Transformation Process Supply Chain

As a result of trends such as globalization of supply, increasing competitive pressures, and dwindling product life cycles, supply chains are being driven to transform and evolve.

Some characteristics of world class supply chain organizations include:

· Develop relationships that benefit its customers
· Products and services that exceed customer requirements
· High priority to quality and safety
· Quick and efficient response to sudden changes in the market
· Attempt to optimize the entire supply chain

It is common for enterprises of a supply chain to operate independently. Marketing, distribution, production planning, manufacturing, and the purchasing organizations typically have their own objectives and they are often conflicting. This prevents the enterprises from providing the right products to the right customers at the right time. All these areas are individually efficient enterprises, but they lack coordination to produce required end results for the entire system.

A (supply) chain is only as strong as its weakest link. A typical supply chain has many interfaces (ex: customer and supplier, sales and manufacturing, etc). The best way to overcome problems between these interfaces is to manage the supply chain efficiently. This makes the organizations proactive, not reactive to changes in the marketplace.

So, in order to transform a supply chain, an organization needs to:

1. Determine the scope of its supply chain

Establish a supply chain team perform a “SWOT” analysis (i.e. Strengths, Weaknesses, Opportunities, Threats) as it applies to the supply chain. The corporate supply chain strategy should be aligned with this information to determine long term goals and a strategy to reach those goals. Current and then future state maps should be developed to come up with a world-class supply chain after identifying best in industry and world-class practices and comparing with existing practices. Any core competencies of the organization should be identified and exploited as well as processes needing improvement. At then end, there should be a roadmap to the future.

2. Cultural change
In order to implement the “future state” supply chain process, structures and business practices must be altered in line with the supply chain goals. Suppliers need to be managed strategically (i.e. long term contracts with its key suppliers). This means sharing information such as inventory levels and production planning with suppliers and you must try to build better trust and win their commitment to the new process.

3. Integrate decision making with customers

Establish a supply chain decision-making process that is from the customer’s viewpoint. Any changed or new processes should add value to the customer. Customers should to be segmented based on their specific needs. The customer demand should be the critical factor for production planning. The production system should be flexible requiring sophisticated demand planning tools which can reduce inventory cost, improve customer service and increases sales and profits. The products customization should be postponed late in the supply chain enabling the organization to reduce safety inventory levels and respond to changing demands. Also, the logistics network must be flexible enough to handle a multitude of customer requirements. In some instances, partnerships with third party logistics providers may be appropriate.

4. Develop a supply chain technology strategy

A world-class supply chain requires world-class technology and tools for forecasting, production planning, and logistics decisions. They must adequately support the supply chain planning activities. This technology should be chosen by determining your organizations’ functional requirements, then matching them against available technology that meets your functional and financial requirements.

5. Supply chain metrics

After the new processes and technology are implemented, performance must be monitored. It is often useful to develop these metrics through benchmarking. The measures should focus on progress towards the organizations’ supply chain goals.

6. Summary

In the end, supply chain management is about having the right products, at the right place, at the right time, at the right cost. To develop a world class supply chain organization, it needs to start thinking “out of the box” to have the willingness to shift to a new paradigm. Supply Chain technology is critical to the success of this change. Reaching this level of supply chain excellence isn’t easy but worth the effort.

LPA, LLC is a Supply Chain software and consulting business offering affordable, easy-to-implement solutions to complex planning problems. Our Managing Partners have over 40 years of combined Supply Chain and Information Systems experience.

Contact us today to receive a Brochure along with our MS-Powerpoint ® Overview slide show which describes our products general capabilities (we also have a more detailed PSI Planner "Guided Tour" slideshow available upon request).

After viewing the slide show, let us know if you'd also like to schedule a LIVE WEB DEMO for a more detailed understanding of its capabilities and how it can make your Supply Chain "Lean" by improving your company's service levels and inventory turns (click on "News and Events " for more details).

Our company also offers Supply Chain consulting services at reasonable rates. We invite you to contact us for a consultation regarding your specific needs.

Read current information on Transformation Process Supply Chain