In many companies, supply chain performance is a good, early indication of the business’ overall success as well as its’ long term sustainability.
What makes a successful supply chain? How do you know if your supply chain is under performing?
The objective of Supply Chain Management is to optimize activities across various partners, to satisfy a customer’s needs in the most effective and efficient way.
Basically, Supply Chain Management refers to all of the aspects relating to the buying, making, moving, storing and selling of goods and services. This includes the flow of information, goods/services and the financial assets to support these activities. The process usually requires managing multiple partners, located at multiple geographical locations and over an extended period of time.
In many cases, businesses are simultaneously involved in a matrix of various supply chain activities occurring over different time horizons. These activities could include:
· Strategic (i.e. design of the distribution network, capacity and location of facilities) which could take typically 1-10 years;
· Tactical (i.e. planning of operations) which could typically take 1-12 months; and
· Operational (i.e. execution of activities) which could typically take 1-30 days.
Evaluating the Effectiveness of Your Supply Chain
In our experience, effectively managing your supply chain ultimately requires that all players in the supply chain have a close, open relationship. This provides accurate, timely information to everyone so each partner can best plan and execute their activities.
A few of the key indicators that we look for to identify if there are opportunities to drive significant supply chain improvement include:
- Unnecessary high stock holding (raw material and/or work in progress) are required as buffer stock;
- High levels of redundant/obsolete stock and finished goods;
- Longer than expected lead times for both raw material supply and delivery of finished goods;
- General uncertainty by, up and down stream supply chain partners on future business activity levels;
- A high level of goods returned for credit, delays in payment and cash flow unpredictability;
- Poor performance in “on time, in full” delivery metrics, leading to poor customer satisfaction and delays in payment;
- A mismatch between resources available (equipment and people) and resources required, leading to low utilization and/or availability percentages;
- High transportation and warehousing expenses due to wrong location decisions and multiple handling activities;
- Inaccurate demand planning (forecasting of requirements);
- Inability of the organization to driving just-in-time supply/replenishment decisions with company partners (i.e. procurement of raw material or components);
- Ineffectiveness in optimal manufacturing of components or assembly of products related to demand; and
- Untimely movement to points of expected consumption.
World class supply chain management can not only reduce cost and greatly enhance an organization’s ability to sustain operations but can also lead to differentiating you from your competitors.
If you have any questions or would like to discuss this topic or other profit improvement topics with us, please feel free to contact us.
Joe Bonocore
