6 Keys to the Sustainable Supply Chain Advantage

How to build an atmosphere of constant improvement in the search for supply chain excellence


 

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2. Remember the Goal — Many strategic sourcing/supply chain organizations tend to get overwhelmed by the task at hand and lose sight of the bigger picture. This is a more significant tendency in organizations where people identify more with their function than with their company. A common trait of successful supply chain professionals is the recognition that, ultimately, they are as responsible for selling product as any member of the sales force. In other words, cost savings aren't sought to meet some functional objective but rather to improve the competitiveness and profitability of the end product.

Aligning goals with the company's overall direction has always been critical to the success of a supply chain. In the best circumstances, supply chains that have developed a competitive advantage actually work to create their company's vision and direction, not just respond to it. Computer maker Dell, for example, established a clear advantage in the late 1990s by streamlining its strategic sourcing/supply chain processes and focusing on servicing a market segment through its distribution strengths. The supply chain created a competitive advantage that became Dell's corporate identity.

3. Recognize the Complex, Manage the Simple — The buzz for many companies over the past few years has been about avoiding complexity. Unfortunately, the supply chain is not cooperating and, despite everyone's best efforts, the exact opposite is occurring. Global marketplaces, outsourcing of non-core activities, extended supply chains with multiple layers of suppliers, shorter lead-times/product lifecycles and so on are combining to increase the complexity of the business environment at an alarming rate. The key, therefore, is to simplify and clarify processes wherever possible. Successful companies constantly work at reducing the complexity in how they work internally as the only possible counter to the growing complexity they experience externally.

While this seems like a basic concept, many of the issues facing, for example, implementation of new enterprise resource planning (ERP) systems are the result of either relying solely on the technology to remove complexity (without addressing process complexity) or becoming enamored with the capabilities of a system and actually adding nonessential elements to strategic sourcing/supply chain processes — similar to building a rocket ship to get to Cleveland. In the end, redesigning supply chain processes and implementing technology should be about simplifying the way business is conducted, not about jumping on the newest technology bandwagon. A reasoned approach that focuses on simplifying the complex should be carried throughout the supply chain.

4. Treat the Issue, Not the Symptom — The supply chain can be analogous to the human body. Both are highly complex and provide a wide range of metrics that can be used to assess their health. Doctors typically focus on a relatively small number of key metrics to guide their effort to find an appropriate course of action when a patient experiences ill health. The key to the efficiency and effectiveness of the doctor's intervention is the ability to interpret those initial metrics and to quickly find the right combination of additional tests to complete the overall picture. Then, of course, the doctor has to draw accurate conclusions and predict the impact of various treatment options.
The same process should be used with the supply chain. A small set of key metrics should be monitored on an ongoing basis to confirm the health of the supply chain. If the key metrics reveal an overt symptom of something gone awry, the supply chain professional needs to analyze the key metrics, gather additional data and craft a response that gets at the underlying issues. If, for example, a key metric reveals an increase in missed shipments from suppliers, the fix is not to expedite product but to determine why there has been an increase (receiving issues, freight issues, vendor performance and so on). While this seems obvious, many companies do not include root-cause analysis as part of their operations and, consequently, frequently treat symptoms rather than causes.

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