Supply Chain Transformation

Nowadays, businesses in different industries are focusing on reducing their cost with the uprising of several commodities such as copper, aluminum, steel, and other prime commodities. With the uncertainties in the fuel prices, companies are focused in finding ways to offset the additional cost in the business. And as many of us know, Supply Chain is one big chunk where cost reduction opportunities can be found.

A lot of companies are engaged in transforming their Supply Chain. Continuous efforts are being exploited to ensure that the cost effective means of managing the business are realized. In a recent news from SC digest, Dell plans to sell off its manufacturing facility as part of their strategy. Other industries have considered this to be beneficial in their cost reduction effort. By outsourcing your production to a Contract Manufacturer, you have freed yourself a large amount of overhead cost associated with running the production. The burden of productivity improvement and utilization are relieved as the CMs will have to work on it to ensure profitability on their part. Same as other outsourcing initiatives such as logistics, material handling, and procurement, it will help the company to focus on their core business. However, is outsourcing really an advantage? Definitely it has benefits, but there are also pitfalls in having one if not implemented properly. It is important first hand to get a CM or provider that are experienced and are equipped in matching your quality standard. You wouldn't want to compromise your quality as you have a commitment to your customers. You have to ensure that business processes are put in place and that the agreement between you and the CM/Provider are well discussed. There are instances that after the contract has been signed, there are loopholes that are seen and would end up costly on the principal's part. Thus, depicting the objective of reducing cost.

Being Demand-driven is another strategy that executives are looking into. Focus is directed more on making sure that what is built is based on what the customer wants, more of a pull system rather than push. Lean Manufacturing is popular in most industries (especially in the Automotive Industry), and has proven to be effective in reducing inventory costs, optimizing packaging utilization, reduction of cycle time, increased productivity and other improvements driven by lean concept. However, is pull system applicable all the time? I will dwell on this issue in another topic. In another news, Kimberly Clark rethink its Supply Chain, which I think is leading them to the right direction as they continue to be flexible and obtain better cost savings. As Mark Jamison (VP of North America Customer Supply Chain for Kimberly Clark) said, "Our vision, ultimately, is that we want use POS to completely drive our replenishment production planning process." This is an example of applying Lean Supply Chain. Ultimately, if implemented smoothly, this vision will provide better result in their operation.

It is always best to look at how your Supply Chain is managed, and how it will be aligned with the current condition in the industry and in the economy. As in Manufacturing, Kaizen, is being observed all the time as there is no permanent in this world but Change. So be prepared in making your Supply Chain flexible and adaptable to the current situation.

On the right track

Individuals with a very clear career path plans ahead on how they would want to achieve their goal. Part of it is being able to manage different areas in the organization that he sees fit in helping his career mature, and opening an opportunity to develop new skills. In order to be on the right track, you should have a basic approach in managing your new assignment. I have been in this scenario many times and here the top 3 areas that I consider in running a new department (in a perspective where the overall company objective has been reviewed and understood).

1. Organizational Structure - important to understand the roles and responsibilities of each function, align their expertise on the current role, rationalize resource allocation, and look at any redundant function. The objective here is to ensure that you have the right person, right skill, and right function in order to yield optimum results. It is important to have a well structured team in order to be more effective in achieving its objectives.

2. Develop/Review Key Performance Indicators (KPI) -establish your KPI that will align to your company's overall objective. Specific measures in your key processes must be defined to address your performance objectives. All metrics must be cascaded to your team for common understanding. Make your KPI visible to your team members, and review it every day and take action on areas not meeting the target. If you want to be on the right track, it's best that you define where you will focus to achieve your goal.

3. Review Process Gaps - understanding your process is a good way to start on where you will focus your attention. Perform a Value Stream Mapping in order to identify process gaps. Perform Root Cause Analysis, and develop preventive solutions. Always review your processes based on the need and trend of your business.

There are other ways to approach in managing a new role, this works for me. I guess key is to set foot on the right direction and be clear on your objectives. At the end of the day it is the result that matters.