Does process improvement require businesses to lose flexibility?
The efficiency of the supply chain is based on good process design, clear roles and responsibilities and performance management. Companies are often concerned about giving teams detailed workflows for fear of losing flexibility. How can companies design and implement efficient processes without losing flexibility?
LEAN PROCESS IMPROVEMENT ENABLES FLEXIBILITY
Although Lean is a concept introduced in the 1930s there is still a general confusion concerning the definition of what lean is. A common definition does not seem to exist although an agreement on Lean as a concept seems consistent. For this article, I have chosen to use a definition of Lean based on five phases.
Understanding customer value – The value is defined from the perception of the customer
Value stream analysis – Identify the value flow from a customer or product view
Flow – Create a simple, resource-effective, and fast flow without stops
Pull – Respond to customer request and deliver only in terms of what the customer wants
Perfection – A continuous pursuit of minimizing waste and delivering on time, according to specification, at a reasonable price and high quality.
Within this framework, we also view the reduction of waste.
WHY COMPANIES ARE CONCERNED ABOUT FLEXIBILITY WHEN CONSIDERING PROCESSES IMPROVEMENT WITH LEAN THINKING?
There is a common misunderstanding about Lean that this framework requires rigid and strict processes, procedures, management tools and metrics that are mostly used by large manufacturing corporations with thousands of employees. Let us clarify:
Lean is about removing waste to achieve efficiency through smooth process flows. It is a strategy that focuses on activities that add customer value and eliminates activities that do not. Adding value is the main activity that the business does to generate revenue. The key is this: if a process or task does not contribute to generating revenue then it adds cost, therefore it is unnecessary.
How does the elimination of non-value activities clash with flexibility?
It does not. This is the essence of Lean thinking. Far from being a set of rigid rules that force users into repetitive tasks and subject teams to being constantly monitored, with Lean thinking applied to process improvements companies can achieve efficiencies while operating with smooth workflows and maintain the flexibility required to serve customers.
HOW TO TELL IF THE TEAM HAS TOO MUCH FLEXIBILITY?
Not all flexibility is created equal. One of the most common mistakes that Supply Chain executives make when approaching team management and process improvement is to allow the team to operate without defined procedures. This is often done in good faith and it is a characteristic that is prevalent among newly promoted managers.
There is a belief that asking teams to operate following strict procedures might undermine creativity and the more detailed the process is the less likely a team member is to come up with improvement initiatives; creating an environment that favour discipline and discourages personal initiatives; here is the key:
Creativity is enabled when teams operate following efficient and effective processes that allow efficiency and provide clear guidance on what success looks like. Under such guidance, users have time and are encouraged to come up with their solutions to improve the quality of a process.
There is no such thing as too much flexibility. With lean processes teams can ensure compliance while having all the flexibility they need to provide value to the customer, here are a few examples:
Flexibility to change delivery days while complying with the booking process
Flexibility to accept higher or lower quantities of a receipt while complying with the purchasing policies
Flexibility to change transport methods for a shipment while complying with the customers' terms and conditions.
Flexibility to accept stock with reduced remaining shelf-life while complying with traceability.
Lack of processes and procedures does not allow flexibility but enables confusion, misunderstanding and increases the risk of disruption by exposing companies to break compliance. Such risks can result in more serious consequences for companies in consumer goods where regulation plays a significant role.
WHY DO COMPANIES END UP WITH INEFFICIENT SUPPLY CHAIN PROCESSES?
Companies operating with a high degree of inefficiency have processes designed around practices that developed internally as a response to business growth.
The typical reactive approach to business process design is very common in growing business and it is often functional but it gives teams a misleading sense of efficiency: Tasks are completed according to self-developed practices that, although being consistent in terms of accuracy and timing, fail to support business goals. Typical symptoms of self-developed processes are:
Lack of visibility: Supply Chain data does not provide other lines of business – Finance, HR, and Business Development – with insights to make informed decisions. Managers must often request bespoke reports to the Supply Chain team, like spreadsheets, because data available in the core system is of no use.
Peaked capacity: The Supply Chain runs at full capacity and the business cannot grow unless increasing headcount. This is a typical sign that the team is overburden with tasks due to hidden inefficiencies.
Low digital adoption: The processes in use are inefficient if the Supply Chain team relies on manual data entry and the business technology is not fully used. Teams might believe that “this is how things are done” or that “the system cannot do that” because the process designer did not take the time to leverage technology and design the process around it.
Companies with one or more of the symptoms above have a problem with self-developed processes with hidden inefficiencies.
