Optimizing the Supply

Chain
Optimizing the Supply
Chain

Jay E. Fortenberry
Optimizing the Supply Chain
Copyright © Business Expert Press, LLC, 2019.

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 Abstract
In a recent article about the death of supply chain management, it was
stated that in this world, forecasts are perfect, machines have no operators,
and block chain drives it all. Practitioners in the world of supply chain
know that it is central to the management of cash and that systems are
never the silver bullet as they do not foresee events; they only provide
calculations from the data they are fed.
Optimizing the Supply Chain is an essential book to help readers
understand the dynamics of how a global business operates. Chapter by
chapter, this book provides a comprehensive understanding of the core
concepts of people, process, and tools; and how a supply chain should
operate in today’s complex world.
Readers will learn about how an ideal business maintains no unneces-
sary inventory, responds to changes, and delivers products on time or de-
fect free—and how this ability is a competitive advantage for any business
that can solve the equation.
Key functional processes are explained in detail for practitioners to
learn how to operate effectively in today’s arena. People still have to do all
of the work to achieve this.

People

Leadership is defined as the ability of an individual to guide other indi-

viduals, teams, or entire organizations to a desired outcome.
A leader drives changes in the way people think, work, and act. They
create and set the values that shape the culture. Leaders step up in times
of crisis and act creatively in tough situations.

Running the Business

Many companies lack the flexibility and agility to maintain liquidity

through tough economic times.
The ideal business maintains no unnecessary inventory, responds to
changes in the marketplace, and delivers the required products in a timely
manner.
vi ABSTRACT

Supply Chain

The Supply Chain is defined as the management of all functions related to

the flow of materials from a company’s suppliers to its customers.
Optimizing supply chain design is about positioning resources in
ways that enhance profitability.
The ability to only deliver what is needed, when it is needed, and in
the quality needed is a competitive advantage to any business that can
solve this equation.
Creating an environment of simplified flows, material availability,
and schedule stability helps build a credible process for customers and
­employees alike.

Risk Management

Business interruptions can take many forms—natural disasters, labor

stoppages, health crisis, or social unrest. In an ideal world, incident re-
sponse is the execution of a well-thought-out, focused, and rehearsed plan
that engages all of the team that will manage the future crisis.

Planning

The demand plan is a realistic view of future sales based on all known
activities and trends. Its purpose is to focus on the commercial direction
of the business as well as to provide a formal request for the supply chain
to schedule capacity for anticipated customer requirements. The demand
plan is also the financial commitment made by the business for top-line
revenue and bottom-line margin.

Tools

Systems do not think or foresee events; they only provide calculations

from data they are fed. It can be a matter of garbage in/garbage out if not
installed and maintained properly.
Building a productivity machine just takes time, energy, and the
agreement with the organization.
 ABSTRACT
vii

By walking our way through the supply chain from supplier to cus-
tomer, you are able to uncover where value is added and where it is lost.
Mapping how a business operates cost relatively little but yields huge
benefits.

Keywords
balance sheet; business strategy; cash flow; cycle Time; inventory; leader-
ship; lean; order fulfillment; organizational effectiveness; planning; P&L;
portfolio management; risk; shareholder value; technology; trade; value
streams
 Author’s Note
From a Global Supply Chain
Foot Soldier
Over the past 40 years, I was transformed from being a U.S.-focused man-
ager into a foot soldier in the whole globalization phenomenon. As I started
my career in 1979, operating a teletype machine at Union Pacific Railroad,
I would never have dreamed that today I would be writing a book about
operating a global supply chain. I was lucky enough to have been taught by
some of the true masters of industry and got to experience, firsthand, many
of the events over the past four decades. So what did I learn from all this?
At Union Pacific, I learned how to literally run the railroad. My lessons
revolved around safety, labor, and how to operate in a very time-defined
environment.
At Toyota, my senseis taught me how to think. I learned how to be
world class, keep cars moving, maintain factory-fresh quality, and pro-
mote efficiency. Here too, I discovered such skills as being a servant leader,
running with zero defects and Kaizen or continuous improvement. This
was a great personal growth experience for me.
At Deere, I discovered how a corporate culture really works. Older de-
centralized American companies operate in a completely different fashion
than a centralized Japanese structure, so change management became part
of my vocabulary. I was given tremendous responsibilities, but I was also
very naïve at this point. Here too, I learned from another master, Dave
Nelson, about the mechanics of sourcing.
Honeywell was a completely different culture to work in. I used to
laugh:

At Toyota I would tell someone to do something and they had to do it;

at John Deere I would tell someone to do something and they’d think
about doing it; and at Honeywell, I’d tell someone to do something
and they’d think of 900 reasons why not to do it.
x AUTHOR’S NOTE

Here, I had an “influencing role” that was probably the hardest

job of my career. This position was ever changing with our 80+ M&A,
loaded with ambiguity, supporting operations in 164 countries, with over
2 million ship-to addresses and 110 enterprise resource planning (ERP)
systems. We were open 24/7, and I can attest that someone was always
doing something (often times not necessarily good).
I have heeded Mr. Toyoda’s instructions to me by teaching the next
generation, everything I have learned along the way, by writing and teach-
ing. I continue to learn and find new experiences in new places in the
world. I love being a global supply chain manager and here for you or
your organization if you ever need help.

