Build a World-Class Supply Chain

How do we know we have got a world-class supply chain? There are as many arguments as to what constitutes "world-class" as there are detractors who would question if such a thing even exists. In this modern era, there are significant complexity challenges that require us to consider multiple business dynamics, not least of which are the realities of:

A global footprint of the supply chain
Contract manufacturing that is increasing
3rd party logistics vendors that are increasing
Product life-cycles that are becoming more dynamic
Distribution movements through multi-channels
Batch size / quantity limitations impacting capacity
Lead time uncertainty impacting on-time delivery
Frozen forecast windows with inaccurate information
Multiple / seasonal supply sources and so on
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Within this environment of complexity, there are also many indicators of success that provide insight as to whether or not we are on the right track.

These include:

Reduced inventory through improved planning and control
Minimized shortages and interruptions to improve production efficiency
Reduced materials cost through improved procurement and payment protocols
Reduced labor cost through better allocation of staff and reduced overtime
Increased sales revenue, driven by better managed customer relationships
Increased gross margin percentage
Reduced administrative costs
Reduced regulatory compliance costs
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Getting to this end state requires not only that we measure ourselves but also that we build strong interdependent relationships across the extended supply chain. The net result is a competitive edge needed to drive successful and sustainable businesses.

‍BUILDING COMPETITIVE EDGE THROUGH INTERDEPENDENT RELATIONSHIPS

‍Competitive edge is something all companies strive for as part of building their so-called "world-class supply chain." From a high-level definition, this means having effective interdependent relationships between people, process and technology; and from our suppliers to our customers such that we are enabled to increase market value and drive down end-to-end supply chain costs. Core elements of effort in getting to that end state include:

Collaborative long-term relationships built on respect and trust
Effective demand signals that drive sourcing and manufacturing and enable volume adjustments as needed
Operations and logistics alignment with capacity managed and leveled production schedules
Ability to manage mixed loads with on-time / in-full delivery coming into and going out of the organization
Ongoing collaborative operations and product delivery improvement with cost reductions across the end-to-end chain

But around each corner, many enemies that undermine our abilities to realize this interdependent focus are lurking. Three specific areas that have an unwanted negative impact are:

‍Delaying decisions

Delayed decisions need to be covered by inventory.
Second-guessing safety stock decisions means it is a false signal.
Time delays increase the size of the process deviations.

Uncertainty and lack of reliable data

Broken and unreliable processes result in poor delivery.
Lack of reliability results is uncertainty any uncertainty gets covered by inventory.

Decision points / functional hand-offs

Each hand-off/pass to another function increases the danger of “dropping the baton.”
We must minimize manual activity and automate within a controlled environment

The underlying hypothesis from the above is that "bad data / information gets covered by inventory." From a world-class perspective, our interest lies in optimizing opportunities that impact the bottom line. This means understanding the supply chain effort required to support improvements in sales, while also driving down costs.

Opportunity to Impact the Bottom Line. Becoming world-class requires that we focus on operational excellence and use all means at our disposal to ensure: