Creating a supply chain strategy is very similar to strategic planning. The difference is we start with an “operational” mindset and finish with a supply chain framework.
Case Study Company
Our case study company is a successful and profitable broker, working with providers (suppliers) to provide a specialty transportation service. They did not view themselves as a supply chain company but when the new Chief Operating Officer (COO) came on board, he saw them as an integral part of a larger supply chain. He identified the need to align the company’s operations/logistics functions to the larger supply chain, which includes their suppliers and customers.
Just What is Strategy?
I saw a quote from a technology CEO that helps me think about strategy:
“I may be wrong, but I won’t be confused.”
Strategy is a plan based on facts, qualitative and quantitative data. But it should not pretend to always be correct. Steve Jobs once said, you never connect the dots going forward, you can only do that when looking backwards. Strategy tries to look forward but more than anything seeks to align the organization to a plan. When the COO joined, he saw a lot of energy and passion, but also confusion and lack of alignment.
As operations / supply chain people we are always thinking about solving problems. That is how we are built. To start the process, therefore, we asked the team to define the problem, in as few words as possible, to create clarity and focus.
COMPANY-X doesn’t consistently partner with transportation providers in ways that meet the needs of our network or goals. We have a reactive culture with conflicting and out of balance objectives.
Key Performance Measures
We then asked the team to give us three performance measures that will improve if the strategy works. This quantification is often left out of strategic plans, or comes at the end, but we wanted it understood upfront.
Successful Customer Trips = trips with no defects / total trips
Profitability = gross margin / revenue
Logistics employee productivity = # of trips / direct labor hours worked
Interestingly, the idea of measuring “defects” was foreign to the organization because they considered themselves a service provider. In addition, because of the service provider mindset, no one tried to measure labor productivity.
Headline and Obituary
We use the headline and obituary exercise to get the team thinking about the future; their greatest potential and biggest risks. For the headline; we asked the team to write the headline and byline of when they are written up in the Wall Street Journal for revolutionizing their industry.
Transportation with purpose! Costs at an all-time low!
Company-X revolutionizes access through innovation and partnership in transportation
After the excitement from the headline exercise, we shift to the obituary. If you want a difficult conversation, ask a team to write their company’s obituary… when they close the doors. It was emotional but galvanized the team to make sure it never happens.
Unable to adapt or innovate Company-X falls victim to industry transformation
Company-X leaves their last customer stranded with a legacy network after years of stagnation and lack of focus. Unable to deliver on their promises they fell far behind the market and failed partners, members, clients, and suppliers.
Note that the obituary is longer. To quote the COO, after we created the headline and obituary, “there are relatively few ways to succeed, but lots of ways to die.”
Perhaps the most well-known strategic planning tool is the SWOT matrix. Strengths and weaknesses are internal; opportunities and threats are external. Strengths and opportunities should be exploited; weaknesses and threats should be mitigated. The SWOT helped the team build facts and knowledge about the company and its market. Below is an abbreviated version of the SWOT.
External Facing technology
Mentorships for Suppliers
Regulation and Legislation
Porter’s 5 Competitive Forces
Another popular strategic planning tools is Porter’s 5 Forces. Michael Porter, a professor at Harvard University, wrote the book on competitive strategy and made people think about competition more broadly. Below is a summary:
Have made customers and suppliers believe they have simplified processes
One competitor has a strong technology platform
No competitor has good supplier relationships
Some competitors have had ownership changes, causing internal disruption
Also work for competitors
Influence compliance, profitability
Influence end-customers’ decisions of who to award contracts
New Entrant Threat
Potential entrants (Uber) have scalable technology and have demonstrated an ability to influence legislation
But they lack regulatory compliance experience in this industry
And lack industry experience (this is a niche of the transportation business)
Decide on transportation mode required, influencing supplier selection
Details withheld due to confidentiality
The Supply Chain Framework and Pillars
The supply chain framework comes from the Supply Chain Operations Reference (SCOR) model. This provides a simple basis for creating supply chain processes:
Plan – Processes that balance demand and supply to develop a course of action that best meets requirements
Source – Processes that procure goods or services, and manage suppliers, to meet planned or actual demand
Make – Processes that transform inputs to a finished good or service to meet planned or actual demand
Store – Processes that manage inventory for use in manufacturing or to support downstream demand
Deliver – Processes that provide finished goods and services to customers
Return – Processes associated with returning, or receiving returned products, for any reason
Our Supply Chain Strategic Planning process is designed to gather facts and data and then build on the supply chain framework and pillars. The team considered each six supply chain pillars to create supply chain pillars specific to their business. Plan became “Develop solutions that just work” and “Build a culture that leverages data”, Source became “Build strategic partnerships”, Store became “Build a complete and flexible transportation network”, Deliver and Return became “Deliver a high quality experience.”
