The Supply Staircase Model

15 Friday May 2015

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staircase modelOver the last few years, the Supply Chain industry has introduced various factory/supplier categorisations in order to determine the status and performance of their whole vendor base. The way it’s normally communicated is in the form of a traffic light colour code. The suppliers are measured against various performance factors (quality, sustainability, logistics and price) that determines whether they are red (poor performing) or amber, green, gold or  champion suppliers!! Usually the total vendor base performance is a Pareto curve. 20% at the top, 70% in the performance improvement category and 10% in the poor performing category.

The increasing demands on performance in price development, quality, delivery and sustainability need to be measured and analysed through all parts of the supply chain. Stakeholders need to make the right purchasing, investment and performance improvement decisions. This can best be achieved through understanding and benchmarking the supply base through a categorisation reporting system.

From my own experience I always preferred the Staircase Model. This approach communicated a more positive message rather than a GO – NO GO of a traffic light colour code.. The staircase provides a 4 step level route that is more about development and improvement rather than just compliance to a standard performance criteria:

Staircase Level 1: Provides a clear entrance level for a factory to be considered for business e.g. they are legal and have a proactive management approach. The factory can at least quote for some test business and within a very limited timescale have a plan to achieve level 2.

Staircase Level 2: Achieving a performance that meets the minimum requirements and would qualify to have the minor part of the buyer’s total business. This business would be for a limited period – max 1 year and is dependent on a continued improvement progress to level 3.

Staircase Level 3: Conducting business to the full requirements; the supplier is operating at a high level of proficiency and reliability on price, quality, sustainability and delivery. They are  always part of an RFQ quotation activity for the major part of the buyer’s total business volume.

Staircase Level 4: Working in partnership with the buyer. Being part of a supplier development programme that improves sustainability, reduces costs and improves efficiency for all parts of the supply chain. The factory agrees with the buyer a level of business commitments on volume (number of pieces), capacity and value that can be valid for many years.

The Staircase Model provides:

  • A vendor base status programme
  • A business development programme for the Factories and the Buying Teams.
  • An improvement process rather than a compliance project
  • Brings Quality, Social and Environmental requirements into the business decision process, rather than being solely technical issues.
  • Be the main agenda points for factory visits rather than quick tours around the operations, enjoying a nice lunch and then the rest of the time is spent in the showroom!
  • Secures Price with a Meaning: The volume of business for level 1 suppliers should be considerably less than those of level 3 and 4.
  • Secures that all parties focus on the right issues and not personal/ subjective points of improvement e.g. installing air conditioning!!!

Conclusion: Gone are the days of just supplying a cheap product for the buyers to negotiate and the factory to make. The product range must constantly develop along with the production process. The Staircase Model provides a clear framework for knowing the performance of suppliers and then what needs to be done in a step by step development for both parties – achieving Good Business Growth.

The Company Resource Strategy

29 Wednesday Apr 2015

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Material strategy

For many years I lived and worked in South Asia in one of the main industries of the region – textiles. In this region textiles is vertically integrated from the raw material supply of cotton, to weaving, processing and stitching. Textile industrialisation and high volume supply from South Asia has been a post war success. At the same time on the Sub Continent  the supply and quality of water, a major resource in the textile process has moved into a UN classification of stressed!

The option of moving this business away from the region is not the best solution for either the buyers or South Asia. To address this issue all textile factories and their customers need to develop water strategies: There is no future for the textile industry without a strategic approach from all partners for the use and discharge of this vital resource.

A resource strategy cannot be developed in isolation, it needs all the stakeholders to participate. Its not just about the buyers sourcing from operations with effluent treatment plants or FSC timber supply for example.

What are the main headings of a resource strategy:

  • The product range designed and developed to secure the best use of the resource in the product and its production.
  • The raw material: specified and purchased from secure and sustainable sources that minimise the use of the resource.
  • Production: Lean and efficient with process control at the heart to optimise the use of the resource.
  • Waste Management: Systems in place and managed on a professional level with an ambitious goal of zero discharge.

