The first step to improving your supply chain is very basic: you have to understand what is working and what is not. Where could improvements make a significant difference in its performance? One of the best ways to determine these critical facts is to undertake a supply chain assessment.
While input from your own supply chain professionals will be invaluable, those totally consumed in the day-to-day running of the elements of a supply chain frequently lack the time, the objectivity and enough visibility into the big picture to conduct an across-the-board assessment of the supply chain strengths and weaknesses. Outside consultants, however, can be very useful in conducting these assessments.
But how can a busy executive know which consulting firm will provide a meaningful assessment? Unfortunately, anyone with a business card can claim to do supply chain assessments. Here are some guidelines for what to look for before engaging a firm to do a supply chain assessment.
The Consulting Firm
Many consulting firms will claim expertise in almost anything. A firm which does consulting on finance management, corporate strategy, shareholder value, and oh-by-the-way supply chain effectiveness, is frequently a "jack of all trades, master of none."
In the 1920s, the Gerber company made a wide range of canned food products for adults. When they decided to concentrate on baby food, they adopted for many years the slogan of "Babies are our business-our only business"-thus differentiating themselves as baby food specialists.
Similarly, a consulting firm whose only business is supply chain will provide a much more productive supply chain assessment than one which sends in generic "experts" who purport to be able to analyze anything. Firms which focus entirely on analyzing and improving supply chains have a large institutional knowledge base of what has and has not worked in scores of other companies, enabling your business to leverage other companies' mistakes.
The supply chain in almost any business is a complex beast. Like the economy, it almost never conforms to "the theory" of how things are supposed to work. Only those who have been in the trenches performing supply chain functions themselves will bring the critical real-world knowledge to get to the heart of supply chain issues in a hurry.
• Look for consultants who have worked as supply planners, demand planners or S&OP leaders -not just in IT or as consultants in the supply chain. And don't look for academics with only "book learning" to bring to bear. People who have gotten their hands dirty will understand what your own supply chain personnel are up against. Naturally, you will need to work with the consultant about the unique aspects of your business, but you won't have to waste time educating him or her in supply chain concepts in general.
• Equally important, look for consultants with domain knowledge in the type of business you are in. The supply chain for a retail store is vastly different from that for a chemicals business. While an exact match is not necessary, domain knowledge of similar businesses within your industry enables the consultant to know the right questions to ask, to know more about the problems others in your situation face, and to be able to leverage what works for others in your industry to what may work for you.
• Look for someone who listens well. A consultant who, in an initial interview, spends most of his time spouting his credentials (articles written, courses taken, official certifications) instead of asking about your business and its pain points is probably someone who won't be listening well to what you need throughout the interview process. The result will likely be a pitch for a pat "one size fits all" solution, which really fits none.
• A second aspect of listening well is knowing when to prick up one's ears. While most consultants will claim a structured interview approach (which is indeed valuable as a starting point), the differentiator for an outstanding consultant is the ability to recognize in a response or offhand remark a "red flag" area not on the structured question list but needing further inquiry. Frequently these are the unique or hidden issues specific to an individual business and perhaps critical to an improvement opportunity.
All companies providing supply chain assessments will tell you they interview your supply chain personnel at all levels of the supply chain. This is, of course, the key starting point of an assessment. But how do they go about organizing these interviews? Is there a structured methodology to be followed, or is it random chats? Do they know what they're looking for?
Look for a firm which can provide you with the issues it will concentrate on. Here's an example of areas of focus for a productive assessment:
1. The level of coordination between different operations from forecasting to manufacturing to order fulfillment, as well as the effectiveness of the current supply chain planning operations.
2. A comparison of the operations with best-in-class operations to determine areas of improvement.
3. An assessment of the information technology systems being used to support the supply chain, to identify specific gaps and improvement potential.
4. Business process changes and organizational needs to support a best-in-class supply chain operation.
The last point is critically important. Studies of supply chain improvement projects have proved that implementations of even the best information systems tools, without accompanying business process changes, have not produced the expected results. An assessment which looks only at systems or only at processes-and therefore recommends changes in only the one or the other-will inevitably be less effective than one which emphasizes the need to modify tools and business processes simultaneously in areas where major deficiencies are found. Furthermore, there are usually many areas where business process changes can result in more efficient use of the existing tools, minimizing expenditures and maximizing the benefits of the assessment.
"Best in class" also deserves some definition. Yes, of course there are some "best practices" to be aimed for, but they are flexible and generic enough to fit many ways of doing business.
Beware the zealot of any single supply chain management methodology. Here, for example, is a statement from a yes/no checklist used by one firm for analyzing supply chain effectiveness: When the quota for the shift has been met, the work crew shuts down the production equipment and uses the remaining time for process improvements.
A stark statement like this indicates a lack of understanding of many aspects of the supply chain. Is this a bottleneck step in a discrete manufacturing operation? If so, perhaps it shouldn't be turned off but rather the improved performance should be dialed into the planning of all other stages of the production process. Is this a process industry, such as chemicals? If so, one doesn't just "shut down" chemical reactors; other methods have to be used for ensuring that demand and supply are coordinated.
"Use what works, regardless of the theory" should be the guiding principle for recommendations for managing a supply chain.
The deliverables from a productive assessment should not be a bunch of vague generalities. Solid deliverables frequently include the following:
• A map of the current state of the supply chain.
• A map of the desired future state of the supply chain.
• A list of "low hanging fruit" improvements that can be made at little or no cost. For example, an S&OP meeting might be moved from afternoon to morning so that the European personnel of a global firm can attend by phone. It's a little thing, but one frequently not noticed except by an outside observer.
• A detailed, prioritized, step-by-step path forward for moving from where you are to where you need to be in supply chain management. Frequently, this list will include organizational changes, business process changes, and tool improvements as necessary to support the required business processes.
• Ideally, a database of your own historical supply chain performance will be provided for further internal analysis (along with the results of the consultant's analysis of the same data).
• Which customers most frequently order with short lead times? (How does this affect supply performance?)
• Which customers are getting the best customer service?
• Which products, customers, or product/customer combinations are most profitable? (The 80-20 rule is frequently even more pronounced in real life.)
• Are the most profitable customers getting the best customer service? The answers are frequently surprising and disappointing.
• Are there trends in the data that would help with planning, such as orders much heavier in the first half of the month than in the last half?
Having a tool for analyzing your own data provides a veritable cornucopia of knowledge you can put to good use in optimizing your supply chain.
There are a large number of companies and individuals in the consulting business, making for an often confusing array of choices. Using the above-listed basic qualifiers can help make that task less daunting. And, of course, ask around. If you do these things, most likely you will not be disappointed.
Jane Lee is director of supply chain solutions at Supply Chain Consultants, Wilmington, Del. Application of SCC's Zemeter software tools range from managing demand and inventories to scheduling production in the chemical, glass, semiconductor and food processing industries. Visit www.supplychain.com for more information.
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