by Tom Craig, CEO, LTD Management
Businesses often define their activities in terms of domestic and export sales. This can be a shortsighted and restricting view. Shortsighted firms also define their logistics and supply chains in terms of freight, warehouse and other costs. They fail to understand how much their customers and businesses are impacted by supply chain management. Best practices in SCM lead to growth and prosperity. However, often the result of all this myopic thinking is that these firms trap themselves into being defined as a commodity product provider where price is the key differentiator with competition. They lack value proposition key customers.
Companies that view themselves as dynamic and as global see the prospects for themselves. They have value propositions and supply chain best practices that separate them from competitors; they know that value propositions are about the customers-and not about what the firms do. They understand trends; they lead. These firms understand what supply chain management can do to not only create service advantage but to be a catalyst for new business.
Two emerging trends are:
Leader firms know that orders-whether they are replenishment, customer or new products-- must be delivered complete, accurate and on time. This must be done consistently; reliability is a hallmark of best-in-class supply chains. These best companies know they use supply chain best practices to effectively manage global supply chains. Supply Chain Management Best Practices are:
Products sold on a global marketplace basis, fast moving products, products with short product life cycles, products with seasonality must utilize best supply chain practices. It is not a choice; it is a requirement.
Time and inventory are two important issues and drive the need for supply chain management best practices.
Increase inventory velocity. nventory must move quickly; turns should be high. It must flow from suppliers or manufacturing sites to customers. Being inventory rich and cash poor is not a sound approach. This is especially so for A items and many B items. Products sitting in warehouses are limited as much as possible.
Implement lean logistics / supply chain management. Lean logistics complements supply chain management. Both emphasize pulling, not pushing, products through the supply chain. Both recognize-and lean removes--the waste created by excess inventory and time and the need for supplier performance.
Improve supplier performance. SSuccess begins with supplier performance. They must deliver quality items and do it complete, accurate and on time. Collaboration is important. Whether the products are finished goods or materials for factories, the need for strong supplier performance is there.
Compress cycle time. Cycle time runs from the time the need for a product-now or replenished-is determined and goes until it is delivered to the customer or to the store. The length of global supply chains adds to the challenge.
Maximize inventory yield. There is a window of opportunity to get the maximum price, the maximum, yield for products. Miss that window and companies face reduced pricing and profit margins. Leaders understand this in using best practices.
Utilize meaningful metrics. There are numerous measures for companies and their supply chains. Many are measures for the sake of metrics with little meaning to C-level executives or with little value in really measuring supply chain performance. Meaningful metrics are orders delivered complete, accurate and on time and time related-such as days of inventory on hand, cycle time and others.
Segment the supply chain. Too many firms have one supply chain approach for everything. This monolithic approach handicaps performance, diverts resources, and creates static noise from external and internal sources that distracts the supply chain organization. The best segment their supply chain and focus performance where it is most beneficial. Instead of practicing one-size-fits-all supply chain management, they tier based on profit margin or days of inventory or similar important ways.
Employ supply chain technology. Supply chain execution technology is important to managing a global supply chain. It should provide visibility throughout the entire supply chain. Tracking and tracing is nice, but it misses the important factor. It is not about the container or pallet of product. The key issue is to manage the customer, purchase or build order through to delivery. Technology, especially when tied with collaboration, can provide that.
Whether firms are looking to improve performance or move into D2M or e-commerce, implementing supply chain management best practices will lead businesses to their desired goal.