Common Pitfalls
Pitfalls 1 through 4 address problems related to information definition and supply chain management. Pitfalls 5 through 9 relate to operational problems. Pitfalls 10 through 14 are problems that are strategic and design related.
Pitfall 1: No Supply Chain Metrics
Although the supply chain’s overall performance depends on the sites’ joint performance, usually each site is managed by fairly autonomous management teams, each with its own objectives and mission. These objectives may have little to do with the supply chain’s overall performance. Worse, these objectives may conflict. The consequence is that the different sites may have operational goals that, if met, result in inefficiencies for the overall chain.
For example, a northern California computer manufacturer’s circuit assembly operation used cost per placement as its overriding performance measure. The site focused on reducing placement cost. This was not inherently wrong, but it didn’t take into account how the site’s performance affected the overall supply chain of computer manufacturing and distribution. Consequently, the site held excessive inventory in order to operate in large lot sizes.
In another case, an Indiana component manufacturing plant of an automobile manufacturer started aggressively cutting inventory, as its performance was explicitly determined by its inventory. As a result, the plant’s response times to the final assembly plants and the spare parts distribution centers became longer and highly erratic. The final assembly plants and the parts distribution centers had to keep inventory high to give their customers reasonable service.