Category Archives: Supply Chain

What is The New Supply Chain Normal?

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In “A New Supply Chain Normal?”, Dan Gilmore of the Supply Chain Digest asked if there will be a new supply chain normal coming out out of the recession as many of the financial experts are expecting a new financial normal. His answer was that there will be a new normal for quite a while because important changes in the consumer consumption, business, and government will inevitably drive new requirements and responses from the supply chain.

In an effort to identify what this new normal would be, he asked a number of leading experts to weigh in with their take. Some of the more important points were as follows:

  • A greater focus on network efficiency as fuel prices rise permanently.
    Dr. Tom Mentzer, University of Tennessee
  • There is no new norm because the pace of supply chain change is too rapid. Supply chain success will only be achieved if the supply chain has enough flexibility and modularity.
    Dr. Jim Tompkins, Tompkins Associates
  • Permanently increased volatility. Constant currency fluctuations, cautious customers, and rapid swings in the price and availability of key commodities are just a few areas where we may never see stability again.
    Bill Read, Accenture Supply Chain Practice
  • The acceleration of risk mitigation. Optimization, simulation, and plan auditability will be critical.
    Richard J. Sherman, Gold & Domas Research

And they all had a common thread. Constant, sometimes rapid, change. This means that the new normal is really the old normal, just sped up. Instead of worrying about fuel price increases, currency fluctuations, or raw material availability over years, you’re often going to be worrying about them over months. Shorter, more unpredictable, product life-cycles. An even greater need for spend analysis and optimization. And a greater need for risk visibility, management, and vigilance.

For more insights into what the experts had to say, check out “The New Supply Chain Normal: Supply Chain Gurus Weigh In” which dives into the views of Dr. Tom Mentzer and Dr. Jim Tompkins, and “The New Supply Chain Normal: Supply Chain Gurus Weigh In, Part 2” which explores the insights of Bill Read and Richard J. Sherman.

The Supply Chain Opportunity in a Challenging Economy

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Spending less money seems to be a logical step when times are tough, but it can be a short-sighted approach. Companies must not just make fewer, smaller investments, but make smarter investments. Just because the economy has slowed down, it doesn’t mean you have to.

I couldn’t have said it better myself. This quote, from a recent article in i2’s Supply Chain Leader about “The Supply Chain Opportunity in a Challenging Economy”, gets to the heart of the matter … if you’re not investing smartly, you’re slowing down with the economy. And if you slow down, you risk becoming the next bankruptcy.

But getting back to the article, the next point it makes is that in this tough economy, a sharp focus on supply chain management is critical to your company’s success. Definitely. Remember Business 101: Profit = Revenue – Cost. Smart supply chain management lowers cost WHILE increasing value, which can increase revenue, which maximizes profit. It’s really that simple.

Now is the ideal time … for technology that provides a quick return on investment and long-term savings. Technology implementations that streamline manufacturing operations, optimize inventory, and focus on increasing cash through improved asset utilization and enhanced transportation management can enable your business to maneuver through volatile times, setting you up for success once the economy recovers. That’s why this blog has a large technology focus. Technology will help you optimize your supply chain, which saves you money and, done right, optimizes your cash flow.

And don’t forget to maximize the investments you’ve already made in your supply chain. This will help ensure that you are in a position to not only weather the storm, but to move past the competition once the storm clears. If you have systems that have been working well for you, even though it might seem a bit costly (at first), maintain the maintenance, acquire supplementary modules or systems that maximize your return, and hire consultants to help you figure out how to get more out of what you have. Remember, it’s all about ROI.

Then stay the course. A focus on innovation will lead to success … especially when so many companies have essentially curled up in the fetal position to wait out the storm. Recessions aren’t just when the losers are culled … they’re when the winners are made. And if you’re reading this blog, I am assuming you’re a winner … so go get ’em tiger!

Reducing the Footprint of Your Supply Chain EcoSystem

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A recent article in Industry Week contained an interview with Christian Verstraete, the CTO of Worldwide Manufacturing & Distribution Industries of Hewlett Packard Co. who is pushing the lean frontier to see “how it can be incorporated into the wider view of the complete ecosystem”. This is because companies must have a handle on risk management and mitigation across the supply chain while simultaneously reducing the variants. Rather than do Six Sigma within the company, do Six Sigma across the supply chain“.

HP, which actively models proposed changes to its supply chain in modern simulation software before making any significant changes that could have (significant) repercussions, won Wal-Mart’s 2008 Home Entertainment Design Challenge which revolved around reducing the amount of packaging material in an effort to be environmentally responsible. HP was able to design one package to meet shipping needs for PCs and laptops from China or Thailand that reduced shipping material by 97%.

While the article was short, Christian did make one very good point … a company is a community of human beings and everyone is responsible for doing their part. And today, that means being socially responsible. So before you make a new (global) sourcing decision that’s going to require significant changes to your supply chain, when you’re running that Total Value Model, be sure to take into account the carbon footprint as well. It might not be a very valuable decision after all, especially once carbon credits become mandatory.

Remember The Three Key Objectives of Supply Chain Risk Management

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As emphasized in an article in Industry Week from last fall on “Supply Chain Risk Management”, from a risk manager’s point of view, the following are the three key objectives of an effective supply chain risk management strategy:

  • identify and prioritize critical business elements,
  • map the entire supply chain to determine interdependencies, and
  • identify the potential failure points along the chain.

Not only is it important to keep these objectives in mind as you are analyzing your current supply chain for risks, especially those that could result from the failure of one or more suppliers or logistics providers, but it is doubly important to keep them in mind when you start re-evaluating your global sourcing strategy in the forthcoming upswing. Otherwise, you could make decisions that will put you right back where you are today when the next inevitable downswing rears its ugly head.

Your Manufacturing Supply Chain is Filled with Waste

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If your supply chain is misaligned, as per a recent AT Kearney white paper on “Aligning the Misaligned Supply Chain”, it’s probably filled with waste that might include, but not be limited to:

  • excess buffer capacity built into the system,
  • overtime and suboptimal changeovers,
  • too much safety stock,
  • excess inventory to keep the lines running, and
  • line shut down.

Of course, all of this costs you money and, if things are really bad, a lot of money. More specifically, if your supply chain is misaligned, once you fix it, you can realistically expect a 20% reduction in costs. Furthermore, you’ll require less capital up front, produce higher quality products (as suboptimal changeovers decrease quality and increase errors), improve service levels (as your service will be more predictable), understand true demand, and improve the overall visibility of total supply chain cost.

More specifically, better alignment will:

  • improve asset utilization (and reduce costs 6%),
  • reduce overtime (and reduce costs 5%),
  • increase utilization of transportation cubes (and reduce costs 5%),
  • decrease expedited shipments (and reduce costs 3%), and
  • reduce inventory levels (and reduce costs 3%).

And, like it has done for Toyota many times, it might even keep you in business. Why? How? Check out the white paper and find out.