Ideally, the supply chain team includes more than just the folks who work in manufacturing and distribution. For the supply chain to work efficiently and effectively, there are other folks in a company (who may not report to the Vice President of Manufacturing or Distribution) that should also be on the team.
Human Resources – They can help you acquire talent, figure out systems to fairly evaluate personnel, and fire underperforming folks without being exposed to lawsuits. If you have managers that are making employees crazy, HR will often be the first to know.
The CEO and Vice President of Sales – When the CEO or VP of Sales pressures the sales force to meet the quarterly (or annual) revenue targets, watch out! In these scenarios, customers are often given unusually deep discounts near the end of the reporting period that trigger a high volume of shipments. The result is increased overtime in factories and warehouses; machines and equipment that are overworked; increased quality issues and, consequently, more returns; and a higher incidence of late or short shipments. Supply chain folks sometimes get blamed for these problems when the fault really lies with the way the firm is conducting business (see related commentary in “Stuffing the Channel”).
The Vice President of Marketing – Promotions can also lead to the surges in supply chain shipments and excessive costs that are borne by the supply chain organization. There are industries, like consumer goods, where many companies would find it very hard to remain in business if they did not use promotions. But if a company is running different promotions at the same time, they are needlessly yanking the supply chain organization around. If the supply chain does not have sufficient advance warning, and a decent forecast of volume surges, extra costs are incurred. And many companies really do not understand which promotions are truly profitable. In these instances, you are making the supply chain work harder for no good reason.
Cost Accountants – Many manufacturers and distributors sell a variety of high volume and low volume products. High volume products tend to be a lot less costly for the supply chain. They flow through the supply chain with less friction –i.e., fewer factory setups, fewer touches in the warehouse, truckload rather than less than truckload shipments, and lower inventory carrying costs. The supply chain likes high volume products. However, if a company lacks good cost accounting, high volume goods get stuck with overhead carrying costs that really belong to lower volume products. The result is that the high volume products look less profitable than they really are, and low volume goods look more profitable than they really are. If that is the case, a company can end up selling more of these marginal goods with high supply chain costs than really makes sense.
Product Development – When products are being developed, the main goal is to make products that customers want to buy at the right price. Well-run companies include “engineer for manufacturing” and “engineer for logistics” methodologies into their product development process. Sometimes small changes in the components that make up a product, or the dimensions of the product, can lead to large savings in the supply chain.
Chief Risk Officer – Supply chain organizations are often under pressure to do more with less. If your company does not have good risk management processes in place, adverse safety, health, or environmental incidents can occur. If these incidents are frequent enough, or significant enough, they can put the company’s survival into question.
Collaboration is an important word in supply chain management. Is your company collaborating internally, in an effective manner, with these key players?