Supply Chain Assessments: No Child's Play
10:45 AM MDT | April 26, 2010 | By JANE B. LEE
Jane, B. Lee, Vice President, Supply Chain Solutions at Supply Chain Consultants
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 your supply chain 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, therefore, 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 1920’s, 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.
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 currently 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 proven that implementations of even the best of 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 question 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:
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.