How to Manage Execution of Big Orders and Avoid Losses
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)