Building world class supply chain

Chapter: Building world class supply chain.

(Source: Stanley Fawcett and  Gregory Magnan ‘ Ten guiding principles for high impact supply chain’ business Horizons October 2004)

 Five principles of Supply chain design:

1.      Supply Chain mapping:  Managers need to map their supply chain in the beginning. This will give the managers to find key participants in the supply chain.  mapping of the supply chain will help the company to find the following points;

a.       Cost and profitability included in the supply chain.

b.      Current technologies and new technologies emerging in the supply chain domain.

c.       Critical success factors throughout the supply chain.

d.      value added roles and

e.       Important customer linkages.

Supply chain mapping helps the organization to define the role clearly. It avoids the communication problems and conflicts in the chain. Supply chains should work towards achieving strategic objectives of the firm and mapping will help them aligning with organization vision.

Figure . Supply chain mapping – an example (Source : Scott & Westbrook (12))

2.      Customer focused supply chain: Though many authors put customers at the end of supply chain but major reason for existence of supply chain is to satisfy the customer needs. If the retails and distributors in the supply chain provide vital information about customer, managers can build and improve the supply chain. The information distortion in of the supply chain members results in increasing the cost and not satisfying the needs of consumer. Therefore companies should evaluate the performance of their physical distribution periodically, benchmark the best in the industry and communicate the performance, expectations and improvement to the organization.

3.       Understand the organization capabilities and outsource the other activities: Organizations in the supply chain whether supplier, wholesaler or retailer should add value to the supply chain. The company’s core competency is tested by understanding how it provide access to different markets, create a value to the end consumer and design the supply chain which is difficult for competitors to copy. Matching the customer success factors and firms distinctive capabilities is vital for the organization. Supply chain leader meticulously align their competencies with needs of consumers and as well as those of the competitors.

Figure:  the competencies- customer success factors alignment matrix.

High                                        Low            Firm’s distinctive capabilities

 

Managers across the supply chain in the modern world understand that they donot have enough resources to do all activities on their own. Hence they decide to outsource certain activities to others. Outsourcing decision are strategic in nature. Therefore three things must be done prior to taking decision about outsourcing. They are

A.    Competitive analysis

B.     Market analysis and

C.     Company’s value proposition

The supply chain managers should answer two questions in the outsourcing decision. They are

A.    How organization can create customer value using supply chain that is superior to competitors? and

B.     who in the supply chain do the following  value added activities/

a.       Assessing the technology trends

b.      Assessing the demand trends

c.       assessing the strategic alignment

d.      Assessing competency alignment

e.       Perform total cost analysis

f.       Consider qualitative issues.

Answering the above questions managers can create unparallel value in the supply chain.

4.      Simplify the supply chains: Modern day supply chain is very complex. The globalization process has complicated the things further. It is the responsibility of managers to simplify these complex supply chain structures. The diverse needs of consumer in different markets put pressure on product line extensions and result in the increase of SKUs. This further complicates the manufacturing and supply chain activities. To simplify the supply chain managers are taking three steps. they are

a.       Reduce the number of suppliers of the firm.

b.      Design the customized supply chain looking at customer profitability

c.       Use of software and third party logistics or fourth party logistics will simplify the supply chain.

5.      Beware of role shifting:  supply chain technologies are changing very rapidly. Managers should keep tab on the changes in the environment. they have to keep their legs on the toes to identify any hybrid or innovative channels exist to satisfy the customer needs. It is necessary to have trade- off looking at long term and short term requirements of the firm.