Jay E. Fortenberry
 Contents
Foreword..............................................................................................xiii
Acknowledgments................................................................................... xv
Introduction........................................................................................xvii
Chapter 1 Keeping “People” Front and Center in People,
Process, Tools.....................................................................1
Chapter 2 How Does a Business Plan the Supply Chain?..................13
Section 1 Running the Business.................................................... 33
Chapter 3 The Business Planning Process.........................................35
Chapter 4 Portfolio Management: New Product Introductions
through End of Life.........................................................43
Chapter 5 Planning Demand and Cash............................................53
Chapter 6 Supply Planning and Cash...............................................63
Chapter 7 Reconciliation and Executive SIOP..................................77
Section 2 Functional Expertise...................................................... 79
Chapter 8 Toyota Production System and Lean................................81
Chapter 9 Sourcing...........................................................................89
Chapter 10 Logistics...........................................................................97
Chapter 11 Trade and Compliance...................................................103
Chapter 12 Quality—The Essential Element for Success...................117
Chapter 13 Business Continuity and Supply Chain Security.............123
Chapter 14 E-commerce across the Globe........................................133
Section 3 Tools........................................................................... 139
Chapter 15 Tools, Technologies, and Cash........................................141
Chapter 16 Building a Productivity Machine....................................153
Glossary..............................................................................................165
About the Author.................................................................................169
Index..................................................................................................171
 Foreword
As a supply chain management practitioner and an academic program
director managing both the undergraduate and graduate supply chain
management program at Portland State University, I am often asked to
recommend one or two books that every supply chain graduate should
invest in. I often struggle to come up with even a single book to recom-
mend. It is difficult to find a supply chain management reference book
that combines the building blocks of managing a business, leadership,
and developing a supply chain strategy that enables a company to com-
pete successfully in a global and complex environment.
Jay Fortenberry, a colleague of mine who coleads our Global Sup-
ply Chain Study Abroad program, has 40 years of world-class experience
from working at Toyota and Honeywell. He’s poured all of these experi-
ences into his book and offers the best practices, necessary wisdom, and
learned skills in running global supply chains. I am very excited for our
future supply chain professionals because they now can have Jay’s refer-
ence book to take with them as they enter into this exciting field.
No doubt, the pace of technological change and the rate of new in-
novations in business models and the competitive landscape will disrupt
almost every business. It is imperative that we prepare our young supply
chain professionals to adapt a “Kaizen” mindset not only in their pro-
fessional life but also in their personal life. Living in a sea of surging
megatrends and figuring out the right piece of the puzzle to solve without
getting overwhelmed by the situation is the type of insight that you will
learn from Jay’s book.
In it, you will learn that inventory is a not a bad word but is actually
needed to help reduce lead time and increase customer service levels by
placing the right amount of inventory at the right place. For an industrial
product manufacturer, the cost of goods sold is typically about 60 to 70
percent of the revenue. A 5 percent savings derived from the cost of goods
sold will ultimately show up in the bottom line, and setting the right
kind of key performance indicators will certainly drive the right kind of
xiv FOREWORD

business financial performance. Equally important, all the participants in

the value chain need to understand where the biggest opportunities lie
and how to create shareholder value throughout the supply chain.
Finally, as a young supply chain professional progressing through one’s
career and eventually reaching a mountaintop, one should consider how
to give back. One must always recognize the privileges of having learned
from all the great masters. Those reading Jay’s book will soon realize that
it is his way of repaying his grand master. So, carry on grasshopper. Soon
you will be writing your own book.
Daniel Wong, Director Academic Program, Master of Science in
Global Supply Chain Management
 Acknowledgments
Many years ago, I was assigned to deliver Mr. E Toyoda to the Augusta
National Golf Course, via his corporate plane. During this journey, this
icon of industry gave me some words of instruction: It is incumbent on
you to teach the next generation of logistics professionals, the lessons you have
learned at Toyota. To this day, those words still ring in my ears and are the
main reason I became a teacher at Portland State University: We receive
and we should give away—pass it on.
So, it’s with this thought, that I decided to write this book as a way for
me to say thank you to all those that took the time to teach and support
me as a supply chain leader.
First and foremost, I’d like to thank my family for supporting me
through all of these years, moves, angst, and triumphs.
Next, many academics influenced and taught me along the way. To
you all, I am eternally grateful:

Mark Moon—University of Tennessee

Paul Dittmann—University of Tennessee
Ray Mundy—University of Missouri, St. Louis
Manus Rungtusanatham—The Ohio State University
Kate Vitasek—University of Tennessee/Vested
Daniel Wong—PSU

Through my 40 years in industry, most of the time, I was blessed with

some incredibly smart bosses that took the time to coach me. Further-
more, I learned early on that I had the ability to recruit great teams. So,
I’d like to acknowledge all of the folks I worked with along the way:
xvi ACKNOWLEDGMENTS

