Flow diagnostics: revealing the secret to supply chain excellence

Supply chains are complex networks. Creating end-to-end transparency on what is really happening in the network requires careful planning and diligent data capture. The provenance of data on variables must be qualified, for example, supply lead times held in systems are often static and not representative of the performance experienced in day-to-day operations. The lack of historic data on the inherent variability in key activities in the supply chain can be revealing.

At the outset of a diagnostic review, critical decisions must be made regarding:

• Definition of strategic market segments for tailoring in supply chain design
• Selection of representative time periods for observation
• Selection of a common unit of measurement for comparison of all key stages in the network.

Meaningful market segmentation could be based on product portfolio, customer category, geographic location, competitive dimension (cost, lead time, service, flexibility) amongst other options. The requirement is to determine a strategic market segment that might justify a distinct supply chain configuration. Time periods for observation should reflect trends, seasonality, and any specific features of the network and its operations. Establishing a common unit of measure for effective comparison across the network may be intuitive, for example, weight of active ingredient in pharmaceutical supply chains. Use of a monetary value may be possible if exercised with care and diligence.

The mapping of the supply chain network needs to balance effectiveness and granularity. The objective is to form an end-to-end view of the network such that the critical factors influencing and controlling the physical flow of goods through the network are captured and measured. The main nodes in the network are likely to include:

• Customers and/or distinct market clusters
• Stock-keeping locations
• Processing locations
• Suppliers and/or distinct supply clusters.

Further depth is added by defining the main connections between nodes, the flows between them, and how flow is initiated. Within each operating location, current ways of working should be assessed to identify and qualify the use of inventory, time and capacity buffers. As part of the diagnostic review, a gauge should also be taken on the span of control a business exerts on the network and the extent to which it might influence adjacent operating entities.

With an end-to-end network map in place, the flow dynamics of current operating models should be analysed. Synchronisation analysis provides essential insight to the coherence and co-ordination of activities across the network; core elements should include at a minimum:

• Inventories at all core processing stages
• Capacities of all core processing centres
• Cadence of core activities; the ‘takt’ of operating functions across the network
• Lead times for core activities; both the actual processing time and ‘takt’ time
• Mean, maximum, minimum, and variance of each of the above variables.

The mapping of the supply chain network and the associated data captured can form the basis for a digital twin to model options and scenarios for the development and transformation of the network. The flow diagnostic is the foundation; the primary challenge and opportunity for supply chain leadership is to improve flow across the supply chain network. Ultimately only by increasing flow velocity can businesses improve cash flow, profits and return on investment.

Health check your supply chain

If you're under pressure to deliver efficiencies within your supply chain, our Flow-First 'health check' is designed to reveal new opportunities for improvement at a fixed investment cost to you.

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