I was looking through my Google reader feed last week (what better thing to do on a Friday afternoon?) and came across a post by “the doctor” that pointed to an article that came out late last year on the Enterprise Apps Today site. The article was titled “11 Ways to improve your supply chain management” and was a collection of tips from supply chain management experts on how to improve the operation of your supply chain. I won’t reproduce the list here, but I’ll point out a few tips that caught my eye:
Throw away your spreadsheets: Amen. Those of you who have read my posts in the past know my position on spreadsheets. (Those of you who don’t can click through to these posts: What is the “right” S&OP tool?, When spreadsheets go bad…, How are spreadsheets like cockroaches?) The bottom line is that spreadsheets are good at many things. They are not good tools for managing ongoing business processes.
Involve your employees: The article explains that you should give employees visibility into how they impact the customer through linking metric programs from the shop floor through to the customer. I agree with this but would like to take it further. True employee involvement is when the employee can understand how a decision can impact the customer and key corporate metrics before they make the decision. For example, a planner may be faced with a late supply order. First, they need to understand who (if anyone…it may peg to forecast or safety stock) this late order will impact. Now they need to decide how to resolve this lateness. One option may be to expedite another order. The other may be to move inventory from another location. Which to choose? The planner could simply try one approach and hope for the best (often what happens). However, if given the ability to simulate various approaches and tools to compare the outcome, they can make an informed decision based on key corporate metrics.
Integrate Sales, Operations and Finance: Absolutely critical in any business. Companies that don’t have sales, operations and finance aligned are destined to experience poor customer service, excess inventory or poor financial performance. In fact, they will very likely experience all three! Think about the following scenarios: Sales plans a promotion and doesn’t inform operations. Result? Insufficient supply…and angry customers. Operations does a massive buy (they got a great deal!) on a component that is used on one product…which has just been discontinued by sales. Result? Lots of obsolete inventory. Sales and the operations team actually work together and plan a huge promotion…which can’t be done because there isn’t enough cash to support the required spend. I think most people understand that we are talking about sales and operations planning. This is something that every company should be doing because if done right and consistently it will ensure alignment across the organization, reduce inventories and improve customer service.
As I was reading through the article, I came up with a couple of additional tips:
Supply chain management has ties to other parts of your company: There are links from your supply chain to other areas of your supply chain that supply chain software doesn’t often provide visibility into. I talked about one link in a post earlier this year: Control Tower Concepts: Hey…you got supply chain in my project management! In this post, we explored how a supply chain event can impact project management…and could drive significant penalties at the project level. The other link could be to resource management and financial reports.
Unleash the power of simulation: More and more companies are realizing that the ability to do instant what-if assessments can lead to much better, more informed decisions. What-if my forecast increased by 15%? What-if I accept this new order? What-if this plant gets flooded and can no longer make parts? Traditional ERP systems cannot answer these questions easily, which means that these decisions are often made based on Excel spreadsheets…(please see the first tip…).
Assess supply chain risk, develop mitigation strategies and review periodically: This can’t be stressed enough. One simply needs to think back to some of the events last year (quake in Japan, flooding in Thailand to name a few) to realize that supply chain risks are out there and if your key supplier is impacted, your business will be impacted. Those that have looked at their risk exposure and have a mitigation strategy to cover significant events will have a better chance of coming out the other side in relatively healthy shape.
Do you have other supply chain management tips to pass on? Comment back and let us know!