Analysis update
While supply chain thinking and ideas of they leave, as well as making good your
best practice have developed and stabilised mistakes. Operational excellence lead by Collaboration – the new critical
over the past 30 years, their application in supply chain design and planning is a factor in success
most companies is still relatively immature critical capability. Collaborating in order to share resources
even though they have the potential to and leverage scale is the new mantra for
transform almost every business in every 3. Become the preferred customer of your competitiveness in a difficult economic
sector. While supply chain thinking and key suppliers – No company can survive world. Companies can no longer afford
ideas of best practice have developed and without its suppliers and nurturing the ones to try to control some aspects of their
stabilised over the past 30 years, their that are long term critical does not mean business on the basis that it ‘might be’ a
application inmost companies is still relatively being soft with them. The experience is that competitive advantage. The future will be
immature even though they have the if you align to them they will give you more about both cooperating and competing
potential to transform almost every business for less; but if you just negotiate on cost, you through shared services and assets;
in every sector. Much of this success will will miss out on benefits and they will leave service providers will need to create
depend not on new techniques but on the you high and dry when times get tough. blocks of scale and give a level of cost
more effective application of techniques with and service
which managers may already be familiar. transparency that
However there is one key new capability has been lacking.
required for the current economic climate. This may extend
to shared supply,
manufacturing
Applying known techniques capacity, and
more effectively distribution and
Let’s start with re-visiting the big idea logistics. There
behind supply chain management. It is that are precedents
managing the interactions between the for the competition
functions and entities in the chain for the authorities taking
benefit of the whole chain, rather than the exception to
individual, will yield a dramatically better exclusive industry
overall performance. This can take many arrangements
forms, but typically organisations benefit and the sharing
from more free cash due to less inventory of cost and
“Speed is the key; fast and accurate processes have been
and assets, better trading margins and
shown to improve customer service and reduce inventories
contracting
lower operating costs. We would highlight
and manufacturing assets.”
data between
five established maxims for success: competitors.
1. Reduce unprofitable complexity by truly 4. Design, plan and execute for agility – Newspaper and magazine distribution
understanding how both customers and In the current climate, demand will be is a current running example where
products erode margin – The universal unpredictable and volatile; companies must economics and service have forced
experience is that 15 per cent of customers be able to respond without lots of inventory service structures that have been viewed
and products erode more than 50 per cent and huge capacity and asset surpluses to as anti-competitive. But that industry is
of the profit potential. Designing this group cope with change. Agility is about fast still fiercely competitive on its content
out or designing their profitability back in is flexible processes to meet real customer and the implications of the logistics
a key step to connect the supply chain to demand and put in place only inventory alternatives would likely be reduced
the company’s performance. The experience that will not be a risk to the business. volumes and higher costs. Executives
is that these unviable activities are often Speed is the key; fast and accurate tiptoe on eggshells when approaching
detracting from profitable activities as well processes have been shown to improve such potentially risky situations as they
as creating losses in their own right. We customer service and reduce inventories may be inadvertently personally liable.
call this ‘cost to serve’ and have found it to and manufacturing assets. In future the competition authorities
be a profoundly powerful business tool. may need to adjust their thinking and
5. Synchronise and integrate to eliminate guidance to reflect industrial and real
2. Build customer service excellence into waste and cost – Toyota made the seven competitive realities.
your supply chain – Service excellence is wastes famous and its practice of waste
often discussed as a marketing imperative, elimination has lead to world class status in Together, the application of these maxims
but seldom connected to the true cost of manufacturing; Tesco has applied lean thinking will release cash from stock and assets,
non-performance both in sales and recovery equally effectively to its business. Both those protect the profitable parts of the business
costs. Outstanding performance protects companies would concede that there is still and create the focus that will be needed to
the customer base that you want to keep much more to play for; however they are in thrive in the recovery. Now is the time to act
and avoids the costs to replace them when a strong position entering the downturn. in order to be there and ready. circlesolid
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MANUFACTURING
December 2009 &LOGISTICSIT
47
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