Supply Chain Strategy Map – Level 0 and 1
A useful way to create a plan is to think hierarchically. Strategy supports the mission, so documenting the mission statement is the first step… if it doesn’t already exist.
This company’s supply chain mission (also called Level 0 Purpose) is:
To Drive Value While Connecting Members
The way to achieve the mission is documented in the Level 1 Purposes, which are the pillars of the supply chain strategy. The Level 1 Pillars enable the mission.
Level 0: To Drive Value While Connecting Members
Develop solutions that just work
Build strategic partnerships
Build a culture that leverages data
Build a complete & flexible transportation network
Deliver a high quality experience
Supply Chain Strategy Map – Level 2 and 3
With the pillars defined, the team created detailed processes to enable the strategy. We continue to use the Strategy Map to hierarchically create these process definitions. An example of our deep dive on “building strategic partnerships” is shown below.
The last step before implementation is to decide what to work on first. We used a gap analysis to help understand where the biggest need is, when implementing the strategy.
The gap analysis requires prioritizing the pillars from most to least important. Even though there are only 5 pillars, there is still a most and least important. Each team member votes anonymously, and re-voting occurs until there is a consensus. Then we decide for each pillar how the company is doing: Very Strong, Satisfied, Needs Improvement, or Lacking.
This is put in a grid (shown below). The areas worked on first are those that have the largest gap. For this company it was “developing solutions that just work” and “building strategic partnerships.”
Implementing the Supply Chain Strategy
The next step is the most important, and honestly, the least exciting. The organization must build processes and realign initiatives around the first two focal pillars. The work of building out these processes took six months.
“In thirty years of hiring consultants, Supply Velocity, Inc. was the first to tell me what they were going to do, set a price they stuck to and substantially exceed my expectations. I have recommended them to friends and acquaintances. They were true partners in assisting with the turnaround of an acquisition we had been struggling with for two years.
Their math-based technology, solid down-to-earth facilitation skills, and positive, patient and enthusiastic attitude combined to make our implementation of Lean a very rewarding experience.
We increased our production by 50% in the first month of implementation and continue to see improvements. Improvements have not only been realized in productivity, but also in quality and morale. We have increased profitability by $2M on flat sales of $10M.
Based on Supply Velocity, Inc.’s integrity and our results, I will continue to refer them to others and utilize them in the future as we expand our company through acquisitions.”
Bill Gilbert, President, Fusion Coatings
“Isolating a problem, finding short, and long term solutions with measurable results is what was promised and results is what was delivered by Supply Velocity. Upon launch of the Lean Six Sigma Selling System, we knew more about our customers, our products, and were able to create a solid plan to increase sales of our most profitable products. Within months of implementation, our booked sales jumped 60% and our most valued customers were getting direct, active, and calculable attention.”
Mark A. Presker, General Manager, Architectural Millwork of St. Louis
“In the spring of 2003, the St. Louis Area Chapter of the American Red Cross engaged Supply Velocity, Inc. to perform a study and make recommendations to streamline office processes, maximize cash flow in purchasing and warehousing and restructure and enhance our maintenance department. Supply Velocity, Inc.’s process was methodical, flexible, staff-oriented, inclusive and, above all, trackable.
In the last six months, our Chapter has realized expense savings of over $380,000 annually, and significant improvement in intra-company service levels has been attained. Supply Velocity, Inc. will return to the Chapter periodically throughout the next 18 months to audit our newly implemented processes. We have been pleased with our results and Supply Velocity, Inc.’s professionalism.”
Joe White, CEO, American Red Cross – Saint Louis Chapter
“We are using Supply Velocity’s Lean Six Sigma methods to analyze a variety of processes including rationalizing SKUs (stock-keeping-units). By using math to evaluate SKUs we took some of the emotion out of our decisions. We expect significant increases in sales and productivity from reducing poor performing SKUs.”
Mark Kelso, Director of Process Improvement, Save-A-Lot
“Supply Velocity has helped Clean succeed in a number of ways. First, they provided the education that kicked off our Lean Process Improvement journey. They also facilitated a number of large supply chain and process improvement projects including: 1) building quality into our direct-labor productivity incentive program, 2) designing the layout of our garment warehouse, and 3) streamlining our route service process.
We have integrated the methods that Supply Velocity taught us into our management and strategic planning. In the process our quality measurement has improved 22% from 2013 to 2015, we have reduced required annual labor by 2200 hours from the garment facility layout project and we’ve seen 50% decrease in error rate. Obviously the numbers speak for themselves, but just as important, Supply Velocity has been fun to work and have become true partners. They have “taught us how to fish” so our internal teams are able to implement change on their own, with the skills we learned from Supply Velocity. This relationship has been invaluable.”
