When I think back on my long career in supply chain and manufacturing, I realize that the buzz word “supply chain” is a relatively new expression in the sector. Job titles such as “Chief Supply Chain Officer” and “Supply Chain Manager” are new as well.
Why is this? There has been a recent shift in perspective from manufacturing businesses to emphasize the value-add to the customer. Therefore, it is now more than ever, critical for organizations in the manufacturing industry to place a larger emphasis on a streamlined and productive management of their supply chain and order fulfillment processes—as they directly impact customer expectations.
This recognition that aligning your supply chain management to customer-focused improvements is becoming very clear to many manufacturing leaders.
Case in point, the example of Target’s expansion into Canada. It’s hard to believe that a store that droves of Canadians regularly travelled south of the border to shop at, would fail to successfully launch in Canada. However, just two years after expanding into the Canadian market and taking over 200+ Zellers stores, Target announced that it would close all of its Canadian locations, and leave Canada with $2 billion dollars in the red.
So what happened?
Canadians were disappointed to find a different shopping experience to the one they had previously enjoyed in the United States. Instead, shoppers north of the 49th parallel were greeted with empty shelves, and a lack of similar product selection and prices to that of the U.S.
It is well-documented that the market research, and back-end logistics and planning process failed miserably. Target failed to conduct proper market research before the expansion and simply assumed that Canadians would buy from them—simply because it was Target. The company, as a whole, failed to understand the Canadian market. Systems-related issues including set-up and configuration, and lack of training on how to use those systems plagued their operations team. Procurement and EDI systems did not integrate with one another so large orders were placed in error. In addition, Target’s vendor compliance was inadequate and was not enforced.
All of these supply chain woes caused incredibly poor visibility into the status of inbound shipments and non-deliverance on the vendor’s merchandise plans, leading to the empty shelves—and unhappy customers.
So, if you are a small to medium-sized manufacturer, assuming you agree with the advent of strategic supply chains, what can you do to better prepare your business?
Some questions to consider:
- Is your procurement team empowered to think strategically? Do they think pro-active versus reactive? Or are they overburdened with chaos—spending a disproportionate amount of time analyzing data to figure out how much to order, and when?
- Have you put in place an infrastructure for a formal planning process? Consider implementing Demand and Supply Planning or Demand Driven MRP (DDMRP), which incorporates Sales and Operations Planning (S&OP) methodologies and best practices.
- If so, have you deemed one person in the organization to a senior-level role to cross- coordinate these processes, between departmental functions such as sales and operations—to reduce silos?
- Have you invested in adequate training for your people? A well-known quote:
CFO asks a CEO: What happens if we spend money on training our people and then they leave?
CEO: What happens if we don’t and they stay?
Successful companies train their talent to be successful. Don’t wait. Start today!
- Have you invested in the right technology? Leveraging systems like Enterprise Resource Planning (ERP) can deliver immediate business benefits including; greater transparency and a single source of inventory information; reduced cycle times for proposals, orders and fulfillment; and improved ability to address complex customer needs more quickly—and with fewer data errors.
Where then, are we going to see supply chains evolve to? Certainly the Amazon business model of business-to-consumer (B2C) is now cross-pollinating into the business-to-business (B2B) sector, with the uptake of electronic web portals for ordering and fulfilling customer orders. An example of this is Alibaba, whose supply chain with more than $250 billion in revenue and most of that coming from B2B transactions, is ready to maybe take on Amazon. Electronic supply chains are here to stay—in a big way.
Want to learn more on this topic?
Download our complimentary white paper, Developing a Demand Driven Supply Chain Strategy—An Informational Guide for Manufacturing Leaders, to learn about a new methodology that can help provide manufacturing leaders with a solution for meeting today’s supply chain challenges.