In this Video, Rob O’Byrne introduces his 5 key levers for Supply Chain improvement.
There are a series of article links to supplement the video shown below.
“In this Video, Rob O’Byrne introduces his 5 key levers for Supply Chain improvement.
There are a series of article links to supplement the video.
Rob: Hi, this is Rob O’Byrne from Logistics Bureau. People often ask me what most effective changes are that a business can make to their supply chain, generally to reduce cost which is the thing that most supply chain managers trying to do this days, but it’s hard to do what’s maintaining or improving customers services isn’t it? Well not that hard actually. So in this series of videos and articles I’d like to share with you the five things that I found consistently make the biggest impact on supply chains and what would I base that on? Well 35+ years in supply chain and logistics, the last 20 or so consulting, working with hundreds of businesses across 23 countries in total, that provides an interesting prospective on what really makes a difference and what doesn’t.
You know, I came across so many businesses struggling to fix multiple supply chain issues at once. We’ll try to manage a whole range of supply chain improvement projects currently and what happens? They bog down and they get disheartened. They waste time, they waste resources and they waste money instead of getting the benefits they so desperately need. You need to be focused on the outcomes you really want. Okay so went to my 5 key levers, I’ll be covering these in details in our upcoming free seminar series in Australia but I’ll try to give you a summary here and then in a series of 5 more videos, I’ll cover each in a bit more detail so at least you can get the concepts if you can’t get along to our free events to get all the detail.
Number 1: Is your supply chain strategy right?
61% of businesses we recently surveyed don’t have a supply chain strategy, so don’t feel too bad if you don’t have one either. Many businesses I come across don’t even have a well-defined business strategy you can do a high level supply chain strategy on one page. Firstly, to find the business objectives, these are typically to make profit, provide great service, good value to customers and the like. Make sure you get the most senior level input to these or glean them from the business plan then articulate these in terms of supply chain objectives.
What does the supply chain need to achieve to deliver those business objectives? Get the idea? It might be high levels of customer service or low supply chain costs. Those two are typically in there and I try to limit it to four main supply chain objectives to keep the business focused on what really matters.
Then, think about the enablers that will help you achieve those supply chain objectives and focus on 80% of your effort on those, so if high levels of customer service are one of your supply chain objectives, you’ll need to focus on the things that help you deliver that like managing suppliers as well managing inventory effectively and so on. Then do that for each objective and you have your target areas to get right in the supply chain. I’ll cover this in more detail in future videos and articles as what the next four levers.
Number 2: So number 2. I call this understanding the key drivers, all those things have a significant impact on your ability to service customers and manage your costs.
I typically group this into 5 areas as shown here on this wheel. Customers, the locations, the ordering panels, the service needs, products and how they need to be stored and hand over, costs such as inbound and outbound, transport and options you may have such as asset ownership, Transport modes and stock holding plans and finally the consequences of your actions; such as lost sales and lost customers, really understanding these on how they impact your supply chain performance is a great start to improvement. You’ll begin to understand which ones have the greatest impact on performance and which ones you can influence to make improvements.
Number 3: Customer profitability.
The supply chain has an enormous impact on customer profitability and if you start to understand the key drivers I just mentioned, you’ll start to see ways to increase customer profitability, maybe by servicing them in different ways through different channels for example. The absolute simplest way to increase customer profitability is to encourage or incentivize them to buy from you in logic quantities less frequently. Easy as said than done I know, but I’ll give you some more ideas later in this series.
Number 4: Managing your distribution network effectively.
This is the network of warehouses and transport leagues that get your product to your customers and consumers. Very often these networks have grown up over time and can become very inefficient and costly. Some simple fixes can deliver huge benefits, easy things to look for are space utilization in your warehouses under ratio of in house versus overflow storage that’s been used. Overflow or outside storage is usually much more expensive on a cost payment bases and small improvements in supplier or inventory management can drive down this need for warehouse space.
Then look at your transports leagues, whether you have your own fleet or have this outsourced like most organizations. Are the right transport assets being used to suit your demand profile? Or are trucks underutilised and are you buying the right transport services at the right rates? Many organizations for example might use express freights at a higher cost when general freight might suffice from large part of their transport needs. And finally:
Number 5: Well know that what you don’t measure you can’t manage but do you measure the right things?
I’ve seen monthly performance reports in some businesses that rival the yellow pages for their ability to destroy the rain forest. In my own businesses, I insist on a one page summary report only and if I need more information I’ll ask for it and I really need to ask for more.
So think about your supply chain strategy and the objectives of your supply chain then maybe pick two high levels of KPI’s for each, what would they be for your? The ones that would really give you the best indication of performance and remember the K in KPI’s, it stands for Key so that’s a quick summary of what I consider to be the five key levers to supply chain success and reducing your supply chain cost.
Get a strategy in place, understand your key cost in service drivers, use this to manage and increase customer profitability and look at your distribution network efficiency and finally, measure the right limited range of performance metrics that will help you drive improvements. I’ll follow up this video soon with a separate video on article on each of the 5 key levers in a bit more detail. But for those of you in Australia in February why not come along to our free half day seminars because I really need at least half day to share all this detail with you so you can start to use this knowledge to build your own supply chain success. The registration link is below and I’ll see you again soon.”
People often ask me what the most effective changes are that a business can make to their Supply Chain Generally to reduce costs which is the thing that most Supply Chain managers are trying to do these days. But it’s hard to do that whilst maintaining or improving customer service isn’t it?
Well not that hard actually. So in this series of videos and articles I’d like to share with you the 5 things that I’ve found consistently make the biggest impact on Supply Chains. And what do I base that on?
Well 35 Plus years in Supply Chain and Logistics, the last 20 or so in consulting, working with hundreds of businesses across 23 countries in total. That provides an interesting perspective on what really makes a difference and what doesn’t. You know I come across so many businesses struggling to fix multiple Supply chain issues at once or trying to manage a whole range of Supply Chain improvement projects concurrently, and what happens? They bog down and get disheartened They waste time, waste resources and waste money instead of getting the benefits they so desperately need.
You need to be more focused on the outcomes you really need.
A quick summary of the video is: Get a strategy in place and understand your key cost and service drivers, use this to manage and increase customer profitability, then look at your distribution network efficiency, and finally measure the right LIMITED range of performance metrics that will help you drive improvements.
The series of 5 articles can be found here:
- Supply Chain Levers Part 1
- Supply Chain Levers Part 2
- Supply Chain Levers Part 3
- Supply Chain Levers Part 4
- Supply Chain Levers Part 5
This is the type of material taught at Supply Chain School. Supply Chain and Logistics Training
Rob O’Byrne is the CEO of specialist Supply Chain Consultant firm, Logistics Bureau.
Also check out this great ebook on supply chain management: Supply Chain Management Secrets