1. Are you influencing your business strategy?
The supply chain is often the tip of the whip, reacting to demand at the point of sale. Quite often the supply chains response is greatly exaggerated to the actual demand input, and what starts out as a joined up response to customer demand signals ends up with over-stocks, redundant inventory and extended leadtimes. When things go well, no one notices how good the supply chain is. When it fails to react, or over reacts, then its all the supply chain directors faultagain! Most organisations dont appreciate how complex the supply chain task is and how much value the supply chain can contribute. 2010 should see the supply chain organisation telling the business what it can do to improve performance, and how it needs to work collaboratively with all the other parts of the organisation. The supply chain team must influence and contribute to the business strategy to avoid being the victim, or tip of the whip. There are several practical things to do:
Talk to the rest of the organisation and improve understanding. Sales need to agree realistic delivery times, but at the same time the supply chain cant remain static and must adapt to market needs. A collaborative approach brings comprehension of the customers needs and allows the organisation to identify where improvement in capability is most needed Ambitions should be explored, agreed, and aligned throughout the organisation.
Having defined what the supply chain needs to support, this should be translated into hard measures. Targets and measures keep the CFO happy and also demonstrate why supply chain capability must be a critical part of the business strategy. It also means that sometimes the supply chain needs to act as a brake on over ambitious parts of the organisation that might put at risk brand credibility and customer satisfaction. Its about showing what can be done but also bringing clearer acknowledgment of constraints.
There will also need to be an assessment of investments required. The worlds a competitive place and the supply chain can provide a competitive edge. Keep it sharp and it delivers improved business performance. Let it get blunt, and profitability, growth and market share are all at risk.
2. Is your supply chain really connected?
MRP, ERP, and CRM have all helped join up the organisation and its supply chain. We get better visibility of whats in the chain and we get access to information much faster. However, the greatest leap in value will come from extending such integration of processes, systems and people activities to all parts of the supply chain. Getting connected to your supply chain partners can pave the way for significant growth opportunities, through being first to sense and respond to the changing needs of the customer.
The reality is sobering, with the vast majority of organisations still miles away from having an end to end supply chain, that is tightly connected and moving to the same customer demand signals. In 2010 the supply chain director needs to create and deliver on a strategy to connect up the supply chain and get it synchronised with customer demand. Plans and transactions which pass seamlessly between departments and supply chain partners ensure a true reflection of demand, and avoid the bullwhip effect.
An integrated supply chain not only responds faster and more efficiently to customer needs, but it is better placed to predict future needs and evolve. It becomes capable of shaping and delivering new products and services ahead of the competition.
Perhaps most importantly, it provides executives with high quality real time data that allows them to take the right business decisions if you dont have this today , are you making the right decisions?
What should you be doing?
Take a long, hard look in the mirror and question how joined up your organisation, and the end to end supply chain really is.
Imagine a world where every part of your supply chain is connected, sharing the same source data and with each part having the intelligence to react in such a way that optimises the whole chain and not just part. Can you see how such a capability add value to your customers and your business? Bear in mind that your competitors might have seen the same world some time ago!
Create the vision. Start selling it to the board, and take action to start making it a reality.
3. Are you adapting?
An adaptive supply chain is one that responds to changes in market dynamics as they are happening. Organisations that dont adapt either dont survive or become heritage centres.
Being adaptive means taking an outward view from the supply chain, seeking opportunities for improvement, being prepared to dismantle the status quo and really challenge what customers will need in the future. Its a paradigm shift, and its going to require significant changes in how things are currently done.
How to become adaptive:
Its an outward facing thing, so if you spend most of your time working on internal supply chain issues, the chances are youre missing the market indicators which hold the critical clues to becoming adaptive.
Are your teams developing an adaptive mind-set, or are you still internally focused? Look for the signals that the organisation is self-obsessed and blind to the changes that are happening outside.
Know your environment ensure you get real insight into how your customers and markets are changing. How can you change to exploit these changes to your advantage?
Challenge those proposals and decisions which make sense to the firm and encourage others to do so. Open minds are the foundation of a creative culture in a team.
4. Is everyone pulling in the same direction?
You think they are? Well, why should they be?
Its easy to assume you are all pulling in the same direction, to the same goals, to the same timelines and to the same set of customer expectations. Chances are that there is considerable misalignment throughout the supply chain on these points ask your board colleagues what your customers expectations areclear and aligned?
Getting everyone on the same page is absolutely critical. Even if you are joined up, if you are not completely aligned then youre in trouble. Alignment doesnt happen automatically and requires a systematic cascade of needs throughout the supply chain with feedback loops to ensure the direction is both achievable and firmly agreed.
You can then overlay a performance measurement structure that encourages the right behaviours to optimise the overall chain and not an individual link. If we need to reduce cost to become competitive, then its a challenge for the whole supply chain and not just your suppliers.
We also need to ensure that performance is actively managed. With the realisation that the whole supply chain must contribute to the end goals then positive behaviour must be rewarded, and negative behaviours discouraged and eventually eliminated.
How to check alignment:
Are you clear on what your customers expect of you? If not, you need to find out. Go and talk to them!
Share your findings with your team and check as to how aligned the suppliers are. If unclear then find out a sample could provide some useful insights. At the same time test whether your measures and performance targets are aligned with meeting the end customers needs.
Challenge the metrics and rewards. Get clarity around whats really important and make sure the measures and rewards are encouraging excellence around these. Test whether the traditional measures add anything or actually encourage the wrong behaviours, silo mentality, and sub-optimal performance.
5. Supply chain complexity is it a good thing or bad thing?
Supply chain directors have traditionally made the case for simplification. Fewer product variants results in a supply chain that is easier and cheaper to run, and this has proven to be true for the many companies which have streamlined their product portfolios, service propositions, and channels to market.
However, taking market share from the competition means providing their customers with a more attractive proposition. New product features or enhanced service offerings add complexity into your supply chain, but also value in the eyes of the customer value they are willing to pay for.
The key to effective complexity management is balance. It requires the continual addition and removal of supply chain complexity to maximise overall business performance. This capability requires an effective product lifecycle management (PLM) strategy, providing you with a firm grasp of product information, and a mechanism for rationalising portfolios and ending lifecycles in a ruthless fashion.
Your PLM strategy needs to be backed by an ability to execute through an integrated and responsive supply network, so that balancing complexity can become business as usual.
How might you benefit from complexity?
Develop and execute a PLM strategy in which you take control and manage complexity to your advantage.
Understand your key markets & customers. What type of complexity do your customers really value? What are they not currently getting, and would be willing to pay a premium for?
Team up with your supply chain partners to pool knowledge and capabilities to deliver added complexity cost effectively.
Continually introduce & extract complexity from your supply chain so that you retain that which adds value, and systematically remove that which simply adds cost.