The above should be in a framework to secure at least the following in the supply chain:

  • the input – the design, raw material and production techniques  (the buyers responsibility)
  • the process – production that secures the resource ( the factory responsibility)
  • the output –  safe and clean discharge management and supervision.(the utility supplier)

Whatever the resource; be it water, timber, oil, etc. There has to be a high level, wide scope approach across the supply chain. This helps to achieve a clarity of vision and the necessary investments in machines, material, manpower and money by all stakeholders – it must be an holistic strategy.

As an example; take a look at the mind map developed below for home textile product supply from Bangladesh . If you have not done so already perhaps this could help you get started on a strategy in whatever critical resource you are currently working with..

Water Stragey map 1

  • Written by Mark K.Astley
    Mark K. Astley

The Cost Down Activity

23 Thursday Apr 2015

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Profit is a result of making good business growth; its not the why a company exists. The company values, service performance, good product quality and a competitive offer is The Why!

In order to secure continued success, a company should conduct regular practical value mapping exercises that are locally organised. They are to be viewed by participants as a positive activity, driving the business forward rather than being a threat to individuals and organisations within the supply chain. My main experience and success in this kind of activity was through the Cost Down Toolbox which involved analysing materials, manpower, machines and of course money.

The framework and process of activities in the Cost Down Toolbox are:

  1. Secure Buy In –  Why Cost Down and everybody is on-board.
  2. Production/Process Walk Through
  3. Warm up exercise – get the creative juices flowing
  4. Design and component analysis
  5. Create draft action plan
  6. Production/Processing Analysis
  7. Finalise Action Plan – confirm responsibilities, lock in activities and time lines.
  8. Completed within the same day – providing a creative and challenging environment.

The Cost Down shall facilitate the understanding of cost structures, design/product tear down risks, process mapping and out of the box/creative thinking. The  participants in these activity should include vendor,buyer,logistics and factory/process representatives including company board members if possible.

The tools to be utilised and made available during a Cost Down are:

Irrespective of whether its the buyers, the factory/processor or sub suppliers the outcome of a Cost Down activity shall be aligned to:

  • Improved retail opportunities for all
  • Costs reductions, not profit reductions
  • Increased volume and efficiency opportunities
  • Increase the supply chain partnerships including logistics
  • Create opportunities for Price with a Meaning and Sympathetic Pricing..

The cost-down program is a road map to achieve cost reductions and performance improvements. It is a partnership process using teamwork, transparent communications and problem-solving techniques. The objective is to secure, continue and provide the key success factors of good business growth for all   supply chain stakeholders.

Mark K. Astley:  Robert Vernon Associates – working with and training on The Cost Down Toolbox..

The Company Board – Securing Good Business Growth

13 Monday Apr 2015

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Good Business grpwth board

Like everything else, the leadership for good business growth comes form the top. Most of the business case studies on inspirational leadership concentrate on individuals – what is their management philosophy, their strategies, what kind of superman or wonder woman are they!!

The company board of directors and non executive directors very rarely get a look in and when they do its usually negative e.g. in the UK the HSBC board were subjected to a humiliating and extremely uncomfortable public interrogation on what the hell have they been doing to combat unethical practices by the bank’s investment division. In the case of one of my previous employers Tesco, the whole board in the last year has been practically replaced.

With the current questions about the effectiveness of Company Board’s, I decided to embark on a small investigation to determine what these collections of individuals should actually be doing to secure good growth for a business. This investigation involved attending training courses, individual discussions with existing board directors, recruitment specialists and actually reading the UK Corporate Governance Code.

The board of directors play a vital role in Good Business Growth, not a lip service but leadership in the set up, vision and the running of the company:

1. The basic elements that a company board works with are the 4P’s of Policy, People, Profits and Principles. This is done with a diverse board membership; representing society and the company customer base. Behaving with integrity through honesty and transparency, whilst avoiding ‘groupthink’..

