Gaining competitive advantage through Supply Chain design

Supply chain design helps companies compete and win by giving them the tools to connect all the parts and capacities of their supply chain in a rational, measured and efficient manner – and that network should be meticulously designed, it should not just happen.

By Rod Stout, Business Modelling Associates

Supply chain design enables the other tools – the ERP, WMS, TMS and APS – to do their jobs in an environment that maximises their effectiveness. These planning tools, as valuable as they are, are only as good as the network in which they function. The skilful design of the network is what gains competitive advantage.

Evolution of a supply chain

Most corporate supply chains evolve over time through a series of individual decisions made in the face of immediate business needs. These decisions often appear to make perfect sense at the time and for the specific issue being addressed, but what is the actual cumulative effect of such decisions? These decisions probably seemed right at the time they were made; they saved a capital expense, or made an individual part of the company more profitable, or maximised production capacity at a single facility. But over a longer period they created inefficiencies in the supply chain. Most companies make dozens, if not hundreds, of decisions that impact their supply chains each year. If each one is made in a vacuum, the inefficiencies can multiply and over time cripple a company, leaving it with a supply chain that eats up precious resources and negatively impacts the bottom line. If these decisions are made in a supply chain design environment, especially one where solutions can be optimised and the results simulated, these decisions can be vetted to understand their total effect on the supply chain. Inefficiencies can be corrected or prevented from ever being implemented.

Design vs planning

Planning systems are incredibly valuable for running the day-to-day aspects of a business. Planning and execution systems automate, streamline and optimise the existing operations of an organisation. They keep many of the important parts of a company running smoothly, but what if the existing operations are not designed properly or not correctly positioned in relationship to each other? How well can the supply chain perform if the foundation upon which it is built is flawed from the start?

Creating SC design competence

To use supply chain design as a competitive weapon, a company must first develop a competence in the process of continuously engineering their supply chain. Because supply chain design is very much a ‘human process’ it is not enough to simply purchase and implement a software tool. The companies that do this best focus on three core elements:

The technology: When selecting the right supply chain design technology, a company should first determine the types of questions and challenges that their business will need to address. It would be best to find a single application or software platform that addresses each of these needs to avoid additional maintenance, training and IT infrastructure issues. The system should be able to scale to address the size and scope of models that the company will be building. As important as the technology itself, the software supplier should be able to support the organisation through continued innovation and system maintenance.

The individual: Supply chain design is a very human activity, so it is important to invest in the designers as much as the technology. Even with the most user-friendly software, the key analysts and modellers will require training, mentoring and support to become proficient as designers. Since accurate operational costs and enterprise data are essential to supply chain design, creating a crossfunctional team to provide access and validation of this data is also critical.

The organisation: Finally, to achieve excellence in supply chain design, it is important to implement a methodology and systems that will facilitate the retention of project knowledge. IT systems can enable knowledge management, but the practice of knowledge management has to be fostered throughout all levels of the organisation. To keep the supply chain design team focused on key business initiatives, corporate executives must know what questions the team can answer and be kept updated through consistent delivery of key metrics so they can understand the progress that is being made and the importance of the results.

By establishing these three key pillars, a supply chain team can be successful, as an integral, repeatable process within the organisation. The design team will be able to execute supply chain design reviews at regular, scheduled intervals and can also add value whenever decisions are being made. In addition, they will represent an important resource when the inevitable unforeseen circumstance occurs that shocks the supply chain. While a competent supply chain design team can’t prevent a natural disaster, they can make reacting to one easier and less costly.

Date: 27 Jun 2013


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