Supply chain fire prevention Featured

11:22am EDT February 24, 2005
Supply chain professionals frequently deal with recurring issues. These issues recur because they're too busy putting out fires to work on fire prevention. The make great fire fighters, but they really need to become great problem-solvers.

A solutions approach

A supply chain problem-solver takes an integrated solutions approach to identify and eliminate the cause of an issue once and for all. An integrated approach begins with the big concerns and attacks them in a methodical way.

* Develop a simple process map around the issue.

* Assess any trends associated with the issue.

* Evaluate the upstream and downstream drivers and consequences.

* Assess the effect on overall performance.

The objective is to resolve the problem by determining the true cause while fully evaluating the potential consequences of the solution and mitigating any possible resulting consequences.

The big concerns

Consider the areas with the highest payoff first. When approached with a solutions methodology, putting a permanent fix in place will yield dramatic results in your business costs.

There are five key areas that present opportunities to reduce cost and eliminate chaos from your supply chain.

1. Variability. Variability increases your business costs. Minimizing the effects of fluctuations will drive improved results in every case. While you might not be able to control the fluctuations, you can mitigate their effects.

* Demand (seasonality, unforeseen demand, forecast error)

* Supply (raw materials, inventory accuracy, obsolescence, labor)

* Capacity (seasonal over/under utilization, network optimization)

* Quality (raw materials, supplies, WIP, finished goods)

2. Transportation. Inbound and outbound, CL, LCL, TL, LTL and parcel all represent opportunities to improve customer service and reduce costs. Through careful study or professional help you can:

* Recover overcharges and settlement fees

* Rate shop to negotiate and route guides

* Reduce total transportation spending with a network analysis

3. Inventory management. Companies rarely optimize the processes which drive inventory levels. Excess inventory can drain capital as well as human resources. To improve inventory levels:

* Use ABC stratification to increase control over high-dollar-volume items.

* Design forecasting models utilizing history, trends and market intelligence.

* Focus on product cost control using forward purchases and inventory builds where appropriate.

* Closely monitor finished goods for signs of obsolescence that burns valuable production capacity.

4. Get synchronized. Improving the basic communication between sales and operations can yield significant cost savings. Any good sales and operations synchronization plan will include five key factors.

* Long-range (12 to 24 months) sales planning

* Long-range capacity planning

* Long-range business planning

* Accountability for forecast accuracy and capacity management

* Financial impact analysis

5. Metrics. Is your supply chain organization getting better or worse? Key performance indicators (KPIs) should be established and closely monitored to respond appropriately and immediately to any problems. Establishing pertinent KPIs will:

* Provide a general management tool to monitor performance

* Help drive continuous improvement

* Identify issues before they hit your bottom line

* Influence business planning

* Force accountability

Professional supply chain management involves an integrated solutions approach -- fire prevention rather than fire fighting. Proactive focus in these key areas can significantly impact the operating and financial performance of most businesses.

Bill Anderson is the supply chain national practice leader for Xperianz, a professional services firm specializing in business cost reduction and leveraging technology for competitive advantage. Xperianz is one of the fastest growing firms in North America, with offices throughout the Midwest and Southeast. Reach Anderson at (513) 576-1970, ext. 111.