Yes, just 11 words
Supply Chain Management can get really complicated! It can. We all know that. But all too often we get tied up with so many different initiatives we start to lose sight of some really basic principles.
So I tried to encapsulate what good Supply Chain management is all about in less that 10 words. I failed… It took me 11. Can you do it in less that 11 words? Maybe you can….Comment below.
Hopefully this is self explanatory but i’ll expand on these below.
1. Understand Service. At a very basic level many organisations don’t understand the service needs of their customers. They under service some and they over service others. And it’s a very rare situation to have all your customers seeking the same service offer. So start here.
- What do your customers really value?
- What do different groups of customers value?
- Do certain products demand different service levels?
- What can you ‘afford’ to offer in terms of service?
- What are your customers will to ‘pay’ for service?
2. Move Slow. Where possible use slower modes of transport. They’re cheaper! Of course this requires reliable supply, good demand forecasting, good inventory management, good customer communications and many other elements to be in sync. But don’t just use faster (more expensive) transport modes to cover up failings in other areas. Move towards………..slow, when you can.
3. In Bulk. Move product in bulk as much as possible. Inbound and outbound. This is often hard on the outbound side of course as in many industries customers are demanding smaller more frequent deliveries, in order to reduce their inventory holding. Bur everyone has their price! Conduct a ‘cost to serve’ analysis to determine the cost savings in delivering larger orders and then work out how much of this you could pass on to your customers. I’ve seen these work wonders many times, boosting sales and market share in the process.
4. Not Far. Try not to move product too far and minimise the ‘touches’. The transport leg to the customer s a much higher cost per unit usually than the inbound leg from suppliers. So it’s usually best to hold stock close to the customer. Of course you need to balance the number of stock holding locations, the level of inventory and the delivery costs.
5. Measure Performance. This doesn’t require a book full of KPIs, but for each management level in the business try to establish 5 or 6 KPIs that are really meaningful and that focus on what’s important.
6. Communicate. Good communication is essential for driving great Supply Chain Performance. Communication within functional groups, communication with customers, and communication with suppliers. If you are running S&OP (Sales and Operations Planning) more recently referred to as IBP (Integrated Business Planning) you’ll appreciate that these disciplines are all about communication.
So there we have it. The principles of good Supply Chain Management in 11 words. Maybe in the comments below add your version in even fewer words! Or comment on what else is important but may have been missed out.