What resolutions should you make in the New Year to improve your supply chain? Here are mine:
To remember that supply chains should be built backward from the customer.
One way to do this is to use a Perfect Order metric as a key way of measuring the supply chain organization. But the question remains if my organization improves from 88 percent to 92 percent, is that good enough? Ultimately, value is determined by customers, and they do this by comparing one organizations delivery capabilities with other organizations capabilities. New Customer-Centric Supply Chain Metrics have emerged that can help to answer this question. And finally, it is worth remembering that large customers serve different types of customers, in different channels.
To delight customers, while remaining profitable, it is very likely a company will need to segment their supply chain. For customers buying high profit margin products, higher service levels are justified. For cost sensitive customers, lower service levels can be justified.
Building a supply chain backwards from the customer also involves becoming demand driven. The more demand signals can be generated from the actual end customer, even if that final customer is a few tiers down the supply chain, rather than from historical shipment data, the better a supply chain organization will be able to serve the customer.
To build a Lean supply chain organization.
At many large companies, Lean continuous improvement programs are well entrenched in manufacturing. But I’ve toured few shipper warehouses where it was obvious that Lean programs were part of the culture. And while it is necessary that Lean be supported by top down management support, the best lean programs are truly bottom up.
To remember that unlocking value will more often involve breaking down siloes than attaining operational excellence within a silo.
This has long been a central tenant of supply chain management. For example, having a manufacturing organization achieve high throughput based on long production runs makes no sense if a company ends up with excess inventory. However, manufacturing and logistics folks both see themselves as part of an end to end supply chain. Functions like invoicing, human resources, and IT may not. It is not just breaking down boundaries between manufacturing, distribution, and transportation that is important. If you truly build a supply chain backwards from a customer, you may find that new forms of integration and process improvement require working with parts of the organization not seen as contained within the supply chain organization, or even within the company.
This process has been going on for a while. Sales and Operations Planning (S&OP) have brought sales and marketing into collaboration with the supply chain. Now as S&OP is morphing into Integrated Business Planning, the touch points with finance are becoming much tighter.
But even this is not enough. At a large global company, if you were to staple yourself to an order as it moved through an organization – for example, manufacturing in Europe, inventory in a DC in Brazil, and delivery to a client in Peru – you would likely be shocked by the excess inventory required and the service cycle time. And the constraints would take you to parts of the organization you would never have thought to look at.
To remember the importance of brand protection.
In recent years, we have been talking more and more about risk management. This is all to the good. A poorly handled recall or not being able to ship product for weeks because of a natural catastrophe, can kill a business. While companies need to do detailed contingency planning, we have learned that supply chains can be too lean. Leading companies are striving to understand how their products are assembled, which components are single sourced or dual sourced in dangerous regions of the world, and what portion of revenues can be put at risk if that component becomes unavailable.
Outsourcing is becoming ever more common. When we outsource, for example outsourcing warehousing to a 3PL, we also need to delve into the 3PLs disaster recovery capabilities.
In conclusion, a supply chain executive can’t possibly keep these resolutions without a good staff, and cross functional and partner collaboration. This means that in many cases, a supply chain leader can’t keep these resolutions without the support of the CEO. Many people resolve to go on a diet, and keep the weight off, and few succeed. Keeping supply chain resolutions is even harder when your own resolve may not be enough if key collaboration partners are unwilling to play ball.