trying to understand what are the similarities and difference between
this 2 models. ( The Logistics Bridge Model and Four Primary Elements of Supply Chain Design)
The Logistics Bridge Model
Both Lean and Six Sigma lend distinctive disciplines and tools to supply chain management and logistics. Using these disciplines and tools will allow an organization to uncover and deal with wastes and inefficiencies. Although Lean and Six Sigma tools are very powerful, we need to remember that for Lean and Six Sigma to work in logistics, a fundamental mind shift must occur. This mind shift requires that we first begin making decisions based on the concept of "Total Logistics Costs," and second, we have the courage to eliminate waste in its various forms. This may sound simple but in reality will prove otherwise. Organizational norms, management tradition, and financial accounting methods will fight against "Total Cost" and will continue to support our natural tendencies to create waste. The Logistics Bridge Model provides a template for the design and implementation of a logistics strategy based on Lean and Six Sigma principles.
The Logistics Bridge Model is a model that can be used as a compass for the supply chain professional. That is, it will provide direction and insight on how to solve today's logistics challenges. At the heart of these challenges is the need to bridge our suppliers with our own processes and then bridge our processes to the customer. All this must happen while we face competitive and shareholder pressures to increase market share and reduce costs.
The Logistics Bridge Model teaches us that Lean Six Sigma Logistics is made up of three main principles. These principles are:
1. Logistics Flow
2. Logistics Capability
3. Logistics Discipline
Flow is a crucial tenet in any corporate logistics strategy. The CEO recognizes that elements of flow are inherent in every business function. Understanding flow inside the organization allows the firm to understand its strengths, weaknesses, opportunities and constraints. Flow describes the operational effectiveness of the company. The CEO will be most interested in three types of flow: asset flow, information flow, and financial flow. How productive are the assets, how do we manage information, and how do we generate a return on our investment? These three key elements of flow form a foundation that is closely tied to supply chain and logistics activities, creating awareness of the importance of flow and strategic logistics management.
Capability is the second priority for the CEO. Once the organization understands how assets and information are flowing, the question will arise of whether or not the supply chain is capable! Capability is very interesting because an organizational infrastructure is only as capable as the system is at any particular point in time. In other words, a CEO can mandate cost reduction, better service, and reduced lead times, but the mandate does nothing to change the capability of the organization.
An organization is a complex series of functions and processes that act interdependently as a global system. Therefore, the system has a finite capability, by conscious or non-conscious design, at any point in time. Uncovering, defining, and articulating this capability is at the heart of Six Sigma. Improving on this capability is at the heart of Lean. The Logistics Bridge Model shows us that a capable system enjoys predictability, stability, and visibility. These are the three tenets that are crucial for systems capability. Progressive CEOs know and understand this fact. Successful CEOs will drive organizational capability to exceed customer expectations. Leading CEOs know that Lean Six Sigma Logistics is required to improve organizational capability.
Maintaining flow and capability requires discipline. Discipline is the third key focus area for CEOs as they develop a logistics strategy. Enlightened CEOs recognize that logistics and supply chain management are not about technology, but rather about people and process. For people and processes to be effective, there must be discipline to the principles and strategies being used. Lean is a quintessential example of the importance of discipline. Many executive managers review the principles of Lean and recognize them as nothing more than common sense. Yet their attempts at implementing Lean fail miserably! Why? The number one cause of failure is lack of discipline. Lean Six Sigma and eliminating waste is not difficult conceptually. At the end of the day, it is nothing more than a lot of hard work. And hard work requires discipline. To work hard and to work smart require a commitment to the principles and consistent application of the tools. Relative to logistics, discipline is extremely important. The Logistics Bridge Model describes logistics discipline as focusing on three main aspects: Collaboration, Systems Optimization, and Waste Elimination. These three tenets will drive discipline and success and are necessary to support any corporate Lean Six Sigma initiative.
Logistics Bridge Model - Getting Started
In summary, the Logistics Bridge Model starts with higher-order principles that will be the focus of the top executive of the organization: Logistics Flow, Logistics Capability, and Logistics Discipline. Once the CEO believes this is the proper strategic approach to logistics, the CEO can pass the strategic focus areas to the next level of management.
