May
20
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.
May
20
Impact of data on supply chain decision making
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All businesses have to make decisions – it will typically come down to one of two things – subjective argument (“I think this”) or analysis of data (“I know this”).
Let’s think about a few examples
Supplier performance
Subjective – “My production manager is always complaining that they are waiting for parts – my supplier performance must be bad – I’ll send a complaint email to my biggest volume suppliers and tell them I want improvements”
Analysis of data – “I’ve analyzed on time delivery from my suppliers and last month we had 1000 deliveries of which 901 were on time 29 were early and 70 were late. Of the 70 were late – 70% came from a single supplier.”
Supplier quality
Subjective – “The production manager says that we have to scrap large quantities of material because it doesn’t meet spec.”
Analysis of data – “Of 1000 deliveries received 960 passed inspection from our quality engineers, a further 40 were sent back to the supplier as they failed to meet our purchase order criteria.”
With these simple examples it’s easy to see where the robust decision making sits – data analysis should always provide a better platform for decision making than subjective argument however what happens if your system data is flawed and you simply don’t trust it?
How good is your data? Data for decision making
Confidence in your organizations data is key! – arguing with a supplier for improvement in delivery is all well and good but its an all too common experience to find yourself sitting across the table from your supplier with two different sets of data portraying two different situations of reality.
Where does your data come from?
Most companies will have a number of computer systems for executing business transactions from procurement to financial through to human resources – this is where most data is extracted for reporting purposes.
Data integrity can become an issue where incorrect data is entered for transactions (for example the expected delivery date of purchase orders) – without a suitable ongoing data checking/cleansing activity incorrect data can become a real problem affecting decision making.
Getting the most from your data – 6 point plan
1/ Use one system – everyone transacts on the same system (no hidden spreadsheets or databases!)
2/ Check for data integrity issues (run reports!) – if the data’s wrong – fix it!
3/ Centralize management information – get data from one place which means one version of the truth that everyone uses
4/ Adherence to process – focus on clean data being entered into the system (should include system training as appropriate)
5/ Adequate controls over who can enter what data
6/ Data integrity is seen as a serious issue by business leadership