In the journey to continuous improvement success, many organizations look to supplier development programs to drive sustainable results. The focus of these programs is improving supplier performance for mutually beneficial outcomes, including reduced costs and lead time, improved transparency and collaboration and increased customer satisfaction. Supplier development is as much about processes as it is about people—the ultimate goal is developing strategic partnerships with companies that are as invested in your business as you are.
A Supplier Development Success Story
In 2002, Coca-Cola and its China-based bottlers established the China Bottlers Purchasing Consortium (CBPC), a mechanism designed to share procurement knowledge and best practices across the Coca-Cola system. Since then, the CBPC has become an effective vehicle for Coca-Cola to undertake its supply chain initiatives, including implementing World Class Operations (WCO) across the supply network.
Swire Coca-Cola, a Hong-Kong-based Coca-Cola bottling partner with a large footprint in the U.S., and its mainland China partner, COFCO Coca-Cola, were the first bottlers to start the WCO journey, powered by a supply-chain digital improvement solution called TRACC. From November 2017, they began extending WCO best practices into the supply network. In that same year, the Swire Beverages WCO Supplier Summit was held to encourage suppliers to join the supplier development journey. The suppliers were asked to fill out a survey that ranked key pain points, and the results were surprising: people capability and process improvement opportunities ranked higher than direct cost opportunities (which included transportation costs, inventory level and defect rate). The results of the survey indicated that the suppliers’ primary concerns were developing skills and capabilities and enhancing processes.
Eleven suppliers went on to join the CBPC WCO journey in the years that followed, and a strong focus on operational excellence has helped them achieve a remarkable turnaround in performance, revenue and growth. From November 2017 to March 2020, the collective value of the profit improvement projects (PIPs) undertaken across the supplier network totalled over 5 million yuan (approximately 800,000 USD).
Aside from financial savings, other notable results thus far include:
· Increased competitive advantage
· Reduced material waste
· Creating sustainable value for customers
· Reduced electricity consumption
· Reduced environmental impact
· Reduced water consumption
· Improved cost competitiveness and risk resistance
· Increased process efficiency
· Creating a common vision and language for continuous improvement to achieve a seamless
end-to-end supply chain
· Reduced CO2 emissions by 490 tons and water usage by 11,000 tons
Based on the survey, here are six key challenges suppliers face on the journey to world class and solutions to overcome them:
1. Developing new talent management strategies
In an era of digital disruption, lack of talent has become a formidable problem for business leaders. The challenges are manifold: organizations need to rapidly identify skills gaps, develop digital capabilities and ensure that employees remain engaged and motivated. New talent strategies need to be developed to address these issues and should include the following: upskilling programs, partnering with academic institutions and industry bodies, apprenticeship initiatives and recruitment and retention programs. Process automation is also a key factor here—by using technology to automate repetitive processes, more time is made available for creative problem-solving and innovation. The result is an engaged workforce focused on meaningful work.
2. Enhancing collaboration and product innovation
Suppliers can be a pivotal part of the innovation process—opening the door to collaboration in the early stages of product development results in reduced costs and shorter development times. Many organizations struggle to integrate suppliers into the innovation process—the solution to this is creating clearly defined strategies that fully leverage supplier capabilities.
Here are some practical tips to bear in mind when developing a supplier innovation strategy:
· Determine the overall focus for innovation
· Identify the areas where innovation is sought from the supplier base
· Build a communications approach with the supplier base that outlines the focus area for innovation and details the benefits of participating in the project
· Create supplier forums to share learning and innovation; establish channels through which suppliers can network with each other
3. Building a culture of continuous improvement
Engaged leadership is a key determinant of success when it comes to building a culture of continuous improvement. Leaders who invest in employee engagement and enabling technology, and who also consistently implement a regimented improvement methodology, will succeed in creating a thriving continuous improvement culture.
Here are six steps leaders can take to promote a culture of continuous improvement:
· Lead by example; participate in continuous improvement openly and with enthusiasm
· Consistently ask for ideas for improvement and respond quickly to those ideas
· Empower employees to make daily continuous improvement a part of their own work
· Emphasize the importance of small, incremental improvements
· Help share and spread ideas
· Document and celebrate the results achieved through continuous improvement
3. Improving workplace organization
5S is a critical best practice for establishing orderliness and cleanliness in a work environment. It is usually the first best practice to be implemented in a continuous improvement initiative, and it creates a foundation for other CI best practices to thrive. The 5S concept of Sort, Shine, Set in order, Standardize, and Sustain, can be used to teach the general lean concepts of waste reduction to your workforce.
5S is more than simply cleaning up—it puts into practice the lean philosophy of continuous improvement through the non-stop elimination of waste. 5S also allows management to illustrate how lean empowers employees to make positive changes in their work environment. By empowering team members to take action, the continuous improvement philosophy can be fostered throughout the organization.
4. Optimizing KPIs
Key performance indicators (KPIs) are critical metrics that help organizations assess the performance of projects, individuals or the business at large. KPIs give a clear indication of where the business is and where it should be; they also drive decision-making and highlight opportunities for strategic and operational improvement.
KPIs and targets must be relevant and practical, and all employees need to understand how their KPIs link to the organization’s strategic imperatives. Optimizing KPIs involves identifying the KPIs that drive profitability; ensuring that KPIs are clearly understood; measuring performance on a regular basis; and updating KPIs whenever there is a change in strategic direction or priorities.
5. Developing greater front-line autonomy
Leader Standard Work (LSW)—the process of ensuring standard work processes are in place and consistently followed‒is vital for bolstering front-line autonomy. LSW drives the correct behaviours by shifting the focus of leaders to teaching, coaching, verifying and problem-solving.
Here are three ways in which leaders can help front-line workers improve decision-making and develop autonomy:
Structured problem-solving will give your employees the tools they need to uncover the root cause of a problem. By formalizing problem-solving, finding solutions becomes an automatic, ingrained response that saves time in the long run.
Conduct regular gemba walks
The gemba walk takes senior executives to the ‘real place’ where value is created in a business, be it the shop floor, warehouse, utility lines on-site or office environment. The idea of the gemba walk is simple: go to the place, look at the process, and talk to the people. This encourages leaders to speak to process owners and to observe and understand the procedures carried out daily.
Coach and mentor employees
Leaders’ focus should be on coaching, mentoring and growing your employees. When engaging with their people, leaders may be tempted to provide solutions to the problems workers face. A better approach, however, would be to coach your employees to solve the problems themselves. This saves time and helps you create an autonomous and empowered workforce.
Implementing the best practices mentioned above will not only help suppliers drive world-class business performance; they will also strengthen relationships between suppliers and buying organizations, resulting in increased business competitiveness and bottom-line results.
Graeme Faulkner is vice president, China, at Competitive Capabilities International (CCi, a privately held global company that enables organizations to deliver sustainable results across the supply chain through TRACC, a digital integrative improvement solution. He specializes in designing and implementing strategies, systems and processes that unlock people capabilities and drive organizational competitiveness. He has a BEng (Hons) degree in manufacturing engineering and management from the University of Strathclyde in Glasgow, Scotland.