Industrial engineering priorities for improved demand chain performance

It may be argued that a realisation that some level of integration would improve demand chain performance dates back at least as far as Forrester (1958).On the basis of simulation experiments, he advanced specific recommendations for integration thereby reducing demand distortion (now popularly known as bullwhip, Lee et al. (1997). Subsequently, these recommendations were further investigated and ranked in"value" of reduction in projected on-costs by Wikner et al. (1991)

Demand chain integration is becoming increasingly popular as an area of endeavour (Chandrashekar and Schary, 1999; Frohlich and Westbrook, 2001; Randall and Ulrich, 2001; Bagchi and Skjoett-Larson, 2003; van Donk and van der Vaart, 2004; Pagell, 2004; Swink et al., 2007). Much of this output rests upon horizontal survey research as distinct from vertical case studies. In contrast approach taken herein is based on evidence from site-based investigations of industrial engineering application obtained via Quick Scan Audit Methodology (QSAM) (Childerhouse et al., 2004) site based investigations.The evidence exploited herein was acquired via comprehensive exploitation of the Quick Scan Audit Methodology (QSAM). This is fully described in Naim et al. (2002a) including samples of the data compilation techniques used. QSAM evolved during the execution of the Supply Chain 2001þ Project (which covered the first 22 audits). The value streams in this first sample were thus chosen in collaboration with the sponsoring industrial organisation as "representative" of their dealings with the European Automotive Sector. Consequently, the range of performance encountered matched expectancy; both "good practice" and "bad practice" extremes was encountered (in about equal measure).

QSAM was initially developed as a mechanism for extracting evidence capable of supporting new management theory (Childerhouse and Towill, 2003; Childerhouse et al., 2008). But acquiring site-based evidence incurs considerable transaction costs to be borne by host organisations. Some of the more enlightened enterprises are capable of readily recovering such costs (and indeed receiving many additional benefits from intensely interactive industrial-academe´ collaboration). Experience suggests that one potent mechanism for action is via the 12 Simplicity Rules. These were originally generated from a thorough search of the established literature directed at seamless material flow. However, when first published, there was no particular order invoked on setting priorities or preferences. Indeed, there is much to support the contention that driving demand chains to their ultimate goal of seamless material flow justifies application of each rule equally. So when dealing with a well-resourced, confident, and competent enterprise this all-embracing logical approach to value stream improvement actions could be well justified.

Unfortunately, in the real world, this luxurious state is rarely met. When under-resourced – both at management and industrial engineering levels – an individual business may be struggling to survive and certainly has difficulty in ascending the ladder of competency. Given such constraints, the paper shows that these 12 Simplicity Rules can be suitably partitioned to advantage. Six are "local" (internal) in the sense that action is entirely within the remit of that business. Hence, it only has itself to blame if they are not successfully implemented. The remaining six are "holistic" (external) in concept and require more collaboration from outside organisations, who have to incentivised to deliver such improvements. Proven internal competency is one such trigger. Hence, in practice, it would be logical to expect businesses to prioritise (whether explicitly or implicitly) and be observed to first concentrate on a restrictive winning agenda via applying "local" rules. These ideas on the industrial engineering of improved demand chain performance have been tested on a combined sample of 40 value streams audited via QSAM. This includes 22 European Automotive Sector supply chains, and 18 Miscellaneous Market Sector chains. Statistical analysis establishes to a high level of significance that both groups (as expected) utilise the "local" rules to a greater extent. On the one hand, such a conclusion may be argued to be just an Aristotelian view of sensible industrial engineering practice. On the other hand, such propositions are always just a theoretical conjecture until actually proven with hard evidence, as attempted herein. Having locally acquired the necessary industrial engineering competence and confidence, business is much better prepared for subsequent external changes. This applies whether the ultimate role is as a commodity supplier (say via electronic auction, Busalacchi, 1999), total  ystems provider to an OEM (Bhattacharya et al., 1995), or totally integrated specialist demand chain (Randall and Ulrich, 2001). What field-based research shows, is that a comprehensive set of industrial engineering guidelines is available via the posited 12 Simplicity Rules. Furthermore, the vast majority of value streams studied are indeed shown to be "learning to walk before they attempt to run". These empirical conclusions are additionally backed by statistical significance testing. The results suggest that it is extremely unlikely that these results have been due to pure chance. Consequently, conclusions support such propositions, as have been posited elsewhere by de Treville et al. (2004), but based only on narrative accounts. Note that in the drive for improving demand chain performance, essential competency in industrial engineering is substantially proven. Suzaki (1987, p. 111) for example, has well documented its essential "learn by doing" role in the Toyota Production System (TPS). To conclude, reliable site-based information on industrial engineering choices provided. It enables the building up of both confidence and competence. The practical result is a business better able to collaborate effectively with both upstream and downstream partners, whether these are permanent or transient, as it moves the organisation towards suitability for membership within a seamless demand chain. The value of adopting sound industrial engineering practice has been verified via independent QSAM acquired evidence yielding statistically significant results.