Supply Chain: 4 Things You Can Do to Be More Competitive
August 27, 2015 12:53 pm
posted by FASTLANE
posted within Supply Chain Development
Written by: Jessica Orr with content from MEP Supply Chain Optimization
No matter where you fit in the supply chain there are four things you can do to improve your supply chain competitiveness:
1) Define a Supply Chain Strategy
Establishing a consistent strategy is key. Your strategy will evolve as the supply chain does, but it must be in place before it can be optimized. Key steps to developing this strategy are:
- evaluating current supply chain maturity
- identifying challenges using Constraint Theory concepts
- recognizing your innovation and sustainability objectives
- establishing clear, understandable supply chain performance objectives
- aligning with organizational objectives
- creating a strategy deployment plan
Involving upper management to ensure internal alignment and visibility, and fostering collaboration and optimization throughout the supply chain are two of the most important factors for successful implementation. While there are many tools available for guiding this effort, one tool MEP Centers have used is the Five Bold Steps approach.
2) Build Visibility
One important step in supply chain optimization planning is assessing how visible your supply chain. Do you know how your partners/suppliers are performing? Are you aware of system constraints they are facing that would also affect your performance? Developing a supplier network diagram can be useful for identifying potential bottlenecks. What collaboration efforts are currently in place? The more visibility and collaboration there is the better you can increase overall performance, address system constraints, and mitigate risks. Use your findings to establish a communication and collaboration plan.
3) Develop a Risk Management Program
A supply chain is not complete without a risk management plan. This doesn’t have to be a lengthy formal document; you can even start with a handful of bullets that capture your most critical supply chain risks and associated plan for mitigating them. The more risk planning involved on the front end, the less costly it is managing risks when they occur. Implementing a Risk Management Program enables you to:
- Identify, assess, manage and monitor the supply chain risks
- Quantify “cost” of risks
- Understand significance/severity of risks
- Reduce occurrences and impacts of risks
- Promote organization behaviors focused on risk management
- Increase effectiveness of product and service delivery to customer
In order to do this, you will need to go through a systematic process of determining what those risks are, how they can be monitored and how you can minimize the chance of their occurrence or respond quickly if they do happen. A recommended reference book is called “The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage” by Yossi Sheffi.
4) Implement Total Cost of Ownership Decision Making
Lowering and managing the total Cost of Goods Sold is of strategic importance to any company. When faced with the dilemma of choosing between multiple suppliers, using a Total Cost of Ownership model is a great tool to help determine the best scenario. Simply considering the per piece price doesn’t give you the whole picture. Often manufacturers either do not have all the information to be able to make the right decisions or it may be spread across different competing departments. Identifying all the information, consolidating it in one place and quantifying in terms of cost enables making the best decision possible. Total Cost of Ownership methodology equips companies to identify and evaluate factors that determine the “real” cost of purchased products, which include not only the acquisition or purchase order cost of an item, but also planned and unplanned costs necessary to obtain the item, methods of transport and warehousing, vendor oversight, and social and ecological costs such as the impact of natural disasters and product disposal costs.