Dan Jones explores the growing influence of the web from a customer sovereignty perspective
The more that customers are aware of their purchasing options and the way products and services are produced and delivered, the more demanding they become. They recognise they have an increasingly powerful voice! They expect providers to be able to deliver exactly what they want, when and how they want it and to continually improve the experience of using their products and services while minimising the impact on the environment.
In retailing, the advent of home shopping revealed that current supply chains could only fulfil exact customer orders about 60% of the time. While suppliers comfort themselves in thinking their service levels are close to 98%, this turns out to be for orders they accepted, not what the retailers asked for! From the retailers perspective it is closer to 70%. A hidden gap that can only be closed by a rapid replenishment supply chain where suppliers make, ship and sell in line with demand within a few days. This is a performance gap that exists in every industry, if we look closely enough.
Second, sustainability and environmental issues challenge us to look end-to-end to find systemic as well as piecemeal solutions. The current global footprint of most supply chains with 200 to 300-day lead times and where products travel thousands of miles before being used will have to be redesigned on economic grounds quite apart from reducing their carbon footprint. Progress so far in doing so has been disappointing, even though the opportunity is huge.
The root causes of this hidden performance gap and these elongated supply chains go right to the heart of modern management – the separation of thinking and doing between experts and workers and the organisation of activities in increasingly strong functions, departments and business units. We are recognising the potential of involving every single employee in continuously improving their own work. We are learning to see all the buffers, inventories, delays and handoffs put in place to insulate activities from the rest of the organisation. We are still reluctant to accept that point optimisation and improvement of our own activities is often at the expense of designing and optimising the end-to-end value creation process.As a result no one can see let alone cost these end-to-end flows, particularly when they share a common pipeline with many other products or services.
In short the biggest obstacle to meeting these new challenges is that functions, departments and business units have become too powerful and act in their own interests. And the countervailing power to articulate the voice of the customer and the voice of the organisation as a whole is too weak. Squeezing budgets to remain price competitive only delivers lasting benefits if we also change the value stream that delivers this product or service. It is not about reducing the power of functions but rebalancing the organisation by introducing value stream analysis and management.
The value stream manager and their team are critical to defining the problem or performance gap that needs to be closed. They are able to effect this change through a number of mechanisms: establishing the evidence base across the value stream through stability and visual management; developing the ability to respond quickly to interruptions; gaining agreement on the right actions based on the facts; resolving conflicts between departmental and value stream objectives; and delivering win-win results for customers, employees, the organisation and the environment.
Over the last year we have learned a lot more about the specific ways in which Toyota uses the scientific method to develop the problem solving skills of its employees. We will also learn a great deal more in coming years about how leaders at Toyota really use policy or strategy deployment to prioritize and focus everyone on making vital improvements. But I think the only way we are going to learn how to make value stream management work is by conducting many experiments in different situations. The learning from these will be extremely valuable as we seek to design the management systems that will be necessary to create and sustain new universal solutions to the challenges we face in the coming years.
By Professor Daniel T Jones, founder and chairman of the Lean Enterprose Academy Enterprise