Toyota Bob Lane

Bob Bennett
Hiroshi Imai Honeywell
Joe Williamson David Graham
Fred Arnow Anne Bruggink
Mickey Sakai Hendrikje Genung
E. Toyoda John Hellriegel
All of my senseis in Japan Martin Oettinger
Jens Schuemann
Deere Bryce Wu
Earl Brinkley Karl Laskas
Mark Ward Joe DeSarla
Ken Carlson Jeff Muradian
Dave Nelson Jeff Soholt
Hans Becherer Dave Cote
 Introduction
Over the past year, I’ve had the opportunity to travel throughout Vietnam.
From Vung Tau to Sapa, I’ve enjoyed getting to know the people, culture,
and cuisine of the country. I found Hanoi to be a vibrant, energetic, and wel-
coming city that is a world apart from anything I’d previously experienced.
As a coleader of Portland State University’s Global Supply Chain Study
Abroad program, I traveled to 11 sites, from a purely manual factory to the
most state-of-the-art, world-class manufacturing operation I had ever seen.
I’ve worked in many developing countries over the years, and Vietnam
reminds me of many of them. The workforce is very solid and trainable,
but there are few local junior or middle management personnel. From my
observations, the leaders who are there tend to be expats from Taiwan,
Japan, Korea, and even Germany. The younger generation (whose parents
left a generation ago) are returning, but the skill sets needed to take this
pulsating economy to the next level is missing today. Areas such as basic
health, safety, and environment (HS&E), planning, supply chain oper-
ations, and finance have yet to become core processes, and this can lead
to uneven results as businesses attempt to grow.
In my own first taste of manufacturing, I was parachuted into the
­Toyota plant at Motomachi, Japan. There, I was instructed to “do Kaizen.”1
To my senseis, it didn’t matter that I was the only one who spoke English
or that this neophyte American was supposed to teach the masters of
continuous improvement how to improve their processes. Rather, I was to
observe and walk in their shoes. I discovered and communicated ideas for
improving their process. Needless to say, this was a great growth experi-
ence and a lesson I was very grateful to learn. It was where I developed the
skill of quickly looking at an operation to see how to enhance its pieces
without being disruptive to the entire process.

1
The asterisk (*) indicates throughout that the term is defined in the Supply Chain
Glossary.
xviii INTRODUCTION

Before we get started, let’s make sure we are on the same page on a few
terms and concepts about running a business, including inventory, cycle
time, and what the supply chain actually does.

The Business
Management’s principal focus for a business should be on growing prof-
its and cash flow, as these are primary elements in creating shareholder
value. Quite often entrepreneurs only focus on their core competencies
of designing, marketing, and selling their products. In some cases, they
understand manufacturing but fail to grasp the rest of the supply chain
as the company grows. Therefore, many companies end up lacking the
flexibility and agility to maintain profits through tougher economic
times.

The Balance Sheet

Inventory has its own line on the balance sheet.
 INTRODUCTION
xix

And the P&L

And the supply chain can be found throughout the P&L.

Inventory
Inventory is much more than property, goods in stock, and building con-
tents—it’s cash. The purpose of holding inventory is to maximize service
and maintain manufacturing efficiency while minimizing the cost of deliv-
ering a product. Contrary to popular myth, inventory is located through-
out the entire business, not just in a manufacturing or a distribution center.
xx INTRODUCTION

Cycle Time
Cycle time is the end-to-end total time from when a customer creates
demand until a product is delivered and cash collected. This includes all
capital, information, and material flows, as well as any processing and
queuing time. By managing cycle time, a business can manage its cash
flow. Managing cycle time brings together all of a business’s processes—
from customer service to delivery—in order to direct how cash is con-
sumed or the cash-to-cash cycle.*

By managing cycle time improvements, a business can drive perform-

ance in a number of key areas:

The first step in managing cycle time is to locate the value stream of
a process. Value streams are where value is added to a product or service.
 INTRODUCTION
xxi

Conversely, Muda (or waste)2 takes value away and must be removed from
the process. Mapping a process shows how work is completed, how money
is spent, and how communications are achieved. Reducing cycle time is
not always easy, but understanding the value streams of a business allows
you to understand the fundamental ways in which the company is run.

The Supply Chain

The dynamics of a supply chain are continually changing—suppliers are
added, investments made in new plants, trade regulations grow, logistics
costs increase, and customers change. With the increase in international
trade, the supply chain has become increasingly complex and central to
the management of cash.

2
Muda is a Japanese word meaning “futility; uselessness; wastefulness” and is a key
concept in lean process thinking, like the Toyota Production System (TPS) as one
of the three types of deviation from optimal allocation of resources (the others being
mura and muri).
xxii INTRODUCTION

The supply chain is defined as the management of all functions related

to the flow of materials from the company’s suppliers to its customers. It
includes purchasing, traffic, production control, manufacturing, inven-
tory control, warehousing, and shipping.
The goal of the supply chain is to reduce the overall cycle time for all
products and services. This is achieved by the following:

• Understanding and analyzing the products you sell

• Developing a standard approach to cycle time improvement
• Adapting for each specific supply chain of a business
• Pursuing improvements based on effort and impact
• Developing a continuous improvement process that is linked to
performance.

Closing Thoughts
Earlier in my career I used to say, “There’s no rule book on how to be a manager.”
Forty years and 42 countries ago, I set out to learn this field, which very few
knew about at the time. Now I’m writing this book to provide a basic primer
for others who choose this path. I hope you find it a valuable reference book
on how to become world class, from the wisdom earned at Union Pacific
Railroad, John Deere, Toyota, Honeywell, and other great experiences. As I
write, teach, and consult these days, I always start with these simple questions:

• Is the supply chain a competitive advantage to the business and how is

the strategy defined?
• How is inventory created?
• Is it clear who has ownership of raw, work-in-progress (WIP), and
finished goods inventory?
• What metrics drive the business for quality, cost, and delivery?
• Are targets, with time periods, established?
• Has a baseline assessment been done to determine key improvement
priorities?
• Have business continuity and disaster preparedness plans been built
for the business?

This book answers these questions.

