How Can I Improve Supply Chain In My Company? Five Signs of a Broken Supply Chain

How Can I Improve Supply Chain In My Company? Five Signs of a Broken Supply Chain

AUTHOR

Vivek Sood

TIME TO READ

minutes 

UPDATED ON

October 15, 2020

Leading Executives Are Continually On a Lookout to Improve Supply Chain in Their Company

Most CEOs and CXOs think about how to improve supply chain. They are surprised to discover that what they thought was a well-functioning Supply Chain turned out to hide such a tremendous amount of problems.

Five tell-tale signs that help you recognize a broken supply chain:

  •  Silos mentality

The big companies are often confronted with this problem. The different departments of the firm are not sharing information properly, and in case of failure the departments tend to evade responsibility. 

  • Unhappy customers

The quality of the service is directly affected by a broken Supply Chain. Customers are not only looking for a good quality offer but also reliable one. Brand image is at stake here.

  •  Struggling sales force, declining market share

The weakness of the reliability of the supply chain makes the work of the sales force more difficult as the brand image of the product is becoming less attractive. Even low prices  are less appealing to the customers, because the competitors win on service. And, when you win by reducing pricing, you encounter the next problem.

  • Eroding margins

A broken Supply Chain is a  handicap  that hits on both fronts. Rising logistics cost  raises the cost of the goods sold. At the same time, poor service can only be overcome by lower prices.

The company faces a dilemma. Either raise the price to maintain the margins at the risk of losing sales, or accept the drop in profitability.  Most companies opt for the second option – and blame the competition. Only a few recognise the root cause – the broken supply chain.

  •  Burgeoning inventories and missed deliveries

Many CEOs are surprised to find both the problems at the same time – overflowing warehouses, and missed deliveries. The reason is simple – their supply chain carries the wrong type of inventories, and in the wrong places. People do their best – by hunting around for the right inventory in the shortest period of time, and by expediting. But, a better solution is to carry the right inventory in the right place. 

To improve the performance of your supply chain we provide a tailored solution to each of our clients for more information click here or contact us.


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Notes:

  1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.
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Vivek Sood

Our Quick Notes On Five Flows Of Supply Chain Management

Part of our new “Quick Notes” series – this report answers your most pertinent questions of the topic.

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  • According to the Council of Supply Chain Management Professionals, the cost of US business logistics is over one trillion dollars a year. That is seven percent of the United States GDP, which is larger than the entire GDP of Mexico. The financial health of the U.S. economy and your business depends on networks of smoothly running supply chains. One of the best ways to improve your supply chain strategy is through utilizing ERP (Enterprise Resource Planning) software. Below are the different ways that ERP software can increase your business profits and efficiency while reducing costs and wastes.

    Hope this helps you in improving your supply chain.

    • U.S. businesses are spending more on transportation and warehousing as demand and prices for logistics services increase.
      Costs for everything–from big-rig haulers and rail transportation to airfreight, parcel carriers and storage–have risen steeply since the middle of last year. And demand doesn’t show any signs of slowing down, according to the Council of Supply Chain Management Professionals’ annual State of Logistics report.

  • Here are some crucial points to remember while improving supply chain in your company.
    According to the Council of Supply Chain Management Professionals, the cost of US business logistics is over one trillion dollars a year. That is seven percent of the United States GDP, which is larger than the entire GDP of Mexico. The financial health of the U.S. economy and your business depends on networks of smoothly running supply chains. One of the best ways to improve your supply chain strategy is through utilizing ERP (Enterprise Resource Planning) software. Below are the different ways that ERP software can increase your business profits and efficiency while reducing costs and wastes.

    Every solid supply chain strategy needs an efficient returns management system. Manufacturers must be able to effectively handle returns so they can quickly re-processor re-manufacture returned products or units. Many manufacturers understandably focus on continually moving new products out the door and therefore, returns often fail to get the attention they deserve. Being able to better manage returns will reduce waste and identify consistent product problem factors.

  • Complex global supply chains, increasingly demanding clients and the strong trend toward more customized products are putting more demands on supply chains. In response, supply chain management, the design, control, and monitoring of supply chain has come to play an increasingly important role for businesses. And while information technology is providing some solution to these problems, there are also more basic practices and concepts that remain useful in a complex, fast-changing world. Whether a company is just beginning to establish its supply chain or is looking to improve what it already has, meaningful strategies could be implemented to improve supply chain management in a business.

  • Process standardization is central to the success of any supply chain strategy and management. Having a standardized supply chain management will increase efficiency while saving time and money. Another benefit is that employees will share a standardized system of tools, which will increase accuracy, encourage teamwork and reduce miscommunication. Waste, mistakes and even fraud are permanent supply chain management problems that can be fixed with the right strategy implementation. One of the biggest problems of inventory management is reconciling the software numbers with a physical inventory count. There are always products or units that are forgotten about or simply disappear. There are many uncontrollable factors and variables with supply chain management. As a result, different managers along the supply chain often are unaware of each other’s expenses. Having centralized financial data pinpoints exactly when and where the organization spends money. This will encourage cost related communication and management strategies for consolidating expenses and streamlining processes.

