Demand-Driven Performance FAQ
Providing customers what they need, when they need it, while lowering the overall cost of delivery and improving ROI
02. Identifying and Addressing Organizational Misalignments (DDPSC02)
02a. What types of policies and measures tend to create the biggest organizational misalignments?
Policies and measures that view the performance of a link within the chain as if it were an independent link as opposed to a set of interdependent links configured to deliver a certain level of overall system performance.
For example resource utilization (or efficiency), which often results in the batching of parts and/or information, can enable one link to be seen as performing well while work and information flow is delayed in reaching other links; or, the early release of material to try to fully utilize each resource as if they were the only link in the chain, which increases queues.
The primary effect of such policies and measures is a delay in the movement of materials with a corresponding increase in WIP, longer lead times, delayed delivery, more expediting, increased costs, etc.
The end result: more variability in delivery performance downstream and more in variability in demand upstream.
02b. Do all organizational misalignments need to be corrected to get significant improvements in supply chain performance?
No. The real issue impacting Supply Chain Performance resides in the effects of variability in demand and/or in delivery performance (supply).
Supply Variability is often the result of organizational misalignments, process variation and/or the non-instant availability (busy, broken, absent) of resources to perform the process, which results in the queuing of work. All queuing of work results in a slowing down of workflow.
Demand Variability at the Point Of Sale (POS) to the actual end user is often the result of their "natural" buying patterns and/or some type of supplier induced buying pattern often the result of various financial incentives, such as "sales," promotions, discounts on volume buys, etc. which results in the delays (timing) and batching (spikes) of the natural buying patterns of the actual end user.
The supply and/or demand variability is what causes all of the expediting, out of stocks, poor fill rates, over stocks, long lead times, late deliveries, lost sales, over time, premium freight, etc.
That leaves us with two, not necessarily mutually exclusive, courses of action: 1) focus our efforts on addressing the causes of variability; and, 2) focus our efforts on nullifying its effects.
Given the fact that we will likely never totally eliminate variability, we are usually better off focusing our efforts first on removing causes associated with organizational misalignments, while nullifying the effects of process and resource variability in order to stabilize overall business performance. Only then, using the information gained from having nullified the effects of process and resource variability to identify and address the causes.
This type of approach will realize the greatest improvements in Supply Chain Performance.
Next: Configuring and Managing Supply Chains for Effective and Efficient Performance (DDPSC03)
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