 CHAPTER 1

Keeping “People” Front

and Center in People,
Process, Tools

Over my career, I’ve seen the gamut of ways that companies administer
their human resources. As a new hire at Toyota I was required to read 35
books on subjects ranging from the Toyota Production System* to how
cultivating a rice paddy symbolized Japanese culture, and I was tested on
my comprehension of these books. Later I was sent to Japan for further
training, all to make sure that I understood the company’s culture.
I’ve seen a wide array of boss types, including the smooth and con-
summate gentleman; the pure politician; a couple of tyrants who compli-
mented the people above them and punished those below them; a servant
leader; and a genius who was probably insane. Managing people is like
parenting. You have role models who you try to emulate, and you have
jerks with whom you never want to be associated, ever again.
People, Process, and Tools is the foundation of the formula for suc-
cess, and it relies on the theory that people are 60 percent of the solution
to any problem. When we look at cash management, properly managing
human resources can help create a productivity machine and make a busi-
ness wildly successful. By contrast, when this vital resource is improperly
handled, the entire organization can end up drained of time, money, and
manpower. It’s truly bizarre that businesses so often fail to protect their
most precious asset—their people.
As managers, we are driven by the numbers, the bell-shaped curve,
and getting our bosses to approve the department’s compensation plan.
We’re required to manage up, and often simply forget to thank the people
below who’ve spent a year of their lives helping the business run.
2 OPTIMIZING THE SUPPLY CHAIN

Following are my thoughts on how to manage a business’s most im-

portant asset—its people.

Company Values, Principles, and Strategy

The Human Factor

A business is not just a for-profit enterprise: It also bears a social responsi-

bility to its customers, its employees, and its community to make quality
products at reasonable prices. It is not facilities, machines, and capital that
build products, it’s the people who actually perform the work (Figure 1.1).

Figure 1.1  The human factor

All companies have a core set of values. An organization’s values must

be authentic and fully supported by its senior leadership team; other-
wise, people won’t follow. It is critical that employees grasp these values
and actively work to put them into practice. They must be expressed and
 Keeping “People” Front and Center in People, Process, Tools 3

modeled repetitively in order to become successfully sustained and inte-

grated into the culture.
Attaining business results revolves around the alignment of a busi-
ness’s values and principles between the individual employee and the
organization.

Business Strategy Deployment

Getting a corporate culture to adopt a strategy takes a greater effort than

the act of designing and executing it. In a global organization, areas like
languages, native customs, skills, and so on can have a profound impact
on the success or failure of a program. Operations can have world-class
processes and tools but still be failures at sustaining improvements if they
fail to take the time to fully bring their people along. Making things more
difficult, the bureaucracy often works very hard at not changing. People
become comfortable with the way they are performing their job, afraid
that change will have a negative impact on their lives. In some cases, they
have developed a power base around the process to be changed and have
ulterior motives for preventing improvements.
Managing the people aspect of a business is a vital part of achieving de-
sired outcomes. It is necessary to emphasize areas such as leadership, organ-
izational effectiveness, and continuous improvement in order to achieve
and sustain a successful business strategy deployment.
A business strategy deployment is an integrated approach to driving
organizational development (Figure 1.2).

Figure 1.2  Key objectives

It focuses on the business’s objectives and goals, concentrating on em-

ployee engagement and continuous improvement to assure a process is
sustainable.

• Prioritizing: Critical business objectives are developed and priori-

tized, flowing from the business leadership to the point of execution.
4 OPTIMIZING THE SUPPLY CHAIN

• Alignment: All functional areas are clearly aligned with the goals of
the business.
• Precision: Assures a disciplined management process that integrates
the business’s objectives and that annual goals are developed, commu-
nicated, and measured through all levels of the organization.
• Accountability: Ensures that the responsible functions drive account-
ability for achieving the objectives and annual goals. The focus is to
integrate all functions into moving in one direction.

Managing across regions, cultures, and functions can provide extra

challenges toward maintaining these values, principles, and systems.
A manager needs to be able to clearly convey roles and responsibilities
(Figure 1.3) while attempting to give some local latitude to how they are
executed.

Figure 1.3  Clear roles and responsibilities with a regional focus

 Keeping “People” Front and Center in People, Process, Tools 5

Through all the years in the companies I’ve worked for, I’ve learned
that there are three best practices for ensuring that a business strategy,
results, and desired outcome are achieved. They are as follows:

• Building realistic and measurable goals and objectives

• Providing employees with an honest and timely evaluation of their
performance
• Routinely reviewing how business resources are deployed and
developed.

These three methods of managing human resources provide the best

balance of managing both the behaviors of and results for the organization.

Goals and Objectives

The old saying, “What gets measured gets done,” is absolutely applicable
in setting and measuring goals for employees. When executing a business
strategy, it is imperative that goals are set and quantified from the outset
as seen in the goal and objectives figure (Figure 1.4). This keeps a proper
focus and prevents conflicting objectives from encroaching and compet-
ing for resources.

Figure 1.4  Goals and objectives

Performance Evaluations

Part of a successful employee retention process is a continuous conversa-

tion between parties on the performance of the business relative to its
goals and objectives. A regular one-on-one dialogue should exist between
a supervisor and their associates throughout the course of the year.
By having continuous conversations, you are able to understand the
reasons for certain behaviors and make corrections where appropriate
6 OPTIMIZING THE SUPPLY CHAIN

instead of waiting for evaluation time. This leads to a conversation that

simply reviews the improvements that have already been made. This also
empowers the employee to reach their full potential. Another highly ef-
fective development tool is the 360-degree evaluation process in which
customers, peers, and subordinates are asked about the behaviors of a
leader. Successful internalization of this feedback provides the leader with
greater knowledge of how to be more effective in driving the business’s
values, principles, and management systems.

