Money Matters
Filling the Holes in Your Supply Chain
by Marc Koehler
Whether you are the first step in the supply chain, the "man in the middle", or final step in manufacturing completed goods, you are facing new challenges today, challenges that are hitting your bottom line. As suppliers to manufacturers, you see a host of issues: cancelled or delayed orders, protracted sales cycles, and excess inventory that has tied up your working capital. At the same time, your customers are demanding just-in-time delivery of your goods, attaching payment penalties for missed deadlines and goods that are not up to spec or are less than perfect. And as a manufacturer, how are you ensuring that you are negotiating the optimal combination of suppliers, products, services, and price? Lack of collaboration with your suppliers clearly leaves you exposed to your customers.
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At a time when trade is shrinking faster than production, and US industrial output dropped 11 percent in the past year, manufacturers and their trading partners cannot afford any risk of cost overruns or revenue leakage in their operations. While risk areas are many, three key issues that must be addressed are attaining supply and demand chain visibility, managing unanticipated events, and controlling inventory management.
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Supply and demand chain visibility |
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The greatest financial value and agility derives from visibility - visibility into every segment of your supply and demand chain. But do you know where to look? Inefficiencies can stem from myriad areas: forecasting errors, inventory mismanagement, off-contract purchasing, delivery cost overruns, and many others. Not only do you need accurate information to identify the Supply Chain Management (SCM) cost leakage, you need the experienced talent to ferret out the root causes and eliminate them.
Far too often today, the areas in the supply and demand chain are treated as discrete parts with limited visibility or communication between the parts. With end-to-end transparency and manageability as the goal, manufacturers and their trading partners need real-time visibility into the location and quality of raw materials, the movement of materials through parts and component creation, and the logistics connecting supplier with manufacturer and manufacturers with customers. Only with that visibility can you ascertain where redundancy, slippage, high error rates, revenue leakage, and cost overruns are occurring. Whether you work with domestic suppliers, importers or exporters with their overseas suppliers, logistics providers, brokers and carriers to communicate critical purchase order, shipment and inventory information, you need the visibility to answer one question at all times: "Where is my order?" |
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Event management |
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Things go wrong in the supply chain. Materials are held up in ports, weather affects quality or availability of goods, lines break down, plants close, and transportation costs escalate. Manufacturers and their suppliers cannot control the uncontrollable but at all times they need:
- immediate notification, and
- a prepared contingency plan for responding without adversely impacting production schedules.
Many manufacturers feel they have enough to do without preparing master "what-if" scenarios, but those companies with the agility to survive the recession have those plans in hand. Only through rapid recognition of a broken link in the chain can you take corrective action before delivery issues arise. If you do not have staff to allocate to this activity, consider hiring an interim supply chain expert to ensure that your company has the ability to act quickly so cost containment and deadline commitment are achieved. |
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Inventory management |
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Just-in-time inventory management has replaced just-in-case, but today's manufacturers and suppliers especially beleaguered mid-market companies know that managing inventory and warehouses is still both complex and costly. Requirements for vendor-managed inventory (VMI), escalating warehouse labor costs, and customer needs for faster turnaround times add increasing pressure. Inbound and outbound inventory management requires the ability to monitor inventory throughout the supply chain. This includes allocating inventory in-transit to improve fill-rates and speed distribution and integrating outbound fulfillment activities and information across multiple channels to enhance customer service. The inability to support these collaborative logistics processes in all aspects of materials and parts movement and their communications to your customers adds even more risk and lessens your market competitiveness. |
Keeping your customer happy is paramount. That requires better supply chain management (SCM) than ever before. Even in this slow down, you want to maintain the best relationships possible with all your current and previous customers. And in fact, research tells us that excellence in supply chain management is a key factor in getting high ratings in customer service. But maintaining a competitive supply chain is challenging, as companies like yours struggle to balance cost competitiveness and risk with maintaining quality in the face of escalating customer service demands.
Marc Koehler is a Principal with Cerius Interim Executive Solutions, the largest provider of Interim Management services. He specializes in Strategic Management Operations, leading teams to focus and align daily activities with set business goals, resulting in streamlined business operations. He is a Six Sigma Black Belt with additional expertise in Supply Chain Management, Dashboards, Balanced Scorecards, Government Contracting, and Organizational Restructuring.
