Mar
7
5 Steps To Succeeding With Supply Chain Collaboration
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Before we look at how to succeed with supply chain collaboration, it is important to look at what supply chain collaboration is and how it operates. Supply chain collaboration is actually when two different elements within the supply chain communicate and work together. So if you have company A and company B involved and company A stocks some of company B’s products then A and B will work together to ensure that the company B products do not run out in company A retail centers. This means that the two companies have to work closely together, but on the other hand, the mutually beneficial relationship means that they can benefit from having a collaborative approach. So how do they succeed?
1. The first element involved in supply chain collaboration is actually a need to acknowledge that mutual collaboration will lead to mutual benefits for all those involved in the supply chain. If parties do not have a belief that it is a beneficial process they are less likely to take part.
2. Collaboration requires a certain level of openness which requires trust. There are lots of other tools and techniques that can aide collaboration, but if there is an absence of trust then opportunities will be hampered.
3. Thirdly there is a need to adopt a strategic approach to the whole process of supply chain collaboration. This is in a sense, the umbrella for how the companies will operate together. If there is no strategy then there is no way that people will know what they are supposed to do or what is being expected of them. The strategy should also include some key performance indicators so that there are some tools to measure success and see how performance is doing.
4. The fourth critical element when it comes to supply chain collaboration is communication. This is necessary to ensure that everyone is clear about what is happening, when it is happening, who is doing what and so on. Communication involved sharing all kinds of information and is absolutely vital if collaboration is to be successful.
5. Technology can be a key facilitator but use the right tools for the right jobs!. Flexible standards based software can be deployed to simplify transactional functions while web based project management tools can bring virtual teams closer together.
There are many other elements that are required for supply chain collaboration but the 5 steps above provide the fundamentals that will ensure collaboration can happen and that people will feel comfortable with the process of collaborating. Supply chain collaboration is extremely beneficial when done properly; the trick is to ensure that it is done correctly and that everyone knows what is happening and what is expected of them!
Feb
16
Using strategic sourcing techniques when faced with cost reduction targets.
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In many firms cost reduction activities generally center around supply chain optimization and a desire to get better value from suppliers. However true cost reduction requires you to be able to cut costs more effectively and this means you need to be able to start at the very beginning of the production process, indeed as far back as design (including design for cost targets). Design and production processes have the largest effect on the costs of the succeeding activities.
Whilst Problems from the supply side often cause the most delay and disorder, racking up costs for you and your company, many organizations fail to understand the importance that product definition and requirements have on total production costs with many having the failed belief that procurement control the costs.
However this is not saying that procurement cannot influence cost and have their part to play in cost reduction projects.
Strategic sourcing
Strategic sourcing is a way to save from the supply chain. Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. This entails that a continuous search for new sources and re-evaluation of existing sources ensuring business requirements are understood and met.
The process could be divided into three steps, which are:
• Surveying
• Assessment
• Procurement
• Evaluation
These three processes should not be viewed as discrete stages, but as mere components of a cycle. All of these processes are done simultaneously, so you need to be able to manage them all. However, when such a system is in place, it generally delivers savings, since the acquisition of supplies is usually from the best source at the best price (this does not mean the cheapest!). It is also flexible enough to adjust to market fluctuations, due to its repetitive evaluation.
Surveying supply sources is arguably the most important step in the process. It is here that the amount of savings incurred shall be determined. Many factors should be taken into consideration when choosing a pool of suppliers. First, you should find out who sells what. Then, you need to check it against your company’s needs. If they match, you should be able to negotiate for you to find out the scope of your cooperation. Clearly to be able to put forward any saving you’ll first need to know your baseline cost that your operating from – for example is it last years budget or a forecast cost? Another important variable is the timeframe that costs will be incurred – for example you may wish to consider fixing annual escalation rates thereby mitigating sharp yearly increases (this is also a saving!) Also consider when you will realize your saving will it be at payment or invoice or earlier in the process (remember just because you’ve negotiated a cost down that does not mean you’ve made a saving as know funds have been exchanged!).
Optimization is one way to minimize costs. Through reviewing the significant sources of expenditure within your material flow and implementing a thorough strategic sourcing approach savings can be realized. Supply chain optimization is not only about reducing lead time or improving quality, but is also about getting the right suppliers for the right jobs at a cost that meets with business requirements (whether short or long term). This entails that a constant re-examination and re-evaluation of currently used mechanisms for procurement and a constant adjustment to fit market’s changing demands. practice.