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Tag: collaborative supply chains

Scottish farmers get their local supply network humming

Be the change you want in the world  . . . but be worldly too

Self-improvement experts will tell you that “you must be the change you see in the world”.  They are right.  But there is another view too.

Developed economies are so complicated that you cannot get anything done unless something else happens, often one or two steps away.

Some people shrug and go into a tail spin of mild depression.  Others set about organising their “supply networks” or “collaborative supply chains”.  They not only take responsibility for what they do themselves; they hold up a market opportunity for all to see and help a network of actors to understand all the points where they need to cooperate.

  • They hold up a real and significant market opportunity.
  • They shine a spotlight on the critical junction points in the supply network.

Farmers in the tippy-top of Scotland go upmarket and boost their local economy by quarter of a million

In this post, I’m going to summarize the triumph of Scottish beef and sheep farmers from the very tip of Scotland who, in one year of enhanced cooperation, gained an extra 10p or kilo or £37 per cow and £3 per lamb more than their peers serving the standard market and brought in an extra quarter of million additional pounds to the remote rural economy.

This is the story of Northern Highland Products, beef and lamb farmers in Caithness in Scotland and an Irish butcher who came to join them in bid to deliver premium meat to the British supermarket chain Sainsbury’s.

  • Northern Highland Products only wholesales quality products within 100 miles of the Castle of Mey.  Beef and lamb are their core lines and they also carry fish, honey, jam, cheese and pork.
  • The Northern Highlands has a strong history of livestock production on small farms.
  • The initial funding for setting up the Northern Highlands Products project in 2005 was a £71 000 grant from the Scottish Executive under its Marketing Development Scheme, some contributions by an initial group of farmers, an on-going levy on producers, and contributions from Caithness Enterprises and the Nuclear Decommissioning Agency.
  • Information from farmers is combined to forecast and manage supply and demand.
  • Delivery and price information is also pooled so farmers can benchmark their output against the average.
  • Mey Selections only buys livestock reared on Caithness grass and does not buy bulls.  Prices vary by quality of the carcass and track the general market but above the average.
  • Farmers have access to information (including organized training) about the whole supply chain so they understand how and why carcass classification ripples through to costs in processing.
  • Mey Selections sponsors a Producers’ Club to help producers share information among themselves.
  • Animals are slaughtered at one of three abattoirs to minimize travel and stress to live animals.
  • Mey Selections offer training to Sainsbury’s staff.

 

General principles about collaborative supply chains and supply networks

I could draw out some general principles about collaborative supply chains and supply networks but in business, general principles often feel like the “tail wagging the dog.”

Business is not a spectator sport and we have to deal with the real and immediate in the same way as shepherd still has to traipse the hills to find a lost lamb in inclement weather.   Do it now, or not at all.

Supply chains work when we have real opportunities that we want to exploit and sufficient knowledge of our industry to see what has to happen. Then we can exercise the leadership to shine a light on

  • The opportunity
  • The critical linkages.

Until we have that real-world knowledge and business-in-action, then we are simply apprentices in our trade and we should do what needs doing now – which is get some hands-on experience.

This post summarizes the information on the supply chain of Caithness farmers in the northern tip of Scotland and how improved collaboration and disciplined attention to what they do well locally led, in a single year, to an increase of a quarter of a million pounds into their combined businesses.

Don’t wait.  Be the change you want to see in the world.  But be worldly and organize what is already working and do it better by focusing on real opportunities and real tasks that need doing!

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Business in a jam – or jam?

We want to work

Undoubtedly, UK is in a financial jam; and undoubtedly, deservedly so.  But talking about what is wrong with Britain is a way of life for the chattering classes.

A business in a jam; the business of jam

This is a story about another kind of jam – one which you may not even buy anymore – though this story will have you looking at your supermarket shelf with more curiosity.

This is the story of McKays – an industrial jam-maker founded in 1938, in the berry-growing, marmalade-making east of Scotland around Dundee – perhaps better known for being home to several games-producers.  Paul Grant bought McKays from global giant, United Biscuits, in 1995.  In the following 12 years, the throughput of fruit and jam multiplied 10 fold.

So in the time that Sergei met Larry, founded Google, and took us to Google Street Maps and the Royal Channel on You Tube, a jam-maker in Scotland bloomed.  This post is about what we can learn from Mackays.  Their transformation is as modern as Google and is a practical working example of a idea that is often talked about abstractly.

MacKays worked on their whole supply chain but rather than trying to manage the whole chain and offload risk to suppliers, Mackays reformed the chain to manage variability. Because they can tolerate variability, they are able to up volumes, and of course grow at the phenomenal rate they did.

