Companies involved in the production and sale of goods will have well established supply chains, possibly unchanged for a number of years. The ideology of “if it isn’t broke, don’t fix it” often applies here. It is, though, necessary to review and sometimes change things if you want to keep up with better methods and, of course, there might be serious financial savings to be had from changing something. It is definitely worth investing in supply chain project management.
Here are a few things to look at regarding your supply chain
Objectives and strategies – delivery of your objectives needs a good strategy. The MD might look back on a year’s trading and declare that the company needs to, for example, find a way of cutting down the cost per unit of incoming raw materials. That objective will certainly increase profitability but there has to be a strategy in place to achieve it.
Why is it there? A company that has been established a long time will have warehousing originally designed to fit in with your production lines and your customer’s needs. Things change though and it may be that having your storage premises in that edge of town location is actually wrong. As customers’ needs and locations change then so must the supplier, hence the question above. If it shouldn’t be there, move closer to the motorway junctions.
Lack of “fat” in the supply chain
If you are getting complaints from customers that they are not getting timely or complete deliveries, there may be a case for beefing up your supply chain. For economic reasons you might choose to have minimum stock levels but you cannot afford to let down important customers. Some redesign of the supply chain should ensure that you can cope with all eventualities.
Fear of the unexpected – sometimes management get nervous about possible disruptions to the supply chain. While interest rates remain low, the company’s inventory costs should also remain low but if there is a threat of a rise management may decide to increase deliveries of stock. This might protect on one front but damage profits on another – more deliveries means more transportation costs. Natural disasters, such as the Icelandic volcanic eruption, caused severe disruption to European air transport and events such as this can destabilise the best run supply chains.
Too many orders, not enough product – this can occur where sales and marketing effort outstrips the production line output. While one half of your organisation is celebrating their success the other half are running around in circles trying to keep up. A supply line re-think is the obvious requirement here. An example might be to trim old products from the output schedule when replacement ones are developed. Having tens of thousands of lines might not be such a good idea in the long run.