Decades before we all believed that ‘Quality comes with high Cost’; then the Japanese showed us that ‘Doing it right the first time’ increases the profitability. TPS (Toyota Production System) showed us how to work leaner, produce quality products at less cost as well as to provide world class customer experience. Seeing the success of TPS, every organization started to reference TPS and build their own lean production systems. Clearly, those days the lean production systems created the much-needed competitive edge for businesses. The benchmarks are broken quite often, and the bar was kept raising every now and then. Decades passed by and now almost every big organizations have mastered the art of lean manufacturing. Thereby, slowly lean manufacturing has lost the status of secret recipe and the competitive edge is lost. The gap is filled by none other than the Supply Chain Management. Supply Chain is one of the key discussion points in every board room and a lion’s share of the Budget is getting allocated to build the supply chain for the future.
As of today, we can loudly & confidently say ‘The Organization with the most successful Supply Chain is the Winner’.
Evaluating a Supply Chain
The Supply Chain has 3 main functions within – Sourcing, Manufacturing and Distribution. The success of Supply Chain is measured by –
- Reaction time – Supply Chain is packed with uncertainties, no matter how well you plan. The successful Supply Chain reacts and re-aligns almost real time to ensure the performance is seamless.
- Efficiency – Supply Chain has numerous sets of activities bundled together in a sequence. With multiple if and then, the flow is very complex. The successful Supply Chain is efficient by having full control on each step within the process.
- Cost – Sometimes we may feel cost is always a sub set of the above two. Partially it is true; by being efficient we save cost. But the point here, the successful Supply Chain has the most updated method of performing the processes and thereby cost efficient.
Starting from Supply Chain Basics till the new trends like IoT and Industry 4.0, all are well aligned to this. For example, in a Nutshell the IoT Supply Chain adds value by aiding in real time decision making which is aligned with the reaction time.
Building a Supply Chain Brick by Brick
Though it sounds so simple, building a Supply Chain from scratch is not a cake walk. It needs a lot of careful considerations, quantitative analysis and design. One wrong assumption in a Supply Chain can back fire very badly. Let me quickly tell you two blunders in Supply Chain Design:
(1) The biggest blunder ever an organization could do is taking decisions here by experience.
Each Supply Chain decision must be backed up well before you implement – that’s why Supply Chain Design extensively uses Simulation and Modelling tools.
(2) The other blunder is blindly implementing a Supply Chain Solution which worked well at another organization.
The assumption is here is it worked well for my competitor and it will work for me as well. It is terribly wrong. Supply Chain Design and Solutions are developed for an organization and hardly we can replicate it from external source. This applies for any Supply Chain Design, ERP, Tech Product, Automation, IoT, Processes etc.
The crucial take-away is to stay away from these blunders and build the Supply Chain for your organization to cater to the demand and expectations of your customers.
Though the detailed explanation of Supply Chain design takes pages, I have consolidated all the nuances in setting up of a supply chain from scratch into 4 Main steps:
- Network Modelling
- Facility Design
- Process Design
- Process Controls
This applies to a new supply chain set up or for an organization which is expanding or entering a new category of business. Network model is a key exercise which is the base for all the supply chain implementations in an organization. Supply Chain Network Model takes in the input of demand, supply, service fill, KANO Model (customer needs) and other parameters to chalk out the Supply Chain Map for the Organization. A Supply Chain Map will have all the detailed ways to service your customers at the optimum cost such that the business is yielding the targeted profit margins.
Facility Design includes the set up of Manufacturing Hubs, Warehouses, Transit Hubs and all other infra needed as per the Network Model. Facility Design starts with Space Calculation and delivers Space Utilization to the brim, efficient Product Flow and Material Handling. Each square foot that is leased is arrived at scientifically and every square foot leased is designed to the detail on the activities to be done.
Unless each step in Supply chain is documented well and presented at POU it is very difficult to train the resources and standardize the output. Process Design uses the right tools like FDM, VSM or PROCESS FLOW DIAGRAMS to document the processes. The most efficient form of Process Design is standard work which document the steps, timings, equipment, method and other useful information.
I still remember what my Quality Guru said – “You can’t control What you don’t Measure”. Process Controls are set at each crucial node within the Supply Chain. They track performance and report on the same. Basis the report, all the under-performing areas are acted upon by performing a root cause analysis and setting up an action plan to correct them as well as prevent the issue from reoccurring.
These 4 Steps applies for a new design as well as existing supply chain improvement projects. In a New design all the 4 Steps are followed to build a Supply Chain and in an existing Supply Chain improvement project, these 4 Steps are followed to arrive at the gaps and fix them.
Effective Implementation of Supply Chain through these 4 crucial steps will ensure a happy smile on your customers. This will also give the organizations the much-needed competitive edge which your competitors can’t copy or follow in a short period of time.
With that I conclude that ‘Supply Chain is the Magic Wand in the current business world’.
About the Author:
Alvis Lazarus is Chief Executive Officer at Hesol Consulting, an Award Wining Supply Chain & Management Consulting firm from India. Senior Leader in Supply Chain & Logistics with almost two decades of SCM hands-on experience in devising Country Level and Global Supply chain strategies, Solutions design and spear heading Supply chain Implementation across 10+ Countries. He holds the distinction of driving Supply Chain Solution Design & Implementation across various industries such as Automotive, FMCG, Pharma, Health Care, F&B, Agriculture and E-Commerce. Global Exposure on handling Operations and leading Supply chain, Warehousing & Logistics Projects across EMEA, APAC & AMERICAS Regions.