Supply Chain Management
My supply chain projects have clustered around two common root causes of inefficiency: too much variability and too little visibility.
Variability comes from many places. Promotional ordering. Agribusinesses’ seasonal harvests. Internal forecasting errors and misunderstandings across the supplier-customer interface.The cost of out-of-stocks (if they’re even tracked!) hurts both sides but particularly the supplier, who not only loses the current sale but also gives the competitor’s product a chance to delight the consumer.
Often, the underlying cause of the variability will lie outside the supply function, for example, in FMCG’s forward buying norms. Striving to smooth supply chain activity by increasing accuracy in the S&OP process is a common response but investigating ways to change the bigger picture can ultimately yield more lasting benefits.
Lack of visibility lurks at the interface between supplier and customer. Even with mutual goodwill, each party can inadvertently add costs to the other – or make savings harder to access. A shared-book approach can be commercially difficult but discounts that reflect avoidable costs and are built into terms of trade can send clear signals in both directions about more efficient behaviour. Also, business growth incentives, supported by agreed measures, can support the development of trust which in turn can make it easier to share information across the interface.
Or… you could find a way for each side’s supply chain manager to meet over coffee. I’ve seen that yield more cost saving ideas in twenty minutes than had been achieved in the prior two years. The simplest ideas really can be the best!