Jeff Lazaroff, Senior Vice President, Clean Uniform
“Anheuser-Busch Precision Printing had been implementing Lean Operations on our own for the past two years. We needed to move faster and partnered with Supply Velocity, Inc. Through Supply Velocity, Inc.’s mathematical workflow balancing and visual management tools, dramatic improvements were achieved. The entire converting operation was rearranged based on Lean principles. The result is a 20.6% productivity improvement, enabling us to operate with 23 fewer people in production.”
Rich Lavosky, General Manager, Anheuser-Busch Precision Printing
“We used Supply Velocity on our Warehouse optimization project. One of the key characteristics of Supply Velocity is that they listened to our requirements and provided a clear path for our Warehouse processes using lean tools and our future sales growth as objectives.”
Haris Tokalic, President, Grand Rock, Inc.
“Supply Velocity has provided the technical expertise and political capital to move our project forward. They have just the right amount of push and the right amount of support. Supply Velocity has helped us make real changes to improve efficiencies in logistics without jeopardizing our performance. We’re happy and our customers are happy.”
David Walters, President, Hy-C
“Supply Velocity’s Lean Six Sigma System has given us new tools to help improve our sales performance. We have learned new ways to analyze our business which makes problem solving more accurate and has made us better leaders.”
Rachel Andreasson, Executive Vice President – Marketing, Wallis Companies
“Your process encourages this group to work together, better communicate and have fun doing it.”
George Edinger, President, C&R Mechanical
“Myerson engaged Supply Velocity, specifically Ray Davis to visit our plant in Trinidad to conduct a two day assessment of our production procedures and provide us feedback on areas for improvement and where applicable, areas for future analysis.
Put simply, we got everything we paid for and in addition to more in depth analysis, we got specific tasks that were immediately actionable. Our local management team found Ray to be engaging, highly credible and insightful based on his wide experience. In other words the cultural differences and lack of specific industry knowledge weren’t impediments to things we could implement immediately and on our own. In a nutshell it was money well spent and will pay itself back many times over.”
Lee Hartwell CPA, Plant Manager, Myerson Tooth
“We used Supply Velocity to rethink our sales process. By analyzing the entire process we found wasted time in our Sales, Admin and Operations departments. Streamlining this process created extra time for each Sales Rep, allowing them to spend more time with Customers and increase the value we add. Gross profit margins are up 40%!
We are now using Supply Velocity to help us rethink our entire Strategic Plan.”
Jeff Reitz, Vice President, Central States Bus
“Our experience with Supply Velocity was one of the best values we have ever had from a consulting project. Cyril Narishkin brought a structured lean methodology, invaluable experience and engaging facilitation skills to help us streamline a very complex and disjointed sales order process. Just as importantly, our team now has the knowledge and process competencies to address other business improvement opportunities going forward.”
Mike Howard, CEO, Aspeq
“We are pleased that Essex selected Supply Velocity, Inc. as our Lean Implementation Partner. At one facility, we have saved over $350,000 in work-in-process inventory, reduced throughput time from 2 weeks to minutes and increased inventory turns 3 to 8 times per year. All these results are in just 6 months. Our return of investment is very high.”
Terry Etter, Vice President of Operations , Essex Medical Systems
“Mitch Millstein and his team helped guide our shop fabrication division in the re-layout of our custom pipe and steel fabrication facility when we moved into a new building. It is not only the results but how he helped. We were involved in every step. I personally did time studies and was able to see the non-value added steps required to manufacture in our old layout. When we created our new layout, everyone was involved, from the executive team to our direct labor force. With Mitch’s help we increased our throughput by a 3x multiple, while providing more competitive prices to our clients as a result of the efficiency improvements.
This has enabled us to not only make more money but also to expand our commercial reach and serve more, and larger customers. I would recommend Supply Velocity to any company that wants to make improvement in supply chain and operations.”
Geoff Gross, President, Gross Mechanical
“The role of the Erie Insurance Marketing Department has been evolving over the past several years – from a support role to a more critical role of driving growth in our organization. Because of our increased workload and desire to prioritize the most critical projects, we hired Supply Velocity to teach us the skills of Lean Six Sigma.
Participants included the Promotions, Market Research and Agency Licensing sections of the Marketing Department.
We learned valuable tools to help us to prioritize based on the voice of the customer.
I firmly believe these skills made a difference in how we work every day. We are moving new projects forward, eliminating or changing ineffective processes, and we are a much stronger department. We continue to use the tools to help us with our highly-complex and time-consuming projects. Supply Velocity helped us to accomplish our goals.”