The market for jam

In 1997, Scottish jam-makers, MacKays, processed 30 tonnes of fruit into jam and marmalade which they sold to supermarkets as “commodities” – that is, they competed on price.

In 2007, they processed 350 tonnes and they had repositioned the MacKays brand as premium and sold a parallel line, Mrs Bridges, through independent retailers such as garden centres and hamper companies.

Premium jams

Premium jams depend upon “things staying the same”, or as we say in management-speak “taking the past into the future.”  We move in the opposite direction to the box-ticking, target-setting fiends, and concentrate on what is good and true.

  • McKays retained its traditional taste by retaining its traditional production of jam with a slow roiling boil in copper-bottom pans
  • They used Scottish fruit allowing them to extend the recognisable and valued Scottish brand.
  • They used local produce which allowed them to coordinate more closely and manage variability that comes with agricultural produce.

Government help

MacKays did receive a government grant that gave their bankers the commercial security to lend them the capital to expand.

Supply chain

There were four key issues to reforming the supply chain and increasing upstream demand for fruit by 1000%.

  • MacKays had sufficient belief in their product and consumers to envision both repositioning as a premium product and multiplying their volumes, not by a few percent, by multiples of 100%.
  • MacKays had sufficient belief in their suppliers to negotiate the delivery of clean, fresh, full flavoured fruit suitable for bottling rather than the fresh produce markets.
  • MacKays invested sufficiently in relationships to welcome farmers in the factory and to be welcome on their farms.
  • Because they had good relationships, it was easier to work through the inevitable variability that comes with agricultural produce.  MacKays retained a consultant as their agent for this work.

Learning from the jam business

These key five points translate to other businesses.

  1. What is good and true?  What is the equivalent of jam made with artisan manufacturing with fresh local produce?
  2. What is better and possible?  What is the equivalent of consumers who want a good quality jam?
  3. Who can we depend upon and what do they need?  Who are the equivalent of farmers who need clear signals about how our needs differ from needs of their other customers?
  4. Who will work more easily with us if they have a sound understanding of how we work and if we have a sound understanding of how they work?  What do our suppliers not understand about us and what do we not understand about them?
  5. And most importantly of all, where is there natural variability in the system and where we need to be available, pay attention, and work together to keep our business relationship intact and prosperous on both sides?  What is the equivalent of strawberries that are better some years than others and what does it mean in our business to adjust to variability in someone else’s part of the supply chain?

In this story, the slightly-new notions are that huge gains come, not out of investment or control or competition, but from

I hope this practical example shows you how networked supply chains work in ordinary, down-to-earth businesses but do remember that the details are different for every business.  And that business is not a spectator sport.   Talking about business does not make it grow.  We need to be doing something.  Now.

Reference: This cases study is part of a wider series of case studies on collaborative supply chains in agriculture in Scotland.

5 benefits about thinking of your business as part of a collaborative supply chain

Supply chains & networks: How do they fit together?

Collaborative supply chain, distributed supply chain, supply network . . . business has long stopped thinking about business as discrete entities.  When Toyota developed long-term, stable relationships with suppliers to allow it to have shorter, quicker, more responsive relationships with its customers, business was changed forever.

Hi speed computers provide us with the tools to take the idea of a collaborative supply chain and turn it into a supply network.  We have to think differently though and many of us ask, is it worth it?

What is the payoff for thinking about our supply chain as a collaborative network?

These are the FIVE benefits that we hope to gain.

  • Be alerted to opportunities more often
  • Get an appropriate team together much faster to respond to opportunities
  • Produce better products and services more profitably and at a lower price
  • Provide the critical mass for genuine innovation (rather than mimicry and spin)
  • Develop skills as a team that can only be developed when a team works together for a while

And isn’t this just talk?  How do we measure these benefits and show ROI?

Metrics can be developed for each of the FIVE benefits.  An industry association might ask its members, for example

  • How many interesting leads did you receive this month?
  • How many leads did you leave on the table because you lacked the resources to respond and how many consortia did you form or were invited to join?
  • Of the consortia whom are working, how many believe they will be able to improve quality, margins and price?
  • How many consortia believe they have the critical mass of skills and resources to work innovatively at the forefront of their field?
  • Does the consortium compete against other named consortia and when do they go head-to-head?

And how does this talk of networks affect HR  – not the form-filling bit of HR – but the organisational design and management?

Equally, somebody say in HR who is working on collaborative supply chains would ask similar questions.

