Is Your Supply Chain Operation Efficient and Resilience?
Keith Olivier gained credit for coining the term βSupply chain managementβ in 1982 but the concept of supply chain first gained traction in the 1920s at the Ford auto assembly plant in USA. Supply chain consisted of a network of activities involving sales, planning, procuring, warehousing, production, quality control and logistics to get the products from the raw material stage to finished product in order to satisfying the need of the customers.
As the concept of supply chain management becoming more popular, many companies around the world adopted the term βsupply chain management systemβ to enforce the importance of bringing supply to the production area and delivering to the customers quickly and efficiently. However, is your supply chain efficient? Are cost been under control or is this a concern to you?
An efficient supply chain utilizes to the maximum, the resources available in the company in order to minimize the cost of operation. This includes reducing process time taken and wastages in resources. Wasteful resources ranging from raw material used, over production, rejects, manpower, additional logistics and other wasteful actions that could have taken place. The next question to be asked is, Is your supply chain has achieved some form of resilience? Throughout history, companies often failed to take early mitigation action plan to overcome sudden unexpected challenges. In 2011, when Thailand was affected by massive flooding, many automotive and electronic factories were forced to shut down and this disrupted supplies around the world. Major companies relying on parts from Thailand were forced to take radical measures in order to reduce losses.
In the current pandemic, most companies around the world faced some form of supplies disruption with some even forced to shut down operation. The biggest strategic weakness in many supply chain strategies is putting major effort to ensure company operation stay efficient and neglecting the resiliencies of it. Although cost is a critical factor for any businesses, maintaining a level of resilient is definitely very important. In order to have an efficient supply chain operation, we need to understand the particular industry business model. By understanding the way the market works, company can plan on how to run the supply chain system efficiently.
The key stages to an efficient and effective supply chain system are to:-
- Building the supply management strategies with Tier 1 suppliers as these are critical supplies. Tier 1 suppliers normally understand their role better and reporting normally via documentation and little interaction between person to person.
- Building the overall supply chain management to include Tier 2 and below suppliers and set reporting and other data sharing requirement. These suppliers will require close management.
- Building up the internal and external integration with all stakeholders. Integration at the least minimum will be functional which will include sharing on risk and planning information and concern
- Enforcing the supply demand network collaboration
On the other hand, in order to achieve a resilient supply chain, companies need to put a lot of focus toward advanced planning strategies which put the company supply chain in a war footing even there is no war to fight. Take the example of the military supply chain system. The major armies around the world plan well ahead in order to increase winning abilities in the battlefield. Research and development activities are been held to improve supplies efficiency, investing in new technologies and training of the personnel. Likewise, in the commercial environment, companies need to review regularly internal and external threats, keep in touch with developments even the minor ones and take mitigation plan.
Research and survey made shown that some of the major companies around the world managed to overcome supply chain challenges through micro risk planning few years ahead and take immediate step upon hearing out of China of the situation in Wuhan. These companies are able to withstand the pandemic onslaught as they have taken various steps to counter the problem well ahead of the other companies. Part of any companies supply chain planning to stay resilient is to imagine the worst case scenario is a future situation. Most of these strategies involved building multiple supply sources, creating alternative routing for delivery of materials, building inventory at the slightest information of potential future instabilities and educating the resources to be well prepare and stay agile. A good example is a well known supermarket chain, THD based in North America get the major hardware supplies out of China but they also maintain a small percentage of supplies out from Malaysia. When USA and China get embroiled in the trade war, inefficient in term of cost supplies out of China get switched to Malaysia supplier and when the pandemic hit China badly, 90% of the supplies get switch over.
However, many companies are reluctant to take such decision for the simple reason of cost but reality strike hard to many when without such strategy, the cost burned away is much too high during the pandemic due to production shut down, extremely higher cost of logistics and losses of revenue.
Please join our training program Strategic Supply Chain Strategies to learn more.