The Perils of Being 99% Effective

For my entire career I’ve had a focus on quality and continuous improvement in the end to end supply chain. It goes without saying that most people come to work wanting to do a good job. Over the course of my career, I’ve never met someone who comes to work saying “I’m gonna do a bad job today”. That said, there are examples time and time again of things going sideways in supply chain. Look no further than the current shortage of children’s cold medications in Canada or the challenges seen in the #airline industry over the 2022 Christmas holidays.

The obvious question for most is why or how can this happen? At face value - it is easy to assign blame and chalk it up to a bad screw up somewhere down the line. While that may be the case on some instances the truth is much more complex.

During my time at Walmart Canada in end to end supply chain we spent a lot of time tackling issues relating to in-stock, on shelf availability and ensuring on time deliveries in full from our vast network of vendors across over 100k SKUs. While we would collectively have spirited debates on what part of the supply chain was driving the issues in network, the various stakeholders - merchants, replenishment, logistics, transport and store operations would quote their respective metrics and proudly declare their compliance to KPIs in the high 90’s. One of my colleagues hit the nail on the head as it relates to the issue - “if you multiply 99% by itself enough times you’ll get pretty close to zero”. Let that sink in for a moment.

Supply chain issues we’ve seen during and after COVID are a perfect example. Any one (or multiple as we’ve seen) stakeholder’s performance in the process can have a devastating impact on in store availability and customer satisfaction. Even if all parties in the end to end supply chain can produce at a high 90’s effectiveness, the end result of the cascading failures, even if they seem trivial, can cripple the in stock and customer facing elements. Based on my time knee deep in and managing the end to end supply chain, here are a few key recommendations as you ponder your end to end supply chain in this ‘new normal’:

1. Drive end to end accountability: success or metrics tied to one cog in the wheel alone are not helpful or effective. You MUST have an end to end metrics and KPI view to create and drive accountability in the process. Take the cough syrup for example - it doesn’t matter that the trucks delivering to store are at 99.5% on time if the product never got moved through the DC in the first place.

2. Create and champion visibility: it is paramount to ensure your stakeholders can see and track effectiveness in the process. Whether that is done by scanning, live tracking with RFID / other technology or creating your own process, you must find a way to keep your stakeholders in the know. In the case of a scarce resource (toilet paper at the start of the pandemic or cough syrup at the end), panic buying and hoarding can result if there is uncertainty or lack of trust in the end to end supply chain

3. Never Stop Improving: just when you get comfortable thinking you have the process down, that is likely the time to break it again and move on. With so much uncertainty and ongoing change in global markets, economies and supply, you must always be nimble enough to change on the fly - get comfortable being uncomfortable as they say.

"If you multiply 99% by itself enough times you get pretty close to ZERO"

There’s been plenty of study and effort out into the practical meaning of 99% effectiveness. Six Sigma training and scenarios paint a strong picture for those wanting to learn more. Airline baggage is a good example. Most times it is pretty good but when things go bad, they do so quickly and compound to the point that recovery is a long and painful process. Pearson Toronto Airport was ground zero for a number of these challenges during the 2022 holiday season - not because someone decided that would be a great idea to leave bags behind but rather - multiple bumps in an otherwise seamless process created chaos and challenges they are still trying to recover from. The booking process is the same - just ask Southwest Airlines , a darling of business school case studies on how to do things the right way. Challenges with their booking system over a short period crippled the airline and stranded passengers at the busiest time of the year. The holiday season in 2022 is a perfect example of how being 99% effective across multiple steps in your process can get you in a heap of trouble real quick and take weeks to recover from.

Till next time, keep the faith…

Jim McKay is a seasoned supply chain executive with over twenty-five years experience in leading and coaching others. Through his 'Reflections' posts and 'Reflections of a Workaholic' publications Jim shares his experience in transportation, supply chain and leadership through impactful and insightful stories that are meant to help and inspire others.