Business Resource Reviews

The purpose of performing a business resource review is for a manager

and the supervisor to have a clear understanding of how a department
is focused on achieving the business’s goals and objectives. It ties to the
strategic and annual plans, providing updates from a human resources
perspective for how processes are operating. Areas discussed should in-
clude actions to be taken and timing for their completion, as well as the
following:

• An update on the organization and people

• A leadership assessment with results from the performance
evaluations
• Retention issues
• Succession depth and planning
• Diversity development.

By executing these methods of evaluating performance, a business can

ensure that there is a proper balancing of behaviors that get the desired
results.

Organizational Effectiveness
Recruit

You can’t play the game if there’s no team on the field, so recruiting a team
should be a manager’s first priority. When executing the business strategy,
a diverse mix of both seasoned veterans and youth from college campuses
 Keeping “People” Front and Center in People, Process, Tools 7

adds a fresh and dynamic approach to solving problems. In addition, it is

vitally important that the people you recruit fit in with the values, vision,
and goals of the organization.
Hiring correctly the first time is essential for driving and sustaining
improvements. The costs of recruiting the wrong employee include hiring
expenses, total compensation, severance pay, and legal fees. Experience
shows that every time a business replaces a salaried employee it costs six
to nine months’ salary.

Train

In order to execute the business strategy with speed and agility, a business
must nurture its talent. There must be a keen focus on organizing the
best people in the right way and giving them opportunities to grow and
develop. Strong leaders understand that actively developing their people
should be part of their daily routine.
The most effective development process is to learn the job at the
worksite through the instruction of the employees who understand the
job best. Development by on-the-job training raises everyone’s abilities
and produces better quality and greater efficiency. This creates a commit-
ment from one to another to execute properly.

Retain

Part of the reason that cash-strapped businesses often hesitate to hire new
employees is the actual cost of hiring. It’s easy to forget that an employee’s
cost is more than just their salary.
The average cost of recruiting, hiring, and training a new employee is
estimated to be $4,000. Therefore, preventing employee churn* and strength-
ening employee retention is imperative to managing cash.
Providing clarity of roles and responsibilities is essential to employee
retention and drives business performance. Goal alignment enables em-
ployees to focus on their objectives for achieving results. In addition, it
drives the development of appropriate skills and removes ambiguity. It
provides a clear understanding of the expectations for both the associate
and the organization.
8 OPTIMIZING THE SUPPLY CHAIN

Building cross-functional teams* helps align the entire end-to-end

process* to execute the business strategy. By aligning functions, a business
can further develop its organizational capabilities in areas such as leader-
ship, productivity, and operating expertise.
Finally, providing people the opportunity to grow and learn (which
doesn’t necessarily mean spending dollars or cash) should be a part of all
employees’ performance development review.

Leadership

Leadership is defined as the ability of an individual or organization to

guide other individuals, teams, or entire organizations to a desired out-
come. It involves:

• The capacity to establish, communicate, and execute a clear vision

for others to follow
• Providing information, processes, and resources to make timely
decisions
• Guiding the process by balancing conflicting priorities
• Ensuring teams are accountable for the performance of the
organization.

A leader drives changes in the way people think, work, and act. They
create and set the expectations that ultimately shape the culture. Leaders
step up in times of crisis and think or act creatively in tough situations.
Servant leadership is an ancient philosophy and set of principles that
is still practiced today. Traditional management revolves around the ac-
cumulation of power at the top. Conversely, a servant leader shares power,
puts the needs of the organization first, and assists in developing their
teams’ skill sets in order to perform at the highest possible capability. They
are comfortable in their own skins and recruit a team that is smarter than
themselves.
A leader is not a bully or a coward and does not act passive aggres-
sively toward their team. They make people better by building a safe
workplace, nurturing the team’s growth, and taking responsibility for
their actions. They are fully engaged in the activities they are responsible
 Keeping “People” Front and Center in People, Process, Tools 9

for and encourage experimentation: They celebrate success and empower

employees by giving up control.
Leaders are role models whose primary task is to coach, counsel,
train, and provide the necessary resources for their organization to
meet its business objectives.

Case Study 1.1

St John Ambulance

On a recent trip to London I had the chance to meet up with an old friend
who I’ve always thought of as the best human resources leader I’ve ever
known. Steve Foster is currently Director of People and Organization at
St John Ambulance. Prior to working there, he was the human resources
leader for a multinational firm where we worked together, attempting to
do the right thing with an organization that literally had tentacles all over
the world. We were required to design programs to fit different cultures,
geographies, and circumstances.
The case study is from the nonprofit where Steve now works in the
U.K. Its roots literally date back a 1,000 years; that’s a long time for a
company culture to evolve! I thought it especially pertinent, as he is fac-
ing the very real challenge of blending an organization made up of both
volunteers and paid staff.

Background

St John Ambulance1 is the United Kingdom’s leading first aid charity. It

can date its lineage as far back as the year 1080 when it established a hos-
pice in Jerusalem. This nonprofit organization is supported by over 4,000
salaried employees and 30,000 volunteers whose mission is to provide

1
St John Ambulance is a trade name used by a number of affiliated organizations in
different countries, counties, states, or provinces dedicated to the teaching and prac-
tice of medical first aid and the provision of ambulance and community volunteer
services, all of which derive their origins from the St John Ambulance Association
founded in 1877 in the U.K. See https://en.wikipedia.org/wiki/St_John_Ambulance
10 OPTIMIZING THE SUPPLY CHAIN

efficient and effective first aid training to local communities and at public
events, such as the London Marathon, pop festivals, and sporting events.
St John Ambulance’s vision is: Everyone who needs it should receive
first aid from those around them. No one should suffer for the lack of
trained first aiders.

