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Decisions: The hiden flow in the Supply Chain Manuel Acero macero@scm-strategies.com Whenever we speak about supply chains we are referring implicitly or explicitly to three tangible flows that in one way or another go through different processes involved in the supply chain: Materials Flow, Information flow and Money Flow. These are tangible because we can see them, verify them physically, and evaluate them, etc. If we analyze the supply chain as a inter related business process followed one by each other, we must consider two process dimensions: First, The Plan process in which we anticipate or predict events that can happen in the supply chain and also we project the appropriation of supply chain resources to meet the planed supply chain events (Sales, Deliveries, Buys, Production, Transportation, Delays, Outsourcing, etc.); And Second, the execution processes where we develop, in a transactional form and in a day to day phase, all actions to reach the plans. In a traditional way, we see the flows in Planning processes, as only one flow: Information for decisions making and then we can predict future events. Also, In the execution processes we see three traditional flows: materials, information and money. But, in these two dimensions of process (both plan and execution) decisions are taken all the time. And these decisions in a way or another can accelerate or diminish the speed of other flows in the supply chain. How many times is the supply chain interrupted because a decision was took out of time?, or how many times the supply chain stopped because there is no one who takes the decision to buy or to pay?, or for how long a company waits for a decision because certain permissions of the organizational hierarchy “are needed”? Then an obvious question arises: Does a decision making flow exists in a supply chain? And the obvious answer is YES, it is the most important flow, but it is a hidden flow, it is the part of Iceberg that we can’t see. Materials flow, Informatión flow, Money flow

Decision Flow

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Do we have clear how decisions making flow is made in the Supply Chain with regard to whom, when and under what situations take the decisions? Do we know this both at internal level as to external level from our Customers, Suppliers and other partners? If the answer is not, we have problems in supply chain synchronization and, of course we are spending the money on optimizing other flows when we must be optimizing the decisions making process. A company or a chain can arrange an excellent flow of materials (Transport Fleet, conveyor belts, hoist, etc.), good information systems (SAP, Oracle, bar codes, RFID, etc.), a good money flow (Flexible Politics of cash flow, etc.) but, if it does not have a effective decisions flow, that allows the best Service / Cost relation in every decision, it will be troubled. The decisions flow depends on the people, only on the people. We are the element of the chain that decides what actions to take in every event. That's why the decisions flow is the more subtle flow of all the four flows. While it depends on people, means it depends on knowledge, emotions, behaviors, empowerment, paradigms, skills, weariness, assumptions, etc., all these are difficult to measure and to improve. The efficiency’s dependency of the materials, information and money flows is directly related with the efficiency of the decisions flow. But as in the Iceberg, this is hidden under water so, to see it we must dive, analyze it, diagnose it and improve it continuously. As well as we can prepare a map of the materials, Information and money flows, it is necessary to design the map of the decisions flow that goes with the other flows. A detail map of the decision systems of the chain is the first step to improve all of the flows. There is necessary to describe clearly Who take the decisions (Responsible), When they must take the decisions (Time) and the criteria to take it (Parameters). A key point is that every planning process has a “When in the future” associated with it. The planning questions are completely time-phased. Hence, to understand the flow logic of planning, we have to add the time dimension. Main questiones about characteristics of the elements associated with the decisions flow: Who: • • • • •

Has the People the necessary knowledge to take fluid decisions? People understands the implications of not deciding about the correct time? Has the People the correct tools to take fluid decisions People understands clearly the parameters under which must decides? People understands clearly the implications of taking decisions out of parameters?

When: • Has the events been established and the moment in which the decision must take? • Is specified the maximum time that must take every decision? (like lead time of flow of materials) • Do we have established the time horizons for the plannning process? • Is understood clearly the speed to which decisions have to be taken? • Do we have a priorities system for the decisions making? (Not to go rapidly all the time) Parameters: • Do we have maximum times for the decision making? • Are the parameters of the Service / Cost relation clearly established and understood? • Do we have defined special cases where the parameters can be violated? • Do we have Planning and Execution politics?

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Supply Chain Decisions Map Example Process: Source Stoked Product

Schedule Product Deliveries

Receive Product

Who: When: Parameters:

Verify Product

Who: When: Parameters:

Transfer Product

Authorize Supplier Payment

Payment

M A T E R I A L S

Who: When: Parameters:

Who: When: Parameters:

Who: When: Parameters:

M O N E Y

D E C I S I O N S

Who: When: Parameters:

I n f o r m a t i o n Decisions Flow

Money Flow

Materials Flow

Information Flow

Advantages of the Decision Map 1) To See the part hidden from the Iceberg 2) Determining critical activities where only there is decisions flow (Schedule Product deliveries and Authorize Supplier Payment in the example) 3) To See graphically the relation between the decisions flow and other three flows, basic to determine his impact 4) To Analyze bottlenecks in the flows of Materials and Money due to problems in the decisions flows: • Who: People have the necessary knowledge? Have they been educated and trained to take this type of decisones? Do they have the hardware suitable? • When: Is the impact known of delaying a decision, in terms of costs and service? Is known the speed to which the business and the market must run? • Parameters: Lead Times, Maximum times to do that activity and the process, Information that must be consulted to take the decision, Costs of the activity and the process, Decision politics like Level of services, inventory levels, etc. 5) To find progress opportunities in the speed of the supply chain 6) To find strengths and weaknesses in the relation of all the flows (Holistic vision of SCM) 7) To see opportunities in the education and training of the people and to define coherent improvement plans with the Supply Chain Management strategy. 8) To help to promote the collaboration between different people of a process 9) It helps to define a synchronized information and decision system, that supports the operational excellence

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Decisions the main flow of the Supply Chain  

Are you enhanced materials and information flow only in your supply chain? And what about flow of decisions?

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