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How to Man­age Ex­e­cu­tion of Big Or­ders and Avoid Losses

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Man­ager in­forms the Pro­duc­tion Man­ager about short quan­tity re­ceived with ETA on short quan­tity, sim­i­larly the Pro­duc­tion Man­ager in­forms the Pack­ag­ing Man­ager or De­liv­ery Man­ager on their OTIFEF with cor­rec­tive mea­sures. These Depart­ment Heads must wear the hats of the Risk Man­agers and be the run­ner in relay race. Buy­ing Agents be­comes the Risk Man­agers man­ag­ing these run­ners in the ab­sence of in­ter­nal re­source in the fac­tory.

Imag­ine a big fat In­dian wed­ding. Its Lav­ish, grandeur, var­ied, ex­ag­ger­ated, zil­lion op­er­a­tions, more than a dozen events and what not. How­ever, the onus of con­duct­ing it suc­cess­fully falls on hand­ful of peo­ple. or imag­ine ar­rival of heads of states for a big con­fer­ence in town is be­ing planned which in­volves many as­sign­ments and tasks that are as­signed to each func­tionary so that on the fi­nal day ev­ery­thing goes smooth and un-in­ter­rupted.

Both these ex­am­ples can be re­lated to ship­ment leav­ing from an ex­porter’s premises. All the peo­ple who are man­ag­ing its sched­uled de­par­ture with re­quired qual­ity/quan­tity pa­ram­e­ters are ba­si­cally man­ag­ing the risk. The risk to sup­ply chain right from pro­cure­ment of raw ma­te­rial to fi­nal de­liv­ery shipped on board. Let us ex­plore how this risk is man­aged or shall be man­aged for has­sle free sup­ply. Be­ing a Buy­ing Agent, my ex­am­ples might sound like some­one who is an ex­ter­nal Risk Man­ager in the sup­ply chain. How­ever, the process is same even if it is an in­ter­nal re­source within the ex­port com­pany.

1. Iden­tify The Risk Pat­terns

Whether it is the Buy­ing Agent or Fac­tory QA, all the fac­tory records of sup­ply chain per­for­mance must be an­a­lysed at each step from pro­cure­ment, pro­duc­tion, fin­ish­ing and fi­nal dis­patch as this is the key fac­tor to as­sess the scale of risk we ex­pect to man­age.

It is called OTIFEF or (On Time In Full Er­ror Free per­for­mance).

Hence we must look at each stage men­tioned above, scaled from 1 to 10 on their OTIFEF. For ex­am­ple, if raw ma­te­rial pro­cure­ment was de­layed in four out of last ten ship­ments, the rat­ing is 4/10 or if quan­tity was short in 3 out of 10 from pro­cure­ment by the pro­duc­tion team, its OTIFEF is 3/10. This is the most im­por­tant ex­er­cise in the whole Risk Man­age­ment of Sup­ply Chain. Hence we must in­sist on it from the man­age­ment and if not avail­able, please pre­pare one with what­ever in­put

you get from the Pro­duc­tion/qual­ity/ Fac­tory Man­ager.

I am sure read­ers will agree with me on how many ex­am­ples we have seen/ ex­pe­ri­enced as when fi­nal quan­tity of pieces were short as per the PO be­cause raw ma­te­rial was bought in short quan­tity. Or at fi­nal pack­ing stage, the la­bels went short and hence 100% of the prod­uct was not packed be­fore fi­nal in­spec­tion. That’s be­cause OITFEF was not an­a­lysed and checks placed ac­cord­ingly.

Once these key ar­eas are iden­ti­fied and we know that this is a pat­tern in the fac­tory, the Risk Man­ager will put max­i­mum ef­fort in that di­rec­tion. QA Man­ager as in­ter­nal re­source or a Buy­ing Agent play cru­cial role in this whole ex­er­cise. They do it for their clients to en­sure 100% OITFEF per­for­mance. The fac­tory man­age­ment must do this ex­er­cise or take this key in­put from the Buy­ing Agents.

2. Relay The Mes­sage

Achiev­ing 100% OTIFEF is mostly not pos­si­ble at all time with all ship­ments and at all stages. Once the above ex­er­cise is done, there might still be some is­sues to deal. Hence the best next step is to play like a run­ner in a relay race.

In a relay race, a run­ner is not only look­ing be­hind his back to take over the bat­ten but also look­ing ahead at the per­son whom the bat­ten needs to be given. Here the bat­ten is not the goods, it is the spe­cific OTIFEF with cor­rec­tion steps to take or that needs to be taken. This bat­ten will be handed by sec­ond in line to the third one with not only the OTIFEF of first per­son, but also of his own per­for­mance.

