Good supply chain practices improve performance

Business
Supply chain management theory underscores that, the success of the firm is not entirely dependent on its own activities. Objectives of the network partners should be aligned and in sync to meet and exceed the expectations of the final customer. In a supply chain, the focal firm is the one linking the upstream and downstream partners and within that firm there is a supply chain with an internal focus.

Supply chain management theory underscores that, the success of the firm is not entirely dependent on its own activities. Objectives of the network partners should be aligned and in sync to meet and exceed the expectations of the final customer. In a supply chain, the focal firm is the one linking the upstream and downstream partners and within that firm there is a supply chain with an internal focus.

supply chain management with GIBSON SIBANDA

It’s of paramount importance for the focal firm to identify the supply chain members that are vital to the link, the processes that have to be taken into consideration, and the type of integration that is needed to link the different processes. Having said that, the focal firm dictates the pace and drives the best practices to achieve superior performance. Procurement practitioners play a crucial role in adopting and implementing best supply chain practices. these include but are not limited to ensuring improved supplier performance, cycle time compression, inventory yield maximisation, supply chain segmentation, utilisation of meaningful matrices and employing supply chain technology.

Increase inventory velocity Inventory must move quickly and turns must be high. It must flow from suppliers or manufacturing sites to customers effectively and efficiently. It’s also poor supply chain practices to be inventory rich and cash poor. Inventory is a form of waste — this is especially so for class A items — high value with low stock turn ratio items (normally these are 20% items constituting 80% of the total stock value and many class B items, which are items characterised by medium to high value with medium to low stock turn ratios. Products sitting in warehouses are limited as much as possible and pose serious financial challenges through reduced working capital of the organisation.

Implement lean logistics in supply chain management Lean thinking leads to analysis of business processes to systematically establish the baseline of value-adding processes and to identify incidence of seven wastes. Lean complements supply chain management, both emphasize pulling, not pushing products through the supply chain. Lean removes the waste created by excess inventory and time and the need for supplier performance.

Improve supplier performance success of the focal firm starts with good supplier performance. Suppliers must deliver quality items and do it completely, accurately and on time. Collaboration with suppliers is important whether products are finished goods or raw materials. The need for strong supplier performance cannot be overemphasized. Coordination and collaboration improves supply chain as this is done through use of Collaborative Planning Forecasting and Replenishment (CPFR) data and information sharing is the backbone of the CPFR. Continuous monitoring and sharing of supplier performance and results feedback leads to improved supplier performance.

Compress cycle time Cycle time runs from the time the need for a product now or replenished is determined and goes until it is delivered to the customer or to the store. The length of global supply chains adds to the challenge of logistics. A clear policy should be adopted with special interest in global supply chains as a special case with regards to the cost of running out of stock, thus dissatisfying the customer versus the cost of inventory holding. The policy which yields the greatest results should be adopted.

Utilise meaningful metrics there are numerous measures for companies and their supply chains. Many are for the sake of metrics with little meaning to cost and customer satisfaction or with little value in measuring supply chain performance. Meaningful metrics are orders delivered complete, accurate and on time. Time related performance measures such as days of inventory on hand, cycle time and cost related measures contribute to firm performance.

Segmentation of the supply chain too many firms have one supply chain approach for everything. This monolithic approach handicaps performance, diverts resources and creates static noise from external and internal sources that distracts the supply chain organisation. Firms that practise best supply chain segments the supply chain and focus performance where it is most beneficial. Instead of practising one-size-fits-all supply chain management, their tier is based on profit margin, days of inventory, and other similar important ways.

Employ supply chain technology Supply chain execution technology is important to managing a global supply chain. The technology must provide visibility throughout the entire supply chain. Tracking and tracing is nice but it misses the important factor. It is not about the container or pallet of product, as the key is to manage the customer-purchase or build order through to delivery. Technology, especially when tied to collaboration, can provide the desired results. Whether a firm is looking to improve its performance, move into direct to market (D2M) or e-commerce, it needs to use best supply chain practices.

Gibson Sibanda is a member of the Chartered Institute of Procurement and Supply (MCIPS) and is secretary of Cips Zimbabwe branch. The views expressed in the article are entirely personal. For feedback you may contact him on [email protected]