2. To secure a sustainable business the board of directors should provide the company with the following:

  • Leadership through a collective responsibility that constructively challenges and develops proposals on strategy.
  • Effectiveness as a group with balanced skills and experience, using a rigorous self evaluation on their performance as a board. The members should contribute sufficient time to the role. Be a worthy and transparently appointed group of executive and non executive directors.
  • Secure Accountability through fair and balanced assessment of the business. Understanding and managing risk with internal controls.
  • Promote long term success of the company through a formal and transparent remuneration package for the directors.
  • Create a dialogue and relationship with shareholders that is mutually understanding and encouraging to achieve the business objectives.

3. In relation to Good Business Growth, what does this mean for the board when working with the executive management team of the business.

  • Work with strategy and long term sustainability – secure the ‘Why’ in the business.
  • Secure the business Code of Conduct and Company values.
  • Understand the Customer Experience of the product or service.
  • Help develop strategy and business longevity product through the use of Democratic Design and Price with a meaning.
  • Understand and guide the company Responsibilities in the Supply Chain.
  • Understand the Risks in the business and how are these risks being identified and eliminated.
  • Determine the right KPI Tools to judge the business in terms of good business growth, remuneration and legal requirements.
  • Use Process Flow Charts to understand the operational parts of the business on a one page holistic view.
  • Where practical understand and follow up the operational management tools employed in the business.
  • All types of auditing activities within the business are followed up. The long term goal should be to secure legal, ethical and profitable practices are assured through business processes rather than auditing.

The board cannot go into operational detail, that is for the executive management team. However, the above points can create a framework to apply in their agendas, reports and information packs used in the regular Board of Directors meetings.

4. The company board should be nurturing the success of an organisation through;

  • Enabling the love of all its stakeholders
  • Securing a company set of core values, policies and operating systems.
  • Helping to create a broader purpose to the corporate vision
  • Create the conditions for a humble, modest and self effacing business leadership
  • Promoting emotional leadership in the business
  • Aligning the business incentives and culture

In Conclusion: a company board shapes culture, provides a conscious leadership and  secures business functions/capability. It should be able to read the signals and join the dots when reviewing performance and understanding the risks in the real world. By doing this the board secures the 4P’s and achieve Good Business Growth..

Moving Compliance from a Project to a Process

23 Monday Mar 2015

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Compliance Audits1

In the supply chain world of quality, code of conduct and ethical compliance the drive to assure and secure has been through the conducting of audits.

For the second and third party auditor organisations, the last 20 years has been a very profitable one. An audit checklist under an arm provides a powerful tool for descending upon a factory and asking the prerequisite questions about quality inspection reports, the contents of the first aid box and where is the factory licence!

However, audits are only a snap shot of an organisations’ compliance. They do have some role in improving operational performance, but essentially an audit identifies a non compliance and raises corrective actions.

Businesses are now well practiced in the art of receiving auditors and their checklists; they have their rapid action teams on standby with libraries of files, procedures, certificates, licences and environmental reports!! This has resulted in in the supply chain improvement of securing and assuring. However, it has to be said its also a ‘cover their bottoms’ activity in the event of a brand attack.

Except for the individual incidents that spring up every now and then, the supply chain breathes easy; the specialist auditors and compliance teams can be left in their little corners to carry on undisturbed with their projects and the factory/merchandising/sourcing teams can carry on with their jobs undisturbed by the nuisance of quality measurements, age certificates and internal factory noise reports!

This level of compliance in the supply chain provides a foundation to move from auditing projects by the specialists to a daily process management by the buyer and vendor teams at all levels of business. Organisations should be moving from handling the auditing snapshots to managing and improving compliance – 365 days of the year.

What should be the elements to a 365 days compliance:

  • All parts of the supply team(buyer and supplier) are responsible for compliance, not just the specialist compliance team.
  • The management of compliance shifts from an audit project to a maintenance/improvement process
  • The compliance requirements should be segmented into levels of priority and regularity to secure resources, capacity and capability.
  • The requirements should act as a WHY and not just a tick in checklist!
  • The Buying Teams should be actively involved in their vendor compliance – poor purchase planning by the buyers causes quality, ethical, environmental and delivery security problems.
  • The specialist team participation in compliance is not on daily operational issues.
  • Corrective actions are not separate procedures form the daily operational work and should not be an admin exercise in completing a CAR( corrective action report) form!
  • Compliance to quality, social and environmental requirements are seen as contribution to business growth and not a cost.

