For
the past ten to fifteen years, you may have read about
Fortune 500 companies undertaking Supply Chain Management (SCM)
initiatives. Business publications are constantly reporting
on the successes – the improved profitability, the
reduction in operating expense and the better utilization of
inventory.
A study done by The Performance Group of PRTM Consulting
finds that specific types of manufacturers with mature
Supply Chain practices are 40% more profitable than
manufacturers with less mature SCM practices.
Supply Chain Management is a set of cross functional
processes that allow for the efficient flow of product and
the most effective utilization of resources. SCM spans all
movement of materials and product inventory from
point-of-origin to point-of-consumption. SCM encompasses the
planning and management of all activities involved in
sourcing, procurement, manufacturing, distribution and
logistics management activities. Importantly, it also
includes coordination and collaboration with channel
partners, which includes suppliers and customers. In short,
SCM integrates supply and demand management within and
across companies.
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Most of the companies to
date that have re-engineered their processes and made large
investments in SCM initiatives have been multi-billion
dollar multi-national corporations. They have been able to
add one more component to their quest for “operational
excellence”.
How Can This Work In Your Distribution Business? Let’s
take a look – first at SCM, and then you.
SCM improvement initiatives usually focus on three pillars:
1. Process – the steps/tasks required to efficiently
execute a specific function
2. People – the skills and
knowledge required to satisfy the specific steps/tasks,
including the education and training needed to elevate and
sustain performance as well as culture and attitudes
3. Technology - the tools
that are necessary to support, enhance, and measure
performance
You have the same three! Aren’t these the same focus areas
in your company that dictate how effective, overall, your
company is - or will be?
The above study also states that there is a maturation
process that should occur in your company to optimize both
the performance and the benefits of SCM. It starts by
recognizing that you are part of a “Supply Chain” and is
driven through your company by a “Lean Thinking” and a
“Continuous Improvement” process that needs to be part
of your company’s culture (visit our website for a copy of
our article, “Lean Thinking In Wholesale Distribution –
Are You Ready For Little Miracles?”)
SCM through a “Lean Thinking - Continuous Improvement”
process addresses the following stages or elements:
1. Connectivity – how well are the internal and external
business functions communicating?
2. Collaboration – are the functions making decisions
sequentially or simultaneously?
3. Synchronization – does everyone know the same thing at
the same time?
4. Leverage – do you know where to focus on SCM to
optimize productivity and profitability?
5. Scalability – can you replicate processes from one
function, location, supplier, customer to another?
“Lean Thinking – Continuous Improvement” focuses on
the tasks and functions, as well as on the “people
enhancement” required, within these stages, to eliminate
the non-valued-added steps, that keep the drive towards
“operational excellence” alive.
Typically, these stages are addressed within a company
first, and then can be expanded to the company’s customers
and suppliers. Regardless of the channel, they require
strategic, tactical and operational level activities that
have to do with:
· Strategic partnerships with suppliers and customers and
creating communication channels for critical information
· Informational technology infrastructure to support the
supply chain
· Aligning overall organizational strategy and structure
with demand and supply strategy
· Customer relationship and supplier relationship
management
· Sourcing, procurement and inventory decisions (quantity
and location)
· Coordinating your demand forecasting with customers and
suppliers
· Order fulfillment and distribution operations planning
and execution
· Returns management
· Transportation operations and decisions
· Performance measurement (costs, customer service,
productivity, quality of services and asset measurement)
Industry organizations, such as NAED (National Association
of Electrical Distributors), have recently developed
“Supply Chain Scorecards, Benchmarks and Best
Practices,” which through their identification of the
“Key Drivers” and components (efficiency, performance
measures and management measures) of supply chain
performance - are excellent. ASA (American Supply
Association) and NAW (National Association of
Wholesale-Distributors) are all making similar efforts.
Whether its “electronic orders”, vendor managed
inventory, or new on-line applications and informational
content, in SCM there is also a “discovery” of the
metrics which will measure a process/function the best and
foster a constant focus on driving performance through those
metrics.
Now, Let’s Look At You
Chances are you’re trying to do this already, but maybe
not in a formal organized manner.
Your business has the same functions as a much larger
corporation:
· Procurement
· Distribution Operations or Manufacturing Operations
· Inventory Management
· Sales and Marketing
· Financial Controls
· Delivery of “value-added services”
Each of these functions is made up of the same “pillars”
– process, people and technology.
Your questions may be the same as those larger companies
that have already been through these initiatives:
· Are we doing things the right way? Is it the most
efficient?
· Is inventory being managed the same way by everyone, in a
location, or across locations?
· Are we getting product from suppliers and to customers in
the most efficient and responsive manner?
· What could we eliminate to decrease operating expense and
redundancy?
· What could we improve, without adding cost?
· Do I have the right people in the right process?
· Can my technology support my “lean thinking -
continuous improvements”?
See -You’re Not Too Small At All!
Your size gives you distinct advantages when looking at
Supply Chain improvements:
· You probably operate “lean” now, so getting to
root-causes and problem resolution will be faster.
· You are not spread across the country (or world!), so
proximity and accessibility allows changes to be implemented
more quickly and easily.
· Your Technology may be adequate – you just may need to
utilize it differently. If so,
· You can focus on the Process and People pillars which
will yield the most dramatic results
The time is right! SCM and “Lean Thinking – Continuous
Improvement” processes have been refined and pretty much
standardized. The methods to get people involved - inside
and outside your organization - the required training of the
concepts, and the implementation activities required, has
been tested and proven.
So take advantage of all the ground work that has been done
so you can quickly become one of the more profitable
companies - in the next study!
Jack McGowan is a Senior Consultant at MCA Associates, a
management consulting firm since 1986. MCA Associates works
primarily with wholesale distribution companies that are
seeking operational excellence. Their staff of Senior
Consultants provide operational excellence – idea
leadership - and implement continuous improvement solutions
focused on business process re-engineering, inventory and
supply chain management, sales development and revenue
generation, information systems and technology,
organizational assessment and development, and succession
planning. MCA Associates can be contacted at their corporate
office in CT at 203-732-0603, at their Florida Southern
Regional Office at 561-989-3221, or by email at hcoleman@mcaassociates.com.
Visit their website at www.mcaassociates.com.
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