  • What is our supply chain at the moment?
  • What line of sight do we have of the supply chain upstream and downstream and can we document our understanding of the supply chain the way we document a job in-house?
  • When do we receive incoming messages about leads?
  • When do we receive data that allows us to investigate our position in the supply chain?
  • What projects have we going on that focus on improving our position in the supply chain?
  • What projects are put aside because ‘we aren’t big enough or good enough to do them’?
  • What holds people up and if we changed the question to what do we do well, what opportunities emerge?
  • Who does our supply chain compete with and how do we monitor them?

 

That’s enough for going along with.  From these lists, you should be able to see how other people manage their supply chains; what industry associations can and should be doing to raise the profitability of the entire industry; and what HR should and could be doing to upgrade HR to the contemporary networked world.

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The basics of managing a collaborative supply chain (Part 5 of 5)

In this the last of a series of  five posts on collaborative food chains, I’ll sum up by asking whether the Scottish pig industry achieved a ROI (return on their investment) in an information system that collects data across the whole supply chain.

Was this just an annoying additional set of ‘paperwork’, or does the system supply information that allows players up-and-down the food chain to work out why variations occur and what can be done about them?

Improvements depended on knowledge of the entire supply chain

The Scottish pig industry described two examples of vitamin supplements on the farm helping to control quality control at the abattoir (by reducing ‘drip loss’) and in the shop by slowing discolouring (which you and I don’t like when we buy meat).

These examples show that a business cannot be dependent only on information collected within their own business. They need information on businesses on either side of them in the chain. The pig industry provides that in 4 quarterly reports.

Improvements depend upon us experimenting systematically to find the causes of unexplained variations

These reports are obviously ‘after the event’. They are not part of the day-to-day management of operations which generate forward momentum. They are an additional diagnostic system to help us understand ‘unexplained variation’.

We have the information systems now to run experiments.  For example, I can ask, if I add Silenium and Vitamin E, will the colour of the meat hold up all the way to the 2nd or 3rd day of display in the store?  Perfecting our craft becomes a matter of understanding consequences along the line.

3 simple lessons for managing collaborative supply chains in other industries

To draw out lessons from the Scottish pig industry for other industries:

  • Collect data across the whole food chain so people at the beginning can help solve variations later in the food chain.
  • Remember this is a diagnostic loop.  It provides data after the event.  It is does not tell us what to do when.  That is management.  But used correctly, and an extra diagnostic loop helps us understand what is important and what is not.
  • Don’t think quantity and control.  Think variations and unexplained variance.  We want to understand what is happening so we can bring good food across the system from farm to plate.

Does the new system help provide better food at a good price?

Well, I hope so because to be well-fed, I need farmers to be making a fair living and I also want farmers to know when I am walking past their food in the shop and not buying it.

A free market system of letting the incompetent go broke is naïve.  Of course we learn some things by chance but in a system as complicated as a modern food chain, we also need a sophisticated feedback system so that everyone who is really into what they do, can do a better job – with data, proper analysis, and well thought-out experiments to understand events beyond our immediate control yet affecting us and being affected by us in small part.

I hope these five posts have helped explain why collaborative supply chains are a critical part of business in a developed economy.  The Scottish pig industry is a good example, down-to-earth, close-to-home and relatively easy to imagine why we collect and share information at industry level.

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The basics of managing a collaborative supply chain (Part 4 of 5)

This is a series of posts using the Scottish pig industry to explain collaborative supply chains.

In post 1, I described the problem of complex supply chains.  Feedback gets lost.  Or to use an example, if I don’t like the bacon on my plate, the farmer does not get to hear about it.

In post 2, I explained that in years gone by we thought food had to be cheap or expensive and there was no in-between. Toyota showed in the car industry that there is an in-between when we move from cheap high-volume to agile, just-in-time supply systems by working closely with our suppliers. Computers make it easier to work collaboratively across a whole sector.

In post 3, I briefly described the diagnostic system that runs in addition to the management system.  Information is sent out every quarter that allows everyone to see the whole supply chain and to work out where variations in quality are happening. I ended that post by staying that a management system will tell us what is explained variance and what is unexplained variance.

Explained variance allows us to act; we have to think about unexplained variance

Simply when we understand the cause of a ‘blip’, we can take action, confidently.  When we see variations that don’t have a known cause, then we have unexplained variance and we have to stop and think.  So what are our choices?

What can we do about unexplained variance?

Unexplained variance means one of three things:

  • We need to do more analysis to see if any of the factors we had thought to be important, and have been dutifully recording, indeed account for dips in quality.
  • Maybe there is no answer, at least for now, and we are going to have to plan for variations in quality (more wastage).
  • Or we can investigate further and collect data on new factors to see if they explain variations as they happen, not only in our own business, but further along the line.

 

Unexplained variance might have its cause several steps removed in the supply chain

You might think that everyone does this already. They do – with the data they have.  But by working together across the whole food chain, the Scottish pig industry is able to help farmers see if there is something they can do on the farm that will help manage variability much further along.

