In the current economic climate of goods shortages and high inflation, “someone should do something about supply chain issues!” is a common lament. Often “someone,” in the minds of the lamenters, is the federal government. Surely government officials, with their seemingly endless resources and expertise, are far better able than anyone else to coordinate assets and repair and enhance supply chains. They are supposed to be the experts. However, those in government are generally too far from where the action takes place to understand the issues. The real experts are the ones closer to the front lines, and in terms of finding the right solutions, the closer the better.
‘Go to the Shop Floor’
More than once in my career I was involved with a quality, production or supply chain issue that defied resolution. Whether at my employer, a supplier or a client for whom I was consulting, salespeople would assure customers the organization was on top of it; engineers, scientists or managers would claim to know the solution. Yet the problems remained. Discussions had occurred too frequently in the office, rather than on the ground where the problem was occurring. Once the higher-ups finally visited the work area, a line worker would reveal the cause, then say something similar to, “I have been telling them we’ve had this problem forever, but no one would listen.” The line worker was usually right. In Kaizen, a Japanese philosophy of continuous improvement, we say “go to gemba,” which means “go to the shop floor.”
I was once asked to consult on a mushroom farm that was having serious pest issues. The owner assured me that they were using effective exclusion techniques to prevent infiltration of mushroom flies, small fungus gnats that can spread mushroom diseases. One of those techniques was placing mesh screens on the air intakes to the growing rooms. When we went to the growing area, though, the screens had been removed from many of the intakes. We asked the grower why the mesh was not in place, and he answered that it was so fine that it quickly clogged, forcing him to remove it so that air could enter the room. The mesh seemed to be a great idea while we were in the office, but once we could witness what was actually happening, we switched to a different filter that did not clog so rapidly and remedied the problem.
Similarly, at a government-sponsored safety seminar for farmers, one of the regulators detailed safety equipment they were going to require farmers to use while applying pesticides: full-face respirator, Tyvek suit, rubber boots and gloves, waterproof hat and so on. Upon hearing this, one of the farmers stood up and said, “I’d like to see how long you hold up sitting on a tractor exposed to the sun while wearing a moon suit instead of sitting in an air-conditioned office.” The regulator thanked him and said they had not considered heat exposure and would take that into account in the future.
Frequently, those who work on the front lines are underappreciated. They may not have the same education as the “experts,” but they have experience and a front-row seat to what is actually happening. They know the process and the unique requirements better than anyone from doing the job every day, all day. They know what their distinct challenges are. By capitalizing on the experience of those on the front line and working closely with them, management can solve problems and implement process improvements.
This phenomenon occurs within and between organizations. In general, the closer individuals are to a process, the greater their awareness of the unique issues impacting it. This helps them to react more quickly and make better decisions. The closer decisions can be made to the process, the more effective they will be.
People on the front lines cannot make all the decisions on their own, of course, or there would be no need for management. Larger organizations that have more specialized management and expertise can be more productive than smaller businesses. Those higher in the organization also have the advantage of being able to see the overall picture more easily, getting input from multiple departments within the company. At the same time, large hierarchies can also cause inefficiencies because of factors such as longer lines of communication. This is why smaller, less hierarchical organizations are usually more responsive to problems. They can see the big picture and have a short chain of command, leading to quicker action. This tradeoff must be managed, but decisions should be made as close as possible to where they are executed.
This was the miracle of this past Christmas’ shopping season: the one that many experts said would be the season of empty shelves. Federal bureaucrats decided that some West Coast ports should operate 24/7 in an attempt to reduce congestion and wait times, but this helped little because the hours of operation were not causing the bottleneck. The greater issues were labor, warehousing, container shortages and insufficient rail shipping and trucking. Ports didn’t have the resources to run 24 hours a day, and unloading the containers would do no good if there was nowhere to put them or insufficient ways to transport them inland from the port.
Meanwhile, the people who make, buy, ship and distribute goods did what was necessary to get them into the hands of holiday shoppers. Management at companies such as Walmart procured their own ships to bring in their products. Some used alternative ports, such as those on the East Coast, which were not as congested as the West Coast ports. Others hired smaller ships that could access ports that couldn’t handle the large vessels typically used to make the Asia run. This also helped reduce truck congestion because shipping containers were unloaded at multiple locations. When ships that were delayed at West Coast ports were finally able to return to Asia, they traveled faster than usual, despite the fact that traveling at greater speeds dramatically increases fuel consumption. Some companies resorted to air freight—more expensive, but worthwhile if the cargo has high enough value. Numerous items were sourced closer to home.
None of these decisions came from central planners. The successes were accomplished at individual companies, by those closest to the process, where decisions could be made rapidly. These decision-makers were the ones who had learned their particular supply chain lessons from the pandemic and who have the greatest incentive to create the more robust and resilient supply chains of the future. This was the free market at work.
Officials in Washington are about as far away from the action as it is possible to be, so it is difficult for them to understand situations, make timely decisions or understand a company’s individual needs. In fact, the government can often make bad situations worse, as when the FDA imposed labeling requirements on infant formula that prevented importation of European formula when U.S. formula supplies were low.
Where regulators can help is by cooperating with companies to make sure regulations are not so onerous as to exacerbate supply chain issues or hamper innovation and risk-management strategies at companies. Regulators can assist by doing no harm, but they are not going to fix supply chain issues. Markets will, so we should let them do their job.