Yes, I know what you are thinking, but no, you can get rid of any unusual thoughts, this article is about The Supply Economics eXcellence Yield (SEXY) which is all about how to create an efficient supply chain that delivers economic excellence.
We are all knowledgeable of Operational Excellence, where lean, six sigma and other ergonomic processing procedures are put in place to reduce waste and increase productivity while maintaining the quality of product and output.
In a supply chain, you don’t really have a use for six sigma since it would be rather unusual to apply such a statistical system to freight tracking. However, you can find places for it in warehouse automation. On the other side of the scale is lean manufacturing, which is all about standardizing production processes and reducing waste, which means a waste of time, energy and physical resources including manpower. Lean can be adapted to supply chain processes in a very inventive manner.
The supply chain is all about saving on costs, its about reducing prices of capex, indirect spend and direct spend, as well as speeding up delivery processes, optimizing supply logistics and naturally handshaking internally between inventory control with the warehouse, production units, packaging and finally streamlining the costs of delivery with an optimized distribution system.
SEXY vs. OPEX
So, OPEX is all about operational excellence, but what is OPEX?
Well, OPEX is a system of methods and models used in combination to reduce processing times in every operational setting. OPEX is about finding ways to live a lazy life where products magically appear from nowhere. The ultimate OPEX would be an infinite source of power at zero cost that would operate in a self-maintaining robotic system that manages all procedures without the use of a human interface.
But…what does this really mean?
It really means that business owners want to pay nothing and receive something they can sell for more than nothing. This translates into SEXY, or supply Economic eXcellence Yield, the next step in the OPEX evolution.
The main difference between OPEX and SEXY is that OPEX presents you with reductions in waste, which are then translated into economic terms, what this means is that engineers look at ways of reducing waste from a process reduction viewpoint and not an economic reduction viewpoint.
Is there a difference?
Yes, there is, because no one individual change in a process is alone, it always has an effect on another process, and this demands that the other process is aligned to accommodate the change of the first process. As such, OPEX is operationally charged, while SEXY is economically charged.
SEXY is all about viewing the whole supply chain as you would an electric current, where instead of electrons you have dollars. You convert every process into cost, not waste.
This is a very large difference since the view of waste is not a view of cost.
The SEXY Effect
How does SEXY work? (Wipe that smirk off your face).
SEXY requires you to break down every process into financial costs. This means that you convert the processes resources from people, materials and time, into cash equivalents and then look at the process in terms of resources and cost.
You then look at the whole system and view where the highest cost line appears; this will show you where you can make the most effective change, where every increment of reduction (%) is a reduction in cost. However, you also factor in the ripple effect each change makes, and find the overall costs generated over a whole system by a reduction in cost on an individual point within the system.
You then do this cost reduction process for every element in the system, approaching it from a cost viewpoint and not an operational viewpoint. This way, you will find that you are not just reducing time, or changing actions, you are also finding ways to remove whole processes, changing resources and equipment, and even experimenting with the cost of labor vs. the cost of automation, which can lead to relocation of a plant to a third world location, or to invest in automation.
Consider that OPEX is reducing waste, and looks at the system from an operations and processing viewpoint, while SEXY looks at it from a financial viewpoint, these are two different angles of view. They do not oppose each other, but the financial one will look beyond lean, and as such is a more comprehensive solution.
The Bottom Line
Can you fire off rounds of cost efficiency? Can you analyze a whole system from a financial viewpoint, then translate it into cost reduction actions that will deliver economic efficiency? After all, what’s the point of just going lean, when you can go completely economically optimized. The bottom line is all about reducing costs is not just about reducing waste. The big difference between the two is that SEXY is about reducing the costs of operation by any means, and sometimes reducing waste is not the first way to go, it is definitely a way to go, but not the first line in a SEXY Supply Chain environment.