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OPS Rules Blog: Insights into Supply Chain and Operations Strategy

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There is no Supply Chain Zen

 
supply and demand yin and yang resized 600

The things we fear most in organizations -- fluctuations, disturbances, imbalances”, part of a famous quote, which I promise to complete later, summarizes the very things that keep most supply chain and operations executives awake at night. The difficulty lies in better predicting these imbalances, and effectively planning to prepare for them. The challenge of optimal deployment of capacity and inventory – what, where, when and how much – will determine how well you deliver value to your shareholders.

Think differently about supply chain risk

 
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A recent survey notes that Supply chain disruption tops manufacturer's concerns. A third (35 percent) of businesses in the manufacturing industry are extremely concerned about potential supply chain disruption according to BSI and the Business Continuity Institute (BCI). 

Reward those who cooperate with end to end optimization goals

 
Incentives for end to end optimization

This is the final blog in a series devoted to exploring organizational techniques that can be used to accelerate the achievement of improvements in the supply chain within a complex organization. The series applies the principles in the book Six Simple Rules to Capturing Value Locked up within Complex Organizations

4 techniques to manage change in a complex organization

 
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In the organizational keys to managing a complex supply chain, we discussed the importance of avoiding the over-specialization of operating professionals and the value that greater understanding and transparency bring to the decisions made by each function.  Absent these insights, functional processes and performance objectives become isolated, even frozen, and the individuals operating these processes may become reluctant to make the necessary changes. This is because they are used to having one hundred percent control of achieving their performance objectives and may even fail to understand why they need to change. 

Is your supply chain exposed to currency exchange volatility?

 
Simpson pound devalued

Architects of global supply chains, traditionally, have focused on strategies that were hypothesized on economies of scale and availability of low cost labor in countries like Brazil, Russia, India and China. But, lately, the surge in demand for improved service, the aggressive competition and the recognition of global uncertainty – uncertainty stimulated by changing labor conditions, extremely volatile oil prices, natural disasters and a spate of other geo-political factors – have made everyone rethink their manufacturing and distribution strategies. Leading global supply chains are being redesigned for not only scalability, but also for flexibility, as we described in leveraging your supply chain as a hedge against uncertainty. A very important part of this redesign process is sensitivity analysis, i.e., testing your network for robustness against controllable as well as uncontrollable factors.

The organizational keys to managing complex supply chains

 
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In Why organizational power matters in complexity management, we discussed how to identify key individuals and organizations and how to plan implementation efforts so that complexity reduction recommendations are advocated and not resisted by powerful individuals and organizations.  Here, we carry on this discussion and focus on how to redefine organizational roles, responsibilities, performance goals and metrics to encourage higher levels of cooperation and better performance in complex supply chains.

Why Power Matters in Organizational Complexity Management

 
Organizational power

In Capturing Value within Complex Organizations, we discussed at a high level how supply chain analytics and organizational techniques can be used to identify and capture hidden opportunities to reduce costs, cycle-times and inventory. The concepts are based on Six Simple Rules:How to Manage Complexity without Getting Complicated. Here we explore the role organizational power plays in identifying and capturing significant benefits from complexity reduction efforts.  The concepts and conclusions presented here apply to both organizations that have either physical supply chains or so-called service supply chains (e.g., telecom services, customer service organizations, software delivery). 

How to manage your groceries like an inventory pro

 
Food Pantry

Businesses have benefited greatly from new technology and systems.  Advances in computing hardware and software allow companies to develop complex models to optimize inventory positions with a PC, a software package, and training.  In Managing inventory in our daily lives, we explained how inventory concepts presented themselves in everyday life. This time, let’s explore how everyday users can achieve similar gains in managing one of the most common, yet mundane, aspects of life: grocery shopping.   

Cultivating Integrators to Overcome Organizational Complexity

 
Integrator

In Capturing Value within Complex Organizations, we discussed at a high level how supply chain analytics and organizational techniques can be used to identify and capture hidden opportunities to reduce costs, cycle-times and inventory. The concepts are based on Six Simple Rules:How to Manage Complexity without Getting Complicated. Here we introduce the concept of (organizational) integrators and explain why they are so important to the change process but are often over-looked and describe techniques we use to encourage them to engage early and well in the planning and executing end-to-end transformation projects.  

What can you do about higher inventory in Pharmaceuticals?

 
Pharmaceuticals
For pharmaceutical companies the focus is typically on assuring revenue with the goal of one hundred percent fulfillment. Therefore, it is not surprising that pharmaceutical companies, and especially bio-pharmaceutical companies have much higher inventories than other industries. Yearly Inventory turnover is often below 2 and in some cases even below 1, meaning that the company in question holds a year’s worth of sales in inventory, which is an expensive and inefficient proposition.
Financial analysts often track these numbers to assess the health of a company, this assessment of Teva yearly turns is around 2 whereas for Taro Pharmaceuticals  they are evaluated at 1.5 turns. Other industries tend to do a lot better. Dell yearly turns are 32 and it is considered a leader in inventory management in the hi tech industry, Toyota has around 11 turns, in a somewhat slower industry. 

The following are six possible reasons for the high turns in pharma:

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