Jul
20
Supply chain performance is always a much talked about issue. There are lots of guides available all promising various cures or remedies for any hiccups within the supply chain and whilst many of these are very good, there has also been a lot of unrealistic expectations raised with regard to how a supply chain should perform!
For a start, the supply chain will be unstable. This is a given, all supply chains, by heir very nature will be unstable, but the trick is to manage the instability and therefore reduce the risk. After all we live in an uncertain world and the supply chain will be subject to natural and man made constraints that cannot always be anticipated. So always take your bottom line as having the expectation that the supply chain will be unstable; what matters is how you manage it!
It is also realistic to expect that the supply chain will manage to meet your needs and in turn meet the needs of your customers. If a supply chain fails to perform and meet these requirements then it has indeed failed, so it should be able to fulfil these criteria.
The meeting of your needs and the needs of the customer sound very easy to quantify, but these are actually quite complex areas. For a start, the supply chain needs to be able to deliver goods or services at the right time for your particular needs. But those goods or services need to be at the right price, in addition the goods need to be of the right quality with either no or very few defective goods received. The supply chain also has to be able to offer the ’back up’ that your business needs in the form of invoices sent in a timely fashion, defective goods being received back by the supplier, administration services that are effective and good transportation links.
Living in the real world
Although in an ideal world it would be conceivable that goods would arrive on time, in the right sequence, 100% perfect etc 100% of the time, every time, this in itself is unrealistic. The supply chain, as stated earlier is subject to the vagaries of the world in which we live and there can be flooding, natural disasters and various other conditions that can adversely affect the supply chain. Hence it is important to decide what is the minimum level of service that can meet your needs, bearing in mind that perfection only exists in the abstract.
For example, to think about realistic expectations of the supply chain, it is reasonable to set a limit as to what is acceptable in terms of supplies. 100% perfection, 100% of the time may be an aspiration but back in the real world how that can be achieved is not yet known. So you need to set a service level you can live with. Some companies aim for 85% or 90% etc.
It is also important to think about the other factors that will adversely affect your business if they are not achieved, for example the timing of deliveries; too early and you have no where to store them, too late and production is halted. So it could well be that you aim to have deliveries on time for some 95% of the time, simply to accommodate the fact that transport can often be held up.
Once you have established the minimum levels of service and accepted the fact that the supply chain is, by its very nature, not stable, then you will have gone a long way to ensuring that your expectations from the supply chain and the supplier relationships within it are in fact reasonable!
Jul
20
Delivering benefits from closer collaboration between suppliers and customers can not only strengthen the links between them so that the relationship between the supplier and the customer is one of mutual trust, but it can also deliver tangible benefits of efficiency. Here’s our top 10 benefits for closer supplier collaboration.
Best Practice Shared: Collaboration results in best practice being shared throughout the supply chain. All those within the supply chain are aware of what is required. There is a real understanding of what the goods supplied will be used for and what causes problems within the supply chain.
Fewer defects: The sharing of best practice also results in improvements being made on a continuous basis, thereby reducing the instances of waste or poor value. Goods that are defective or substandard are simply not supplied, which in turn drives down any ‘glitches’ within the supply chain.
Improved communication: Communication is a direct result of closer collaboration with suppliers. For them to be aware of the requirements that the customer has, there has to be communication.
Suppliers get to have a voice: The collaborative approach requires communication to be two way, with suppliers being able to report any problems to the customer and hopefully they can then work together to ensure that these are eliminated.
Continuity of supply: The process of managing supply chain risk improved because the supplier is able to plan effectively for the future. Due to operating within an exceptionally competitive market, there is always a risk that the supplier will not survive, especially if they have cash flow problems. However the collaborative approach means that the supplier will be able to plan for the future, knowing what share of the market they will be able to retain or even expand into, with reasonable accuracy.
Improved stability: Stability within the supply chain cannot be overestimated. Any supply chain that is unstable will have stock outs, will have an inability to meet sudden peaks in demand and ultimately will not provide a good service to the customer. So collaboration helps to stabilise the supply chain in a way that was almost unimaginable only a few years ago within the Western World, although such stability had long been achieved in the Japanese car industry.
Flexibility: The closer the collaboration between suppliers and customers ensures that the supply chain can meet any peaks or troughs in demand. The flexibility of approach can actually make a huge difference to the customer. They will be able to take on new contracts with little notice or they will be able to withstand periods of low demand, simply by working in a close relationship with their suppliers.
Reduction in costs: The reduction of defects and the time saved within the supply chain means that the supplier is able to lower the costs of goods supplied, which is a benefit to the customer but also helps the supplier to keep afloat and stay competitive. Collaboration can be an good driver for cost reduction
A mutually beneficial relationship: Whereas in the past, the relationship was between supplier and customer was adversarial and the supplier was often seen as being wholly dispensable. The supplier knew that this was how they were viewed, so they had no interest in responding flexibly, they knew they could be replaced within a matter of days. Now they could be replaced, but both parties recognise that there is a vested interest in them both working together.
An optimistic future: The final benefit of closer collaboration with suppliers has to be the potential for expansion and new opportunities that are presented when the supplier and the customer find that working collaboratively makes them a very strong team!