Let us take an ex­am­ple. The

Pur­chase Man­ager in­forms the Pro­duc­tion Man­ager about short quan­tity re­ceived with ETA on short quan­tity, sim­i­larly the Pro­duc­tion Man­ager in­forms the Pack­ag­ing Man­ager or De­liv­ery Man­ager on their OTIFEF with cor­rec­tive mea­sures.

These Depart­ment Heads must wear the hats of the Risk Man­agers and be the run­ner in relay race. Buy­ing Agents be­comes the Risk Man­agers man­ag­ing these run­ners in the ab­sence of in­ter­nal re­source in the fac­tory.

3. Keep The Aux­il­iaries Ready

This ex­er­cise is equally im­por­tant as the above two. By Aux­il­iaries I mean plan­ning ahead for all nec­es­sary ap­provals re­lated to an or­der. Like raw ma­te­rial qual­ity ap­provals, pro­duc­tion sam­ple ap­provals, pack­ag­ing, test­ing re­ports, drop tests ap­provals on fi­nal pack­ag­ing, etc. Most of the ex­port firms pro­fes­sion­ally man­age this by mak­ing TNA. Buy­ing Agents too have TNA or PO Con­trol Copy per or­der to pro­fes­sion­ally man­age each stage.

I still re­mem­ber my mer­chant days. How we used to have re­minders set up on our out­look email for all the dif­fer­ent dates we agreed to ad­here to, for spe­cific PO. And these dates were week in ad­vance then the sched­uled ones so that con­tin­gency is met in case we fail to meet our tar­get dates. If Buy­ing House is part of the PO, key dates must be matched with their in­spec­tion team sched­ule as well as ship­ping man­ager for bet­ter re­sults.

4. Bet­ter Late Then Never

Go­ing one step ahead and two step back never helps. Hence what­ever may hap­pen, never rush be­cause of time lines. Al­ways re­mem­ber that it is a big ship­ment that is mov­ing like an ele­phant. Once the process is moved to next phase, there might be pos­si­bly of no re­course to turn back for cor­rec­tions. Hence do all nec­es­sary checks of the sit­u­a­tion, leav­ing no room for course cor­rec­tion.

I know the growth story of a small com­pany two decades back, who now ships 400 mil­lion dol­lar of gar­ments. I was talk­ing to their old time ware­house man­ager and he nar­rated an age old fact. How this tiny ex­port firms used to keep a spare cut­ting ma­chine handy dur­ing night shift be­cause the man­ager never wanted to be struck due to fail­ure of one ma­chine in use which would later be­come an ob­sta­cle. And that is how they grew to be a gi­ant.

An­other story I found very in­ter­est­ing was of a Buy­ing House Mer­chant who tested the prod­ucts with all op­tions like a lay­man con­sumer and made sure that stan­dards are main­tained and prod­uct doesn’t fail the fi­nal in­spec­tion to be con­ducted by third party be­cause then there is no com­ing back.

5. Post Sup­ply Risk Anal­y­sis

This process will bring you back to point i.e anal­y­sis for im­prove­ment in next or­der by data min­ing. Hence, it is not to be a missed ex­er­cise. And this anal­y­sis must be made by all depart­ment heads for their in­di­vid­ual ac­tiv­ity on an or­der. If needed, a depart­ment head may ask for a feed­back from other depart­ment heads. If Buy­ing Agent is also part of the PO, the Mer­chant must be in­sisted to share their re­port for each depart­ment. And OTIFEF is cal­cu­lated with all in­puts re­ceived.

A suc­cess­ful ex­port com­pany in South In­dia deal­ing in palm leaves prod­ucts is so pro­fes­sion­ally man­aged that to­day also you can re­trieve records of their first ship­ment they did 32 years back and can ac­cess stage wise PO re­ports on their sys­tems. With over 2000 ship­ments an­a­lysed so far, their OTIFEF cal­cu­la­tion comes in handy at each stage.

I know a Buy­ing House Owner who works so well with OTIFEF. He only fo­cuses on PD OTIFEF, PO OTIFEF, QA OTIFEF & SHIP­PING OTIFEF for all the work man­aged for 32 buy­ers. That is the only way he can man­age 70+ team and 22 Mil­lion Dol­lar busi­ness.

All the above points men­tioned will surely help you draft a SOP best suited for your or­gan­i­sa­tion. There can be sev­eral other ways to achieve OTIFEF. I shared just a few from my ex­pe­ri­ence.

Ar­ti­cle con­trib­uted by Lokesh Parashar PRES­I­DENT BAA (BUY­ING AGENTS AS­SO­CI­A­TION)

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