Effective Supply Chain Management (SCM) applies well-developed and efficient strategies that integrate every variable in a supply chain — manufacturers, suppliers, distributors and customers — so that production and distribution can be achieved at the lowest possible total cost. Ideally, this also meets or exceeds customer needs.
While a finely-tuned SCM strategy is optimal, the reality is that most companies struggle to do this. Factors such as: advancements in technology, the return of onshore manufacturing, adaptive shipping trends, internal processes and balancing key stakeholders each play a significant role in the actual effectiveness of the supply chain. All of these affect SCM differently, requiring strategies to continually evolve in order to remain integrated and responsive to modern consumer/client demands and expectations. Today, there are some major innovations occurring in the manufacturing environment that make this the perfect time to reevaluate your companies SCM.
The supply chain begins with leadership. Creating a more agile, efficient and productive supply chain is a universal goal. But how do you do this? How does leadership propagate or inhibit this?
It’s not enough to be aware of the significant factors that affect good SCM. Understanding these variables and recognizing how to best integrate them is where real, measurable success stems from.
Identify The Variables Affecting Supply Chain Management
It’s no secret that leadership is the driving force behind effective SCM strategy. Developing a better supply chain blueprint is one of the more difficult responsibilities company leaders struggle with. Here are the key factors which build the foundation of an optimized supply chain:
SCM is a big-picture entity and requires top-down solutions in order to be effective. A survey by Booz Allen Hamilton found that when companies assign SCM to functional leaders, they achieve on average, 55 percent less in savings than those whose CEO is involved. Corporate leaders are the only ones capable of building an SCM system directly into the corporate framework. By linking SCM to the overall corporate strategy, the company can operate with a more nimble, adaptive process. Direct involvement from leaders at this level ensures that everyone buys into the program and that it will yield good results.
Key stakeholders must be weighed against budget limitations and cost of operations, while customer satisfaction is a result of efficiency of internal processes, distributors and suppliers. Process execution is increasingly involved and influenced by technology advancements, while the return of onshore manufacturing is changing how shipping operations function best in relation to customer satisfaction. With so many moving parts, a good strategy must consider each variable before SCM can be streamlined.
Customer Driven Priorities
Increasing profits while meeting and exceeding the customer’s needs is the driving force behind SCM. Satisfied customers/clients means more business, more networking opportunities, and better industry awareness. Corporate leaders that oversee their companies supply chain have the ability to implement changes based upon what the customer needs. The more the leadership focuses on the customer, the more effective SCM.
Balancing Company Economics
Successful supply chain design should both address and have solutions available to maintain a balanced budget while factoring trade-offs between cost and services. Important considerations of supply chain design incorporate: inventory, manufacturing plants, supplier’s warehouses/logistics, people, technology and required capabilities.
What works for one company will not necessarily work for another. Customization is the result of a flexible SCM strategy that is directed by corporate leaders. This is another balancing act in itself—it needs to be both realistically managed and affordable. There are an endless amount of solutions available to SCM, from technology to pre-designed strategy program plans. What can be done must be weighed against what should be done while remaining cost effective to the overall budget. There’s no point to developing — and paying for — a supply chain system that costs more money than it generates or saves.
One of the biggest mistakes company leaders can make is investing in technology of which they have little to no understanding. Lightning-fast advancements in technology have greatly impacted the logistics and supply chain sectors in ways previously only dreamed of. From ordering to cash, today’s modern technology offers an unprecedented degree of transparency and customization, while allowing precise measurement and tracking of the supply chain from start to finish. Yet, while this is a huge leap forward in the evolution of the industry, much of this technology is new. In some cases, it has yet to prove itself.
Remaining both flexible to change and maintaining supply chain efficiencies is tricky at best. Many companies still use processes that haven’t been updated in years — decades even. Often, a small change will be integrated into one segment of the chain, resulting in either little to no effect, or worse, throws the entire system out of order. A truly successful SCM strategy is built to be adaptive and responsive to changes in technology, production, shipping trends and client expectations.
Successful supply chain management leads to economic growth, stronger client and partner relationships, innovative technology solutions, and can create new opportunities. Integrating these key variables when developing a strategy are only one side of the coin however. Corporate leaders must be able to see the big picture. The benefits of each factor must also be considered and then weighed into the overall equation.
One of the biggest drivers for developing and maintaining a sound SCM policy — economic growth — is a prime motive, but can act as a double-edged sword. Customer satisfaction, inventory on-hand, quality and timely delivery can all suffer by focusing too much on cutting costs. This will hurt sales. On the other hand, overemphasizing service can also result in the loss of profits. Excessive inventory, over-capacity and stressed workers trying to meet unrealistic demands will hurt the economic value of a streamlined SCM strategy. Prioritizing goals, how and when to focus on them, and increasing profits all along the way is an integral part of creating an optimized SCM program.
Communication is at the center of all prosperous business. Creating, building and maintaining relationships is vital to a company’s success. For example, Sales & Operations are commonly at odds trying to reach their goals. Manufacturing leadership are responsible for improving efficiency, especially with their partners and clients. A company that consistently delivers measurable results while improving their client value will inevitably strengthen existing relationships, and also help to build a reputation that can bring more clients in. By communicating effectively in all areas — both internally and externally — the supply chain becomes a well-oiled machine.
Streamlined efficiencies that grow profits don’t just happen. Insight into your own industry is supplemented by a strong awareness of the other industries involved in your supply chain. Knowing how to find, interpret and integrate this information can easily overwhelm a person. This is where professional development can help. Everyone — including executives — can benefit from continuous professional development training. Great leaders spend their entire lives honing their skills — and so should you. By growing your leadership abilities, you’re investing in both your company as well as yourself. Professional growth training can open new doors, offer greater insight and create networking opportunities that may not be as readily available.
The very first step to achieving the goal of a shorter supply chain begins with research. Manufacturing leadership must first understand current industry trends and then work to develop an adaptive SCM program that accounts for each of the variables discussed above. By looking ahead, projected growth patterns can be better balanced, while strategic incorporation of the right technology — at the right time — can improve all areas of the supply chain, from inventory management to client relationships to understanding how to get the most out of your investments.
Effective communication across the entire supply chain maximizes efficiency, strengthens relationships, grows profits and helps to solidify your position as an impactful leader. When manufacturing leadership is proactively involved with and committed to their companies SCM process, they become a part of the overall strategy.
Kelly Rudy is President, The Paranet Group, and can be reached at 414-305-5632 or firstname.lastname@example.org.