Field Notes #1: Some Thoughts on Continuous Improvement

This is different from my other posts as it gets into business strategies so if you’re not interested in supply chain and business you may want to wait for the next post. This ones for the supply chain squad.

If you’re leading supply chain team, especially at a startup, in addition to working on “fun” and high visibility projects like product launches and launching at new retailers you cannot forget continuous improvement initiatives for your current and sustaining products. These initiatives are usually where you unlock outcomes that lead your company to be successful in the long term. 

What are some examples that you may think are obvious but people tend to forget in the day to day?

• Supply chain resiliency. Go down your BOM and identify how reliably you can source each part. Are there any high risk items from a cost, lead time, accessibility standpoint. For non-commodity parts have a minimum of 2 suppliers you can rely on in most cases.

• Your contribution/gross margin is x% and want to increase it? What are the largest cost contributors and which ones are the quickest ones you can tackle and reduce? Some easy unlocks:

  • Send your shipping profile (order volume dissected by weight/dims, shipping location/zones) to different carriers to see if you can get better rates or different 3PLs to compare to your current 3PL.

  • Another easy low effort one is asking your suppliers across your supply chain what volume (of shipments or manufacturing units) would trigger the next cost break? If you’re 75% there negotiate to unlock them now especially if you have a great relationship and are showing signs of growth. They're interested in your success more than you think they are.

• Keep track of your manufacturer’s first-pass-yield (FPY) - this is especially for hardware or discrete products that require multi-step assembly and manufacturing processes. Simply put this tracks what % of units they manufacture are made perfectly the first time. Why is this important? Because the cost of every unit not made correctly and being reworked is being added to your unit cost for the items made correctly. Ask for a root cause analysis so you understand why parts are failing. Ask for plan to improve FPY and if they do this should drive down your cost automatically or at the least you’ll have data to negotiate cost down. 

For a successful continuous improvement culture you need to ensure you have a strong culture of data collection, templates for sharing that data with suppliers (shopping profile, forecasts, etc) tand preferably an agile method of managing each initiative.

I’ve lead organizations where I’ve built this culture and once operationalized it runs like an engine where the cost reduction, quality and continuous improvements just take a life of their own.

If you’re interested in any of these or related topics, reach out to me on twitter or linkedin. I’d be happy to chat general strategies or specific structures to position your product ops and supply chain to help your company meet its goals.

Until next time!