No Pain, No Chain - How To Optimize Your Supply Chain
Without some pain, you might not get optimized supply chain.
We talk a lot about getting supply chains optimized. For instance, the high level definition of optimized supply chain that we like to toss around here: "Get your customers what they want, when they want it - and spend as little money as possible getting that done."
We know what the end result looks like.
- Lower inventory spend.
- 100% customer on-time delivery.
- Cost of goods reductions.
- Lead time management.
- Optimized production and production planning.
- Strains of "Kumbaya" reverberating throughout your warehouse.
But what does it take to get there? Is it going to be easy - streamlining processes and consolidating suppliers? Probably not. Okay, definitely not.
First, what does your supply chain look like right now? If you haven't mapped it - that's where you need to start. Part of the trick of accurately mapping your existing supply chain is to interview the stakeholders outside your supply chain.
When you ask your current purchasing, inventory control, customer service and logistics teams about the as-is state of the process they manage - well, let's just say you might get a much different answer than when you ask your suppliers, customers, sales and manufacturing teams.
Your as-is supply chain map should start with your suppliers (or, ideally, your Tier II suppliers) and run though your freight, warehousing, production and customer delivery. This map should also tell you how much time and how much cost is built into your supply chain. Now, look at it - is it optimized?
- Are you getting your customers what they want?
- Is it getting to your customers when they want it?
- And are you spending as little as possible to get this done?
If not (and, in most cases, it's not), then that's where the pain begins.
Why Isn't Your Supply Chain Optimized?
If you're not getting your customer their orders on time, is it because your own suppliers are late to you? If so, you may need to begin optimizing by firing some of your existing suppliers. That might mean terminating supply agreements or shredding long term relationships. Never easy.
If you're not spending as little as possible to get your products through your supply chain? If not, is it time for a sourcing project? Can you generate competition within your existing supply base and can you bring in new suppliers that will help lower your cost of goods?
Sourcing projects can be very intensive and should include not just cost considerations, but on-time delivery, cost of quality, supplier innovation and customer service.
Do you have the right physical flow of goods? Is your warehouse optimized? Do you use a third party logistics provider - and, if you are, do you need to be using that 3PL?
Sometimes optimizing your supply chain means you might literally need to rip warehouse racks out of concrete floors and move them to the other side of the warehouse or other side of the world.
When was the last time you walked through your pick-and-pack operation? How long does it take? Is there any waste in the process? Can measuring real-time metrics provide tools that allow you to improve your daily throughput by ten or twenty-five percent?
Do you have the right talent managing your supply chain? This might be one of the most painful practices of them all. When companies go from needing functional silos to needing globally integrated supply chain teams, they sometimes find that the people they've had working in those silos aren't the right fit for the new supply chain paradigm.
Optimized supply chain professionals need to be:
- Facile communicators
- Forward thinkers
- Team players with meticulous attention to detail.
Painful as it may be, optimizing your supply chain may mean letting go some of the old guard.
The process of arriving at supply chain optimization might be painful, but just like looking in the mirror and seeing those washboard abs - once you see your 100% on-time delivery and cost of goods reduction and all the other rock hard metrics - it will have been worth it.