At a glance
- Supply chain management has become cross-functional, touching every part of an organisation
- The economic and political upheaval that has affected supply chains now therefore also has impacts across the business
- The businesses that manage supply chain most effectively are those in which supply chain managers sit at the top table
- Processes that have been proven to optimise supply chain success include architecture and procedure, people and organisation, collaboration, performance measurement and management, and mastering change
- Companies with the best-performing supply chains also tend to outperform rivals in their industry on many fronts – capacity, flexibility, costs, cashflow, and cash-to-cash cycle
With a wide-ranging background in procurement, business process optimisation, strategic planning, and cost reduction, EFM Ireland Associate Tom Brennan takes the view that supply chain management must support and contribute to these business objectives, rather than functioning as an isolated discipline in its own right.
At the same time, he argues, in the face of the current “perfect storm” of upheavals in border controls, disruption to shipping caused by the Covid pandemic, conflict in Ukraine, unexpected political instability in the cradles of democracy, and rampant inflation, now is the time for businesses to urgently look again at their supply chain and identify how to improve it based on past experience.
Below, using examples from organisations he has worked in and with across his career, Tom explores what businesses need to be doing to adapt, and to ensure their supply chain continues to align with their overall business strategy and meet their customers’ needs.
The key supply chain issue arising from the world’s woes at present is this: how do businesses balance supply and demand, and still get products and services from their suppliers’ suppliers to their customers’
At the same time, this is now a much more complex undertaking than it was in the past. No longer simply a logistical matter of warehousing and transport, supply chain management has become cross-functional, embracing a whole range of processes that support a company’s overall strategy – including what customer need the company is trying to fulfil, what the business will do to fulfil that need, and – almost more importantly – what it won’t do.
Tom’s supply chain work with many clients, in sectors including retail, food distribution, catering, and hospitality, has shown that effective supply chain solutions combine a number of characteristics.
In a climate like today’s, the most important of these is agility (being able to respond to short-term changes in supply and demand) and adaptability (being capable of meeting long term structural changes in the markets in which the business operates).
Businesses that, in Tom’s experience, manage supply chains successfully, therefore focus on:
- Architecture and procedure – A six-stage process, embracing planning, procurement, production, order fulfilment, returns, and enabling process (rules, compliance, etc.) Critically, there must be no silos or barriers between departments; supply chain considerations must touch every function. Eliminating standalone applications and manual data entry, both of which lead to higher error rates and costs, is also essential.
- People and organisation – This works best with defined supply chain roles and responsibilities across functions, but only on the basis that people have the competence and talents required: strong analytical skills, deep process knowledge, customer service ethic, sensitivity to the company’s corporate communications and social responsibility policies, and relationship management skills. Breadth of experience is important, but more important by far is that those
responsible for supply chain management have a seat at the top table.
- Collaboration – Sharing assets, information, knowledge, risk and reward, both internally within
the business and with suppliers – rather than playing cards close to the chest – is often key to ensuring that both the business and its suppliers can execute according to their mutual agreements.
- Performance measurement and management – Businesses that “do” supply chain
management effectively look not only at performance measurement – that is, visibility of “lag
factors” that can indicate problems (profitability, revenue, return on assets, etc) – but also
performance management, which is about forward-looking indicators (order delivery, customer
service levels. etc) that can be used as a basis for productive change.
- Mastering change – Businesses that pursue positive change in the supply chain reap rewards,
but they must also understand the different types of change – innovation (new ways of competing, or changing the basis of the competition), excellence (industry-leading performance, service, quality and cost), and incremental (year on year) improvement. A good understanding of current performance and the business’s ability to absorb change potentially sets the stage for far-reaching transformation.
Tom’s experience of companies with the best-performing supply chains suggests that they outperform rivals in their industry.
They tend to have better delivery performance, upside in production capacity and flexibility, and lower total supply chain management costs.
At the same time, they typically also benefit from lower total inventory (thus improving cash flow), and shorter cash-to-cash cycle time, and whilst it is impossible to eliminate complexity completely, they tend to manage it better.
View Tom’s expert bio here