Their values guide their thinking and actions, and they set out the “way
we do things” as:

• Humanity—Treating others with compassion and respect

• Excellence—Pride in doing an excellent job
 Keeping “People” Front and Center in People, Process, Tools 11

• Accountability—Delivering what we promise

• Responsiveness—Continuously learning and improving
• Teamwork—Working together effectively

Their corporate values spell HEART, as people are at the heart of St John
Ambulance.
Although St John Ambulance has roots that date back a millen-
nium, they have been able to transform themselves into a vibrant
twenty-first-century organization. So how exactly does St John Ambu-
lance deliver this vision—with its set of core values—to over 30,000
people annually, with only a small paid staff and a large number of vol-
unteers? As one might expect, managing and supervising first respond-
ers is far more challenging than building an automobile, thermostat, or
security system. This is literally a life-or-death scenario every day, where
Six Sigma* is totally unacceptable.
It started by establishing leadership competencies for each layer of the
organization based on their corporate values of HEART. These competen-
cies are defined for everyone—from the CEO to a manager, including
first-responder volunteers. This set of required skills describe the behav-
iors that should be displayed, as well as those that should not be dis-
played, at each level of the business. These competencies are presented
in combination with each position’s description in order to provide a full
picture of how each individual is meeting the requirements of their role.
They go on to affirm that the incumbent in each role should be able
to demonstrate the ability, not only for their own level but also for the
people who work for them.
Next, St John Ambulance developed a performance and development
review process based on managing this process. This starts with under-
standing the following from the employee:

• Identifying progress made against the previous year’s developmen-

tal actions
• Identifying what they are doing differently now versus 12 months
ago
• Referring to their competencies, what four to five things they are
feeling really good about
12 OPTIMIZING THE SUPPLY CHAIN

• Referring to their competencies, what two to three things they

could have done better
• Identifying their frustrations and/or disappointments
• Identifying their aspirations for training or moving to a different
role
• Anything else that they’d like to discuss.

The supervisor then reviews any applicable regulatory training require-

ments as well as each of the competencies for the position. The employee’s
strengths are identified as well as their developmental needs, with actions,
timing, and necessary required management support. This completes the
overall assessment for the employee. It’s a very simple but direct method
of managing people across regions, functions, and abilities.

Final Thoughts on People, Process, Tools

Over the past year, I have had the opportunity to tour operations all over
the world. I visited an incredible variety of businesses from traditional
brick and mortar to the fastest ecommerce businesses in the world, and
my biggest takeaway from these visits is that it doesn’t matter, it is still
people, process, and tools that drive business success.
It comes down to the basics—a well-thought-out business structure +
strategy + people + fundamentals = success.
 Index
A-3 format, problem-solving
tools, 158
Ad valorem tax, 111
Affinity diagrams, 163
Aggregated forecasts, 56
Alibaba, 135
Alipay, 137
Assemble-to-order manufacturing, 67
Association of Southeast Asian
Nations (ASEAN), 106–107
Availability, defined, 121
Baidu (search engine), 135
Balance sheet, xviii, 15
Beginning-of-life process, 47–50
inactive, obsolete, and surplus
inventories, 50
new product introduction, 47
product rationalization, 48–49
simple SKU rationalization
process, 49
SIOP process, 48
Bill of materials (BOM), 50, 67, 74, 147
Boss types, 1
Brazilian trade management, 111–115
Broker management, 107
Business continuity, 123–132,
150–151
disaster preparedness, 124
leadership, 124–125
supply chain security, 125–132
Business interruptions, 123
Business leader, role of, 125, 126
Business planning process, 35–42
impact of demand changes on
supply, 38–39
maturity stages versus time, 42
production planning, 39–40
sales, inventory, and operations
planning, 35–38
tools for, 145–146
Business resource reviews, 6
Business strategy deployment, 3–5
Capacity planning
basic data for, 66
definitions, 66
factors affecting, 65–66
Case study
Brazilian trade management,
111–115
cost management, 93–95
demand changes on supply, impact
of, 38–39
German manufacturing and global
customer, 148
production planning, 39–40
project Big Bowl, 99–102
raw material purchases, 149–150
St John Ambulance, 9–12
supplier development, 93–95
supply chain of vitamin, 25–31
Cash flow, 13, 21, 117, 118, 120
Cash management, 14
Cash on delivery (COD), 136, 137
Cash-to-cash cycle, 17, 143
Cause and effect diagram. See
Fishbone chart
Check sheets, 163
China International Payment System
(CIPS), 136–137
China’s e-commerce market, 134–135
Company values, principles, and
strategy, 2–6
business resource reviews, 6
business strategy deployment, 3–5
goals and objectives, 5
human factor, 2–3
performance evaluations, 5–6
Consensus building, 59–60
Continuous flow processing, 85
Contracts, 107
172 INDEX
Control charts, 162–163
Conveyance, 66
Cost management, 90–91, 99
case study, 93–95
Country of origin, 106, 110
Credit cards, 136
Customer care/order
management, 127
Customer costs, 45
Customs Laws, 103
Customs-Trade Partnership Against
Terrorism (C-TPAT),
108, 128
Cybersecurity, 129–130
Cycle time, xx–xxi, 15, 29, 40
Data integrity, for MRP system
accuracy, 147–148
Declared value, 106, 110
Demand changes on supply, impact
of, 38–39
Demand, defined, 55
Demand forecasting, 55, 58, 145
Demand planners, 48
Demand planning, 53–61
consensus building, 59–60
forecasting, 55–58
multidimensional metrics, 60–61
Demand profiles, 52
Deming, Edwards, 80, 81, 155
Deming Wheel, 155–157
Deming’s 14 Points on Quality
Management, 81–82, 156–157
Disaster preparedness, 124
E-commerce, 133–138
in China, 134–135
defined, 133
EMEA, 134
emerging markets, 135–137
in United States, 133–134
Economic uncertainty, 53
Electronic payment processes, 136–137
EMEA, e-commerce, 134
Employee, 126–127
recruitment, 6–7
retention, 7–8
training, 7
End-of-life process, 50–51
Enterprise resource planning (ERP),
141, 144–148
customer service and care,
144–145
data integrity, 147–148
forecasting and business planning,
tools for, 145–146
materials resource planning,
146–147
Executive SIOP, 77–78
Export Control Classification
Number (ECCN), 106, 110
Export Control Laws, 103
Factory scheduling, 66
Finance’s role, in supply chain design,
14–17
balance sheet, 15
profit and loss statement, 17
Fishbone chart, 159
“5S,” for TPM, 120
The 5 Whys technique, 87, 154,
158–159
Flowchart, 159–160
Fool-proofing. See Poka-yoke
Force field analysis, 163
Forecasting, 55–58
benefits of, 56
components and methods of, 57
tools for, 145–146
Foreign Trade Zones (FTZs),
109–111
Free trade agreements (FTAs),
106–107
Freed-up cash, 14
GAC 26 Rule, 135
Gantt chart, 163
German manufacturing, and global
customer, 148
Global exporters/importers, 106
Good manufacturing practice (GMP),
118–119
Great trade program, elements of,
105–111
automation tools, 108–111
broker management, 107
free trade agreements, 106–107
people, 105–106
 INDEX
173

