Ten simple ways to optimise your supply chain

By Tim Foster

Business leaders are seizing the opportunity to reduce complexity in their businesses to empower growth, build sustainability and drive shareholder returns.

Supply chain embraces almost all aspects of business performance enabling revenue growth and driving bottom-line results through achieving operational excellence. Supply chain operations aim to be effective in meeting customer service requirements and efficient in managing resources and assets.

We are seeing a closer alignment between the agendas of the CEOs and the Heads of Supply Chain, that is a shared desire to address customer service, reduce operational complexity, and manage supply risk.

Here are ten steps which when taken can improve and optimise supply chain performance:

1.    Understand your customers buying behaviours and needs
Make sure supply chain has a clear understanding of customer needs and is involved in analysing customer buying behaviour. Instead of a traditional focus on the buyer / seller relationship set up opportunities to collaborate by involving cross-functional teams with your customers to identify opportunities for improvement for both organisations. Look to group customers with similar buying behaviours eg. regular replenishment, ad hoc emergency buying and develop supply chain platforms to service these different buying behaviours.

2.    Make sure you are clear on the overall business strategy
Along with capturing target customer needs the business strategy should clearly layout the vision and direction for the business including key strategic priorities, customer service standards, operating costs and assets, capacity planning and capital and business performance standards. If it is not clear work with your executive leadership team and stakeholders to identify the priorities to be supported by the supply chain.

3.    Align your supply chain network infrastructure to the customer needs and business strategy
The supply chain network comprises supply points, manufacturing sites, inventory holdings, distribution facilities and transportation all of which needs to be aligned meeting customer needs effectively (service) and efficiently (costs, assets). Changes in customer needs and business strategies will drive the requirement to review the supply chain network infrastructure, assets and services in order to adapt to changing conditions.

4.    Embed Cross-functional supply chain planning (Sales & Operations Planning)
The central planning process to enable effective and efficient supply chain performance is sales and operations planning (S&OP). S&OP is a cross-functional planning process looking at projected demand and supply allowing the business to identify the decisions and trade-offs to be made in order to maximise revenue and profit goals.
In order to continually drive supply chain improvements your business should have a robust S&OP process embedded and top-down, from the CEO, ownership to ensure effectiveness otherwise forget it.

5.    Clear, robust processes, business rules and policies
Mapping supply chain processes and procedures that translate in to planning and operational execution is only the starting point. Where most organisations struggle is the underlying business rules and policies that guide key day-to-day decisions.
Make sure that key decision points within processes are identified and there are clear parameters to guide these decisions including accountability for decision-making. And where possible automate processes through the use of technology to improve effectiveness and efficiency and facilitate performance reporting and management. By doing this and regularly reviewing key supply chain processes you will achieve a more empowered flexible supply chain rather than an ill-disciplined mess.

6.    Proactively manage inventory performance
Effective inventory management will impact on key areas of the business including customer service performance, supply chain efficiency and working capital performance. Inventory management concepts and processes should be an integral part of overall supply chain improvement strategies.
It is the role of supply chain, logistics and inventory managers to reduce complexity when it comes to inventory management by gaining a clear understanding of the factors impacting on inventory holdings rather than letting a strong financial view of inventory within the organisation dominate.

7.    Manage key supplier performance and supply risk
Supplier performance (be it finished goods, raw materials or key supply services) has a substantial impact on overall service, cost and capital performance.
Yet there is not enough attention or management time focused on systematic supplier performance management or in managing the potential risk to supply as recent world events show.

Establish an effective supplier performance management framework (strategy, processes, rules, responsibility, and technology). You should create a management focus on supply performance in full and on-time, assessing supply risk and developing programmes for reducing total supply cost rather than unit cost reduction, which will often create greater service failure and supply risk.

8.    Ensure accurate master data management
The effective and efficient performance of supply chain is becoming more dependent on the establishment and maintenance of master data within IT systems across the organisation and with its key customers and suppliers.
Make sure your target master model is clear by identifying key producers and consumers of master data.
Make the responsibility for creating and maintaining master data clear – and it is not IT’s job! It is the responsibility of key business user groups including supply chain. “One version of the truth” is the aim and the outcome will be improved productivity and better decision-making.

9.    Be clear about organisation roles and responsibilities
Define the organisation structure aligned to processes, policies and the level of automation within the supply chain.
Developing a basic view of responsibilities and accountabilities with a focus on key decision points will help in managing supply chain performance and identifying resource and skill gaps.
Take account of the workflows configured within key planning and operational systems and where it makes sense align roles to facilitate workflows.

10.    Performance measurements and metrics
Develop a clear, concise and hierarchical set of key supply chain measures with an ability to quickly drill down from a management perspective to identify root causes of strong or poor performance.
Designing and automating reporting frameworks based on a high degree of data integrity will allow for early identification of opportunities for improvement in the supply chain.

Tim Foster is the Commercial Director for Logiworx a supply chain optimization and logistics specialist, based in Sydney
www.logiworx.com.au