Perspectives on Information in Supply Chain Visibility and Risk Management
During the Cold War, a Soviet general told his American counterpart (while sipping champagne at a US Embassy reception in Moscow): “You people don’t get enough information. And our problem is …we get so much, we don’t know what to do with it! You should see the storehouse of tape recordings no one will ever listen to or analyze! But who knows if either one of us gets the right kind?” What a difference in perspectives!
Isn’t it interesting that the same perspective can be easily applied to managing supply chain risk?
Supply networks are spread like enormous webs around the globe, and companies face the same problems – too much, not enough, the wrong kind. This challenge has been translated into terms like “risk management” and “visibility.” As a practical matter, it means understanding whether you know enough about your suppliers and the materials they send you and, if not, what will you do about it? The issue is being framed at many levels in board rooms, in the trade press, and by specialized units of consulting companies. It is also being confronted at the “shop floor” level, by the professionals involved in managing supply quality on a daily basis.
THE BIG PICTURE VIEW: the perspective from the top
One of the principals at Deloitte & Touche LLP, involved with supply chain risk, addresses the big picture of the challenge in a question addressing the impact of the wider environment in an article titled Supply Chain Risk Assessment: Mining for Potential Threats:*
Q: How has the changing business environment impacted the way organizations approach supply chain risk?
Kate Ferrara: … when organizations start to think about monitoring risk in that context [the changing business environment] they may realize there are more things outside of their control than there had been in the past. Risk sensing data can play a role in those situations because it can help organizations begin to understand what’s coming around the corner. In that way, companies anticipate supply chain issues and potential disruption or risk more effectively rather than responding after an event happens. A way to start is by asking, “How do we get a better handle on what could go wrong?
The same perspective informs the suggested solutions, in a question answered by the leader of the Deloitte Center for Global Food Value Chain, James Cascone:
Q: What examples of unexpected findings have supply chain risk assessments revealed?
James Cascone: Some organizations are surprised to find that even though they have some visibility into their tier-one suppliers, they don’t have much transparency into what those suppliers are doing, let alone what their tier-two or -three suppliers are doing.
For example, some companies found that they didn’t know how suppliers were managing inventory or didn’t have solid knowledge of their supplier’s production capacity. Although there often is a good deal of trust between companies and their suppliers, the risk assessment is slowly changing that relationship to a trust-but-verify approach. Coming out of a supply chain risk assessment, a company’s management can begin to learn what a particular supplier’s true vulnerabilities are. From there, they can collaborate with the supplier to develop a more flexible supply chain.
This top-down perspective must also consider what it considers to be the “top.” At what level should the risk management (information gathering) conversation take place? The Deloitte consultants explain:
Q: Do supply chain risk issues generally rise to the board level and, if not, should they?
Kate Ferrara: Ideally that’s what organizations should aspire to, viewing supply chain risk from a strategic, board-level perspective. Generally, that is not the case, but it’s changing. Given the many other issues boards have to face, it may not be feasible to add supply chain risk to their tasks. Nevertheless, management should consider how to elevate the discussion on supply chain risk to a more strategic level before such a risk occurs.
From this perspective, the management looks at the big picture, and not “down” to where the reliability is actualized in terms of risk management. It is, rather, focused on strategy, which considers the worthiness of the supplier as a company. It doesn’t descend to the level of materials flowing into or out of the supplier or even their own company, nor where materials are being processed or incorporated inside the company and then flowing to another location or to the consumer.
THE SHOP FLOOR PERSPECTIVE
One of the companies using GSQA®, our company’s Service-as-a-Software (SaaS) solution, is Handgards. For over 40 years, Handgards has been a North American manufacturer of approximately 800 foodservice plastic disposables, a number of which require compliance with medical-grade standards. Of finished products sold, 75% come from overseas independent suppliers, while 25% are manufactured in El Paso. As the business continued to grow, requirements for managing information greatly increased because of the sheer volume of suppliers (45) making a large number of products. Each lot arrived with a Certificate of Authenticity (COA).
Before changing their methodology, Handgards received COAs from suppliers as well as laboratories in the form of e-mails, but that’s not the whole story. Not only did each item require certification, but also (on some items) the ten ingredients (for example) that went into making the item, each required its own certification, with all of the data being entered into Excel spreadsheets.
While Handgards gave suppliers a standard template, they often adjusted the data to fit internal conventions. The first approach Handgards used to track their information gathering efforts was Excel spreadsheets. One of the major limitations of this system was the impossibility of applying Statistical Process Control (SPC). Suppliers sent documents in a range of formats, including images, PDF files, and Excel spreadsheets. In addition, there was a language barrier, with some suppliers submitting data in their native language, which meant translating each document.
There was nothing in the system that could tell Handgards management quickly if materials were in-specification or out. As the number of orders and items and lots grew, the data became so massive that the flow of data eventually ended up “crashing” the system. In a sense, the company was faced with a situation similar to that of the Cold War era Soviet general – an unmanageable amount of information relative to the methodology in use.
THE QUALITY PROFESSIONAL’S PERSPECTIVE
Companies are charged with safeguarding, and sometimes defending, a daunting list of domains: customers, investors, reputations and brands, as well as simply market share. To do so successfully requires dealing with many different pressures. It’s a process that requires constantly reviewing and answering a plethora of questions. Quality professionals must consider many questions, sometimes needing to manage “up” (asking top management to review them and authorize the adoption of state-of-the-art approaches) and sometimes implementing changes at their own levels or below. Among these are:
Do we know where the materials in our supply chain are coming from?
- What do we need to know about them (critical points associated with serious consequences)?
- How quickly do we need to know (what is the necessary lead-time to allow for an intervention, rather than after-the-fact information)?
- At what resolution does the information need to be presented?
- How do we ensure its reliability?
- Who, in our company, needs to get it and in what form?
- How do we standardize the information we get so we understand what we’re seeing?
- How do we make it possible for our suppliers to give this information to us?
- How much does it cost, and is it worth the cost?
- How flexible, safe, and scalable should the approach we select be?
Depending on the answers to the questions above, companies may want to consider installing cost-effective solutions like those offered by GSQA® which can make this kind of management both relatively easy to implement, efficient and cost-effective. It can be implemented as a Software-as-a-Service solution requiring the company to install no new software.
Visit www.gsqa.com for detailed information about managing material variability and acceptable quality at each checkpoint in your supply chain to provide quality assurance that lowers incident and defect rates, enables supply visibility and ensures spec-driven material performance.