Executive Briefings

Tackling the Challenge of Supply Chain Optimization

It's no easy task, given the complexity of today's global supply chains. Henri Duhot, global transportation and logistics manager with Echostar Technologies, drills down to some of the processes and skill sets that companies must possess, in order to address this crucial issue.

The first step in enacting supply-chain optimization is to look at the difference between price and cost, Duhot says. Managers should be tracking trends in the rise of expenses related to fuel, capacity and security compliance, to name but a few key areas. They can ease the pain of fuel-price increases, for example, by drawing up three- to five-year scenarios. The trick lies in identifying which expenses are climbing and which are remaining level. Using that information, companies can calculate their end-to-end supply-chain costs.

Good capacity management offers additional opportunities. Instead of buying goods in aggregate and putting all inbound materials into safety stock, companies should differentiate on the basis of value. They can then "feed the lane" according to specific vessel and flight departures. "You essentially speed up inventory turns based on the value [of the product] rather than the whole project," he says. "If you have one month's worth of front-end inventory, you can cut that in half, knowing that you have something moving ... in the pipeline."

Security and compliance are difficult issues for every global supply chain today. For high-value products, Duhot recommends that companies deploy global positioning system technology on trucks, along with exception management systems to ensure that shipments are where they're supposed to be. They should also embrace the voluntary Customs-Trade Partnership Against Terrorism (C-TPAT) initiative, to improve oversight of suppliers and gain preferential treatment by Customs for imported goods.

Cost control is essential, but the ultimate goal should be customer satisfaction. Duhot acknowledges the difficulty of quantifying the price of failure from a customer-service perspective. Nevertheless, companies should be acutely aware of the consequences. "If you lose a customer because of not fulfilling [an order]," he says, "the impact is a lot greater than any cost in the supply chain."

To view this interview in its entirety, click here.

It's no easy task, given the complexity of today's global supply chains. Henri Duhot, global transportation and logistics manager with Echostar Technologies, drills down to some of the processes and skill sets that companies must possess, in order to address this crucial issue.

The first step in enacting supply-chain optimization is to look at the difference between price and cost, Duhot says. Managers should be tracking trends in the rise of expenses related to fuel, capacity and security compliance, to name but a few key areas. They can ease the pain of fuel-price increases, for example, by drawing up three- to five-year scenarios. The trick lies in identifying which expenses are climbing and which are remaining level. Using that information, companies can calculate their end-to-end supply-chain costs.

Good capacity management offers additional opportunities. Instead of buying goods in aggregate and putting all inbound materials into safety stock, companies should differentiate on the basis of value. They can then "feed the lane" according to specific vessel and flight departures. "You essentially speed up inventory turns based on the value [of the product] rather than the whole project," he says. "If you have one month's worth of front-end inventory, you can cut that in half, knowing that you have something moving ... in the pipeline."

Security and compliance are difficult issues for every global supply chain today. For high-value products, Duhot recommends that companies deploy global positioning system technology on trucks, along with exception management systems to ensure that shipments are where they're supposed to be. They should also embrace the voluntary Customs-Trade Partnership Against Terrorism (C-TPAT) initiative, to improve oversight of suppliers and gain preferential treatment by Customs for imported goods.

Cost control is essential, but the ultimate goal should be customer satisfaction. Duhot acknowledges the difficulty of quantifying the price of failure from a customer-service perspective. Nevertheless, companies should be acutely aware of the consequences. "If you lose a customer because of not fulfilling [an order]," he says, "the impact is a lot greater than any cost in the supply chain."

To view this interview in its entirety, click here.