Preparing your Supply Chain for Change
Know where you are today. Know where you need to be.
By Steven Bowen
A recent research paper from the Global Supply Chain Institute (GSCI) found that increasing complexity across the supply chain and cost-savings fatigue is driving the need for a new approach to achieving competitive advantage. Supply chains that are not adopting this new approach risk being left by the wayside as new technologies and more collaborative ways of working come to the forefront. The question for supply chain leaders is this: How well is your end-to-end supply chain truly positioned to adapt to new technologies and capitalize on growth opportunities?
Answering this question in any meaningful way requires taking a “warts and all” look at your current buy-make-move-fulfill supply chain to establish exactly where you are right now, where you want to be and how you are going to get there.
Understand Your Current Supply Chain Situation
Why did the Titanic hit an iceberg while 200 miles south her identical twin, the Olympic, sailed serenely through the same ocean? On board Titanic, the first rule of corporate survival, not to mention growth and prosperity, had been violated. This rule is, know your current reality.
If you don’t know your course, speed and what hazards lie ahead in the dark waters, you need to find out.
Over the years, I have had the privilege of meeting and getting to know many talented and conscientious CEOs and supply chain leaders who only want the best for their organizations. Often, the reason I’m meeting with them to begin with is they believe their company could do better. That’s not to say they’re performing poorly. You don’t go to the doctor for a check-up only because you feel sick: you go on a regular basis to get your health evaluated and to see if there are any hidden problems. In today’s hyper-competitive business environment, even a small gap between seemingly acceptable EBITDA and free cash flow and the optimum competitive performance can spell the difference between long-term smooth sailing or crashing into the unforeseen iceberg in the dead of night.
The Importance of Supplier Relationships
Your supply chain is only as good as its weakest link. The best supply chain leaders are those who drive collaboration inside and up and down the end-to-end supply chain to achieve results. Finding the weak links can be a challenge, but one thing is for sure, you don’t want the weak link to be within your own company. While your supply chain partners may have their own issues and faults, which you can either deal with, help them to improve or sever the relationship, there’s no excuse for not having your own house in order.
The First Step Towards Improvement is to Know Your Current Condition
This is often not easy. Companies have a lot of moving parts, people have opinions and information is not always as accessible as it should be. So, where to begin? I would suggest carrying out an in-depth review to:
- Identify and quantify the real opportunities. What are you trying to accomplish for your customers? What are the problems you are helping them to solve?
- Understand your company’s strategies and priorities. No company can do everything for everyone. You need a set of specific goals and a clear road map showing how you plan on getting there.
- Articulate areas for value creation. It’s all about delivering value at the right place, the right time and for the right price in a way that’s sustainable for you.
- * Identify current constraints, risks and barriers. You must be able to spot the visible icebergs and quickly adjust to avoid the less visible or unforeseen ones. Ignoring them is not an option.
- Create a robust and measurable business case with a clear ROI. Lofty goals are important, achieving these goals in the real world, with real numbers that show stakeholders their investment of time and money has been worthwhile is critical. Don’t succumb to woolly consultant value propositions. Ensure that if you use a consultant, you tie them down to measurable results. For example, the metric of identified savings is useful to some extent, but annualized savings that can be realized are far superior to helping you achieve improved EBITDA and cash performance and lead directly to realized savings on a daily basis.
- Develop a pragmatic road map for accelerated results. Business moves at a rapid pace. Plunging ahead blindly doesn’t work. Leading and adapting to a new level of performance continuously is a necessity.
Take a Total Value Approach
The GSCI white paper concludes that a Total Value Optimization approach helps companies know their supply chain maturity level by describing how they can assess it. Total Value Optimization (TVO)™ also helps them understand the value potential as they start their journey towards achieving excellence across their buy-make-move-fulfill supply chain. The TVO model helps a company see a clear path to optimization of all functions, working together with alignment, clarity and driving end-to-end collaboration.
Steve Bowen is chairman and CEO of Maine Pointe, a global implementation-focused consulting firm. With more than 30 years of P&L experience, Bowen has an exceptional track record in supply chain optimization as well as lean and demand-pull global environments. He is highly regarded for his ability to quickly transform organization vision and mission into exceptional team performance. His new book, “Total Value Optimization,” is available at Amazon.com.