Learning from Failure: 5 Lessons in Supply Chain Management

In supply chain management and logistics you can always learn from mistakes that others have made! Whether it is deliveries that cannot be made on time or manufacturing processes that cannot keep up with the pace of demand, there is always something that can be learnt from the issues experienced by other companies. Here we consider 5 supply chain lessons that all supply chain managers should pay attention to.

  1. Demand Forecasting

Are you wondering whether it would be worth investing in a demand forecasting process? It certainly does require input from across all the functions of your business, including sales, finance, production and supply chain to identify, assess, and incorporate everything that can have an impact on meeting your core market demands.

It will mean a necessary investment of time and money, but can you afford not to? Learn the lesson from Yodel’s mistake in the Winter of 2014 when it failed to plan effectively for the Black Friday event and the run-up to Christmas.

2014 was the first year that the Black Friday marketing deals frenzy really hit the UK. It was previously an American concept, following Thanksgiving. The Yodel management didn’t plan effectively and had to take the unprecedented decision to suspend all collections from their distribution centre as they simply couldn’t cope with the level of demand.

With a functioning demand forecasting process in place, they would have been able to plan capacity and labour more effectively, thus reducing the risk of failing to meet their core market demands.

Lesson: invest in a demand forecasting process that will strengthen your company’s ability to meet customers’ demands.

  1. Network Design

Effective logistics network design in your business is key to maintaining the flow of goods through to the customer. Your logistics network connects all the points in the supply chain where material travels to and from. But what if there is a weakness at one of those points that results in a failure to ensure the product gets to the customer?

Logistics networks can become fragmented over time or they can break down due to unexpected failures in supply routes. In both cases, the risks can be significantly reduced if a healthy network is maintained and risk assessments of all points of the supply chain are done. Even a company as large as Sony can make the mistake of not doing an adequate risk assessment of its logistics network.

In 2004, Sony was all set to make a lot of Christmas dreams come true by fulfilling orders for their new Playstation 2. However, an oil tanker became stuck in the Suez Canal resulting in a breakdown of the supply network. Sony was then unable to deliver many of the new Playstations to customers.

The decision was taken to charter Russian cargo planes to get the remaining products moving along the supply chain again and get them delivered safely to their destination. This was an unexpected problem that took some time to correct and resulted in significant delays for customers. The risk of time delays in the supply chain can be reduced with an effective assessment of all risks to the logistics network.

Lesson: build a robust and resilient logistics network that can cope with the unexpected problems that life throws at you.

  1. Transport Operations

Organising transport and drivers to operate within your logistics network can be costly and complex. Obviously, you will want to introduce efficiencies by maximising your use of transport assets and vehicle capacity and reducing assets. But these will need to be balanced against service level agreements and operational constraints.

Some of the constraints which impact transport efficiencies are time windows, varying vehicle capacity, access restrictions, and driving hours. The failure of Nando’s to provide enough chicken for its customers in the New Year of 2017 is an example of where the efficiencies of transportation were not balanced correctly against service level requirements.

When considering all the ways in which you would like to increase efficiency in your transport network, you need to consider optimal fleet configurations, vehicle and trailer numbers, driver shifts, and daily route plans. It can be complex but it is necessary to consider all the elements which could impact on your customer.

Nando’s ended up unable to provide some customers with its core product because not enough chicken could be delivered on a bank holiday. With due consideration given to issues such as daily route plans and driver shifts, plans can be made to cover bank holidays which do not impact on the customer so negatively.

Lesson: consider carefully all the issues which could impact on your transportation network when seeking efficiencies.

  1. Production Planning

If you want your manufacturing operations to be efficient you will need to focus on production planning that seeks an alignment of both material and resource requirements. Although traditionally you may have only focused on the planning of your material requirement, this approach needs to evolve to include resources and other business functions.

Update your production planning to avoid making the mistakes Boeing did in 2014 when it attempted to roll the 787 Dreamliner off the production line faster than any twin-aisle jet had ever been built before.

Unfortunately, the pressures put on the production process resulted in 2 significant problems: staff on the production line were very skilled but there was not enough of them to keep up with the required pace of production; parts that were manufactured elsewhere and delivered to the 2 main Boeing factories were not of the required quality, for example, bundles of wires were not connected properly in the initial manufacturing stage.

To address these issues, Boeing had the costly expense of hiring more contract workers and creating new inspection teams to highlight any manufacturing errors.

Lesson: create efficiency in your manufacturing operations by updating your production planning models.

  1. Stakeholder Engagement

If you decide to implement a new and expensive operating system which will be used by all your staff and affect every aspect of your business, make sure you do your homework first. Engage with all stakeholders across the organisation, including senior managers, to find out what they require from the new system and make sure it works for them.

John Prescott, during his time as Labour’s deputy prime minister, failed to listen to complaints from the Fire Brigades Union (FBU), when he pushed ahead with 9 regional command centres which were intended to replace 46 fire control units in England.

Plans were made to restructure the service which went against the considered judgement of those working in it. The Government’s failure to consult and then engage with critics of the new command centres resulted in a £500 million bill for the taxpayer. The costs soared for new command centres that remained empty, despite early and continued warnings from the FBU.

Lesson: ignore the professional advice of your staff at your peril.

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Tamsin Giles, Client Service Coordinator, contact photo

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