Supply chain management is supposed to deliver flexibility, efficiency and, above all, speed. Accomplishing those objectives and related goals for global supply chains is a matter of getting things right and, equally important, not doing things wrong.
With that in mind, here are five things that may slow down your supply chain.
1. Having too many partners.
Recruiting backup sources for critical items and services is a common and sensible objective of a supply chain management strategy. But at some point recruiting more vendors, shippers or other supply chain partners may produce more complications than comfort.
Having an excess of partners can make it difficult to work effectively with any of them. “If you have too many vendors it is difficult to satisfy the need for information and feedback across the entire supply base," says Josh Nelson, associate principal for strategy and transformation at consulting firm The Hackett Group in New York.
2. Poor vendor relationships.
While getting the lowest cost from your suppliers is important, it may be even more important to invest effort and money into having good relationships with your vendors. Better customer service, smoother operations and happier employees can result from seeing that vendors are paid on time and knowing they can rely on you for accurate information.
Good relationships benefit both sides of the supply chain transaction, notes Geoff Annesley, executive vice president for One Network, a Dallas-based cloud platform designed to optimize trading partner business networks. “It's about trust," Annesley says. “If you trust the signal that you're getting from your partners, that takes out a lot of the issues when you're trying to improve relationships."
3. Working in silos.
The old way of separating manufacturing from marketing and shipping from accounting doesn't work well when you're operating a global supply chain in the 21st century. Siloed organizations can't collaborate on supply chain management as efficiently as networked organizations.
“Some of the basic mistakes are not having shared processes and being siloed," Annesley says. “A lot of companies as they grow become siloed internally. That's a disaster waiting to happen."
4. Not optimizing and automating processes.
Streamlining your global supply chain means more than getting products through production and into distribution as fast as possible. Supply chain processes should be optimized and automation used when possible all the way from manufacturing through customer returns.
Something as simple as failing to pay a single vendor's invoice on time because of inefficient processes and not automating accounts payable can slow your supply chain to a crawl, says Nelson. “You place an order and find out you're on a credit hold, and it takes time to approve that," he says. “This is where it pays to have good credit standing and make sure you proactively work on payables and you're never in a credit hold situation."
5. Lack of transparency.
Transparency was a foreign concept in supply chain management strategy not too long ago, when buyers and sellers faced off as opponents determined to safeguard internal information to avoid tipping their hands. Today, however, the idea of transparency extends into sharing all kinds of data and even giving partners the ability to manage your inventory.
“Trust, transparency and shared processes," Annesley says, “so you're working on the same workflows and there's no discontinuity. You're not bogged down in reconciliation and not trusting your partners."
More Supply Chain-Slowing Errors
While these five mistakes are among the most common slip-ups companies make that slow down their supply chains, the field of supply chain management is chock-full of potential missteps for the unwary. To further complicate matters, drags on supply chain performance may come disguised as ways to actually speed things up.
Nelson cites the concept of the “perfect order" profile. “You'll often hear people talk about the perfect order and what a perfect order looks like," he says. “Fifteen or 20 years ago they'd design distribution centers for the perfect order and incentivized customers to have their orders look like that."
For instance, he says, companies might grant customers discounts for orders of a full pallet, to simplify operations and control costs in warehouses and distribution centers. While that served the sellers' needs, it didn't address the buyers' concerns and that makes it incompatible with the collaboration that permeates modern supply chain management strategy.
Some of the basic mistakes are not having shared processes and being siloed. A lot of companies as they grow become siloed internally. That's a disaster waiting to happen.
—Geoff Annesley, executive vice president, One Network
“Customers want more flexibility," Nelson says. “They don't want to have to fit an order profile. But the fact is that many are still set up for that perfect order." To improve supply chain relationships and avoid setting operations up for perfect orders that aren't coming, companies may want to re-think the way they incentivize customer ordering practices.
Down the road, avoiding errors that slow supply chains will increasingly consist of a mix of applying appropriate technology such as cloud-based supply chain management systems, emphasizing good supplier relationships and optimizing internal processes and sharing.
“The next opportunity, now that we have cloud technology, is how we expand beyond the walls of our company and collaborate with suppliers," Nelson says.
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