Are not supply chains a question of “intelligence”?

This piece came to my mind when seeing it printed in gigantic types on a big truck.

This year a campaign was started in the EU against mega trucks, and for a number of good reasons: road wear, accident risks, and need of far away warehouses where to load and unload these enormous vehicles.

Sea transportation is a no better means than mega ships for transporting thousands of containers or hundreds of thousands of  tons of oil or gas.

Large airports are not good too.  Their almost daylight lighting makes the fauna run away, just the same as the larger harbors and noise made by big ships.

Needing wide, almost desert roads, like in Australia, such roads will have to be built for mega trucks, destroying houses, forest and fauna.

TRANSPORTATION IS CRITICAL
Transportation – or forwarding – doesn’t therefore seem to be the wisest or the most effective – environment-wise – solution to an ever increasing global economy.

From history we learn that some great leaders – Epaminondas, Alexander, General Sherman – conducted great campaigns in what were their days with almost no logistic support at all.  They supplied themselves with what they needed, food, shelter, and water.

At the same time, we’ve learned from history that the success of both World Wars and their campaigns heavily depended on logistic support.  Vietnam war too, and even modern warfare can’t live without effective logistics management.

Nuclear submarines could be on mission for months, but the missions’ time is limited by the necessity of fresh food and of crew’s necessity to rest.

PROCESSING WHILE IN TRANSIT
I was much impressed when hearing of Japanese whaling ships processing whales on board; the same happens with fishing ships, cleaning, freezing and storing frozen fish on board.  In old times, fish was cleaned and salted, nowadays it’s frozen.

I’ve also heard of Chinese selling their metalworking equipment to western countries and assembling the equipment while the ship navigates.

These are all examples of how transportation time can be advantageously used for processing.  It’s hard to imagine that processing could be done on trucks.  The only thing that comes to my mind is to load trucks with easy-to-mix non hazardous, light liquid substances, so the mix will be ready upon arrival after long hauls.

Nevertheless, since continual training would be a crucial matter, especially when addressing risk.   Cargo airplanes, cruise and cargo ships crews could be continually trained for emergency situations dealing with continual processing.

LOGISTICS
We haven’t touched on train logistics.  It has certainly many advantages over road transportation in the long distance.  But it has to be well organized and managed.  Train logistics have to be organized in hubs, efficiently connected to seaports and to the main industrial stations.  There’s no sense in having fresh fruit or vegetables in a truck loaded container leaving on a ferry from Palermo harbor to Genoa – a 24 hour voyage – and then another 12 hours, including paperwork, from Genoa to the railway terminal, and from there another 24 hours to – say – Germany or Denmark.

Should we still speak of “fresh” fruit and vegetables?  Not really!

Certainly, Sicily’s weather is not the same as Germany’s or Denmark’s.  Just the same as the bananas we eat here get ripe on the refrigeration ships sailing from Brazil, Ecuador, Colombia to Italy,these bananas would taste like zucchini or would get rotten and go to waste.

What’s the solution?  Why not grow them on ships sailing to the ports of destination?  We have the necessary technology.  Darwin and Bligh did it when sailing a few centuries ago.

IT’S ALL ABOUT RISK!
Supply chain management is really supply chain risk management.  We have to be adept at  foreseeing the risks that our supply chains can incur.  It will force us to invest money and resources to anticipate the foreseeable risks so not to possibly be hit by them.

Nonetheless, our supply chain, or important parts of it, can break down, independently from our will, for many a cause.

What shall we do in such a case?  We cannot be un-prepared to such a dramatic event.

This is one of the reasons why we’ve to keep our eyes wide open to supply chain risks.  The next one being that the “chain” inter-connects suppliers, thus making our entire supplying process quite a labyrinth.

I’ve often insisted – and I still do – that any supply chain is a process.  Much more than a “chain”, it has to be looked at as to a branched tree, as to a spider web, as to a network – any supply process is anything but linear.

Once more, history teaches us an important lesson in World War II.  UK was almost starving for lack of primary food and its industries had no raw material to feed its  manufacturing processes.

Supply chain intelligence has much to do with logistics.  In as much both have to detect the weak points in providing the necessary resources and therefore do what’s necessary to mitigate risks.  This is especially critical when performance of supply chains and logistics are crucial to the organization’s overall performance.

We have also to view logistics as a much more complex process than transportation and warehousing only, as far as our supply processes are concerned.