Factory and supply chain audits are here to stay in the short to medium term as an in depth snapshot on operational performance. The long term goal should be to move away from the audit activity. Compliance is part of the business – making a contribution to an organisation’s competitive advantage, improving the experience, opportunities and skill set of buyers, technicians, factory operators throughout the whole supply chain.

Compliance to quality systems, code of conducts and legal requirements are actually about efficiency and productivity – it is a vital process in business. The days of compliance being a project delegated with relief to a specialist should be numbered.

How can this be developed and achieved? Well hopefully I have been describing this in my previous articles and will continue to do so in future articles. Its Good Business Growth.

Quality: Control the Process – Secure the business

27 Friday Feb 2015

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To secure quality in production there needs to be a fully implemented process control scheme for the operators and their machines. Process control can best be described as per baking bread. You need the right ingredients in terms of measure and quality standard, then the correct viscosity of the dough, oven temperature and baking time. To achieve the best tasting bread, the recipe needs to be followed and the baking process needs to be monitored and maintained to within the optimal range. Its the same in any other production process – get it right with any process and like the bread, the end results will comply with requirements every time.

If you are buyer, secure that you have agreed a process control scheme with your supplier that can be verified in every batch being produced.

If you are a production manager bring the buyer into the agreement on a Process Control Scheme to secure quality and your profitability.

As per my previous articles, this is part of a Good Business Growth. A process control scheme need not only be for a factory. The principles as described by baking bread can be applied in any type of business, its all the same – control the input, control the process and the output will be secured.

Below is a flow chart I devised a few years back to describe how a Process Control Scheme can be devised for the buyer and supplier of any process, whether its a product or a service.

In the process, the control scheme can be as simple or detailed as required. Sometimes it requires only one control point to determine that a process is under control and producing the expected results. The important part and probably most difficult is as per the above flow chart – finding the control points and everybody agreeing. The method of reporting and controlling can then be a simple yes/no (poke yoke devices) or a full statistical process control implementation with machine or manual record maintenance.

With a process control quality system; the virtuous circle of quality, availability, price and ethical compliance are assured for Good Business Growth – its all connected.

Quality Improvement: The Learning Box

20 Friday Feb 2015

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Learning BoxDuring the early 1980’s the Quality Circle idea took hold in the electronic and automotive industry. One of the most famous case histories of its successful implementation was at Jaguar cars in the UK, where the workforce from top management to shop floor operator formed teams to understand and improve build quality. At the start of implementation they were not producing jaguars but dogs!! Since then of course the company has gone from strength to strength and they now produce a world renowned quality product.

Quality Circles are a great tool for an inclusive approach in a factory/service operation improvement programme . However, they can still be a bit formal and are essentially led by management as they work with an agenda base and a meeting protocol that is data driven with extended corrective action lead-times.

A more informal, inclusive, customer focused and flexible approach to Quality Circles was developed during my 10 years working in South Asia with IKEA – The Learning Box.

A Learning Box is a container or designated area for rejected articles/materials. This can be the existing facilities in the production inspection areas, either in process or at the end. It is important to label these facilities as the Learning Box for all to see including customers.

Before the well designated Learning Box’s are emptied and remedial work is conducted, the contents should be reviewed, analysed and actions agreed on how to avoid similar rejects/issues happening again. This activity needs to be done on an exceptionally regular basis with selected members of production; the operators, supervisors and managers. It should be an open platform, with a no blame culture, treating the contents of the Learning Box as valuable material in the drive to secure improvements and grow a Customer Experienced Product Quality approach.

