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Why your supply chain is not best in class

 

Are you content with the performance of your company’s supply chain? Most companies, it’s fair to say, are not. If you count your business among that majority, you’re probably well familiar with that sense of frustration that creeps in whenever you see a horizontal line across your supply chain KPI graphs.

 

High Performing Supply Chains Statistics from Deloitte

It can sometimes seem impossible to gain an inch, let alone elevate performance to best-in-class levels. But why isn’t your company achieving the supply chain improvements it seeks?


 

Perhaps some of the following common explanations, as observed in our work with clients, will strike a chord. If so, you might try out some of the tips we’re sharing to combat these obstacles. Let’s begin with one that probably seems really familiar… Too many projects on the go.

 

#1: A Multitude of Concurrent Projects

A single supply chain project can take a ton of time, money, and human resources to complete, yet it’s all too common for companies to be running a number of projects concurrently, with no single project relating to any of the others.

If your company is running multiple projects, your chances of successfully completing any of them are diminished—and here are some of the reasons why:

  • Every project generates change, requiring efforts to reduce uncertainty and change resistance
  • Projects get in the way of one another, creating confusion and bottlenecks
  • It’s difficult to achieve consensus on priorities
  • No project receives the focus necessary to stay on track
  • Too many people are trying to juggle project work with their day-to-day duties and responsibilities

 

Change quote by Alvin Toffler

Now at this point you might be anticipating some tips for managing multiple projects, in which case I may be about to disappoint you, because there is only one tip worth following… DON’T DO IT!


 

Improvement Tip: Don’t Try to Manage Multiple Projects

If your company is serious about developing a best-in-class supply chain, or even making any meaningful performance improvements, keep the number of projects down to one… or two if you have plenty of resources and at least one of the projects is critical and urgent.

Supply chain improvement is a continuous process, so instead of trying to get on top of every issue at once, prioritise according to which improvements will deliver the most benefit, and move toward supply chain excellence one step at a time—and that tip leads us nicely into discussing the next major obstacle to supply chain improvement.

 

#2: Not Knowing Where the Value Lies

If you’re not somebody who manages supply chain improvement regularly, it can be hard to know where and how to start with improvements. Plenty of companies make the mistake of launching initiatives without really knowing what value they offer to customers or the business.

 

Supply Chain Strategy quote by J. Paul Dittmann

 

If you can avoid making this error—by first identifying where you can make the most meaningful improvements with the least amount of effort—you should start to see real results, which believe me, is one of the very best ways to build momentum. There’s nothing quite like a few positive outcomes to fuel continued improvement efforts.

 


It doesn’t mean you should simply go after the quickest wins though. Instead, try to strike a balance between the size of the prize and the effort required to attain it.


 

That said, there are two areas that, regardless of anything else, should be the very first targets for improvement. The first is supply chain strategy, especially in terms of its alignment with your overall business strategy. The second is performance benchmarking and measurement.

 

Improvement Tip: Know Your Goals and Measure the Gaps

Your supply chain strategy should be closely aligned to business strategy because any improvement initiative you take should move your company closer to achieving its strategic goals. If strategies are not aligned, the time and money you invest in the supply chain may not contribute to those goals, and might even make them harder to achieve.

 


In other words, the definition of supply chain improvement is subjective (to a certain extent). The only way to know which way is up, is to allow business strategy to guide you.


 

Once you can be sure that supply chain and business strategies are aligned, the next priority should be to know how your supply chain is performing, so if you haven’t benchmarked your supply chain and/or, you don’t have a portfolio of objective, relevant KPIs in place, these should be your next steps on the path to improvement.

 

Improvement Tip: Some Other Areas to Focus On

After those two vital steps are complete, improvement-prioritisation becomes a matter of assessing benefits and effort. In general though, the following areas are often full of opportunities to benefit customers and business alike:

  • Customer service
  • Sales and operations planning (S&OP)
  • Supply chain network setup and design
  • Integration and collaboration
  • Asset utilisation

It’s also worth looking at the possible benefits of outsourcing some aspects of your supply chain operation, especially if your company is really struggling to improve things. Outsourcing isn’t always the solution to lacklustre performance, but on the other hand, it can sometimes prove to be the only realistic solution.

 

#3: Lack of Performance Awareness

I touched on the topic of performance measurement a little earlier in this article, when mentioning benchmarking and KPIs. However, this is such an important factor in supply chain improvement that it merits a few paragraphs all of its own.

