Supply Chain Management For Dummies. Daniel Stanton

cooperation, and relationships

       Developer: Force for creativity, change, and flexibility

       Administrator: Force for analysis, systems, and control

       Producer: Force for energy, action, and results

      FIGURE 2-3: Dominant group personalities.

The strength of these personality forces leads to differences in the culture of a team or organization. The most accurate way to measure culture is to formally interview people on a team and then analyze their responses. But in many cases, you can get a good sense for a team’s culture simply by working with the team for a little while.

      Teams that are driven by the Integrator force tend to have a group culture, in which everyone is encouraged to develop personal relationships and informal communications. In a group culture, people feel that they’re part of a family. But a group culture also tends to be exclusive: the team against everyone else.

      Teams that are driven by the Developer force form an entrepreneurial culture, in which everyone focuses on realizing a common vision. Communications are informal, and ideas are exchanged with people inside and outside the group. An entrepreneurial culture may tolerate bad behaviors that don’t interfere with achieving the shared goal.

      Teams that are driven by the Administrator force create a hierarchical culture, in which communication is formal and shared through official channels. Hierarchical cultures are good at developing processes and ensuring consistency, but they’re often slow and inflexible.

      Teams that are driven by the Producer force develop a rational culture, in which communications are concise and fast. Plans are made, plans are executed, and updates are sent out to keep stakeholders in the loop. Rational cultures are good at keeping teams focused and delivering results. But these cultures often find it hard to deviate from a plan, even when the circumstances around them change.

      A useful exercise for analyzing your supply chain is to list the groups that work together and try to determine the dominant culture of each group. This exercise can help you anticipate conflicts that might emerge when these groups interact and find ways to use differences to your advantage. Here are some examples:

       Purchasing departments often have a hierarchical culture, whereas operations departments have a rational culture. The purchasing department may feel frustrated because operations doesn’t follow the rules. Operations may feel frustrated because purchasing is slowing it down. So you could create a small team of expeditors, made up of representatives of both operations and purchasing, to manage urgent orders while ensuring that all the proper policies are followed.

       Large companies often have strict rules that lead to a hierarchical culture. Startup technology companies that focus on innovation have an entrepreneurial culture. To take advantage of the latest technologies, these companies may need to start new programs that respond faster and have more flexibility for their suppliers.

       Human resources teams often have a group culture, whereas consultants may have a rational culture. The human resources team may find the consultants rude and disinterested, and the consultants may view the human resources team as being nosy and unprofessional. For these groups to work effectively through a corporate merger, for example, you may need to schedule time for their members to interact in a social setting, such as a kickoff celebration.

      You can also use an understanding of group personalities to choose teams to partner with in your supply chain. If your priority is creativity and innovation, for example, you’re likely to work best with supply chain partners that are driven by an entrepreneurial culture, and you’re probably going to be disappointed by a supply chain partner with a hierarchical culture.

      Gattorna makes the point that supply chains are dynamic, so balancing these forces is an ongoing process. One way to create balance is to build teams of people that include each of these tendencies. If the team has a diverse set of personalities, its members are more likely to appreciate the strengths of diverse supply chain partners and find ways to build effective relationships with other teams.

Designing Supply Chain Systems

      The most complicated way to understand a supply chain is to look at it as a system. (I think that this perspective is often the most useful.) Like many other systems that we encounter every day, supply chains are made up of interconnected components that can behave in unpredictable ways.

      Your car is a good example. You expect your car to move you from Point A to Point B. In fact, you probably take for granted that your car will take you to Point B any time you want to go there. But your car is a system, and it can perform the way you expect it to only if all the components are operating correctly. A dead battery, a broken fuel pump, or worn-out brakes could bring the whole thing to a halt (or, in the case of the worn-out brakes, not bring it to a halt).

      Supply chains are systems too. The components that make up supply chains are people, processes, and technologies. Each of these components needs to be organized and managed correctly for the system to operate as expected.

When you look at them as systems, you begin to see that supply chains have underlying rules and patterns that are key to understanding how they work. A good example of one of these patterns occurs when a company experiences wild swings in inventory levels. It can be difficult for people in the company to understand why these swings occur until you look at the supply chain as a system. Then you can recognize a pattern called the Bullwhip Effect, in which inventory peaks and valleys are amplified as they move upstream from one step to the next in a supply chain. The Bullwhip Effect, which occurs often in supply chain systems, is a normal, predictable result when everyone in the supply chain makes decisions that seem to be logical. To fix the problem, you need to change the system, which means understanding what is really happening.

      Here’s a scenario that explains how a Bullwhip Effect can occur. A customer comes in to buy a widget, which turns out to be the last widget in the store, so the store needs to order more inventory from its wholesaler. But the wholesaler doesn’t sell individual widgets; it sells widgets in cases of 100 units. Now the store has to buy a full case — 100 widgets — even though it sold only one. If that case was the last one in the warehouse, the wholesaler will replenish its inventory by ordering more widgets from the factory. The factory, however, sells widgets in batches of 100 cases, so the wholesaler has to buy 100 cases of 100 widgets each. The wholesaler just bought 10,000 widgets even though it sold only 100.

      How many widgets did the factory sell? 10,000. How many did the wholesaler sell? 100. And how many did the customer buy? Yep: 1. A small demand signal at the end of the supply chain became amplified at every step, creating a Bullwhip Effect on inventory. The store may never sell another widget, so it would still be stuck with 100 widgets in inventory. The wholesaler may never sell another case of widgets, so it may be stuck with 100 cases of widgets. All that extra inventory costs money for everyone in the supply chain without adding any value.

      Here are three ways that you can change the system to reduce and even eliminate the Bullwhip Effect:

       Make batches smaller. The fewer widgets that the store and the wholesaler need to buy, the less amplification occurs when orders move up the supply chain.

       Improve forecasting. If all the partners in the supply chain have a better forecast, there’s less chance of ordering widgets that no one will buy.

       Improve communications. If the store, the wholesaler, and the manufacturer know exactly how many widgets are being sold, they can do a better job of managing their inventories.

An important point to notice is that some of the things you