The RightChain supply chain model is designed to look holistically at the entire supply chain, says Lou Arace, partner at Logistics Resources International. This model eliminates pockets of sub-optimization that occur in other models when sectors are optimized separately, he says.
The RightChain model is based on the work of Dr. Ed Frazelle, president of LRI, director of the RightChain Institute and founding director of The Logistics Institute at Georgia Tech University.
Arace briefly describes a number of the model's process steps. The first step focuses on the customer and on formally stating customer service policies. "When companies look at this they typically find that they are making money on only a third of their customers and losing money on a third, with the remaining third being about break-even," Arace says. "Companies need to clearly understand which companies are in each category."
The second step is implementing a balanced, holistic scorecard that measures key performance indicators for the total supply chain.
The third step is to optimize the forecast. "A lot of companies have multiple forecasts throughout the organization but they usually are not aligned," says Arace. "Good raw data is very important in this process."
The fourth step focuses on procurement or RightBuys. A key question here is whether inventory strategy is optimizing the financial performance of the entire supply chain, Arace says. This is followed by inventory optimization, or making sure that inventory is deployed correctly.
Last, but not least, the model requires companies to closely examine their team of workers. "The point of all these steps is to make sure that the best strategies are in place all along the supply chain, but if you don't have people who can implement the strategies, they are not worth the paper they're printed on," says Arace.
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