Supply Chain Management Best Practices
Supply Chain Management Best Practices - Businesses often define their activities in terms of domestic and export sales. This can be a shortsighted and restricting view. Shortsighted firms also define their logistics and supply chains in terms of freight, warehouse, and other costs.
They fail to understand how much their customers and businesses are impacted by supply chain management. Best practices in SCM lead to growth and prosperity. However, often the result of all this myopic thinking is that these firms trap themselves into being defined as a commodity product provider where the price is the key differentiator with the competition. They lack value proposition key customers.
Companies that view themselves as dynamic and as global see the prospects for themselves. They have value propositions and supply chain best practices that separate them from competitors; they know that value propositions are about the customers-and not about what the firms do.
They understand trends; they lead. These firms understand what supply chain management can do to not only create service advantage but to be a catalyst for new business.
Two emerging trends are:
Direct To Market (D2M)
D2M is selling direct to consumers in the United States or Europe or elsewhere in the world. Instead of selling to large retailers under the merchandisers' brand names or to middlemen-and both of which make the large profit on the items-they looking to go direct to consumers with their products. Leaders know that D2M lets them both improve profit margins and take control of their businesses.
D2M firms know they must create their own brand identity. They know that they need to build and direct a global supply chain that extends from suppliers through to store shelves or customers' warehouses.
It is no longer about handing off their export shipment to a freight forwarder with a low rate. It is now about positioning SKUs (stock-keeping units) outside of the home country. The focus is managing the flows of three supply chains-product, information, and financial.
E-commerce is a way to begin D2M and can be a stand-alone venture. It is an "easy" way to sell and to gain brand identity. E-commerce opens multi-channel possibilities. It requires a very responsive supply chain. Orders must be delivered quickly to customers.
Otherwise, customers will cancel their orders and will return shipments. Customer satisfaction is about good products and good service. As with D2M, operations/supply chain success is about more than making an export shipment. It is about positioning products and integrating them with platform technology.
Leader firms know that orders-whether they are replenishment, customer, or new products-- must be delivered complete, accurate, and on time. This must be done consistently, reliability is a hallmark of best-in-class supply chains.
These best companies know they use supply chain best practices to effectively manage global supply chains.
Supply Chain Management Best Practices are:
- Increase inventory velocity
- Implement lean logistics/supply chain management
- Improve supplier performance
- Compress cycle time
- Maximize inventory yield
- Utilize meaningful metrics
- Segment the supply chain
- Employ supply chain technology
Products sold on a global marketplace basis, fast-moving products, products with short product life cycles, products with seasonality must utilize best supply chain practices. It is not a choice; it is a requirement.
Time and inventory are two important issues and drive the need for supply chain management best practices.
Increase inventory velocity
Inventory must move quickly; turns should be high. It must flow from suppliers or manufacturing sites to customers. Being inventory rich and cash poor is not a sound approach. This is especially so for A items and many B items. Products sitting in warehouses are limited as much as possible.
Implement lean logistics/supply chain management
Lean logistics complement supply chain management. Both emphasize pulling, not pushing, products through the supply chain. Both recognize-and lean removes--the waste created by excess inventory and time and the need for supplier performance.
Improve supplier performance
Success begins with supplier performance. They must deliver quality items and do it complete, accurate, and on time. Collaboration is important. Whether the products are finished goods or materials for factories, the need for strong supplier performance is there.
Compress cycle time
Cycle time runs from the time the need for a product-now or replenished-is determined and goes until it is delivered to the customer or the store. The length of global supply chains adds to the challenge.
Maximize inventory yield
There is a window of opportunity to get the maximum price, the maximum, yield for products. Miss that window and companies face reduced pricing and profit margins. Leaders understand this is using best practices.
Utilize meaningful metrics
There are numerous measures for companies and their supply chains. Many are measures for the sake of metrics with little meaning to C-level executives or with little value in really measuring supply chain performance. Meaningful metrics are orders delivered complete, accurate and on time and time related-such as days of inventory on hand, cycle time, and others.
Segment the supply chain
Too many firms have one supply chain approach for everything. This monolithic approach handicaps performance diverts resources and creates static noise from external and internal sources that distract the supply chain organization.
The best segment their supply chain and focus performance where it is most beneficial. Instead of practicing one-size-fits-all supply chain management, they tier based on profit margin or days of inventory or similar important ways.
Employ supply chain technology
Supply chain execution technology is important to managing a global supply chain. It should provide visibility throughout the entire supply chain. Tracking and tracing are nice, but it misses the important factor.
It is not about the container or pallet of product. The key issue is to manage the customer, purchase, or build order through to delivery. Technology, especially when tied with collaboration, can provide that.
Whether firms are looking to improve performance or move into D2M or e-commerce, implementing supply chain management best practices will lead businesses to their desired goal.