Cover Story: 7 Habits of Highly Efficient Supply & Demand Chains

To go the distance in business you need to take a disciplined approach. Here are some key best practices for making your supply chain hum.


2. Benchmark

The second best practice is Benchmarking. As a first step toward identifying opportunities for supply chain improvement, we need to understand what our competitors are doing, what our industry is doing, what the best-in-class companies are doing, so that we have a framework against which to establish improvement.

Typically organizations will continue to do better on the things they already do well. For example, if you take the transportation piece, I've seen companies that do an absolutely awesome job on managing the parcel spend. They really have this down to a science, and the guy that runs the UPS or Federal Express portion of their business has really got this fine tuned, and everyone in the company knows that Bob does a great job on parcel. The tendency is that next year Bob will continue to be innovative and creative, but then the people who are handling dedicated freights, less-than-truckload, ocean, truckload and intermodal are doing a terrible job.

If you look at bodybuilding, the old bodybuilding philosophy said that you should build certain muscle groups to be very, very, very strong. This is contrary to Arnold Schwarzenegger, who adopted a different philosophy. He said, "Every month I'm going to evaluate my body to identify my weakest element, and for the next month I'm going to really focus on developing that weakest element." That's what we need to do in the supply chain; we need to make sure that we identify what our weakest elements are and work on those. The only way to really identify those is to compare them to the industry, competitors and best-in-class, and then see how we're doing. If there are six subjects and we're getting 100 points on three of them, 90 points on two of them and 60 points on one of them, we need to address our attention to the area where we're getting 60 points, and the only way to identify that area is through a robust process of benchmarking.

S&DCE: What are the challenges here? Is momentum again a problem?

Tompkins: Yes, momentum, and then the hesitancy to be open. Some people say, "Well, the problem with benchmarking is, if I want to see your data, I have to be able to show you mine." There's a lack of security, and I don't want to tell anybody anything about my operation and so I'm not going to be able to benchmark. You've got to get over that. You've got to realize that you're either going to join the people that benchmark and therefore get better, or you're going to keep your data extremely secure but guess what, no one's going to care because you are going to go out of business.

S&DCE: Does there need to be a top-down focus on this as part of the culture of a company?

Tompkins: Absolutely, yes. In fact that's true with both of the best practices that we've discussed so far, because a focus on communication, education and vision has to be articulated from the top. You don't get a supply chain vision starting in the middle, because there's just no way to overcome the boundaries that exist, and so you need someone at the top busting down those silos.

3. Assess and Partner

The third is a combination of assessment and partnership. For assessment, after we've done the benchmarking and we know where the opportunities for improvement are, we need to ensure the readiness to move forward. I have defined six levels of Supply Chain Excellence (see sidebar "Six Levels of Supply Chain Excellence").

So first we benchmark to determine our strengths and weaknesses, and then we've got to do this assessment process to identify which areas to improve. If my organization has two areas at Level 2 and everything else at Level 3, 4, 5 and 6, I've got to work on those two Level 2s. Once I get everything in the organization at or above a Level 2, then I'm ready to start pursuing visibility with my supply chain links. The challenge here is that you can't do visibility with someone who hasn't already reached Level 2 as well. If I'm trying to do visibility with a supplier who's at Level 1, they're going to be giving me bogus data, because they are not functioning as a link and therefore their selfishness is going to have an impact on me. So I need to make sure that I pursue visibility only with organizations that have reached Level 2 as well.

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