Art Koch’s Profit Chain® Tips
The Supply Chain Revolution: Unlocking the Sustainable Profit Chain
Volume 5 | Number 21 | November 2024

Let’s continue with my What’s Inside the Book series – here I share what you’ll find in Chapter 9: Turbocharging Supply Chain Sustainability.

Turbocharging Supply Chain Sustainability

In Chapter 9, Art Koch introduces the concept of “entropy” in supply chain management (SCM) and its detrimental effect on business processes. Just like divers use tools and techniques to avoid the bends, organizations need to establish strong processes to prevent entropy from creeping into their operations. The chapter emphasizes the importance of sustainability, both in profits and corporate culture, and presents “Entropy Busters,” a three-phase methodology to minimize disorder and improve operational excellence.

Understanding Entropy in SCM

• Entropy refers to the gradual decline into disorder, much like an old, neglected farmhouse.
• In business, this manifests as inefficient processes, firefighting, and costly mistakes like inventory errors, rushed orders, and customer dissatisfaction.

Entropy Busters Methodology

• A three-phase process designed to combat entropy and restore order:

• • Phase I: Problem identification.
  • Phase II: Operational excellence through visual daily management.
  • Phase III: Team empowerment and sustainability.

Firefighting vs. Process Management

• Many businesses fall into a cycle of firefighting, which creates short-term fixes but doesn’t address the root causes.
• Koch advocates for building robust processes and following through with sustainability checks to prevent chaos and reduce total cost of ownership (TCO).

Five Essential Management Principles

• Engage the team in problem-solving.
• Stay focused on key performance indicators (KPIs).
• Avoid distractions and maintain discipline.
• Play to win—don’t settle for temporary fixes.
• Become a leader who empowers the team to make small, incremental improvements.

Sustainability in SCM

• Building processes that minimize entropy is key to achieving long-term success.
• Leverage automation, enterprise planning systems, and structured daily management to avoid entropy and ensure continuous improvement.

Watch the video below for Chapter 9: Turbocharging Supply Chain Sustainability.

Carpe Diem,

Art Koch