Sunday, March 30, 2014

Inventory, Beer and Tests

Last week I spent a morning playing The Beer Game with a group of senior Supply Chain and Continuous Improvement leaders.  Before we started the game our host, an SVP of Supply Chain, related that he once played this same game with the CEO of an organization and the CEO became very frustrated at playing a 'game they couldn't win'.

Supply Chain and Continuous Improvement practicioners know it's not about 'Winning' but rather about the march of continuous improvement towards True North.

Well, our group of experienced leaders did not do so well.  Although we weren't supposed to collaborate it was difficult not to overhear what orders the distributor sitting next to you was going to place.  In spite of the factory trying to maintain some semblance of level production, inventories downstream (bull)whipped in all directions, stockouts occurred, and a certain amount of chaos ensued.  Your basic supply chain challenges.  The supply chain participants were surprised to learn at the end of the game that the customer simply ordered one amount for the first several periods and then doubled their demand for the following periods. 

Fortunately we were moving producing and distributing red 'chits' and not real inventories subject to expiration or trying to service customers that could turn to our competition.  Although this game seems simplistic it is a great way to drive home the value of Supply Chain collaboration. 

A few weeks earlier I attended a plant tour of Revolution Brewing Company sponsored by the APICS Chicago Chapter.  (Yes, I know it's a difficult job touring breweries but someone has to do it).  Chris Bird, the Director of Operations at Revolution told us that it's not unusual for them to have trucks waiting while cases of beer come off their packaging line and go straight onto a pallet and into the truck.  It's not their packaging line that is the constraint - they only run it 3 days a week; it's the size of their fermentation tanks that are the system constraint.  All of the beer they brew is routed through this set of tanks and they are rather traditional in the aging periods used for their beers (or rather they don't 'rush' it out the door).  They didn't seem particularly compelled to expand capacity (and it's interesting to note that since this tour another local craft brewery, Half Acre, announced an expansion of the capacity).  

Late this week I sat for the APICS CSCP exam again (I already have my CSCP certification but APICS instructors are encouraged to retake these exams).  In a recent SCM World report the CSCP and CPIM certifications were  recognized by business leaders as the leading Supply Chain certifications in the world (beating the next competitor by a substantial margin) and after taking the exam it is clear why. Supply chain challenges run the gamut - one Supply Chain may be challenged with inventory chaos while another may be facing demand that can't be met.  The understanding of the concepts tested on the CSCP exam give a Supply Chain practicioner a wide variety of tools to face these challenges.