  • Working with experts and business professionals could be rewarding in improving supply chain management. The best supply chain professionals have strong communication and relationship management skills to deal with both internal and external stakeholders. They also have the ability to think strategically and create value. Once you’ve found the right people, you’ll want to organize your supply chain to maximize their effectiveness. Some companies place supply chain professionals in various business units, while others centralize their operations in a single department. You may also want to consider a hybrid approach that combines centralized planning with decentralized execution to provide better services.

  • Nice Article Vivek on supply chain improvement. Now companies in process industries are increasingly reorienting their supply chains to have a stronger service focus and to be able to react quickly and reliably to customer requirements. Supply chain management and improvement at the industry level is undergoing a fundamental change as the industries are becoming more of a service business. Yet as process industry companies seek to implement supply chain best practices and frameworks, they must be careful. Most of the current supply chain models were inspired by industries that operate close to the end customer. Process industries, however, operate further down the value chain and deal with completely different constraints and planning cycles than do consumer industries.

  • In my opinion, Supply chain continuous improvement is a supply chain improvement method that takes the approach of using small, endless efforts to solving existing supply chain problems. It is important to note that, even in big project supply chain improvement initiatives, employing a continuous improvement mentality or process guarantees better-sustained results over the long-haul. Every solid supply chain improvement strategy needs an efficient returns management system. Manufacturers must be able to effectively handle returns so they can quickly re-processor re-manufacture returned products or units. Many manufacturers understandably focus on continually moving new products out the door and therefore, returns often fail to get the attention they deserve. Being able to better manage returns will reduce waste and identify consistent product problem factors.

  • Well, for any supply chain improvement initiative to succeed it’s essential for the business involved to outline the goals and objectives of the project. Each organization within the supply chain may have different objectives and goals for wanting to improve the supply chain. While supply chain improvement initiatives often promise projected cost savings most businesses fail to realize these cost savings sometimes in part due to lack of collaboration between the different functions of the organization. For instance, while the objective of the sales and marketing organization is to maximize sales and revenue, the distribution function might be looking to minimize inventory and warehousing costs.

  • Outstanding piece of writing Vivek. Getting the right product at the right place as fast as possible is one of the primary goals of supply chain management and improvement. To achieve this supply chain improvement goal, many supply chains will tend to carry too many products at a time, leading to increased costs and inefficiencies. To limit the company’s inventory levels, the focus must be on transferring information to suppliers as quickly as possible. The company will then be able to increase or decrease supply in accordance. Just like inventory should always be moving, delays in information transfer should also be tackled as soon as they appear. This would greatly help in improving the supply chain mechanism.

  • A worth reading article on supply chain improvement. I guess each supply chain improvement initiative can bring on different benefits, depending on the concentration of the project. All the benefits that come from improved demand planning, supply planning, and inventory management are exponentially increased by coordinating these functions to optimize the whole supply chain. In improving the supply chain, one of the most difficult steps is knowing how to get started. Too often, a whole host of things seem to be wrong and trying to figure out where or how to begin can be overwhelming. In this regard, managers, consultants, and company executives must outline some supply chain improvement ideas that could help others to get started.

  • Weak supply chain? Fix it, of course. Though that’s never as easy as it sounds. Supply chain disruptions are not a matter of if, but when. High-impact events that were once considered very low probability sometimes seem to be almost regular occurrences. While not all such supply chain disruption events reach as high magnitude as of an earthquake and tsunami. With our globally interconnected business environment, problems that used to remain isolated now have far-reaching impacts. If we accept that disruptions will happen, the question then becomes, how disruptive must they be? Organizations can mitigate the effects of supply chain disruptions by applying the principles of supply chain risk management and perceptibility.

  • Good to read this article from you Vivek. I think a supply chain without visibility into all of the supplier relationships and processes is like trying to navigate an obstacle course blindfolded. You might make it through, but not quickly, and probably not without injury. The lack of visibility actually increases the risk that you will get injured, and a lack of visibility into a supply chain increases the risk that snags will become snarls and disruptions will become disasters. To effectively deal with supply chain risks in our business environment, an organization must look deep into the supply chain and work as hard as possible to predict potential problems and then, in true risk management and improvement style, develop ways to prevent the problems, if possible, or if they can’t be prevented develop plans to deal with them before they happen. An effective supply chain improvement program will anticipate and react to triggers as deep in the supply chain as possible. The world is not going to get any less chaotic in the near future. Are you prepared for the disruptions that are almost sure to come your way?

  • If you’ve been hit with a supply chain or logistics issues, you know the pain firsthand. If you haven’t yet, the best way to deal with these issues is to prevent them. Whether you are the CEO of an expanding corporation or the owner of a fledgling enterprise, its fortunes are subject to an undeniable truth. The success of your business links inextricably to the performance of your supply chain. If you want business success, and who doesn’t? you have to make your supply chain successful too. Poor supply chain performance commonly contributes to corporate or business failure. Similarly, one can assume that in many cases, businesses that fail do so because of financial problems.

