Supplying products to customers is clearly important. If you can’t satisfy the needs of a prospective customer, that prospect can easily buy from someone else who can deliver what they want, when they want it. Lost sales and additional expediting costs hit your bottom line. At one level, end-to-end supply chain success is simple: get the right stuff to the right place at the right time. So, what’s hard about that? The answer is “lots”. Products change. Customers order at the last minute and change their orders. On-line customers expect their product to be shipped, if not delivered, on the day they place the order. Supplies don’t arrive as expected. Supply chains typically use several layers of companies, manufacturing sites, and warehouses between raw materials and customer delivery. The number of products and the number of units of those products produced are enormous: 5 million integrated circuits a day, 35,000 vehicles per day, 3,000 major appliances per day. I recall a visit to an electronics manufacturing facility in Juarez, Mexico. Every week, amongst other products, they made about 200,000 units of a consumer electronics product. They did this despite having to manage an average of 30 production changes to that product every day! How did they do it?
Every insight you can gain regarding potential changes and disruptions will help you manage your supply chain to accommodate them:
- Be sure your staff knows what to do and how to do it in order to keep product moving smoothly.
- Establish relationships with your internal or partner staff responsible for developing product and production methods. Seek advance notice of any changes you might need to handle.
- Establish relationships with your suppliers and their suppliers through as many layers as possible. Track projected supply availability and limitations. Collaborate with them so they also know what you are likely to need.
- Establish relationships with your customers and their customers through as many layers as possible. Collaborate with them so you are more prepared for demand changes and other drivers which might change your requirements.
2. Focus on Flow
Keep material flowing. Items sitting on a shelf are not making you any money. Stock only helps you to the extent you need it to cover variations in your supply or demand. Everything else should be progressing towards delivery to your customer. This is one of the basic concepts of a “Lean” process.
3. Invest in Data Quality
As your operation grows, the volume of data you rely on grows exponentially. That data can be your key to success. It can also lead to disaster unless it is accurate and consistent. For example, if the name for a part in your supply data is ABC but A_BC in your demand or customer’s data, or worse, XYZ, then you will have more and more trouble recognizing which supply you can actually use to satisfy which demand. This might seem to be obvious and unlikely. However, it is common for large (and even small) companies to have different part numbers for the same part. As you migrate towards being a digital operation, that system can only operate if you have accurate and consistent data.
4. Segment Your Products and Processes
Recognize that different products have different characteristics within their supply chains. Often, even the same product sold into different markets will require different supply chain strategies. Therefore, although management principles are the same, actual execution practice should be quite different. Categorize your products and then align your supply chain management processes to match the characteristics of those products. For example, some of your products might have steady demand over long periods of time. Others might have ready supply on short notice. On the other hand, some of your products, such as seeds, might only be produced over a short time frame, yet might have demand over a similarly short time frame – but at different times of the year. Clearly, your strategy for managing these products must be different. Segmentation ties back to the Mexican factory I mentioned earlier. Production in the Juarez plant was allocated to products with highly volatile demand and rapidly changing designs so the company could respond immediately to changes for the North American market. A sister plant, in the Far East, produced steady volumes of stable products where seven weeks crossing the ocean would not be a problem.
People, Processes and Tools
These four steps might sound simple. In reality, they are anything but simple! Supply chains are difficult to manage because they must operate despite constant change. Your challenge is to establish a team of supply chain professionals who can navigate the changing environment. You then need to equip them with tools and processes so they can execute strategies to deliver products while handling all manner of changes and still keep your costs under control.