Senior management will be tasked with implementing the three key Lean Six Sigma Logistics principles. This takes us to the next level of tenets in the model. Logistics Flow will focus on Asset Flow, Information Flow, and Financial Flow. Logistics Capability will focus on the logistics system's Predictability, Stability, and Visibility. Logistics Discipline requires strategies focused on Collaboration, Systems Optimization, and Waste Elimination.
In the end, the senior executive will embrace these nine second-order tenets and will develop an execution plan to implement the strategies, engaging the next management level of the organization. This takes us to the level of the doers, the people who have to implement the strategy. These are the people who have to get it done! Fortunately, the Logistics Bridge Model has developed third-order tenets. These are the strategic areas that the implementers need to focus on, twenty-seven tactics that represent the best of what Lean and Six Sigma have to offer to supply chain organization and processes
Four Primary Elements of Supply Chain Design
Physical Flow Design
• Physical flow refers to the movement and storage of inventory through the supply chain from points of supply through the focal company and out to customers.
• The company's network design consists of its physical locations for storage and processing of inventory.
o These are called nodes.
• Companies seek to optimize physical network design in terms of the number of facilities, location, size, and function of these locations.
• The movement of inventory (inbound transportation, transshipments, and outbound transportation) is essential in the optimization of the physical network since transportation accounts for substantial supply chain operating expense for many companies and is a significant contributor to order lead times.
o Transportation movements are called links in physical network design.
Supply Chain Finance
· Many aspects of supply chain planning and analysis involve investments, revenues, cost of goods sold (COGS), and expenses. Supply chain finance captures these flows of capital and equity through supply chain transactions within and beyond the company (with suppliers and customers).
· It is essential for supply chain professionals to speak the language of the chief financial officer (CFO), as this individual will often have the responsibility of approving supply chain initiatives and evaluating supply chain performance from a financial standpoint.
· Supply chain managers must, therefore, become conversant and knowledgeable of important financial tools, such as
• The Strategic Profit Model
• Economic value added (EVA)
• Metrics, such as order-to-cash and cash-to-cash cycle
• Analytical methods, such as activity-based costing (ABC) and discounted
• Cash flow analysis.
Information Flow Design
· While much of supply chain management focuses on the optimal flow of physical inventory, a great deal of coordination is required to support this optimal flow. Coordination occurs via the flow of information within and across companies in the supply chain.
· The design of the information flow is concerned with how firms communicate with
o suppliers (procurement, risk contracts),
o internal resources (production planning, bills of materials, material requirements planning), and
o Customers (sales & operations planning (S&OP) and other collaboration-based processes).
· Information flows consist of technical and nontechnical means of expressing needs, status, and confirmatory information among supply chain members. It provides visibility of orders, inventories, and process activities.
· Organization design expresses WHO will accomplish work and process design conveys WHAT work will be accomplished and HOW.
· Organization design for supply chain planning and analysis will reflect the roles and responsibilities of those involved in the execution of supply chain processes.
· Note that key interfaces may involve those from outside the "supply chain" organization, as decisions involve interfacing with customers (e.g., sales/marketing/customer service), making capital investments (e.g., finance/accounting), fulfilling legal requirements in supply chain execution (e.g., legal), and providing workforce support and enablement (e.g., human resources, health and safety), among others.
· The degree of centralization/decentralization of supply chain decision making is vital component of organization design in supply chain activities.
o Centralization refers to consolidation of decision rights within the headquarters.
o Decentralization refers to the allocation of decision rights to those in the field (e.g., distribution locations).
· Highly centralized organizations seek higher degrees of uniformity and control in supply chain execution.
· Highly decentralized organizations allow for greater freedoms and "local flavor" to be introduced in supply chain execution (at the expense of control).
· Process design consists of the flow of work activities such that value is maximized and wastes are minimized.
· Operational excellence/improvement methods like Lean and Six Sigma can be helpful toward the design of work processes that maximizes value and minimizes waste.
· Helpful tools can include
o process maps,
o value stream maps,
o fishbone diagrams,
o pareto charts, and
o Process capability charts.
· Performance measurement is another essential aspect of organization and process design.
· The selection of metrics and consistent measurement inform the effectiveness and efficiency of supply chain planning, analysis, and execution.
· Metrics should capture the efficacy of supply chain decisions and actions, including those related to internal processes as well as those that interface with customers and suppliers in the supply chain.
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