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 The whole is greater than the sum of its parts...or is it?

01/07/2008


When a piece of plastic the size of a quarter can cause a multimillion-dollar operation to screech to a halt, the importance of an effective, well-oiled supply chain becomes obvious.

If an end product is made up of a 1,000 parts and only 999 are available, that product is incomplete - regardless of how big or small the missing item may be. When the Gestalt psychologists first coined the phrase, ‘”The whole is greater than the sum of its parts,” they may have overlooked its application to an assembly or production line.

Supply Chain Management: How it Really Works

Trent Bester and Pradeep Narayanaswamy encounter this kind of challenge in their work every day. Trent is vice president of MNP’s management consulting team, while Pradeep is a senior MNP manager specializing in supply chain management.

“When you come right down to it, supply chain management is about getting the right things, in the right place at the right time,” says Trent. “Running out of materials is a common problem, and can end up costing companies days or even weeks of production time.”

Trent and Pradeep specialize in helping companies understand how the integrated parts of their companies interact to create a finished product or service. They work to create equilibrium among cost, quality, and delivery to keep business operations flowing smoothly and efficiently.

Trent believes many of us have a misconception that supply chain management is all about saving money. “In reality, it’s about balancing all aspects of the supply chain and ensuring all affected parties are in consensus.”

That fact was particularly evident when Trent and Pradeep were advising a major construction company in B.C. on supply chain issues. The pair discovered the client’s primary challenge was not keeping costs down; a scarcity of labour and materials were a much greater challenge.

“Construction couldn’t even begin if materials and workers weren’t available in the first place, regardless of what they might cost,” explains Pradeep. He and Trent worked with the company, its suppliers and employees to devise a long-term plan to secure access to the limited resources.

Competing priorities are another common challenge in effective supply chain management. Workers on a production line want parts to be readily available at all times; marketing wants the highest quality products with the most attractive finish; and finance wants it all at the lowest price. Trent and Pradeep work with clients to assess these needs and develop a plan that manages competing interests while ensuring the company attains maximum profitability.

“Usually with even a simple assessment and analysis, we can guarantee a 10 per cent cost savings or increase in process improvement,” says Pradeep.

The Case of Excess Inventory

One of Trent’s favourite cases involves a client that manufactured movable office walls adorned with expensive handles. The company culture was very customer-centric; the CEO demanded his customers got exactly what they wanted as quickly as possible.

If his customers weren’t happy, the CEO wasn’t happy, which trickled down to the production line. To avoid running out of inventory, production floor staff ordered large quantities of door fixtures. This led to significant capital being tied-up in inventory – and the company losing money.

When Trent suggested the company contact their supplier to see any of the unused door fixtures could be returned, they learned a valuable lesson. The supplier asked the company to let them know how much inventory they had; the supplier would then let them know how much they could take back. When the company provided its final number, the supplier exclaimed, “You have more inventory in storage than we do!”

Tailoring Your Technology

When asked whether new technologies or software can increase supply chain efficiencies, Trent and Pradeep are matter-of-fact. “Technology is certainly a part of supply chain management, but it’s secondary in importance; it’s an enabler,” affirms Pradeep.

Despite being advocates of logistics management software like ORACLE, Trent and Pradeep both stress the importance of having a strategy to tailor technology to your particular needs before investing in potentially expensive software that may not solve the problem.

To illustrate the point, Pradeep explains that if he gave someone Microsoft Word and told them to write a novel, few would be able to complete the task.

“The person would need to have the skills and intelligence to write in the first place. The software is simply something that lets them do what they already know how to do.”

The same is true with logistics software; software will enable you to do what your business already does well. Although it can render your processes more efficient, a strategic plan has to be in place before implementation.

It’s All About the Sum of our Parts

Supply chains are all around us. They’re present in product manufacturing; they’re visible in the service industry; and they’re a dominating element of the transportation industry. When one part of the supply chain is missing or disrupted, it can affect the entire process.

So, the next time you ponder the saying that a whole is greater than the sum of its parts, think about what it would be like to try driving your car without the steering wheel. It reminds us all that the whole really is as great as the sum of its parts.

By Trent Bester, Vice President of Management Consulting. For more information on supply chain management, please contact your local MNP advisor, or Trent at 1.877.688.8408.