Logistics can be expanded to include – for example – packaging operations from bulk to individual packages, ore sampling and analysis, radioactivity measurements, and so on.

I’ll never stop criticizing some interpretations of ISO standards that lead us to believe that supply chains could be controlled via paperwork only.  If we really want to know what we’re supplied with, we havve to be there where it’s shipped and where it’s received – directly or via skilled, reliable local inspectors or agents.

UNFORESEEN RISKS
The aim of really effective logistics is to focus on the critical few suppliers in order that our delivery processes do not incur unforeseen risks.

This will require that our internal auditors, or engineers, be well aware of our supply and delivery processes, and be empowered to warn top management of any foreseeable failures or failure risk.  Additionally, they should also be empowered to suggest or design how critical supply operations could be moved further upstream.  Just as the saying goes “fish where the fish are.”   We should look for and at risks where risks are.

What’s the solution?  Let’s look at Ockhams’ Razor.  Among competing hypotheses, the one with the fewest assumptions should be selected.  Other, more complicated solutions may ultimately prove correct but – in the absence of certainty, the fewer assumptions that are made, the better.

When trucks, wagons, ships, barges, and containers are at our plant’s gates, it’s simply too late if the merchandise we need is found non conforming.  We certainly may have some inventory to protect us but stocks are expensive, both in terms of fixed assets and in terms of cash.  Knowing in advance the quality we’ll get will reduce the risks to reduce the plant’s output or stop it at all.

This is especially true when our supplies originate from faraway countries.  Transportation time depends on weather conditions or what are commercially called “Acts of God”.  Many buyers cancelled their orders or had to buy from more expensive suppliers, that had what the buyer needed.

Of course, “supply chain intelligence” cannot guarantee that we’ll be exempted from all supply risks; but it’ll give us a wider and deeper perception of the risks we may incur when buying, especially when buying for assembly.

Again, effective supply chain processes are far from being a simple question of paperwork, charts and rating.  We must not limit ourselves to this.

Supply processes go hand in hand with logistics processes.  And, these have to be subjected to the ISO 9001 requirement for continual improvement if we really want to think in terms of risk reduction.

As I wrote above, logistics processes have to be thoroughly reviewed in terms of their capability to produce compliant products.  Unless the buyer’s customer compels him to do the job himself, there are ample opportunities to sub-contract jobs.  This only works provided the buyer keeps his eyes wide open to suppliers’ risks.

Cases where buyers are much smaller in size than their suppliers and don’t have have contractual power are very common.  To the extent that suppliers even prohibit the buyer to visit their premises.

Beside diplomatic negotiations and by saying this I mean the buyer has to be a good seller of himself or herself.  If the buyer’s customer is equalling the supplier’s size, I would make them speak to one another.  If not and no smaller supplier is available or appearing at the horizon, I would double-check whatever I get from that supplier and cross my fingers.

I wouldn’t be the first to be hit by a supplier closing his tap for financial or market reasons,  that’s life.

It’s however essential that the buyer’s top management be informed and warned of any possible and foreseeable supply malfunction and that top management’s commitment or policy clearly states its will to put risk – controls in place.

All too often, top managements’ commitments or policies fail to address the organization’s vital processes.

EFFECTIVE LEADERSHIP
Captain J.E. Moore and Commander R. Compton-Hall in their book Submarine Warfare (Adler & Adler Publishers, Bethesda, Maryland, 1987, from page 51 on – and especially pages 60 and 61) make an interesting analysis of how dull routine  can reduce attention and motivation.

A submarine is a stand-alone, closed system organization. it’s therefore rather similar to a commercial, manufacturing or service organization, where processes receiving inputs and producing outputs are routine.  It’s critical in a submarine to be always alert.   This is done through leadership.  No written commitment or policy could ever replace the leader’s eye and hand.

Whatever we mean or intend to do in our organization, be its size very small or very large, has deal with ALERTNESS.  We can’t afford to be caught asleep when Risk attacks us.

With colleagues, I’m presently working on a project started by a primary Italian University.  The project itself means nothing new under the sun, but it summarizes the discontent that buyers feel towards their suppliers.

Though registered to some standard, suppliers are not believed to be reliable, thus this project is meant to by-pass this stalemate and do without third party registration.  Will this provide us greater supplier assurance and answer the “make or buy?” question.  I don’t know, but it raises a lot of questions.