process, 106–108 Long-term forecasts, 56

regulatory partnerships, 108
Make-to-order manufacturing, 67
Harmonized Commodity Description Make-to-stock manufacturing, 67
and Coding System (HS Managing supplier relationships,
code), 135 92–93
Heijunka, 84, 85 Manufacturer, 127
Histograms, 161–162 Manufacturing, 66–69
Human factor, 2–3 costs, 44
key role, 67
Importer Security Filing (ISF), 100 supply chain with, 68
Inactive, obsolete, and surplus (IOS) types of, 67
inventories, 50 Mapping, 21
Income statement. See Profit and loss Marketing costs, 45, 92
(P&L) statement Material planning, 66
Insource versus outsource decision Materials management, 69–70
matrix, 22–23 Materials resource planning (MRP)
Inspections, 117 system, 71, 73–76,
International Society for 146–147
Pharmaceutical Engineering data integrity and, 147–148
(ISPE), 118 Matrix diagrams, 163
International trade, 103 Maturity stages versus time, 42
Inventory, xix, 70–71 Milk-run pickups, 95
in balance sheet, 15 Mistake-proofing. See Poka-yoke
types of, 71 Mistakes, 122, 141–143
Inventory-carrying cost, Mitigation, 53
components, 16–17 Modeling, 22
Inventory Control and Recordkeeping Muda, xxi, 83
System (ICRS), 110 Muir, Robert, 99
Multidimensional metrics, 60–61
Jidoka, 86–87
Just in Time (JIT) Production, 81, Nakajima, Seiichi, 120
83–84 Net weight, 106, 110
Network design, 99
Kaizen, 87, 120, 153–154 New product introduction (NPI),
Kanban, 71, 81, 84–85 47, 52
and SIOP process, 48
Labor analysis by region/country, 23–24
Leadership, 8–9, 124–125 Ohno, Taiichi, 80, 81, 90
defined, 8 On-the-job training, 7
Leading indicators, 59–60 “one-piece flow”, 85
Lean, 81–88 Order fulfilment, 30, 134
Logistics, 97–102 Organizational effectiveness, 6–9
costs, 45 leadership, 8–9
introduction to, 97–98 recruitment, 6–7
project Big Bowl, 99–102 retention, 7–8
providers, 128 training, 7
quality, cost, and delivery, 98–99 Organization’s values, 2–3
three pillars of, 99 Outputs, defined, 55
174 INDEX
Overall equipment effectiveness
(OEE), elements of,
121–122
Pareto chart, 160–161
Pareto, Vilfredo, 160
People, process, and tools, 1–12
company values, principles, and
strategy, 2–6
methodology based on, 35–38
organizational effectiveness, 6–9
overview of, 1
St John Ambulance, case study, 9–12
Performance, defined, 122
Performance evaluations, 5–6
Plan-do-check-act (PDCA) process,
155–157
Poka-yoke, 118
Portfolio management, 43–52
beginning-of-life process, 47–50
defined, 43
elements for, 51
end-of-life process, 50–51
product cost, 44–45
product review, 45–46
Prioritization matrices, 163
Problem-solving tools, 158–163
A-3 format, 158
control charts, 162–163
fishbone chart, 159
flowchart, 159–160
histograms, 161–162
Pareto chart, 160–161
run charts, 161
scatter diagrams, 162
Process flow diagram. See Flowchart
Process optimization, 99
Procurement costs, 45
Product development, costs involved
in, 44–45
Product lifecycle management, 45–46
Product rationalization, 48–49
Production planning, 39–40
Productivity machine, building,
153–163
5 Whys technique, 158–159
plan-do-check-act process, 155–157
problem-solving tools, 158–163
team assembling, 157–158
Profit and loss (P&L) statement,
xix, 17
Project Big Bowl, 99–102
Pull system, 85
versus push system, 71–73
Push versus pull system, 56, 71–73
Pyramid, trade, 104–105
Quality, 117–122
control, 117
defined, 122
good manufacturing practice,
118–119
manufacturing maintenance
control, 120–121
overall equipment effectiveness,
elements of, 121–122
Queue time, 66
Quote sheet, 90
Radar charts, 163
Raw material purchases, 149–150
Reconciliation, defined, 77
Recruitment, 6–7
Regression analysis, 59
Regulatory partnerships, 108,
128–129
Replenishment systems, 72
Resiliency, 123, 129
Retention, employee, 7–8
Right process for business, 18–20
Risk, 53, 124, 129, 130. See also
Business interruptions
Route sheet, 66
Run charts, 161
Run time, 66
Sales costs, 45, 92
