In previous decades, the adage of seeing the big picture was often counterbalanced with a grim realism declaring that everyday realities and difficulties ultimately reduce that picture to empty ideals and failed goals. Hence, the latter often insists on just survivability via desperate cost reductions even though there is actually no guarantee that what they are doing is sustainable. In fact, it’s been clearly demonstrated through experience that it’s not.
Unfortunately, as human beings we are limited by the capacity of our own minds. And so, rather than stretching them to understand the complete end-to-end supply chain (or even the industry-wide supply chain which we are being asked to do now), we focus on that little piece of the supply chain that we think we can control and have some influence over.
This means we continually compartmentalise it, into functions, like manufacturing, warehouse, transportation and then further into subfunctions like picking, packing and inventory management.
We set to work delivering improvements which can be measured and costed and we think we’re ‘shooting stars’ for a moment because we can show that we have reduced cash or reduced cost in our supply chain.
And then, the focus moves on to some other area which then improves as the result of greater focus and so on.
However, what really happens to these areas once the improvements have been delivered? Is there a:
- Proverbial stake to keep things in place?
- A set of processes mapped?
- Solid unmoving foundation established for future business improvement?
- A new thought process that can even drive even more improvement?
Oftentimes, the answer is: No!
The reality is that these ‘improved’ supply chains are just left to go back to the very place that they started.
You think this is just exaggerated cynicism? It’s actually a serious reality. You would be shocked to know how many times a listed company can, for instance, save millions in improved inventory management. But instead, every year they just promote the last guy and move in the next one to clean up the mess that has regenerated because no one seems to remember how to actually map a process and hold people accountable for implementing the new process daily! (Imagine ‘saving’ the same $100M every year and then wasting it within the same timeframe.)
Furthermore, because no one is actively looking at the grey areas that are usually the cause of supply chain failure (such as the areas between the functions), this method falls flat.
These grey areas are crucial to manage because of the way each parts of the SC handle their capacities and outputs.
- The manufacturing facility will have a capacity and an output.
- The logistics provider will have a capacity that it can manage along with an output and an input.
- The warehouse will have a capacity that it can manage, an input, output and store.
- The distributor will have a capacity that it can handle, an input and an output
- The customers themselves will have a capacity that the need to handle.
And yet, who exactly is seeing and managing these different capacities? Often no one.
Surely, there is a better way.
So, what if we could actually get a holistic end-to-end view of our supply chain? Would that solve the issue? And how do we ensure that this just doesn’t become another failed vision or mission that was simply too big, too far fetched or too ideal for anyone to connect with the reality of their current position? (Which in turn, ensure that the changes and benefits remain in place even when the key leaders of the change initiative were promoted or moved.)
These are very important questions to ask (and not simply because they touch the issues of visibility). When an organization’s leaders (no matter where in the organisation they reside) can unanimously see the big picture, they can also see opportunities to drive value which are not too narrowly focused on reducing costs.
In our supply chains, every industry has varying levels of cash and costs that needs more than siloed calculations to measure. Truly accurate calculations are those that can work on reducing cash and costs but still stay in line with the optimal operation of the supply chain (while also ensuring that it maintains its focus on the customer).
Procurement, for example, has often been the process that many chief executives look to to reduce the costs in their supply chain, because everyone understands that if we can buy better we can save! But in a recent report by the Hackett Group, there are signs indicating that this is about to change. It won’t be about just reducing costs but leveraging the power of process automation, big data and advanced analytics to make choices that have a wider, more positive effects on the SC.
Because when one is too narrowly focused on cost-cutting, they become just as guilty of creating an idealized picture that is wholly fixated on certain numbers and not the other realities of the SC network (from suppliers to end customers).
In contrast, truly holistic big picture thinking is capable of a wider perspective that considers things like the following:
1. Street level perspective
It’s a well-known narrative: A company strives to reduce the cost of raw materials by changing purchasing supplier and location, hypothetically, and inadvertently discovers that the new supplier is cutting back on quality check processes. But by opting for cheaper sources with weaker QA, the end product suffers and results in negative impact on the finished product and damages credibility. It culminates with sentiment taking to new lows and corporate now struggles with rebranding.
Another similar story is a company laying off employees to replace them with machines but finds itself paying additional costs to retrain new operators (when they could have simply upskilled established employees).
A big picture perspective is not necessarily one that takes off and forgets to see things from the eye of the layman. In fact, it is one that often starts by seeing things from that same person on the factory process line or in front of the counter.
2. Crowd perspective
Have you ever observed a busy shopping street? It may seem random and chaotic. Look more closely though, and you might start seeing connections from the interactions that take place.
You have shopkeepers busy handling supply as the demand comes in the form of a line of customers. You might see delivery drivers, leaving their vehicles and walking to shops to deliver their products/parcels. Different specialty stores crop up, but their combined appeal to the people tell a story about the town’s overall culture.
All of which implies that there are overarching influences at work that drive each, individual interaction and activity. Just because you cannot see the patterns or reason for these interactions doesn’t mean those patterns aren’t there. When you make a change to the system, even simply studying the system can lead to a change in the system.
A mindset that is strictly focused on cost-cutting often runs the risk of overlooking the snowball effect their decisions make on the whole system. This is why the analogy of bubbles under plastic works well in supply chains. Take cost out somewhere in the supply chain and if unmanaged, the costs pop back up again elsewhere.
3. Ecosystem perspective
Lastly, you have the perspective that needs to account for the relationships between systems in your supply chain (such as those between your logistics partners, suppliers, manufacturers, distributors, customers, etc).
Gone are the days when each aspect of the supply chain is practically forced to rely only on the data they have acquired on their own processes. New technologies are allowing information from other partners to flow through more freely and more accurately and they must because of the need to manage the grey area and the differing capacities issue raised earlier.
As a result, supply chain leaders have bigger roles and responsibilities in ensuring that this information is understood clearly and must always be concerned with any possible impact that could lead to less desirable chain reactions or consequences.
In short, authentic big picture thinking is more focused on value generation and value loss than merely focusing on costs. Because when value is lost, the impact of survivability is keenly felt even when the numbers may not always be saying so. The world of supply chains is entering an age where industry supply chains are the norm and we are working beyond improving value towards true optimisation of value across a loosely network group of industry players (who may be partners and collaborators in one part of the supply chain and competitors in another part).
All of this in the name of creating more combined industry value (rather than destroying it).