Supply chains come in all shapes, sizes and complexities. And supply chain management needs to adapt and plan ahead to keep everything flowing smoothly. That is why we will discuss how you can get the most out of your unique supply chain in this blog series. To guide us through this series we start each of our topics with a meaningful film quote that explains the core of our story.
The somewhat modified quote that inspired us for the first topic:
“Supply Chain is like a box of chocolates; you never know what you’re gonna get.”
Just as the unpredictable life of Forrest Gump, a company’s portfolio can become very complex and its supply chain equally challenging to predict. So, what can be the impact of a complex portfolio on your supply chain and how can you deal with its impact as a company? In this blog I will provide possible answers to your challenges.
The challenge of managing a complex portfolio
The modern supply chain has evolved to meet new demands and supply chain challenges. A complex portfolio is perhaps one of the most crucial challenges you can encounter and that needs to be overcome. A combination of consumer expectations, retail demands and the diversity of suppliers creates significant hurdles throughout the supply chain network.
One of these hurdles is delivering products with a diverse set of parts on time in full (OTIF). For many suppliers it’s difficult to combine a complex set of parts for their products without some margin of error on delivery. I like to explain this problem using an example of the racing world: Formula 1 constructors have to make choices when developing their racing cars. On the one hand, they can focus solely on max speed and enhance your engine capabilities, but this will be detrimental to how the car accelerates and handles tight corners.
You always have to make choices in your supply chain as well, and – just like in an F1 team – you have to make these together with other colleagues or departments in your company. Do you focus on speed of delivery, on convincing promotions, or do you improve the quality of your products or services for instance? In facts, it’s not about just speed or just downforce, it’s about the right mix to be on pole position.
How to optimize a supply chain with a unified approach
Effective supply chain management, much like a successful F1 car, can offer speed, durability and flexibility for companies. So overcoming challenges to keep things running smoothly is a top priority for supply chain professionals. First of all, you need to make the overall decision of what you want to be known for as a company and then communicate this set of goals throughout your business. Only when every department follows those same basic principles, you will be able to handle your complex portfolio and supply chain with joint forces.
A perfect example of how this can go wrong, I experienced recently through a promotional campaign of a German brewer: ‘buy a six-pack and get 2 bottles of Weiss Beer free’. This kind of promo can be great for your marketing and short-term sales, but what I see often is that production wasn’t informed beforehand and didn’t have a chance to increase their output in preparation of the promo. The result: beer delivery shortages in the short term and a demand drop right after the promo. That is why clear and frequent communication with all stakeholders in your supply chain is necessary to avoid these adverse effects of an originally great marketing idea.
Whether you choose to only produce a qualitative A-brand, or focus on low-priced white labels, or you offer a wide assortment of both: your choice determines which business priorities and KPIs will get precedence over others. The choice for quality means a better customer service, but also higher costs in production, just as the choice for low-priced products means a lower cost in production, but also a less exceptional customer service. Whatever your fundamental choice is, you need to make all the people in your company aware of what it means for their role, their priorities and how each department can work together to achieve the goals. As this chain of reactions goes through every level of a company, it’s also crucial you can map these interdependencies and follow-up on all the causes and effects that make up your supply chain.
How to optimize your complex supply chain in 3 steps
STEP 1: Awareness of the impact of supply chain to the whole business
The first thing I do for my customers is make the management of the organization aware of the impact of their supply chain on their whole business. How much value can it bring, which competitive edge it can provide, and how much it can benefit them to optimize it in the short- and long-term. It always amazes me that 80 to 90% of C-levels underestimate the potential power of their supply chain. That’s unfortunate, as in my experience, it can be the number 1 value creator for a company. Once you have management on board, they can start spreading the message of the importance of the supply chain throughout the rest of their organization. STEP 2: Get different departments working together on optimizing the supply chain instead of working isolated
A prime example is the collaboration (or lack thereof) between Sales and Supply Chain departments. These teams often have a different way of thinking, the one focusing on selling as much as they can, while the other struggles to keep up with the fluctuating demand. Creating awareness in one team of how the other team thinks and operates is therefore crucial, and the one thing to improve this is frequent communication and collaboration moments between those departments that are this closely linked to each other.”
STEP 3: Invest in knowledge and planning tools
To help form these internal collaboration processes, we guide our customers with our experience, workshops and top-notch supply chain planning tools. Even when a supply chain planning tool and its dashboard is in place, we continuously adapt it to your changing needs and the requirements of the market. And when you the hang of the basic processes, we can add other in-depth features as they see fit. But the key ingredient behind this all remains, in my opinion, your company’s vision: what do you want to achieve and how do you want to get there. If the vision is clear from the beginning, the rest will follow. With everything you do, with every decision you make; keep the end-goal in mind.”
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