Very often, when you fix something, it leads to a better outcome than you expected. For instance, if you start getting a better night's sleep, you're not only more alert, your overall health can improve. It's similar to the benefits of supply chain management. When you tweak your supply chain's efficiency or bring your costs down, other advantages can emerge.
That's why thinking about the benefits of supply chain management can be worthwhile—and why having a better one is an important goal to have. When you make modifications to your supply chain, the results may be better than you imagined.
That's what these companies discovered.
1. Invest in your suppliers.
Yes, you can strengthen supplier relationships by putting money in their pockets—not merely by buying products or services, but by improving their infrastructure or technology.
When we can anticipate which product we will need in each market and when the product needs to be delivered, then we can work backwards to determine how we will meet that market demand.
—Allan Burk, supply chain manager, LP Building Products
It's something to consider for your best suppliers—and the poor performing ones, too, says Jack Buffington, assistant professor of practice in supply chain management at the University of Denver's Daniels College of Business.
“It's a dialogue that a lot of businesses have," Buffington says, “where a business will say, 'Hey, your company needs better technology, and you need to pay for it,' and the supplier will say, 'You're not paying me enough to pay for it.'"
While you may be tempted to walk away, it's generally a smart move to make investments in your supplier's company, Buffington says.
If you're investing in your suppliers' companies, it doesn't matter that there's something in it for you. You've likely created a lot of goodwill and loyalty, which may mean your supplier will be more willing to bend over backwards for you. That's where you can really see the benefits of supply chain management flourish.
Besides, it simply makes sense, according to Buffington.
“There are a lot of costs involved with leaving and finding a new replacement supplier," he says.
Business owners could also stand to look in the mirror and make sure that the supplier isn't poorly performing due to something on their end, he adds.
“You could invest a lot of money into hiring a new supplier and find out that you have the same problems as you did with the old one," Buffington says.
2. Spend more money on your technology.
“A lot of companies are focused on supply chain optimization," says LP's supply chain manager, Allan Burk. “To me, it all starts with a forecast. When we can anticipate which product we will need in each market and when the product needs to be delivered, then we can work backwards to determine how we will meet that market demand.
“Over the past couple years, we had incredible challenges shipping out of our Canadian mills for various reasons," Burk explains. "We struggled to get enough rail cars to the point we had to shut down some production because we were making more product than we could ship. As a result, we were either not shipping enough product or delivering product late, so we were disappointing customers."
Last year the company began automating a lot of work that had been done manually—particularly forecasting the demand for each of their products that go in trucks and trains across North America.
“Forecasting product sales is a bit like weather forecasting. It's not perfect, but we are much more accurate today than we were five years ago," Burk says.
The company has also increased its logistics options by including two more reloads across rail and truck lines.
“By adding these reloads, we can fill our target rail capacity by diversifying the carriers. We can load product on trucks and move it from the mill to another rail line if we can't ship all product on a single rail line," Burk says.
By working on automating and tweaking its logistics, the company soon realized even more benefits of supply chain management.
Not only did the new technology allow their company to deliver shipments faster—and to deliver more products more efficiently—LP's employees now have more time to spend on other, more productive ways to help the company grow.
3. Improve communication and the benefits of supply chain management will multiply.
David Altemir, is the president and senior consultant at Altemir Consulting, a Dallas-based firm that specializes in lean manufacturing and supply chains, among other things.
One of his clients had a supply chain that sourced raw materials from China. Sub-assemblies were manufactured in the Caribbean and the final product was assembled in Texas.
“The problem was that the quantity and timing of material purchases and shipments was out of sync with production demands," Altemir says. "Some sites ended up having too much inventory while others were starved. The production rate was severely hindered for over two years due to material shortages at various points within the supply chain."
Altemir helped the client optimize target inventory levels at all the sites and made sure that purchasing signals would be triggered at the right time.
The shortages stopped, the client ended up carrying less inventory and production rates shot up by 400 percent within nine months, he says.
And all of that, of course, helped Altemir's client's bottom line.
Just as taking better care of yourself can bring forth a lot of new, positive changes, analyzing, examining and improving your supply chain can do the same. Take care of your supply chain, and it'll take care of you.
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