5 Best Practices for Supply Chain Management Report

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Martin Nehls Auren E. Kaplan 2012-05-14

1. Ensure Supply Demand Synchronization

Ensuring the synchronization of supply and demand is important in that it prevents overbuying. Rather than allocating money you dont need to spend, you can use it in other areas. In this situation, you are not tying up the money. The idea is similar to the just-in-time principle of lean manufacturing. You dont want to have a warehouse full of product that never gets sold. By synchronizing supply and demand, you ensure that you have the parts you need, and not more or less. Moreover, it is the suppliers responsibility to get the parts there when you want it, and with synchronization, you dont pay until they deliver.

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2. Rationalize the Supply Base

Rationalizing the supply chain is an important best practice for improving processes related to supply chain management. The essential idea is to reduce the number of suppliers, particularly if you have numerous suppliers for a single category. If you can, minimize the number of suppliers you use per category. In doing so, you are able to direct more volume per supplier, and therefore save money by gaining volume discounts that would be otherwise unavailable if your supply chain was more spread out. When you rationalize the supply chain in this way, you reduce complexity as well as facilitate collaboration.

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3. Integrate Engineering & Sourcing

When developing a new product, the cost per part is higher. There is no tooling in place. Rather, everything is prototyped. There is a lot of time and money spent in the R&D processes to ensure that the new product is developed successfully. A best practice is to integrate both sourcing and engineering into your supply chain management, in order to avoid inventory write-offs or shortages of necessary components. If you integrate the engineering and sourcing department into the supply chain, then you get the true cost of the new product. You dont overlook having a certain number of engineers working on a part for a certain number of hours in order to see if its worth including in the product. Unless this is integrated into your ERP for supply chain management, you would never know about these necessary and very real costs. Take an Excel file for example. This file, with line items for all costs, allows you the capability of looking at the total cost of that new product. In this way, you do not overlook line items for engineering, R&D and sourcing that are in fact integral to the development of the product. We talk a lot about product lifecycle costing on our blog, because it is an important way to save money across a long period of time, from the initial development phase of a product all the way to its market and recycle phases. What we are describing in the paragraphs here is a focus on that initial stage in the products lifecycle, when costs are high due to prototyping and when costs are often unknown. Incorporating engineering and sourcing allows the necessary personnel to see the true cost of a given product, and then make better decisions based on that more accurate information.

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4. Continually Measure Performance Metrics

When evaluating your supply chain performance, it is imperative to set parameters in advance that you will then use for measuring. A director of purchasing or procurement should sit with their purchasing officers and get feedback from all of them: information that is important to them, information relative to their specific facility, and information about product costs. In other words, upper management needs to set parameters on needs based on the company direction in order to ensure that your supply chain is performing to your most exacting specifications. For example, ISO 9000 was a performance standard that became very popular for manufacturers during its initial rollout. It is important to have quality assurance programs, so that whenever something fails, the right person checks the reason why. Then, they can implement that error as a parameter for the next audit. In this way, errors become the next round of performance measurements and the supplier quality process is constantly refined.

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5. Deploy an Integrated Solution

Treat your supply chain as you would a carefully built (and hopefully authentically built) personal network. Reward the people that have been with you from the start, and give an edge to people that have positively served you in the past. You want to cultivate long-term mutually valuable relationships, and you will find that in doing so you will realize benefits and gains you had not previously been aware of.
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For example, you may decide to give an edge to a supplier with which youve done business in the past and reward them with a long-term contract or preferred supplier status. Suppliers may know information about your business that you dont, simply because of their proximity to specific areas (for example, a key part). A supplier could provide a reverse angle look, offering useful feedback on what your company can do as a big buyer. A supplier may see an opportunity for you to save 10 percent on cost without doing less business with them simply due to that proximity and that window into a specific area of your business.

It is additionally important to look to companies that will work with your ERP solution rather than find somebody outside who will have to do a remodel of the whole system. Companies invest a lot of money on implementing an ERP, training their staff, and securing updates. Often, there are costs for years. If you can streamline your supply chain by working with a company that fully integrates their solution into your ERP system, then you are going to increase both efficiency and flexibility, and positively impact your ROI.
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About POOL4TOOL Consulting Services: In addition to POOL4TOOLs natively integrated SRM suite providing offerings in procurement, sourcing and supply chain management, POOL4TOOL offers strategic consulting to support new projects and bring them to fruition more quickly and successfully. Using an academy strategy, POOL4TOOL offers three tiers of support: Basic consulting includes SRM, project management and eProcurement support. Professional consulting includes category management and product lifecycle costing (PLC). Expert consulting focuses on process setups, analytics and workflow design. Our consulting academy is customer based, with functional training according to customer rollout.

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Consulting can help with strategic decision focus, the standard academy approach, blueprint audit, escalation of project approach, rollout audit, and/or rollout service covering every section from sales to testing, implementation and live operation.

About POOL4TOOL
About POOL4TOOL
POOL4TOOL is a natively integrated SRM and CRM suite, providing procurement, supplier relationship management, eSourcing, and supply chain management for automotive, manufacturing, consumer products, and services companies. We work with companies like Carl Zeiss, Visa and more to optimize their supply chains across the globe. To learn more about how POOL4TOOL can help you manage risk and optimize your supply chain, visit our website at http://pool4tool.com.

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