Sales, inventory, and operations
planning (SIOP) process,
35–38
for business management, 41–42
cycle of events, 36, 44
and new product introduction, 48
Scatter diagrams, 162
Servant leadership, 8
Setup time, 66
Shareholder value, 13
Shipments process, logistics, 97
 INDEX
175
Short-term forecasts, 56
Simultaneous indicators, 60
Six Sigma, 11
Sourcing, 89–95, 127–128
case study, 93–95
cost management, 90–91
managing supplier relationships,
92–93
mission of, 90–92
sales and marketing costs, 92
Stage gate review process, 47
Statistical process control (SPC), 81
Stock-keeping units (SKU)
rationalization process, 49
Supplier, 127
Supplier development, case study,
93–95
Supply chain, xxi–xxii, 13–31
cash-to-cash cycle, 17
defined, xxii
description of, 17–18
designing right process for business,
18–20
elements, 19–20
finance’s role in, 14–17
introduction to, 13–14
with manufacturing, 68
technology and, 143–144
tool, selection of, 20–24
of vitamin, case study, 25–31
Supply chain security, 125–132
customer care/order
management, 127
cybersecurity, 129–130
facilities, 127
logistics providers, 128
manufacturer/supplier, 127
regulatory partnerships, 128–129
sourcing, 127–128
Supply planning, 63–76
inventory, 70–71
manufacturing, 66–69
materials management, 69–70
materials resource planning, 73–76
push versus pull system, 71–73
Takt time, 68, 86
Taobao, 137
Tariff code, 106, 110
Tax, 111
Team assembling, 157–158
Technology, and supply chain, 143–144
Tencent, 135
Tencent’s WeChat, 137
The Theory of Constraints, 69
360-degree evaluation process, 6
Tools, 141–151
business continuity, 150–151
enterprise resource planning,
144–148
German manufacturing and global
customer, 148
insource versus outsource decision
matrix, 22–23
labor analysis by region/country,
23–24
mapping, 21
mistakes, ultimate teacher, 141–143
modeling, 22
process automation, 108–111
raw material purchases, 149–150
technology and supply chain,
143–144
total acquisition cost model, 22
trade, administration of, 150
Total acquisition cost (TAC) model,
22, 91
Total Productive Maintenance (TPM)
system, 120–121
Toyoda, Eiji, 80, 81
Toyoda, Kiichiro, 80, 81
Toyota Production System (TPS), 1,
81–88
fundamentals, 83–87
Jidoka, 86–87
Just in Time production, 83–84
Kaizen, 87
Kanban, 84–85
Takt Time, 86
visual control, 86
Trade, administration of, 150
Trade and compliance, 103–115
automation tools, 108–111
Brazilian trade management, case
study, 111–115
great trade program, elements of,
105–111
trade pyramid, 104–105
176 INDEX
Trade pyramid, 104–105
Training, employees, 7
Tree diagrams, 163
UnionPay, 137
United States e-commerce market,
133–134
Value stream mapping (VSM), 156
Value streams, xx, 31
Vendor-managed inventory (VMI)
system, 71, 73
Vietnam, e-commerce,
135–137
Visual control, 86
Year-over-year (YOY) versus P&L
activities, 17
Zero defects, 117–118
 OTHER TITLES IN OUR SUPPLY AND OPERATIONS
MANAGEMENT COLLECTION
Joy M. Field, Boston College, Editor
• Managing Using the Diamond Principle: Innovating to Effect Organizational Process
Improvement by Mark W. Johnson
• The Global Supply Chain and Risk Management by Stuart Rosenberg
• Insightful Quality, Second Edition: Beyond Continuous Improvement
by Victor E. Sower and Frank K. Fair
• Moving into the Express Lane: How to Rapidly Increase the Value of Your Business
by Rick Pay
• The Effect of Supply Chain Management on Business Performance by Milan Frankl
• The High Cost of Low Prices: A Roadmap to Sustainable Prosperity by David S. Jacoby
• Sustainable Operations and Closed Loop Supply Chains, Second Edition by Gilvan Souza
• Statistical Process Control for Managers, Second Edition by Victor Sower
• Mastering Leadership Alignment: Linking Value Creation to Cash Flow
by Jahn Ballard and Andrew Bargerstock
• Understanding the Complexity of Emergency Supply Chains by Matt Shatzkin

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