Many mid-market businesses never get around to crafting a comprehensive supply chain strategy, according to supply chain expert J. Paul Dittmann, Ph. D., author of: The New Supply Chain Agenda, and Supply Chain Transformation. And that’s a great pity, Dittmann says, because a written strategy is one of the most important tools a business can use to become more efficient and successful.
In fact, Dittmann has demonstrated that large enterprises that have effective, comprehensive supply chain strategies eventually experience higher profits and increased shareholder value over companies that do not.
At the mid-market level, however, many decision makers believe they lack time and resources and so must prioritize certain aspects of the business over others. Often, the supply chain is not seen important enough to merit scarce resources. But that’s not the case at the North America-based Hispanic and Latin American foods company, Goya.
Earlier this decade, the company had experienced strong growth, perhaps a bit too much for its own supply chain to keep up. The company knew it needed to make changes to continue to grow, and those required careful planning to successfully execute.
Goya understood, additionally that many elements of enterprise supply chain planning strategy and execution could also be applied to smaller businesses. Even without the deeper resources of larger companies, many mid-market companies have found that enterprise-sized techniques scale down well and can be just as effective at the smaller scale.
Here are some of the key high-level approaches that mid-market companies can adapt from their bigger business counterparts, as Goya did.
The most important aspect of a robust supply chain strategy is that it meets the current and future needs of the customer. Customers are more sophisticated and demanding than ever, and understanding them—will inform your long-term supply chain strategy. Talking to them directly is the best way to find out what they need.
Companies can proceed by next comparing their supply chain practices against best practices in other companies and industries, to determine whether current practices will meet customers’ future needs.
It’s important not to restrict your chances of success by examining best practices only at companies that look like yours (though checking out what your closest competitors are doing certainly does not hurt).
Here’s why: Best practices often transfer amazingly well across industries. For example, “lean” warehousing concepts are likely to work just as well in a Walgreens warehouse as in a Pfizer warehouse. And best practices in inventory management and forecasting can serve a heavy manufacturer like Whirlpool just as well as they can serve a manufacturer of handheld devices.
Technology can help provide end-to-end visibility across all supply chain channels, and it can speed up process steps. But it’s crucial that mid-market businesses don’t just adopt the latest technology just for its own sake. A solid supply chain strategy will place the customer’s needs front and center when it comes to establishing the need for new technology, and determining the correct solution.
Another reason to lean on the right technology: With the breadth of new technology available today, including cloud-based services, mid-market companies can invest in supply chain technologies at less cost than ever before.
Unlike some other business processes, the supply chain is subject to many external forces. Mid-market businesses can prepare for potential disruptions by being knowledgeable about the latest trends in the supply chain, and analyzing in advance how their business will be affected by a multitude of different event types. Disruption can be deeply damaging—and potentially for a long time to come—from lost customers, to lower revenues, even to loss of brand value.
Despite the potential consequences of supply chain disruption, however, a recent survey suggested that around 60 percent of healthcare companies do little to prepare for it. Many companies lack even a process to identify, prioritize and mitigate all the risks.
But this is a crucial step that should be taken. Even making the most basic preparations with for a product recall and putting in place reverse logistics capabilities before they are needed can go a long way towards ensuring your company will survive the unexpected.
Paul Dittman recommends you make the assumption that the overarching goals for your supply chain will likely call for, among other things, multiyear targets for cost reduction, inventory reduction, and product availability improvement. So choose the critical new supply chain capabilities and prioritize them into a project plan that delivers those goals at a rate of spend your company can afford.
“Supply chain executives must speak the language of the executive suite, and the board of directors, and sell their recommendations based on how supply chain excellence will enhance the top line, minimize business risk, and generate major improvements in cash flow and shareholder value,” says Dittmann.
Goya enacted many of these “customer-first” strategies to review and overhaul its supply chain and sustain its impressive growth.
To begin with, the company created a roadmap for future developments, which led to a technology overhaul over a five-year period including new warehouse and transportation management systems, to help manage inbound freight. Next, the company switched to a modern supply chain management system, which helped improved the accuracy of demand forecasts, and sharpened inventory planning and ordering practices.
Now, the company is poised for continued growth and has an efficient supply chain that contributes to profits and is resilient enough to keep its offerings available to families everywhere.
According to Dittman, strategy development in demanding environments can often takes a back seat. “But delivering supply chain excellence in the long run cannot be done without a documented, multiyear supply chain strategy, he adds. And as companies like Goya can attest, it’s worth the effort.
In our next article in this series, we will take a deeper dive into the specific tools successful enterprise-level companies are embracing to make their supply chains more efficient, and how midmarket companies can employ these in their business.
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