  • If your company hasn’t focused much attention on supply chain improvement strategy, now is the time to start, even if it means enlisting some external help to do so. A properly designed supply chain improvement strategy is an enabler for achieving commercial goals and consequently, corporate success. What do I mean by “properly designed” mean? I mean that your supply chain strategy should support the overall strategy of your business. In far too many organizations, this is unfortunately not the case. As a business owner, if you want to be sure of business success, review your supply chain improvement and management strategy. If it doesn’t align with the objectives of your business, you have some work to do.

  • After reading this article I thought about the supply chain of Walmart. Walmart may be the most famous example of a company that has succeeded primarily because of a well-developed and aligned supply chain strategy. I read in a book about some of the company’s most notable strategy wins and few I remember could be concluded as:
    Strategically removed links from the grocery supply chain
    Pioneered the use of vendor-managed inventory
    Built strategic partnerships with vendors to drive down prices
    Developed a process of excellence in supply chain collaboration
    Implemented cross-docking in its supply network to enable inventory reductions
    Established the strategic use of technology to gain supply chain efficiencies
    All of the initiatives listed above support the company’s business strategy to be a leader in low-cost grocery retail, making Walmart a prime example of what enterprises can achieve when supply chain improvement and overall business strategies are aligned.

  • When it comes to supply chain consumers, consumers have previously had very little influence on the supply chain as they were not fully aware of what it was and any of its processes. A consumer who ordered an item would have no idea where the item was made, who made the item, under what conditions or when to expect delivery. Nowadays consumers play an important role in the creation of the supply chain. Consumers now have access to information on all these areas and have therefore gained unprecedented influence over supply chain management and improvement. The consumer is the key figure in the supply chain and their needs and opinions will affect the supplier’s decisions. Retailers, shipment and corporations alike are changing the way they operate, all because of the customers they serve.

  • Unhappy customers are potential threats to supply chain management and improvement process. Customer demand for more sustainable business practices can have significant supply chain implications. For instance, mobile phone purchasers typically consider four key factors into consideration when buying a new phone: the desire to upgrade, the need to stay within a budget, the durability of the product and environmental sustainability. Although some consumers on a tighter budget may be inclined to pay less attention to sustainability issues, some consumers are willing to pay more money for a product they consider to be more sustainably efficient. If a company’s supply chain is found to have questionable environmental or labor practices, consumers who prioritize sustainability will look elsewhere.

  • If we are trying to be innovative, we need to challenge the notion that supply chain activities are primarily a tactical cost lever. The reality today is that supply chain is more than fulfillment operations. It has become the most critical link to the strategies and tactics of marketing, customer relationship management, and market and service segmentation. The most successful companies integrate their business, marketing, and supply chain strategies. In their view, the cost is not the central focus of supply chain performance management. The strategic value of supply chain operations is in fulfilling the marketing strategy to delight customers and grow market share, not just fulfilling orders at the lowest cost. Certainly, the development of advanced information systems, material handling technology, sophisticated order management, and customer intelligence systems has improved supply chain operations dramatically. And procurement, manufacturing, and logistics functions are becoming increasingly more integrated.

  • Supply chain performance can be your hidden weapon to boost customer satisfaction and to increase your profitability. No other part of your business can have the supply chain’s impact on reaching the customer, lowering retail prices, and improving service levels; meaning effective supply chain management creates value for both your customers and your business. The customer expects great service. They’re giving you money to perfectly satisfy their needs to get a product on time and in one piece. If a problem does arise, they want your company to have the transparency to show why it occurred, and what you’re going to do for them to fix it. Especially in the modern climate, where a customer can blast your company publicly on social media, your brand’s reputation is more susceptible to damage from preventable supply chain mistakes than ever before.

  • While every supplier should strive for 100% on-time delivery, even Santa misses a rooftop every so often. But the best way to mitigate late supplier deliveries is to communicate. Communicate early, as in, give your suppliers forecasts or blanket orders so that they can secure raw materials, components, and production capacity. Communicate often, as in, check in with your supplier to make sure that they’re on schedule and they’re staying on schedule. And communicate clearly – as in, make sure your suppliers know your requirements: quantities, dock dates, and quality specifications. So, communication, planning, improvement and making sure you have a safety stock in case Santa’s late one year.

  • This is probably the easiest to relate to and yet the hardest to prepare for. How often have you been late to a customer because one of your suppliers was late? Exactly. And what could your customers do about it? Bupkis, most likely. So how can you protect yourself against this eventuality? The easy but more costly solution, according to me, is that you carry enough safety stock to protect yourself. The safety stock solution protects you against all three reasons that suppliers might be late but there’s the obvious financial risk of holding too much inventory. After a supplier’s late because of this reason the first time, you now have leverage over your suppliers. Use the opportunity to insist/demand that they hold safety stocks. Their safety stock policy should protect you against your late suppliers.