Karen Rugare, Director of Marketing, Erie Insurance
“In a time of volatile supply chain disruption, Supply Velocity is helping us develop Demand and Supply Planning processes to proactively tackle these new challenges. They are genuine partners, working with our team, facilitating and teaching.”
Jane Thrasher, Vice President of Supply Chain, Horizon Hobby
“In 2015 we began working with Dr. Mitch Millstein to optimize our inventory locations supporting e-commerce and in-store inventory needs. From this work we developed a new omni-channel warehousing and inventory plan that entirely redefined our approach to warehousing, inventory management, store distribution and fulfillment. As a result of the analyses by Dr. Millstein we have begun the move to an improved omni-channel design by reassigning MSAs to new warehouses, greater leveraging of in-store inventories to satisfy e-commerce demands, and exploring acquisitions of new warehousing space in strategic locations. We have already seen an improvement of $300,000 from both more efficient shipping strategies due to better inventory management.”
Rob Bowers, Vice President of Strategy, Total Hockey
“Closure Medical recently completed a major reorganization in order to enhance our ability to rapidly create innovative medical devices. We hired Supply Velocity to help us map out the process and service flows of the new organization that would maximize our product development process (PDP). In four weeks, Supply Velocity helped us envision a new PDP structure, develop measures and accountability for each step, and gain consensus within the organization. Supply Velocity’s focus on speed and accountability helped us complete a critical project in a timely fashion.”
Gabe Szabo, Vice President, Product Development, Closure Medical – A Division of Johnson & Johnson
“I am thrilled to provide this testimonial for Supply Velocity and their outstanding work in implementing Lean Warehouses and processes at Crescent Parts & Equipment through the COVID pandemic. With their data-first focus and Mitch’s exceptional coaching and experience, they transformed our business into a more supply chain-oriented organization, enabling us to grow while prioritizing employee safety and creating a better work environment. Supply Velocity’s expertise in Lean methodologies and their comprehensive evaluation of our customers have been instrumental in optimizing our operations and increasing customer satisfaction. We highly recommend Supply Velocity to any company seeking to implement Lean processes and enhance their supply chain efficiency.”
Josh Cole, Director of Supply Chain, Crescent Parts & Equipment
“Supply Velocity created visibility within our Assurance Services Group… visibility of performance, Client-service, employee satisfaction and processing time. Using the Supply Velocity System, Audit Report Cycle time is down over 50%. We are using his strategies to create greater Client loyalty.”
Fred Kostecki, Partner-In-Charge, Assurance Services, Rubin Brown
“Supply Velocity is driving instrumental change in our inventory management processes. This is critical for us to be competitive in a supply chain environment with numerous disruptions. They are making change happen, which can be challenging in a 182 year old organization.”
Jim Carroll, Executive Vice President Operations, Schaeffer Manufacturing
“Many thanks to all three Supply Velocity presenters. I think you guys took a very difficult time for learning and capitalized on everyone’s time and training needs. I truly hope this helps your business as this was a considerable undertaking on the part of Supply Velocity. Outstanding!!”
Mark Holdinghausen, VP of Operations, DEMA Engineering
“Supply Velocity gave us the tools to analyze our business and processes based on the facts and numbers versus our perceptions. Our common quote was “Let the numbers lead us”. The key for our organization was how quickly we moved from classroom to actual project initiation. We were able to jump in, start using the tools and see a difference right away.
The get-into-action approach was good for our culture.”
Ned Lane, President, CeeKay Supply
“C&R was struggling with labor productivity. The construction crews were often missing materials that they needed to do their work. This caused significant idle time. Supply Velocity, Inc. and C&R used value stream mapping and visual management tools to make dramatic improvements in operations. Most importantly, two years later C&R is sustaining and improving on the implementation. C&R’s return on investment was 11:1. C&R had a record year last year in both sales and profits and would not have been able to pull it off without the changes Supply Velocity, Inc. helped us make.”
Tom Kuthe, V.P. Construction Operations, C&R Mechanical
“For several years we have worked with Supply Velocity to support us with their expertise on Lean Operations and Supply Chain Management. Supply Velocity has helped us implement Lean, improve our inventory systems, and educate our people. They are professionals who are always available to help us as needed.”
Lorenza Pasetti, CEO, Volpi Foods
“We engaged with Supply Velocity to help us embed process improvement at all levels of the business. Our team learned from Mitch to let the data drive decisions, to use Lean tools to help us see our processes critically and objectively, and to create a control plan to manage all of the tasks that were the outcome of the data study.
The project turned out to be very significant to the company and most importantly, our customers. We reduced our customer wait times by 40%, and cut in half the labor cost to fulfill customer orders.
Some results are not able to be measured. However, as a result of this project, we have started to build a Lean mindset and culture, which is part of our strategic mission to save our customers money. Supply Velocity has been a valued partner in this mission.”