly to the CEO/President.

Column Two (3 points)

SCM and Lean Six Sigma together are important to our organization. Together they are in the top 20 key initiatives we are working on. These functions report directly to the CEO/President.

Column Three (5 points)

SCM and Lean Six Sigma are of little importance to our strategy and differentiation going forward. They are silo functions buried in operations or elsewhere.

Statement #5:

Development of people to support the supply chain―formality of structure and development of resource capabilities in purchasing and supply chain management functions in your organization.

Column One (1 point)

We have a dedicated EVP-level supply chain professional on staff with 20-plus years of experience. There is a formal and required education program to develop our SCM and procurement people and to help trading partners develop their people as well.

Column Two (3 points)

We have director-level professionals in procurement and SCM operations or materials management. We have an active program to encourage the development of people in-house with tuition reimbursement.

Column Three (5 points)

SCM and procurement are done as one of many “hats” by several people in the organization who have not necessarily been formally trained in supply chain Management, materials management or procurement. There is no effort to develop skills in SCM or procurement.

Statement #6:

Level of formal continuous improvement activities taking place in the relationships with current trading partners. These activities are related to kaizen costing, quality, lead time, product/process design and other performance improvement efforts.

Column One (1 point)

We conduct joint kaizens or continuous improvement activities at least three times a year with each of our top suppliers and channels/customers that make up 80% of our spend and revenue, respectively.

Column Two (3 points)

We conduct joint kaizens or continuous improvement activities about once a year with key suppliers and channels/customers making up 80% of our spend and revenue, respectively.

Column Three (5 points)

Are you kidding? Any continuous improvement efforts we get out of our suppliers and channels/customers to come at the point of a bayonet.

Taking score

OK, now you can tally up your numbers. If you scored 10 or fewer points, congratulations! Your organization is a real leader in many ways when it comes to the convergence of SCM and LSS best practices. You should tear up this article and discard it before your competitors see it.

If you are in the 11 to 20-point range, you have a lot to feel good about–as you are ‘in the pack’ competitively. There is definitely room for improvement, and you will want to examine your gaps, which we will discuss next.

Finally, if you are 21 or more points on this little continuum assessment, you should not feel discouraged or feel that there is anything wrong with your company. The good news is this: now you have a sense for some of the areas you may want to focus on in the future if competing on the basis of supply chain performance is important.

Last step–gaps and considering more study and action

As the last step, I suggest you now go back through our list and plug in your target values–where you think the organization should get to in the foreseeable future. Where there are the biggest point gaps is where you would focus your scarce time and energy on learning more and developing a plan of attack to close the gap. Each of these factors in the continuum is a major undertaking in and of itself and not to be taken lightly.

If you enjoyed this exercise and would like the entire detailed continuum (which actually has eight assessment points and more details), please contact me for a PDF copy. Good luck to you on your journey to excellence!

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