Could your supply chain be your secret weapon?

Retailers and manufacturers have already discovered how leaner and meaner supply chain management can give them the critical edge over their competitors, whether it’s by cutting costs, improving time-to-market or speeding up response times. The same advantage exists for all kinds of organisations, from developers to energy companies, but it is missed by many.

Reaping the rewards

For retailers, smarter packaging helps to cut handling, storage and shipping costs (and keeps their increasingly eco-conscious customers and shareholders happy). For manufacturers, integrated planning can make production smoother, which in turn means there’s no need to keep stock as a safety net.

There are other kinds of businesses that can also benefit from a more proactive approach to managing their supply chain. Developers for example, can challenge their suppliers to do things like improve delivery time or cut out defects and waste. Financial institutions can team up with service providers to deliver more services with fewer in-house costs, and some aviation companies have saved up to 50% on the cost of materials by cutting out the middleman.

The practicalities may be different for every sector, but the overall message is clear. Taking control of your supply chain can help your business perform better by making it more agile and competitive.

Getting the right blend

Most companies focus on certain parts of their supply chain over others. Asset-rich businesses (like oil and gas or utilities) tend to focus on cutting procurement costs - while neglecting the opportunity to understand the Total Cost of Operation (the Capex and Opex lifecycle). Or they focus on the optimisation of asset performance including maintenance, with longer-term
or less obvious consequences. They also focus on the top tier of suppliers,
turning a blind eye to the lower levels of the supply chain which could account for up to 70% of total procurement costs. This ‘tunnel vision’ is one of the reasons we see so many of these businesses outsource their operations, only to bring them back in-house within a few years.

First steps

A Forensic Cost Analysis (FCA) is a good starting point. It’s an easy way to pick up on any overlooked costs in your supply chain, so you can find ways to fix them. It is also worth remembering that a responsive supply chain is built on collaboration, transparency and cost-efficiency.

There are four key ways to make your supply chain more responsive:

1 Strategic Alignment: Making sure your supply chain and overall business strategy match up

2 Integrated Planning: Using consistent planning processes across every part of your business

3 Improved Processes: Regular reviews and ongoing improvement

4 Managed Complexity: Delivering more for your customers without complicating things behind-the-scenes.

Putting theory into practice

After casting a critical eye over their supply chain, a UK steel company decided to focus on their coated steel building products.

They realised that their processes were geared towards clients with continual demand, rather than ‘spot’ customers with less predictable needs. In response they came up with a new short lead-time production process, so now the spot customers can still get the range of colours and coatings they want at short notice - and track the whole order in real-time. Simpler production and better service.

Or there’s the example of a major developer in the Middle East that was
using three different contractors for concrete delivery. All three contractors
were getting their concrete from the same supplier - but there was up to 50% difference in their delivery times, unlike their biggest rival, who’d stolen a march on their competitors by putting well-defined supplier management and metrics in place.

We can help

In our experience, most businesses come up with initiatives to try and improve their supply chain. But, all too often, they’re centred too heavily on procurement, at the expense of other essential areas. We can help you strike the right balance to suit your own business plans, sector and markets.

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