Are best SCM practices really all that they are hyped to be? What can organizations do to truly improve supply chain process?
If you Google Supply Chain Best Practices you end up with more than a million results. Trying to define supply chain best practices is like trying to select the best car. It is not so much how good the car is, but how well the car works for you.
The Truth on Best SCM Practices
Recently, we got some of our senior consultants like Peter Murphy, and Farah Marasigan together to try to figure out what are the key characteristics of successful supply chains. Each of them has more than ten years of working in this area and multiple implementations.
What they came up with is that successful companies have common core values or goals rather than best SCM practices. These core values are around teamwork, communication, and a desire to manage their supply chain quantitatively. These core values do not translate to practices in exactly the same way for every business because converting these values into practices must always take into account the particular characteristics of the business.
To prevent stockpiling unneeded parts, for example, it may be a good practice to shut down the machine in some environments. However, in process chemicals, the correct practice may be to switch to low margin opportunistic product because manufacturing is highly capital-intensive and the high-pressure continuous processes cannot just be turned on and off at will.
Another core characteristic of all effective supply chains is a quantitative representation (model) of the supply chain which is developed and reviewed cross-functionally through a well-designed Sales and Operations planning function. This may be as simple as a spreadsheet or as complex as a complicated mathematical model. Either way, it provides a consistent medium for reconciling conflicting opinions. More importantly, it provides a starting point for reacting to disruptions or dealing with, as one politician said, the “unknown unknowns.”
So, what are the things that all supply chains must do to improve?
- Develop a passion for communications and sharing data.
- Be willing to incorporate all stakeholders in developing plans like forecasts, capacity profiles, and KPI’s.
- Rely on quantitative supply plans (and alternatives) that optimize the long and short-term profitability of the business, in agreement with the business strategy.
- Monitor plans throughout the month to quickly trigger a re-plan if necessary.
- Make sure that plans are tied to operational tasks like scheduling and delivery to customers.
- Concentrate on optimizing the whole, not the parts.
The trick is to develop practices that enhance the above principles for a particular business. The “best practices” popular in the literature are a good place to start but simply installing them without adapting them to the business is an exercise in futility.
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