Supply Chain Frontiers issue #8. Read all articles in this issue.
Smoothing the Work Flow Across Enterprises
Removing the functional barriers that impede the end-to-end flow of work within an enterprise is not a new idea - but companies now need to start doing it across enterprises, according to Dr. Michael Hammer, President of Hammer & Company and a Visiting Professor at MIT's Engineering Systems Division. This is no mean task, but the benefits more than outweigh the challenges.
"The next big thing usually extends the current big thing," Hammer told CTL's "At the Crossroads of Supply Chain and Strategy" symposium, March 1, 2005, at MIT. The current big idea is to capture efficiencies by transcending the functional boundaries that fragment such processes as order fulfillment and product development. This process-focused approach has yielded significant gains. Hammer described an order fulfillment process that "bounced around seven departments" before the order was filled. By re-designing the process on an end-to-end basis, the company, an oil and lubricants giant, reduced cycle time by 75% and upped customer satisfaction by 100%. In another example, a trucking company revamped its sales process and was able to respond to RFPs in a single day rather than the 30 to 45 days it previously took.
The next step is to broaden this approach to inter-enterprise processes, he maintained. The themes here include smoothing "jerky" transactional hand-offs, sharing information, eliminating duplication and reallocating work to whoever is best suited to perform it. Hammer underlined the gains with some examples. A yogurt supplier was finding it difficult to meet delivery schedules in the Los Angeles area, so it did a deal with a butter company to carry butter on the yogurt maker's delivery trucks. By consolidating the loads both companies improved on-time delivery rates and both benefited from fuller trucks, while retailers liked the arrangement because products arrived when expected and they had fewer deliveries to handle. And there are more gains to be had. Since customers perceive the co-delivered brands as one, there can be a single order for the butter and yogurt products, cutting costs for each parent company. In effect, the partners are able to capture "the benefits of a strategic merger without merging," Hammer pointed out.
There are four keys to success in intra- and inter-enterprise process alignment, he said. There must be process owners who are accountable, consistent metrics and awards, rapid results from a staged implementation, and effective change management. But the essential prerequisite is: "Executive belief in the power of operational innovation and a commitment to making it happen," Hammer said.
For more information on the Crossroads symposium contact Jim Rice, Director, Integrated Supply Chain Management Program.