  • To take a simple example where the farmer’s action brings a clear and immediate benefit to the farmer – giving a pig Vitamin C shortly before it is sent to the abattoir reduces the drip-effect, i.e., maintains the weight of the meat and gives the farmer a better price per carcass
  • To take another example that benefits the whole industry and gives the farmer a better price eventually because average prices are higher – giving a pig Selenium and Vitamin E slows down the discolouring of meat, meaning it looks a heap nicer in the supermarket and I as a consumer are willing to keep it in my mix of groceries.

When we can match data on what is happening in our business with data on what is happening in businesses up-and-down the chain, we might find new solutions to unwanted variations.

Once we know what to do and what to look for, future variations done to these causes, become of course explained variance – which is good, we know what to do now.

But is this science good business?  Is there a ROI on a collaborative supply chain?

In the next post, let’s ask whether the Scottish pig industry got a ROI (return on their investment).

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The basics of managing a collaborative supply chain (Part 3 of 5)

This is the third post in series on collaborative supply management.  The posts are based on a case study of the pig industry which I’ve rewritten to bring out how we manage collaborative supply chains.

In post 1, I described the supply chain for pork products simply and pointed out that feedback gets lost in complex supply chains and does not reach people who need it.

In post 2, I pointed out that Toyota showed that it is not necessary to choose between cost-driven high volume businesses and high margin niche luxury businesses if we are able to manage our supply chains to deliver ‘just-in-time’.  Becoming nimble becomes easier with modern computers.

In this post, I’ll move from telling you about the general problem to what the Scottish pig industry did to manage their collaborative supply chain.

The Scottish pig industry already had an efficient system of delivering pigs and pork to market

The Scottish pig industry got together to do what they do well even better.  The farmers, the butchers, the shop-keepers and yes, the farm and meat inspectors run the ‘forward system’.  In psychological parlance, they track – they pay attention, they coordinate and they get everything done in an intricate and complicated dance.

And they added a diagnostic system which feeds information on the whole system back to individual players

The Scottish pig industry, working together, then added a ‘diagnostic system’ which collects information and feeds it back to everyone in the food chain every three months.

An example of a collaborative supply chain

Let’s take an example of how it works.

The farmer has records of how much food was given to a particularly pig, what supplements it gobbled up, how often it was ill and what medicines it was given.

By monitoring food throughout the chain, farmers can now learn what happens to a pig after it leaves them and they can find the condition of the meat when it lands on our plates (or rather leaves the supermarket in our trolley).

Let’s imagine that sometimes the pork I eat is fantastic and sometimes it makes me regret my purchase.  The information system in Scotland lets farmers know that this variation is happening.

The information system can also analyse the variation to see whether it the fluctuations are triggered at a particularly farm, a slaughter-house, a shop or transport system.

Once we have seen the numbers, then we can begin to understand ‘unexplained variance’

Moreover, the information separates out explained and unexplained variance.

Explained variance means, in plain English, that we know what caused something.  If we know what caused a blip, then we know what to do and we do it with confidence knowing that when we do the necessary, quality will go up and will be seen to go up. The consumer will be happy again.  Bravo. Simple. We can get it done.

I’ll explain in the next post what we mean by unexplained variance.

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The basics of managing a collaborative supply chain (Part 1 of 5)

Our food comes a long way from a farm

Let’s imagine a farm and on this farm, the farmer keeps pigs.  He, or maybe she, feeds them and waters them and breeds them and fattens them.  And when the pigs are big and fat, the farmer puts them on a truck and sends them off to the abattoir.  At the abattoir, the pigs are slaughtered, and sold as carcasses to butcheries and supermarkets who butcher the meat and package it into smaller quantities for us to take home and cook.

But if we don’t like it, it is difficult to let the farmer know

You and I, the shoppers at the supermarket, know what we want.  We want a meat that cooks well, looks good, smells good, tastes good, and feels good.

And when we don’t get what we want. . .well, exactly how is that communicated back to the farmer?

And are we sure that the problem was with the farm and not elsewhere in the complicated food chain?

And indeed how would the farmer know that it was something to do with his (or her) farming that created the undesirable quality.  Possibly the problem is elsewhere in the food chain… the transporting of the live pig or the handling of the pork at the butchery. . . to pick only two possible points.

A series of five posts to understand how we benefit from the collaborative management of a complicated supply chain

In this series of five posts, I have rewritten a case study of the pig industry in Scotland to help people who are interested in collaborative supply chain management understand how we  organize the collaboration and the key role of computers, data, analysis and experiments.

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