The secret has been out so long it’s no longer one.
An effective supply-chain strategy is key to corporate success.
But what’s up with this ancient concept, a staple of business organization since the industrial revolution swept into town (although the term “supply chain management” was first coined by an American industry consultant two decades ago)? And how to exploit its evolving magic to its greatest advantage?
1. Get informed. Today’s supply chains have something yesterday’s didn’t: access to boatloads of information. For us to genuinely delight the consumer—ever our goal—we need to dig deep into the well and surface with data that can drive real changes in work process and flow.
2. Collaborate. Precisely because no one enterprise controls the entire supply chain, collaboration—among not just manufacturers and retailers, but also third-party suppliers, and transportation and logistics players—is critical to change. Ideally, a spirit of global cooperation would oversee a kind of worldwide supply chain in which companies work together to eliminate waste, donate surpluses and reduce carbon footprints.
3. Call in the big guns. Supply chain management software executes supply chain transactions, manages supplier relationships and directs associated business processes. The functionality of today’s supply chain management software is vast, and includes tools for managing a range of operational processes, including inventory management; sales forecasting; order fulfillment; demand, inventory and returns management; and purchase order processing. Serious, smart supply chain software will eradicate such unpleasantries as shipping delays, production delays and stockouts.
4. Get a handle on costs. You might know your high-level numbers, but are you losing money on certain mixes of customer, product and geographic locations? Are you figuring in that the costs of certain processes may be higher than expected? You can measure supply chain costs as a percentage of sales, or per order, pallet or carton. Pick one and figure it out. And, while you’re at, what are your storage and delivery expenses, your average cost per order, your stock turns?
5. Expand your view. Historically, broad, big-picture efforts to improve supply chain management fare better than those that see a business’s various transactions unfolding inside narrow, separate silos. Regard your supply chain as a wide sea, not a collection of individual puddles, and invest in its revision with a clever, coordinated philosophy.
6. Break it down. Use surveys and industry research to separate your customers according to their unique service needs—not according to their industry, product or trade channel—and adapt the supply chain such that it best serves these segments. Analyze each one’s profitability to determine how to most efficiently allocate resources.
7. Be realistic. Overhauling a company’s supply chain management system is a massive undertaking whose eventual impact—both financial and operational—is profound. But patience is important. This is a long-term effort, and management must be mindful of that, balancing the revolution’s long-term promise against a company’s more pressing business needs. Plan ahead. Be transparent with your vision. Communicate your goals.