 


Here’s a quick analogy to help you understand the need to be aware of your current supply chain performance. Have you ever watched those auditions for musical talent competitions on TV?…

Results Quote by Winston Churchill

 

If so, you’ve probably laughed at some of the horrendous singers who audition, and who clearly believe they have a shot at winning The X Factor or American Idol. But if you and your management team can’t say whether your supply chain is a poor, average, or great performer, you really shouldn’t laugh at those misguided would-be superstars, because just like you, they really have no clue how poorly they perform.

 

Improvement Tip: Understand Your Supply Chain Strengths and Weaknesses

If you want your supply chain to perform well, you have to know what good performance looks like, which means knowing how your organisation measures up against others with similar operating characteristics. That is the purpose of benchmarking.

 


Once you have your benchmarks, you can use them in combination with your strategic supply chain objectives, to develop a set of key performance indicators with which to measure improvement.


 

From that point on, as long as you continue to benchmark occasionally, you’ll always know if your supply chain performance is great, good, or bad (as compared with similar supply chain organisations), and can use that knowledge to guide improvement strategy and tactics.

 

#4: Shortage of Resources and Experience

The majority of companies don’t see themselves primarily as supply chain operators. That’s fine because the supply chain is typically an enabler for business, except in the case of transport companies and 3PLs, which of course, exist to service other companies’ supply chains.

 

Getting the right people quote by Tom DeMarco

 

However, this does mean that supply chain functions often struggle for resources and in smaller businesses, may not even exist as specific business components. Human resources with the right supply chain skills and experience may not be present in abundance, making improvement efforts harder to execute.

There may also be a shortage of people available to work on supply chain projects. In the worst cases, there’s very little opportunity to even begin making improvements. If this situation applies to your company, there are a couple of ways to overcome the obstacle. Both of them cost money, but if you can finance either option, the long-term results should be well worthwhile.

 

Improvement Tip: Invest in People

One way is simply to invest more in hiring managers and staff with supply chain skills, or in developing those skills among your existing workforce. The other way is to bring in extra help for improvement projects. This is obviously the less costly solution of the two, since you will only be paying fees to a consulting firm on a project-by-project basis.

 


However, you should try in any case to invest in supply chain training and education programs for your managers and staff.


 

That will pay off by increasing the internal resources available for future projects and indeed, should help with general supply chain improvement. Staff well educated in supply chain matters will be better able to drive small improvements on a continuous basis, in between the times that they’re committed to larger projects.

 

#5: Insufficient Integration and Collaboration

As you’re no doubt aware, supply chains are complex and extend beyond the boundaries of your own organisation. In order to succeed with supply chain improvement, you need the help of all your internal business functions, along with the cooperation of business partners, suppliers, and sometimes—even customers.

 

Change Management Quote by J. Paul Dittmann

 

Unfortunately, when supply chain improvement efforts fail to make headway, it’s commonly because collaborative challenges coalesce to become obstacles. Furthermore, these challenges all too often originate internally, as functional teams pursue their own agendas and fail to understand and support the bigger picture.

 


If you wish to minimise these issues, it’s vital to select the right people to participate in improvement projects. In many cases, this will mean you need representatives from each of your internal functions.


 

Moreover, participants should be chosen (at least partly) for their standing and level of influence within their functional teams. You need participants who will be ambassadors for the project and agents of change within their functions.

 

Improvement Tip: Collaboration is a Practice, Not a Project

It is not sufficient to focus on collaboration merely during projects. One of the most important improvements you can make to your supply chain is to strengthen its integration, shifting from a disjointed group of silos towards a seamless, holistic entity.

It’s not an easy task by any stretch of the imagination, which is perhaps why just 20% of companies are able to claim that their supply chain operations are best in class. It’s also why your company should try to weave cross-functional collaboration into the very fabric of business culture.

 

One Good Reason to Break Down Improvement Barriers

There are always reasons for things to be tougher than expected, but that should never be an excuse to settle for mediocrity, or worse still, to remain unaware of what needs improvement.

Whatever type of product or service you provide to your customers, your supply chain is not only critical, but can add a lot of value—and the more you improve it, the healthier will be your company’s revenue and profit.

 


This brings us to one final, and very important point, and a great reason to overcome the barriers to improvement.


 

Companies that develop best-in-class supply chains are able to operate at a cost significantly lower than their industry average—up to 50% lower, in fact. While the journey to the top may not be a walk in the park, and will certainly take time, every step will bring its rewards, and those become greater the further you get.

 

Contact Rob O'Byrne
Best Regards,
Rob O’Byrne
Email: [email protected]
Phone: +61 417 417 307