Supply Chains to Admire - SDBS
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08.09.2017
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16.10.2017

Supply Chains to Admire

The supply chain is a set of organizations, people, technologies, processes, information and resources involved in the production and delivery of a product or services from a supplier to a consumer.

Supply chain management involves optimizing your operations to maximize both speed and efficiency. Speed is important because customers value fast service. Increasing speed, however, can cause costs to skyrocket, so maximizing efficiency is equally important. The most effective supply chains deliver products as fast and as cheaply as possible without sacrificing quality.

2017 Supply Chains to Admire – Annual research, conducted by “Supply Chain Insights” company. This article is based on their report, released on 13 June 2017.

Research:

The main goals of supply chain to admire are to help supply chain leaders set realistic supply chain goals, to provide benchmarks by industry peer groups and to reward companies achieving higher levels of supply chain excellence.

One of the key indicators of the assessment is the supply chain index, calculated in three dimensions:

  1. Balance (vector analysis of the rate of change at the intersection of Return on Invested Capital & Revenue Growth for the period),
  2. Strength (vector analysis of the rate of change at the intersection of Inventory Turns & Operating Margin) and
  3. Resiliency (tightness of the pattern at the intersection of Inventory Turns & Operating Margin as measured by mean distance of years on an orbit chart).

In 2017 there are 24 winners from 16 industries such as Apple, Bridgestone, Broadcom, Hershey company, Honeywell, Herman Miller, Loreal etc. Using Supply Chain to Admire analysis Apple, Cummins, TSMS are winners for two last year. Dollar Three and L’oreal are winners for the past three years. Finaly, Cisco is winner for four last year.

The testing of true leaders is not only the rating of high level of performance also it is sustain competitive advantage over time. When assessing the characteristics of the companies, the following patterns were found for the leading and lagging:

 

According Supply Chain Insights leaders have five characteristics:

  • focus on horizontal processes
  • build balanced scorecards
  • consist leadership and culture
  • have strong planning and network design
  • clarity of supply chain excellence

Leaders avoid supply chain fads and try to multiple consulting based projects with a dogged focus on supply chain excellence.

According to the research it has been found that leaders in supply management have strong horizontal processes: focus on revenue management, sales and operations planning, innovation of the new products, corporate social responsibilities, supplier development.

 

Recommendations:

As supply chain leaders develop strategies and focus on driving balance sheet improvement, we recommend that supply chain teams consider these seven recommendations:

  1. Build a Guiding Coalition to Drive Improvement Based on Industry-Specific Data. To maximize potential and to set goals, organizations should benchmark companies within their industry sector. Each industry has unique rhythms and cycles. As a result, supply chain excellence analysis needs to be an industry-specific comparison.
  2. Understand Supply Chain Potential and Orchestrate Trade-offs. Balanced metrics portfolios drive higher levels of value for the company. The metrics are non-linear and tightly coupled. Managing them as a group in a balanced portfolio requires system thinking. Companies with higher performance use advanced analytics to plan outcomes and design the supply chain.
  3. Drive Horizontal Alignment. We find that those who have the best performance on the Effective Frontier align teams to focus on supply chain finance, and the translation of supply chain processes and strategies into balance sheet results. This requires holistic organizational thinking which is quite different than the traditional functional thinking. This can result in a shift in analytics and reporting. For example: today, while most organizations can easily access functional costs, only 24% of companies can easily access total costs across source, make and deliver together. As a result, it is tough for operational teams to make trade-offs.
  4. Make the Supply Chain an Engine for Growth. When we present this data to many supply chain teams there is a push-back. Many do not understand how their work can drive growth. Unfortunately, many organizations are stuck in a cost-focused paradigm with significant gaps in horizontal organizational alignment between operations and commercial teams. Shine a light on the opportunity and take the steps to drive growth. Each industry has different ideas of how to drive growth through the successful implementation of supply chain strategies. This includes test/learn/adapt strategies in consumer value networks (using channel data and aligning the supply chain response to maximize value), clinical trials in pharmaceutical industries, the successful manufacturing of samples and execution of new product launch strategies, agility in responding to customer requests, and flawless execution of order management to maximize on-time and in-full orders at the time of shipment.
  5. Effectively Manage Complexity. When we interviewed the leaders in past reports, we heard a consistent theme. Each company has managed product and customer complexity. This includes customer segmentation, cost-to-serve analysis, item rationalization and ongoing network design efforts. In an organization, there is good complexity and bad complexity. Good complexity drives growth with minimal impact on the performance factors on the Effective Frontier, while bad complexity degrades performance. Maximize the growth opportunity with good complexity and eliminate bad complexity.
  6. Focus on Building Value Networks. Only 95% of companies accept the limitations of the inside-out supply chain. Over the last decade, only Walmart and TSMC successfully executed value network strategies.
  7. Learn from Other Industries. Supply chains can be differ significantly in the processes between different industries, but some know-how techniques in other industries can be exactly what you are looking for.

Conclusion:

Companies that have done their best in the analysis have consistency in leadership, a clear understanding of supply chain processes, disciplined processes and horizontal focus.  The superiority of the supply chain is the result of the intense hard work of an organized team with a clear definition of the supply chain strategy and top management’s effort.

Currently, there are many different solutions for automation and improvement of supply chain management. One of the leading solutions in the international markets is Vendorlink, provided by our partner, Manthan. It allows you to optimize interaction with suppliers and maximize the benefits of sharing information. Read more ...

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