HOW TO DESIGN SUPPLY CHAIN THAT IS BOTH EFFICIENT AND FLEXIBLE?
Processes are best defined following the formulation of the overall supply chain strategy so that the goal of the strategy becomes the starting point of the process design phase.
Start from the Supply Chain strategy: The first step to improve supply chain processes that enable efficiency and flexibility is to start with the overall goals of the supply chain strategy. It is common for companies in multi-channels to formulate more than one strategy, there can be one for E-commerce, one for wholesale and one for retailers. Different strategies might be also formulated depending on categories or price bands like one strategy for the convenience and one for the premium range.
Move to process design: Design one process for each strategy starting from the end and go backwards: For example when designing Purchase Order Processing the design phase starts from the receipt of the goods in the company warehouse and, with a clear idea of what users should expect to do when receiving the goods, it goes backwards throughout all the steps until the planning phase. This way the process is less likely to miss critical elements of the flow.
Identify key decision-making steps: Process flows that looks like a straight line of tasks are not processes but a list of tasks. Processes must include decision-making steps that give users guidance of what to do if certain events occur or when certain values do not meet certain criteria: There are two common mistakes that many Supply Chain leaders make when it comes to decision-making in process design:
a. If in doubt ask your manager: This is the worst way to design a process: it is disempowering, it sees users like non-value elements of a chain and it leads to longer response time and risks of errors. Efficient processes empower teams with guidance and knowledge, especially about decision-making and problem-solving.
b. Use your judgment: This approach seems to encourage creativity; what it does though is to pass the burden of the decision to a team member without providing guidance or support. Teams operating under processes that do not provide them with guidelines when a decision is required either rely on their managers, take inefficient shortcuts or even risk to break compliance.
Define RACI: Good processes make it clear who is responsible for the completion of the task, who is accountable for the successful completion of the task, who needs to be consulted in case of an important decision and who is to be informed. It is common to have the same department in two of the four elements of a RACI matrix but the process is not designed well if one department is at the same time responsible and accountable, while not required to consult or inform any other department during the execution of a process.
CAN COMPANIES MAINTAIN PROCESS COMPLIANCE WHILE ALLOWING USERS FLEXIBILITY?
Lean processes that are easy to follow and well designed enable flexibility but must not enable risks about breaking compliance. The key is in the design phase:
Supply Chain leaders designing lean process must identify key risks and design the process around those so that users know when to be flexible to eliminate bottlenecks and when to be strict and comply. Far from being a simple matter of what can or cannot be bent, being flexible while maintaining compliance is where the process is translated into a procedure. Here are some examples:
Order fulfilment PROCESS: The process requires sending an order confirmation to the customer before shipping the goods. Not sending the confirmation means breaking compliance, here no flexibility is allowed.
Order fulfilment PROCEDURE: The supply chain user sends an order confirmation via email to the customer before releasing the picklist to the warehouse. If the customer email bounces back or the email is missing, the user can be flexible and call the customer, get a reference about the order confirmation and file a note about the order being confirmed over the phone. Here the user owns the procedure, is empowered to come up with a solution while ensuring not to brake compliance.
Companies that allow users to break compliance when and if they need do not have processes but nice charts to show to auditors or customer when trying to win a tender. These though serve little purpose about efficiency.
HOW TO USE TECHNOLOGY TO ELIMINATE THE RISK OF BREAKING PROCESS COMPLIANCE
Technology is one of the most valuable tools to avoid breaking process compliance. Enterprise technology can be used to:
Use access management to give or limit permissions to mirror the roles and responsibilities of a workflow.
Make certain fields mandatory to avoid processing documents with incomplete data.
Set up approvals.
Enable document version control and audit trail to encourage transparency.
COMPLY WHILE MAINTAINING FLEXIBILITY: LEAN + AUTOMATION
There are countless technology options that companies can use to reduce the risk of breaking compliance but to give teams time and resources so they can be flexible when completing tasks, the best tool is process automation.
Lean and efficient processes are designed by teams who also own the technology to run elements of those processes. Automation in this context means technology that helps eliminate manual data entry, streamline repetitive tasks, and generate insights from data.
Supply Chain leaders who are committed to creating efficient business processes are also capable to enable business technology.
Lean thinking applied to process improvement enables efficiency while giving teams the flexibility to come up with their solutions without breaking compliance.
Create an environment that allows creativity and ensuring processes are followed for maximum quality is one of the main responsibilities of Supply Chain leaders who embrace Lean thinking and can design smooth processes that are aligned to the Supply Chain strategy, give teams guidance and support, and maximise usage of automation through smart technology