Think you want cost savings? Consider supply chain transformation to add real value.
Filed Under Blog
We Supply Chain types know that to add value the business needs to allow their teams to focus on the strategic part of the job from risk and stakeholder management, supplier engagement, innovation and of course cost management. This is where true value can be found.
Many companies find themselves focussed too heavily on the tactical element (i.e. getting parts through the door) and of course on chasing the near term dollar through negotiation etc.
This typically will pitch buyers against vendors rather than aligning them in a supportive collaboration.
The transformation from this type of business can be a difficult concept to get to grips with. Migrating to a model that delivers true value can mean transforming the Supply Chain teams core processes. For example, consider how procurement is structured within the organization. In large organizations, they may be geographically disparate even separate entities lacking cohesive corporate governance,
While this structure can still facilitate tactical cost saving it does require a re-think in order to optimize itself. For many businesses, Supply-chain becomes the tip of the iceberg and ends up being the facilitator for change.
Of course, as a facilitator, the SC team need to have a clear signal of where the business is going. As such the business needs strong clear strategies and goals, no business stands still and most continue to evolve whether through acquiring other companies, developing new products or simply just reacting to the pressures of the market-place.
This continual change requires a level of agility and strategy from its supply chain team to keep pace and deliver the value that the company needs. The company should be asking in 5 years time where do I want to be and what therefore do I need from my supply-chain. Having a target allows people to focus on what’s required.
There are of course barriers to this, not understanding Supply Chain fundamentals and how it can add value can substantially hinder progress and without corresponding support from management, the department is unlikely to get far.
So what strategies should the Supply Chain team utilize in order to drive the type of transformation that delivers real value (as well as cost reduction!)
1/ Utilize effective internal communication – communicate, communicate and communicate. If company’s do not know what you can do they are unlikely to support it.
2/ Involve stakeholders as part of the process – looking to negotiate with suppliers – involve your internal customer, looking to source new suppliers, involve your finance team, looking to establish supplier business reviews – involve a broad spread of your stakeholder community. Why – you’ll find out what they really need and where the supplier can add value.
, / Have clear and agreed goals – your key annual goal might be to reduce storage costs however the business might need vendor support with the launch of a new product range. Being tapped into the business strategy should help align the SC team’s goals too.
4/ Use appropriate tools – From Supplier management systems, P2P. For true value, you need excellent processes. For excellent processes, you need effective tools. This needs thought and commitment early on in your process and of course funding (making point 2 & 3 more vital).
5/ People need the right skills. To add value people need a number of things, they need to understand the goals, and they need to understand the steps and have the capability and drive to get there.
6/ Time. be aware that any strategy will not deliver overnight. The goals should be broken down into steps so that progress can be communicated. Of course management understanding of the timeline to deliver value is key.
Transformation programs are rarely simple. But considering where your business is going and what it needs from its supply chain function – and the converse of the SC team informing and educating what it can do, whilst delivering value, can help create a roadmap to success.