Factory’s and organisations can find their own way to do this, dependent upon conditions, culture and opportunity. However, the main points to include in this approach are:

  • Be CUSTOMER FOCUSED and driven
  • Wherever possible work ‘bottom up’ – everybody has the possibility to contribute.
  • Make the analysis of reject articles as regular as possible
  • Find solutions – not who is to blame?
  • If the solution is ‘more inspection’, then it’s not a solution and the chosen method of working with the Learning Box is not working.
  • A solution is a corrective action and it must be as immediate as possible.
  • Use the inspection records to help in the review /analysis. This will provide valuable trends and patterns in helping to find the best possible course of action.
  • Make it a team effort – publicise the team’s work and results throughout the operation.
  • Use the Learning Box to create interest and involvement in all sections of the workforce.
  • Must include a factory operator who has been selected, trained and designated as the Customer Champion. Someone who can use customer eyes in the Learning Box discussions.
  • Include whenever possible the client and customers, so that their valuable input and contribution can be included.

This activity should be informal – avoiding as much administration, data presentations and form filling as possible. The result of the Learning Box should be an improved product quality. However the why to a Learning Box are:

It provides organisations with the opportunity to learn from mistakes and the responsibility to use the different skills and knowledge in their operations to find solutions. By involving as many levels in the workforce as possible, the quality message can be driven through all areas, not just in the inspection/compliance department. Everybody should be working to achieve a Customer Experienced Product Quality.

Mark K. Astley – Robert Vernon Associates Ltd.

Price with a meaning..

31 Saturday Jan 2015

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price with a meaning

When talking about the price of a service or product we all know the maxim ‘you get what you pay for’. Of course there is no reality to this! No matter how low the price, if it doesn’t do what it says on the tin or is actually very poor doing it, then its expensive!!

When I worked for IKEA the big statement when designing, sourcing, working with factories and communicating with customers was ‘low price with a meaning‘. Just to have a cheap product with poor functionality, design, quality and ethically unsound has no meaning!! Everything has to have a value no matter the price.

How can organisations achieve low price with a meaning? As with all things it requires the virtuous circle of the following:

The Price: Achieving a low price requires a concentration on high volume, with a high degree of industrialisation to secure the most efficient production process. Raw materials are secured in terms of sourcing, specification, availability and all within a transparent supply chain..

Supply Chain Agility: A forecast and order planning system that shrinks the distance between the point of sales and the factory. Regular shipments with stock having a status of evil! Implementing a supplier matrix set up of 70-30. Split the sourcing between two factories, securing high production utilisation at the 70% factory and the rest as a security back up at a newer supplier being developed for future business.

Secure Product Quality: Please see my previous  article CEPQ – Customer Experienced Product Quality

Socially and Environmentally Assured: Secure the following basics:

  • Transparent and well supervised supply base including sub suppliers and contractors to the direct vendor factories.
  • Secure legal, clean and efficient factory supply.
  • Well managed labour in the supply chain – no child labour, no excessive hours etc..
  • A legal and well paid workforce securing an efficient and motivated factory.

The Product Design: See my previous LinkedIn article Democratic Design..

Everything that is made and supplied must have a meaning. It should be part of a company’s intrinsic value whether they are in the low volume/high price or the mass volume competitive market. Its all part of Good Business Growth…

Whatever the market, products have to be competitive, design and quality assured, produced and supplied by companies that care! As Apple Inc and IKEA have proven; customers buy why and not always the what !!

Buyers need to assure further down the supply chain….

23 Friday Jan 2015

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Linkedin sub supplierTransparency and management custody down the supply chain are very important in today’s business – from avoiding horsemeat in processed food to eliminating clothing production in structurally dangerous factories. Knowing where products come from is paramount to secure:

  • Final user accountability (the guilt free purchase for Mrs Jones)
  • Legal compliance
  • Quality, service, code of conduct and price assurance

Sub suppliers (organisations supplying the direct suppliers) need to be managed and assured by Retailers, Traders and Producers. This has been and still is a daunting prospect, especially when the numbers involved take a steep exponential curve across various geographical locations. Typically a retail company’s vendor base can move from a hundred direct suppliers to thousands of sub suppliers. However, no matter the numbers and logistics involved, this issue need to be addressed and secured with the following:

  • Be a major part of the buyer- supplier relationship management
  • The Supplier takes responsibility for their suppliers
  • The Buyer is clear on the sub supplier requirements i.e adherence to its own specification or industry standards.
  • The Buyer has a regularly updated database of suppliers and sub suppliers..

