What is Supply Chain Management Best Practice?

February 1, 2007 from Supply Chain Digest – “We all hear a lot of talk about supply chain and logistics “Best Practices”, including from me. But what are they, really? Are they truly useful?

This column was spawned, in part, from a panel discussion I moderated more than a year ago on Best Practices. It went in a direction I don’t think the panelists or the audience expected. By the end, we were discussing not Best Practices per se, but whether the concept was really meaningful. Somewhat to my surprise, neither the panelists nor audience, at least in this case, thought it really was. One consultant on the panel at one point near the end went so far as to say “Best Practice is baloney.”

Now, in fairness, this was a discussion centered around distribution center operations, and I think processing in a DC tends to be pretty situation specific, making (perhaps) the use of Best Practices less clear. To further think through this, we decided to get the opinions of a number of supply chain and logistics experts.

Ralph Drayer, ex-Chief Logistics Officer at Procter & Gamble and who now runs Supply Chain Insights, thought I was batty for even questioning the concept of Best Practice: “Shame on you! Of course there is such a thing as Best Practices,” Ralph told me. “The fact is that every situation is NOT really that unique, and believing so only adds to unnecessary complexity, cost and consumer value erosion.”

“That's why the consumer goods to retail industry pulled together under ECR [Efficient Consumer Response] and the Global Commerce Initiative to develop and publish Industry Best Practices for common processes," he added. "P&G did the same thing internally as we globalized our operations. A Best Practice is developed by a group of expert users who share their knowledge and experience to define the best method of operating a common process.”

There is strong merit in that perspective, to be sure. If a process is common across a company, then surely there is a “best way” to do it most of the time within that enterprise. And if a process is common across businesses generally, it would seem there is an opportunity for Best Practice – or is that commoditization?

Gene Tyndall, well-known consultant and SC Digest Contributing Editor (and a friend of Drayer’s) had a somewhat different view: “The term “Best Practices,” and the relentless pursuit of them, has caused more trouble than benefit. Everyone believes they need to find them, but then they cannot even define one, much less adopt it,” he said. “Even if you find one, it will change very soon, as someone else tops it.”

He added: “The trick, when you find one, is to "adopt and adapt" the practice to your unique situation. This is what people struggle with. I have argued for years that Dell and Wal-Mart (and others) do indeed have some, but others cannot adopt and adapt them. High-techs have struggled to do so, and K-Mart failed miserably. Others just say that their business models are different, which is a cop-out.

He also stressed the role of metrics: “Best Practices without performance measures, or metrics, are useless. Just like benchmarks, which without practices or processes are also useless.”

Jim Tompkins of Tompkins Associates, whose company runs a benchmarking consortium, agreed with Tyndall’s last point, focusing on the “result” aspect: “A Best Practice is a process that produces the best benchmark for a specific task," Tompkins said. "So, if the task being considered is inventory accuracy and one determines that 90% of the companies like my company, which have a benchmark of 99.8% or higher for inventory accuracy, utilize cycle counting, then cycle counting would be a best practice for my company. Furthermore one could look into the specifics of the best practices of cycle counting to gain more insights into how to best perform cycle counting.”

Ed Marien, well-known to many from his supply chain leadership at the University of Wisconsin and on-going consulting work, also focused on using benchmarking and metrics right. “The problem with many Best Practice comparisons is that they forget the metrics side,” he said. “The problem with many benchmarking studies is that the focus is upon the metrics, which may not be defined the same across companies or industry comparisons are made based upon metrics only, without considering the How To’s.”

I think I will make a "Part 2" of this column in a few weeks, incorporating some of your feedback. Netting it out here, though, I like the simple way Stephen Craig of transportation consultants CP Consulting answered when I asked him about whether there was such a thing as Best Practice. He answered: “I don’t know if there is Best Practice, but there is clearly Good Practice.”

SCDigest Technology Editor Mark Fralick took a similar tack, and maybe even summed it up best. In working with clients, he said, “I don’t worry so much about Best Practice as I do in eliminating Bad Practice.” Now that’s something I think we can all agree on.

180 View – We often hear the vendors offering “best practice” to their prospects. This article backs up our long-held belief what’s good for one company could be a disaster for another. It’s a great idea to know how others are doing it and compare metrics to benchmarks, but every company has uniqueness. If nothing else, the people are different with different motivations, which could have a huge impact on efficiency and effectiveness.