Away from the day to day noise of typical business process and transactional activity – raising purchase orders, booking in materials for example – its likely that there will be a number of projects, many targeted at improving performance and efficiency, taking place within the business.
Recognizing that supply chain can not only impact profitability but be a significant contributory factor to customer satisfaction there is usually a clamour to improve, providing both better service and increased financial contribution to the business
You may have many projects underway in the supply chain function at any point in time – Supplier rationalization, improved customer scheduled deliveries, commodity programs for example. Due consideration of how these are implemented from a methodology perspective can improve not only the possibility of success but also help with the communication of company goals and strategy.
The supply chain war room
A war room is a single space or meeting room within the business, used as a visual management centre, where you can assess both the performance of your function but monitor the progress of particular improvement work streams that may be underway.
KPI’s
The building block for your war room will be a continuously updated set of measures and metrics they will define performance and clearly indicate any gaps against desired targets. In many organizations these will typically be set against QCD objectives. Under performing KPI’s will then be targeted for project/workstream activity.
Worskstreams/Projects
KPI’s that underperform (for example supplier delivery) become the focus of an improvement work stream or project – The original KPI is taken and then drilled into for more detailed analysis (for example this might be in the form of a Pareto Analysis e.g. Worst delivering suppliers) to try to ascertain the route cause of the problem.
Each work stream will be given an owner or project manager and once a more detailed assessment has been carried out of the data– a resourced action plan is developed to describe what activity will be carried out to improve the situation. Key issues are recorded and further analysis produced as required.
More than just visual management
In this way rather than just be a place to put KPI’s the war room becomes the central meeting place to discuss departmental performance and improvement– for many this might be a daily “stand up” to review the actions of the day – for other organizations it might take the form of a weekly/monthly review. Attendees may be various stakeholders from executive decision makers through to operators / buyers – anyone who is able to influence performance.
The process is typically thus
1/ Review the top level metrics
2/ Allow each work stream owner to provide an update as to their project
3/ Consider which projects might need retiring (KPI’s are back to expected levels)
4/ Consider what new projects need initiating.
Regular focused reviews of departmental KPI’s not only draw the attention to corporate objectives but also help ingrain it into the organizations culture – using visual management in a recognized context can underpin this ethos – challenging everyone to play their part in routing out waste and inefficiency.
Businesses operate to make money – whether that money is reinvested in growing the business, for paying a shareholder dividend, or paying staff their pay checks – without profits businesses die.
Unsurprisingly then – a significant focus is placed on functions within the business that can impact profit. By controlling resources, materials and dealing with a multitude of external and internal stakeholders the supply chain function can have significant influence over profitability. It’s not uncommon, if you follow the financial news, to see companies placing the blame for lower than expected profits on their supply chain – this is increasingly more apparent given the ever complex nature that globalization has bought to medium to large companies. But how does the supply chain impact profitability?
Here’s our eight point guide to explain some of the key areas.
1 – Continuity of supply
Perhaps the number one cause or issues – without the materials coming through the door to make your product you face an uphill struggle.
2 – Excess inventory
Inventory costs money – if you’re going to turn it into finished product that sells then great! – However too many companies find themselves with materials sat on the shelf unused committing wasted funds that would be better utilized.
3 – Inadequate contracts with suppliers
When things go wrong contracts matter – for example if a key part supplied by a vendor does not meet the expectations where do you stand? Can you claim back any lost profit/revenue? If not your company is paying for your suppliers mistake.
4 – Accepting poor quality goods and materials
Without the correct controls in place your organization may accept materials that fail to meet specification and can cause problems with the manufacture of your product or worse than that impact levels of customer satisfaction.
5 – Inadequate Logistics / Transportation agreements
You can have a fantastic product that everyone loves – but if you can’t get it to market you can bet you’ll impact your revenues.
6 – Poor sourcing choices
Getting the right price for your materials is crucial if you’re going to maximise your profits – failing to compete commodities and get the best deal for your business can cost you serious dollars.
7 – Failure to embrace technology to lower transaction costs
Investment in the right technology can streamline your supply chain – lower your cost base and make you more profitable. Fail on this and you won’t only impact your bottom line but your competiveness too.
8 – Inadequate planning
Planning brings all areas of the business together – it joins the supply chain team up with the manufacturing/assembly plant it can be a significant area for developing inefficiencies costing more money in the long term, reducing your profitability.