Daily Archives: March 22, 2009

Supply Chain Performance Improvement For the Beginner

Industry Week recently ran an article on supply chain performance improvement for the rest of us that is a good read for any organization just starting down the supply chain improvement path. The article outlined four strategies which can be used to jump-start a performance improvement initiative in an organization that is not best-in-class, or, in layman’s terms, your average organization. (Less than 20% of organizations are truly best-in-class, and the reality of supply chain improvement is that you need to do it in stages and trying to bite off too much too fast will just lead to failure.)

  1. Stop Obsessing Over Six Sigma
    It’s not the methodology, but where you apply it and how you use it to better your operations. It’s about leveraging the chosen process life-cycle improvements to focus on customer-visible process improvements, not about the processes themselves. Eventually you’ll want to optimize every process to the nth degree, but not when you’re starting out. An 80% improvement across the board is much better than a 98% improvement on one process that only affects 10% of production. After all, would you rather be 1.8 times as productive as a whole or 1.198 times as productive?
  2. Forget About “The Perfect Order”
    The “Perfect Order” is Supply Chain Nirvana, and every budding Buddhist knows that this is a lifelong journey. You need to start by improving your basic processes, which will minimize errors, and managing the mistakes (or order exceptions) better when they do happen. Install visibility systems that allow you to identify and deal with exceptions as soon as possible and the process improvements this will inevitably lead to will result in a significant drop in errors almost overnight.
  3. Pay Your Suppliers Better
    This will save your company money. Not only will it strengthen vendor relations, which could lead to happy suppliers willing to share insights and best practices and go the extra mile, but it will reduce the amount of capital the supplier has to borrow, which usually comes at a high cost. This reduces the supplier’s cost of capital, which reduces the supplier’s overhead, which decreases the mark-up the supplier has to charge, which enables the supplier to offer early payment discounts or charge you less (at renewal time).
  4. Don’t Talk to Customers
    Stop wasting time haggling over credit and other meaningless disputes. Automate the dispute resolution process and spend time listening to your customers’ product and service interests and business process priorities instead. That way you can find out what your customers really want and improve your offerings accordingly.