Perhaps: A story of the operations side of the supply chain

NOTE: A version of this essay was published in the September 2021 edition of When Free To Choose.

As we know, the COVID-19 pandemic has affected supply chains on many fronts. Recapping them now would be rehashing information we have all read about or experienced in some way. In addition, the Association of Supply Chain Management (ASCM) has a depository of articles, podcasts, webinars, and other documents on its website, www.ascm.org, discussing the effects of the pandemic on the supply chain.

Instead, let me tell you a story. My family and I recently launched a home remodeling project. The project plan included installing flooring throughout most of the house, new kitchen lighting, a beam and chandelier hanging from the living room ceiling, and new kitchen countertops. Of course, along with the countertops, we ordered a new kitchen faucet. The project began the day after Father’s Day and, as I wrote this, was within five working days of being completed.

As most of you have experienced yourself, “because of COVID,” lead times for the delivery of products and the scheduling of services have been longer than during pre-pandemic periods. For example, after leaving messages with several local electricians searching for someone to run an electrical line to the chandelier, we received one return phone call two weeks later. It is easy to discern that we awarded the business to the one who returned the phone call.

After the countertops were installed, it came time to install the kitchen faucet, which we had in our possession for roughly 45 days. One major issue arose – the new faucet’s cold water intake hose leaked at an internal fitting point. We could not stop the leak, so we removed the faucet and returned the defective product to the retailer where it had been purchased. The retailer could not estimate the time for a replacement faucet to arrive, which has not been uncommon during this pandemic. As a result of that uncertainty, we bought another faucet off-the-shelf at a different retailer. The new faucet, which was also from another manufacturer, was installed with no leaks. However, it was not our first choice.

You may be asking, “Was the defective faucet made in the U.S.?” Yes, it was. We buy American-made products out of principle, but let’s not go down that road for now. Instead, let’s think about what might have happened at the U.S. manufacturer, which we’ll call the “L” company that allowed the defective faucet to reach a customer “because of COVID.”

• Was “L” short assembly workers, thus forced to use untrained or uncertified employees to perform the job of installing the fitting, hence creating a defective product? Perhaps.
• Was “L” anticipating or experiencing a material shortage, choosing to adopt the “when in doubt, ship it out” cost-centric mantra rather than “when in doubt, throw it out” quality practice? Perhaps.
• Was “L” operating under a production quota standard for the day with this particular faucet, making quantity a higher priority than quality? Perhaps.
• Was “L” experiencing all of the above issues at once, creating the perfect storm for producing and shipping out defective products? Perhaps.
• Was “L” experiencing none of the above issues yet still shipped out a defective product because of its demonstrated process capability? Again, perhaps.

Without being entrenched in “L’s” culture and diving into the data, one could speculate without understanding the true root cause of what happened. Unquestionably, a five-why analysis should be used at “L” to determine the root cause and subsequent corrective actions.

For now, we can learn a great deal about the impact of the pandemic on supply chains and the power inherent in The Northwood Idea by looking at The Safety-Quality-Throughput-Cost Model (SQTC):

As businesses struggle with material shortages, labor shortages, and cash shortages, they must make allocation decisions for what they have available. In making those decisions, the top priority must remain the safety of people, followed by the quality of products and services, followed by the throughput of the process, followed by cost. Leaders following the SQTC model help create a business culture that continuously strives to improve itself and add value for the customer.

The principles of The Northwood Idea provide a foundation from which crucial decisions can be made effectively. The Code of Ethics at Northwood includes responsibility, respect, empathy, and integrity. As transformative leaders, we believe that showing empathy and respect for one another, including those who report to us, creates the relationships we covet to compete as a team. As transformative leaders, we believe that demonstrating personal responsibility and integrity in our words and actions creates an internal truth about ourselves.

Let’s not forget that operations are the execution engine of the supply chain. Reviving our supply chains begins at the operations level. Providing a safe work environment demonstrates empathy and respect for those around us by making all team members feel physically and emotionally safe within the organization. The feeling of safety shows we truly value people first and foremost. Not sacrificing safety for quality, throughput, or cost demonstrates personal responsibility and integrity and meets the sequence of the SQTC model. Encouraging and expecting front-line workers to make decisions on quality, regardless of production quotas or cost targets, shows respect and trust. Finally, giving individuals a sense of pride in workmanship helps build a quality mindset as we face material, labor, and cash shortages daily “because of COVID.”

As a transformative leader of “L” company, safety would come first. The untrained/uncertified line worker would not qualify for the hose-fitting job. Production quotas on the faucet would not exist. Quality would prevail over throughput and cost, which would help create the learning culture necessary to compete and continuously improve process capabilities. In short, had the basics of the SQTC model been followed, the defective faucet would never have been manufactured – or, at the very least, reached the customer. Transformative leaders need to realize that providing a product or service that the customer values is what is truly important and sustainable for a business.

Cutting corners or making decisions out of sequence from the SQTC model is inconsistent with The Northwood Idea and would not improve our supply chains. We do not want to say, “because of COVID,” we had to compromise safety or sacrifice quality to get the product shipped, or we had to meet production targets to stay on budget regardless of the quality of the product or the safety of our team. We don’t want to say “because of COVID” we had material and labor shortages, which “caused us” to make decisions that sacrificed safety and quality. That particular mindset is ineffective and leads to unsustainable outcomes. Instead, as transformative leaders, we live the code of ethics by showing empathy, respect, integrity, and personal responsibility – those are values that will drive operations and supply chains to perform efficiently and consistently. We follow the sequence of the SQTC model to build the learning culture of continuous improvement within our team. Our code of ethics actively engages us as transformative leaders to create the culture we need to sustain the business. It is our freedom and code of ethics that provide the foundation for sustaining our operations and supply chains.

One might ask whether I’d buy another product manufactured by “L” company. Possibly, assuming “L” company will implement corrective action to fix the process issue’s true root cause. Only time will tell. Perhaps.