Supply chain management is really process management applied to your materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer and to consumer. Supply chain management includes coordination and integration of process flows within and among the various stages (or providers) of the process.
Supply Chain
The ultimate goal of supply chain management is inventory reduction based upon the ‘planned’ assumption that products will in fact be available when needed. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.
The various entities that make up the supply chain are linked through physical and informational flows. Physical flows which are the most visible aspects of the supply chain, include the production, modification, warehousing and movement of goods and materials. But information flows associated with the supply chain are just as important because they permit the various entities within the supply chain to control the day-to-day flow of goods and material up and down the supply chain, as well as cooperatively plan for long-term needs.
Bernard J. (Bud) LaLonde, professor emeritus of Supply Chain Management at Ohio State University defines supply-chain management as, "The delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption. "
Essentially every product that reaches a consumer represents the cumulative effort of multiple entities. These entities collectively represent “the supply chain.” While supply chains have in some since existed from when that first product was made by someone, way back when, most producers have only paid attention to what was happening within their own ‘four walls’. These historical limitations and outlook of many businesses have contributed to their supply chain failures.
Bad Habits
The ‘bad habits’ of many organizations that result in excessive order-to-deliver cycle times, occur when a company fails to implement or revise processes to reflect market changes. In some cases, the fact that different departments, divisions or even locations within the organization are all competing against each other, rather than striving for a common purpose, means that their tendencies to focus on perpetuating their own self-existence contribute greatly to inefficient practices. Rather than focusing on eliminating bottlenecks to improve product availability and speed delivery to customers, and thus increase sales and profits, they build walls to segregate themselves from a cooperative sense of unified focus.
An actual bad example. Sales orders entered into the CRM during one week were being re-keyed into the manufacturing system the following week, which meant that some orders were sitting around unprocessed for an entire week. Once those orders had been entered into the manufacturing system, the engineering department required another week to produce technical drawings. Engineering then needed several more days to match up drawings with orders and other documentation. This meant in some cases that almost 4 weeks had gone by before a sales order was actually sent to production.
On the following Monday morning, the production line would be overwhelmed with a week's worth of orders all at once; in some cases, based upon the complexity of the orders, several days were needed by the production team to actually schedule manufacturing orders where an average of three weeks' time was allowed for actual production. It was only during this time that stock quantities of raw materials were checked to determine availability, and when needed purchase orders were issued. In this work flow it was not unusual for customer orders to be held for almost five weeks before actually going into production, even though the typical time required to produce any finished product within the catalog ranged from a 3 days to one full week.
Many delays resulted from untimely materials management due to supply shortages or delays in receipt of materials from suppliers. The organization’s ‘delivery team’ then took over, it averaged 3 days to plan and route a delivery, 2 more days to schedule personnel and equipment, and then as much as 5 to 7 days to actually make the delivery of the finished product. As it stood, the average “order to delivery time” was between seven and nine weeks.
Troubleshooting a Solution. The vast majority of delays in this process boiled down to ‘turf protection’, each of the various functions, sales-clerical, manufacturing control, engineering, and production had their own reasons as to why they did things in ‘just this way, or that way’ and why it ‘takes this long’ to accomplish their respective tasks. ProAdvisors, specializing in inventory, warehouse management and manufacturing, can serve as trusted advisors in this area if they develop skills and expertise in supply chain management; they should then be able to quickly identify the bottlenecks and the root causes, and in so doing implement plans to slash order-processing time.
In reality what was taking 3 to 4 weeks, sales to manufacturing control processing, engineering drawing completion, materials management and fulfillment, and production management scheduling, should be easily accomplished within no more than 3 or 4 days (at the very maximum). The production schedule should be optimized via proper routing, staff assignments and materials management such that actual required time 2 days to 1 week became the scheduled completion time, not 3 weeks.
The delivery team was directed to start pre-planning for deliveries set for production, to have routes configured and personnel and equipment ready to go by the end of the actual production process. As a result, customer deliveries began being made within a week of rolling off the production-line.
None of this streamlining had anything to do with technological changes, it had to do with ‘management’ and ‘attitude’ changes, and the recognition that the goal of the organization was to get product to the customers in as timely a manner as possible.
ProAdvisors need to be ready to step into the mix, as trusted advisors, to troubleshoot the problems and resolve the issues. Your job is to help your client maximize their supply chain efficiency in an effort to maximize customer satisfaction and organization profitability.