Category Archives: Supply Chain

No One Gets Out of Here Alive …

… only the D.U.M.B. survive!

Wow! Twenty years ago, the case was that only the strong survive. Now, the only way to survive in the global marketplace is if your product [is] D.U.M.B. enough to take overseas. How the mighty have fallen.

But seriously, the article in question makes some good points. Your product is only going to make it in a foreign market if it is:

  • Demonstrable
    You have to be able to demonstrate that your product does whatever you say it does, and do it in a manner that the common person in your target market can understand. If only an engineer with a PhD can understand your message, your product is not going to go very far.
  • Unique
    If your product comes off as another “me too” product, than the local brands that are currently established are going to maintain their marketshare.
  • Meaningful
    Your product has to serve a purpose in the eyes of the local consumer in addition to being demonstrable and unique. The example in the article is a great one: low-fat/low-calorie snacks aren’t going to sell when in Spain, or other Mediterranean markets where diets are already low-fat/low-calorie.
  • Believable
    Outrageous claims will not be rewarded. For example, never claim an athletic product will “prevent injury” when it’s clear that all it will do is reduce the risk.

And each of these requirements has a lesson for your local supply chain.

  • Use local partners.
    You need to be able to demonstrate you can get the job done. Using trusted partners will help.
  • Use modern technology solutions.
    Used properly, they will help give you a unique edge in terms of efficiency and performance.
  • Use the right modes of transportation.
    Depending on geography, it might be air, rail, truck, bus, or even courier! Be sure to adapt to the market. In some South American countries, high priced electronics (smartphones) are shipped in unmarked boxes in busses because it’s cheaper and less prone to theft. In busy cities in Asia with narrow streets, you’ll need small delivery vehicles that deliver daily, as some shops are so small they can only hold a few days of inventory at most.
  • Use meaningful, and transparently generated, forecasts.
    Forecasting sales numbers that are way too low or way too high isn’t going to do much for generating good will and trust in your new “partners” who will get the impression that you’re not a serious player in their market.

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It’s Not Time to Celebrate Yet — We’re Only Recognized Half the Time

A recent article in Industry Week stated that “supply chain earns a seat at the table”, but I fail to see how it’s time to celebrate when only 51% of manufacturing companies surveyed have a supply chain leader at or above the executive vice president level.

Until 9 of 10 companies have a supply chain leader at or above the executive vice president level, the celebrations need to be put on hold. Supply chain leadership is much too important to be satisfied with leadership at only half of the companies out there — and anyone who thinks that 51% is cause for celebration is missing the big picture.

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Should Companies Really Be Building Their Own Credit Scoring Capabilities?

As per a recent article in Market Watch on “supply chain risk companies must develop credit scoring capabilities to predict supplier defaults says oliver wyman report”, a new report issued by Oliver Wyman, in collaboration with the Association for Financial Professionals, suggests that companies must develop their own credit scoring capabilities to prevent supplier defaults from jeopardizing their supply chains. In “The New Weakest Link in Your Supply Chain: Supplier Credit”, they say that companies can no longer rely solely on credit ratings from credit rating agencies to evaluate their suppliers’ financial vulnerabilities.

While I agree that credit scores are not enough, because it can be a few months before a credit score reflects a supplier with failing financial health as it will typically take a few months of missed payments before the credit score accurately reflects the supplier’s financial health, I don’t think that developing sophisticated scoring is the answer. First of all, your average company is not going to have the expertise to even begin such an exercise. Secondly, the whole point is to detect when a supplier might be in financial distress, not score them.

Would not careful monitoring of shipments, payments, and quality be enough? Most suppliers who are in distress are going to either be late with payments, late with shipments, or cutting corners in production, leading to a drastic decline in quality. If you can catch this behaviour early, then you can tell when a supplier might be distressed and start to make back-up plans, all without sophisticated credit scoring. And that’s what’s important. Not how much complexity you can throw at the problem.

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Stress-Test Your Supply Chain Strategy

Even if everything is going okay, and especially if everything is going well (as good fortunes never last), it is important to stress-test the supply chain strategy on a regular basis. If the weaknesses in the supply chain are not uncovered before a supply chain disruption occurs, it could mean the difference between a minor hiccup and a major disaster that shuts down production for a week and costs the organization millions of dollars in losses.

The weaknesses will only be uncovered if the organization is asking the right questions. After all, as Peter Drucker has warned, the most serious mistakes are not being made as a result of wrong answers; the truly dangerous thing is asking the wrong questions. If the right questions are not being asked of the supply chain strategy, there’s nothing to stop the organization from taking the wrong fork in the yellow brick road and ending up lost in the jungle instead of back home in Kansas.

So what are the right questions? That’s a good question in and of itself, but thanks to Robert Simons, the Harvard Business Review and a recent article on how to “Stress-Test Your Strategy”, it’s one that is fairly easily answered as the right questions to start with are the seven counterparts to the seven questions every business should be asking at the strategic level. More specifically, the seven questions that should be asked to test your supply chain strategy are:

  1. Who Is Your Primary Stakeholder?
    The organization has to serve its primary customer, but as an internal function, you have to serve your primary stakeholder who must, in turn, serve the primary customer. It’s important to know who the primary stakeholder is because supply chain generally has multiple organizational stakeholders, each trying to pull the organization in disparate directions. Unless the organization can quickly focus in on the most important direction, which it can if it knows whose needs must be met first, it will lose a lot of time, energy, and productivity.
  2. How Do Your Core Values Prioritize Customers, Stakeholders, And Your Team?
    An organization must serve its customers (who are the source of life-blood revenue) first, stakeholders (and internal supporters) second, and it’s employees (workers) third. By keeping this trio of parties happy, it will ensure success and thereby achieve the first goal of business — generating value for the shareholders.
  3. What Critical Performance Metrics Are You Tracking?
    Only what’s measured get managed, and since it’s critical that the right things are managed, it’s critical that the right things are measured. Furthermore, it’s even more critical that the right things are measured in the right way. For example, as a measurement, “on-time outbound shipments” is a useless metric. What ultimately matters is whether or not it reaches the customer on time, not that you shipped it when you said you’d ship it.
  4. What Strategic Boundaries Have Been Set?
    Where does your function begin and end? Does it stop with sourcing and procurement? Does it include logistics management? Does it include risk management? Does it stop at risk identification or does it include the implementation of mitigations? Are the mitigations limited to disaster recovery or do they venture into financial hedging? Despite pressure to the contrary, no supply chain organization can do everything on its own, and it must ensure that those functions it is responsible for are appropriately staffed and monitored.
  5. How Is Creative Tension Being Generated?
    What incentives do your team members have to push through the boundaries and find ways to improve processes and policies? There should be a constant effort to improve the supply chain while adapting it to the current economic conditions.
  6. How Committed Is Your Team To Helping Each Other And Key Organizational Stakeholders?
    No person can be a peninsula thinly attached to the rest of the team if the organization as a whole is to consistently generate great results. The amount of skill and knowledge expected of today’s supply chain professionals is simply staggering and the team has to work together if they are to succeed. Furthermore, they have to help those whose help they need, and finance in particular (which might mean leaning to speak the language of the CFO: Part I and Part II) as the ultimately control the budget and resources the supply chain organization has at its disposal.
  7. What Strategic Uncertainties Keep You Awake At Night
    If something isn’t keeping you awake at night, then you fail to realize that there are half a dozen things that could grind your supply chain to a halt at any particular moment. You need to be constantly thinking about these possibilities and coming up with ways to prevent them, or at least mitigate the damage they could do if they materialize.

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