When What's Best For "Me" Doesn't Equal What's Best For "We"

One of the key principles of being a Lean Leader in a learning organization involves the student/teacher relationship. In this case, you must put on your one-size-fits-all hat and embrace both roles. We are encouraged to be both patient instructors and eager learners. As such, I recently took strides towards the latter when I made like Rodney Dangerfield and went “Back to School,” participating in the LeanCor Academy.

The Academy offered several modules with different focal points on lean development. Our lesson plans included enlightening lectures, captivating discussions and hands-on madness. We participated in several different simulations and exercises meant to help us hone our critical thinking skills and build on our breadth of understanding. One such exercise stands out because of how far reaching its implications are.

This simulation involved team decision making for different key players within the lean fulfillment stream. The class was split into teams of four members, each representing roles from functional silos within a typical organization such as finance, sales, procurement, and logistics. (Now I’ve I got your attention!) Within the exercise, there were a series of decisions to be made by the group on behalf of the organization in order to come up with a best-case decision for the company. Different outcomes were given different point values. Additionally, each role preferred and would advocate outcomes that were more or less favorable to their department. (The plot thickens.)

As you can imagine, one would think that this would lead to lots of arguing and divisiveness around which direction our company should take. It should be less like an “all for one” and more like a “one for the money" approach. Unfortunately for our instructor, who I’m sure was expecting some really healthy discussion over sub-optimal decision-making, our groups generally chose the option that was the best for the organization (we are professionals, after all). It was usually pretty simple to identify the right thing to do, even though doing the right thing wasn’t supposed to be simple for everyone to embrace.

On the other hand, it would be awfully easy to shrug off this phenomenon of conflicting incentives as a mere wrinkle in our game meant to drive discussion and teach teamwork. Then again, I believe that this problem is all too real in the context of modern businesses. Functional silos and rigid, fragmented organizational structures can lead different groups to effectively work against each other based on how they are measured.

In the Supply Chain Management: Processes, Partnerships, Performance textbook, Dr. Goldsby and Dr. Garcia-Dastugue speak about this very issue. They note, “In organizations where incentives across functions are not aligned, managers do not consider the collateral damage and associated costs of their decisions. In the supply chain, wastes, such as inventory, unnecessary or expedited transportation, and overproduction, can be attributed to these self-interested actions” (Lambert, 2008). In our operations group, it is easy to spot conflicting incentives on the surface when different members of the same customer have wants and needs that are not necessarily harmonious.

In purchasing, lower piece price is a common objective for buyers across the country. This leads to larger minimum order quantities and a build-up of inventory. Better luck next time, materials group (who gets gold stars for inventory turns) - this didn’t work out for you so well. Perhaps you can convince the logistics team to pick up freight with greater frequency. Don’t worry, they aren’t measured on transportation cost!

As proponents of Building the Lean Fulfillment Stream, it is easy to sit high up on the rooftop of our House of Quality and cast down judgments on our less enlightened neighbors. But, if we take a look at ourselves in our proverbial mirrors, sometimes our throne appears less like that sturdy house and more like a giant boulder stuck in the middle of the River of Waste. Even we can be victims of sending mixed messages to our teams.

One such example comes from my own Ops team. A key indicator/measurement that we have always worked towards for our customer is trailer utilization. The thought is that more full trucks lead to higher efficiency and lower transportation cost. Accordingly, this metric has been displayed for the team and our route engineers always make a push for higher utilization numbers. This leads to a greater use of dynamic routing which can force suppliers to ship on different days of the week and at different times than their normal plan.

As a lean logistics company, we want to inject lean principles into every facet of our work that we can. Therefore, I am constantly trying to preach stability to my team members for our process. Increased stability builds the foundation for better relationships, less breakdowns in the process, and improved workflow for all parties.

Obviously, there are many times when my team members are trying to fill up trucks as much as possible while I am simultaneously preaching stability for the suppliers. They are measured on one thing and I am charged with the execution of another. Our solution to this quandary thus far has been to work on developing a redesign process for the different regions of our network. This process will have a set cadence and critical to quality checkpoints to allow us to target the areas that are least efficient. By periodically redesigning the regions, we will allow a more stable and proactive approach to adjusting the vendors’ shipping plans without sacrificing an efficient output.

This is one example of misaligned motives from our group. I am more than sure that this type of conflict is not isolated to LeanCor. Once a company is made aware of this issue, how does it respond? I’m glad you asked. It’s time to get out your scrubs and take on the role of the lean chiropractor, making sure that the backbone of your organization is in healthy alignment. There are many great ways of performing this adjustment (insert shameless LeanCor business case plug), but I would just like to submit the following three for consideration.

1. Take a systems view of your organization. In this day-and-age with high levels of information flow and more transparency within an organization, thinking in silos doesn’t cut it anymore. An organization is made up of a series of business units. But these units all function as smaller moving parts of one large machine - like vertebrae within a spinal cord. These pieces must act in concert to maximize the performance of the whole. In the supply chain industry, this is applicable within the context of managing the total fulfillment stream and not just transportation, or materials, or finance.

2. Practice “nemawashi” in creating strategic alignment. Nemawashi refers to a consensus-driven form of decision making that requires slow, deliberate consideration before a plan is implemented. In the book, The Toyota Way, Likert explains, “In the nemawashi process, many people are giving their input and this generates consensus. By the time the formal proposal comes up for a high-level approval, the decision is already made.” ...To tie this back to the alignment of incentives, a company’s commitment to including all affected parties in the strategic goals and measures of the organization can reveal the opportunities of conflict before these are implemented. Preventing this internal opposition can create a more unified outlook.

3. Be diligent and intentional with reflection. It is very easy within the life cycle of an organization to get wrapped up in the momentum of short-term goal attainment and firefighting. As this inertia takes hold we forget to stop and think about where we’ve been and where we want to go. What have I done well and where have I failed? By stepping back and reflecting on your organizational strategy and structure, you can see where you’ve found synergies between departments and where you have experienced conflict. It is only when we reflect that we can be truly disassociated from our daily drivers to understand the big picture.

After all, making changes to your strategy and evolving as an organization is natural and needed. It all goes back to the concept of learning, being students of the game that we play so much. Besides, organizations need all the advantages they can procure as the corporate landscape becomes increasingly competitive. We can ill afford to work against our teammates if we are to succeed. If we can unite together to continuously challenge ourselves and improve, we can even break through that Dangerfield barrier and finally get some respect as an organization.

Written by Clint McCrystal, Lean Logistics Team Leader at LeanCor

Sources:

Liker, Jeffrey (2004). The Toyota Way. Madison, WI: McGraw-Hill.

Lambert, Douglas M (2008). Supply Chain Management: Processes, Partnerships, Performance. Sarasota, FL: Supply Chain Management Institute.

Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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