To manage and handle sub suppliers in a practical and concise way Buyers should consider:

  1. The sub supplier requirements are a ‘lite version’ of their full code of conduct, quality specification and delivery conditions – secure the absolutes of customer, legal and company demands eg child labour, working hours, process control and tolerances etc..
  2. The Buyer and Supplier agree on the mechanics of how sub suppliers shall be checked and managed. eg auditing, verification material, designated factories and follow up reporting.
  3. The Buying Team add Sub Supplier management to their visit and meeting agendas with their vendor base.
  4. Where practicable, the buyer follows an industry standard to make it more manageable for the suppliers and the rest of their customer base.
  5. It should not just be an ethical requirement but also include quality assurance, production planning and price development.

The auto and aerospace industry have been working with and down their supply chain for many decades. They are working in high value, scientific/engineering industries with limited number of sub suppliers. The challenges in a consumer led, general merchandising, clothing and food supply industries are certainly different and probably not so exacting as science and engineering but they are no less important.

In my experience, the toughest part of implementing sub supplier management is the initial denial – ‘its not our responsibility and the numbers involved are huge, it cannot be done’. However, it can be achieved through a practical approach and management relationship between the buyer and direct supplier. The acceptance on the importance and responsibility to manage further down the chain secures the business for all stakeholders, including the final user – Mrs Jones!!

Can we help you and your business to secure further down the supply chain!! Please contact us for an initial discussion..

Mark K. Astley Robert Vernon Associates Ltd.

Quality is defined by customer experience..

13 Tuesday Jan 2015

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CEPQ_LinkedIn Banner

When boiling down to the main parameters for a business to succeed, it has to secure the following; competitiveness, availability, sustainability, good product design and quality. This means a customer offer that provides a well designed, competitively priced product on the store/warehouse shelves, supplied by a company that cares about society and the environment. And of course great product quality?

How can a company move quality further into the business, engaging all operations and not just the Technicians and Quality Managers. Quality is an essential part of good business growth..

Over the last 30 years there have been many quality improvement programmes and concepts developed and implemented. This has seen the use of science/maths equations, black/green/yellow belts and manuals full of procedures and directives. These improvement programmes have made great strides in improving service and product quality. However, they have been and are essentially the tools for quality technicians and managers.

As a business driver Quality needs to be concise and standardised for a more holistic understanding and participation by everybody. This starts with understanding the customer, it is only their experience of a product/service quality that determines success or failure. The best  approach to customer quality I have worked with are the following 4 definitions of Customer Experienced Product Quality – CEPQ:

  1. Durability and Function: What is the performance of the material and components to secure that the product does ‘what it says on the tin’.
  2. Safe to Use: What shall be the product’s chemical and substance content. What is the security of small and loose parts.
  3. Well Designed Product: Clear design briefs and specifications. If the product is part of a range, is it modular e.g. correct dimensions, consistent and true colour/shades.
  4. Customer Friendly: What is the after use appearance, are the buttons, switches etc convenient. Is the packaging sufficient and recyclable. Assembly and installation is easy for the customer.

Using the above 4 CEPQ headings, a company can devise their own points to secure according to their customer’s profile, operational and product range requirements. Once devised, these CEPQ points are then used as integral inputs for design/development, manufacturing and quality assurance management.

Irrespective of which Quality management systems a company employs i.e. ISO 9000, Six Sigma, TQM, Lean Manufacturing etc. – Quality is defined by the customer experience. Therefore CEPQ shall drive all these systems and similiar used in the supply chain.

Everything is connected; achieving a competitive price, secured availability at point of sale and a sustainability for the product and the company is difficult without assured quality. Implementing and securing good Customer Experienced Product Quality is vital to secure for any company’s Good Business Growth..

RVA helps business to achieve Good Business Growth, please contact us for further details and discussions on how we can work together.. Mark K. Astley – Robert Vernon Associates Ltd.