Supply Chain Fitness - How Fit Is Your Supply Chain?
How fit is your supply chain? Optimize it today!
There are four stages of fitness for most of us:
- Stage 1) We're just doing what we do and end up getting exercise without realizing it
- Stage 2) We work out to excel at a sport or enjoy activities that require us to be in shape
- Stage 3) We start working out simply to look good
- Stage 4) We exercise so our bones don't turn into jelly.
Our supply chains go through the same four stages.
Supply Chain Fitness - Stage 1
The "we're just doing what we do and end up getting exercise without realizing it" stage.
For people, this is when we're kids. For supply chains, it's when they're young, too. When we were kids, we sprinted everywhere we went. We'd run up stairs and jump over anything jump-over-able. Exercise was a way of life. Not something we ever thought about.
Supply chains were the same way in their youth.
When companies are young, their supply chains burn brightly and intensely. Unfortunately, they also tend to burn a lot of cash.
Inventory is ordered without thought to optimized stocking levels. Expedite fees and overnight shipping rates are paid to get products and raw materials quickly.
And while Stage 1 can be effective, it is not sustainable.
Supply Chain Fitness - Stage 2
The "we work out to excel at a sport or enjoy activities that require us to be in shape" stage.
For people, this starts with organized sports or a love of some kind of activity that requires fitness.
For supply chains, this is when companies realize that supply chains need to become optimized in order to maximize earnings.
For people, we start training to excel at soccer or basketball or triathlons or mountain biking. We work out the right muscle groups, we build our endurance and we study our sports. Our goal is to excel or, at the very least, to get the most out of ourselves.
For supply chains, this is when companies start to talk about optimization. Companies always want to get their customers what they want, when they want it - but with optimization, companies start to realize they need to get their customers what they want, when they want it - and accomplish this by spending the least amount of money as possible.
This is when supply chains start to contribute to a company strategically, whereas in Stage 1 - supply chains were focused on transactional and tactical wins.
When Stage 2 starts humming for people, they collect trophies for their mantles and making their personal best times. When Stage 2 works for supply chain, cost of goods go down, on-time delivery nears 100% and a company's earnings increase.
Stage 2 is where a company wants its supply chain to stay, but unfortunately...
Supply Chain Fitness - Stage 3
The "we start working out simply to look good" stage can take over.
Stage 3 for people is when their glory years fade to black.
For supply chains, this is when companies start to focus more on metrics or reporting and not maintaining an optimized supply chain. When we're living in Stage 3, it's usually a few years after we've played our last game or competed in our last triathlon.
When we start working out again, we come to a realization that we'll never be as good as we once were, so our goals change. We just want to look good, or at the very least, look good for our age.
For supply chains, this is when management might become more concerned with reporting than performance.
And if your supply chain team becomes more focused on their PowerPoint slides and not their on-time delivery, Stage 4 might soon be a reality.
Supply Chain Fitness - Stage 4
The "we exercise so our bones don't turn into jelly" stage.
For people, this stage often comes as a final act of desperation.
Same for supply chains.
For us, we start walking after dinner and attempting push ups after a doctor's warning or a spouse's chiding.
For supply chains, companies start to realize that costs have started to erode earnings and Wall Street or other investors lay down the law. Get your costs down or else.
For us, we pedal like maniacs on stationary bikes.
For supply chains, sourcing projects get launched and supply agreements get re-negotiated.
The danger in Stage 4 supply chain is that partnerships with suppliers can erode along with those costs.
Stage 2 is where we all want to live.
Those are the glory years for you and your supply chain.