reason, including those caused by running out of raw materials
Aligning production schedules and orders for raw materials with forecasts received from customers
Although increasing operations efficiency sounds like a great idea, sometimes it actually creates supply chain problems and does more harm than good. Companies may invest in increasing their capacity only to find out that their suppliers or logistics infrastructure can’t support the higher production levels or that they’re making more product than they can sell.
Connecting Supply Chain Communities
If you’ve ever taken a personality test, such as the Myers-Briggs Type Indicator, you know that these tests can reveal important differences in the way that people approach problems and make decisions. It turns out that groups of people have personalities too. These personalities form the culture of a group, and culture matters a lot when it comes to managing a supply chain.
Suppose that one of your customers is a company that really values reliability. That company considers it important for a supplier to deliver exactly what was ordered, exactly the same way, every time. The culture of that group — the things that the company values — determines how it judges its suppliers. Now suppose that this customer has a choice of working with two suppliers: one that’s known for consistent quality and another that’s known for flexibility and innovation. Naturally, the first supplier would be a better cultural fit because of the value that the customer places on reliability.
The impact of culture can also apply to the functions within your organization. Different departments — such as purchasing, logistics, and operations — often develop cultures of their own. If the values of these departments clash, it’s difficult for the company to manage its supply chain effectively.
One useful way to think about the culture of a company or a department is to use a framework that was developed by John Gattorna in Dynamic Supply Chains: Delivering Value through People, 2nd Edition (FT Press, 2010). Gattorna says that four major behavioral forces determine the culture of a group (see Figure 2-3) and are often related to the style of a group’s leader and the norms of a particular industry:
Integrator: Force for cohesion, cooperation, and relationships
Developer: Force for creativity, change, and flexibility
Administrator: Force for analysis, systems, and control
Producer: Force for energy, action, and results
FIGURE 2-3: Dominant group personalities.
The strength of these personality forces leads to differences in the culture of a team or organization. The most accurate way to measure culture is to formally interview people on a team and then analyze their responses. But in many cases, you can get a good sense for a team’s culture simply by working with the team for a little while.
Teams that are driven by the Integrator force tend to have a group culture, in which everyone is encouraged to develop personal relationships and informal communications. In a group culture, people feel that they’re part of a family. But a group culture also tends to be exclusive: the team against everyone else.
Teams that are driven by the Developer force form an entrepreneurial culture, in which everyone focuses on realizing a common vision. Communications are informal, and ideas are exchanged with people inside and outside the group. An entrepreneurial culture may tolerate bad behaviors that don’t interfere with achieving the shared goal.
Teams that are driven by the Administrator force create a hierarchical culture, in which communication is formal and shared through official channels. Hierarchical cultures are good at developing processes and ensuring consistency, but they’re often slow and inflexible.
Teams that are driven by the Producer force develop a rational culture, in which communications are concise and fast. Plans are made, plans are executed, and updates are sent out to keep stakeholders in the loop. Rational cultures are good at keeping teams focused and delivering results. But these cultures often find it hard to deviate from a plan, even when the circumstances around them change.
A useful exercise for analyzing your supply chain is to list the groups that work together and try to determine the dominant culture of each group. This exercise can help you anticipate conflicts that might emerge when these groups interact and find ways to use differences to your advantage. Here are some examples:
Purchasing departments often have a hierarchical culture, whereas operations departments have a rational culture. The purchasing department may feel frustrated because operations doesn’t follow the rules. Operations may feel frustrated because purchasing is slowing it down. So you could create a small team of expeditors, made up of representatives of both operations and purchasing, to manage urgent orders while ensuring that all the proper policies are followed.
Large companies often have strict rules that lead to a hierarchical culture. Startup technology companies that focus on innovation have an entrepreneurial culture. To take advantage of the latest technologies, these companies may need to start new programs that respond faster and have more flexibility for their suppliers.
Human resources teams often have a group culture, whereas consultants may have a rational culture. The human resources team may find the consultants rude and disinterested, and the consultants may view the human resources team as being nosy and unprofessional. For these groups to work effectively through a corporate merger, for example, you may need to schedule time for their members to interact in a social setting, such as a kickoff celebration.
You can also use an understanding of group personalities to choose teams to partner with in your supply chain. If your priority is creativity and innovation, for example, you’re likely to work best with supply chain partners that are driven by an entrepreneurial culture, and you’re probably going to be disappointed by a supply chain partner with a hierarchical culture.
Gattorna makes the point that supply chains are dynamic, so balancing these forces is an ongoing process. One way to create balance is to build teams of people that include each of these tendencies. If the team has a diverse set of personalities, its members are more likely to appreciate the strengths of diverse supply chain partners and find ways to build effective relationships with other teams.
Designing Supply Chain Systems
The most complicated way to understand a supply chain is to look at it as a system. (I think that this perspective is often the most useful.) Like many other systems that we encounter every day, supply chains are made up of interconnected components that can behave in unpredictable ways.
Your car is a good example. You expect your car to move you from Point A to Point B. In fact, you probably take for granted that your car will take you to Point B any time you want to go there. But your car is a system, and it can perform the way you expect it to only if all the components are operating correctly. A dead battery, a broken fuel pump, or worn-out brakes could bring the whole thing to a halt (or, in the case of the worn-out brakes, not bring it to a halt).
Supply chains are systems too. The components that make up supply chains are people,
