It depends who you talk to - some companies are flat out, others could hear a pin drop. There is still a significant amount of uncertainty in the marketplace and we’re all waiting for “the boom” to happen across various industries. Is it the quiet before the storm? (storm = good times that is)

When things are good, it is easy to become complacent (relaxed) and we tolerate certain costs (with some containment) – it’s also an excellent time to focus on improving customer service. When things are tough, we kick ourselves for not containing enough costs when things were good – this is when most companies focus on reducing costs, quite significantly. The key is to practice a happy medium and be consistent when times are good and bad, so that we are able to ride the rough weather and come out shining on the other side.

This article focuses on maximising value from priority markets during uncertain times and when times are good.

Let’s start by identifying what your customers want.

Is your company an SME or a corporation? It does not matter, we all want the same things when it comes to customer service.

Here’s a list of what corporations expect of suppliers:

• Deliveries in full, on time, error free
• Capability and capacity to meet their demand
• Cost effective and efficient operations and quality systems
• Innovation and high quality practices, products and services
• High standards for health, safety and environment.

Here’s a list of what corporations want to achieve:

• Reduced overall inventory costs and warehouse operating costs
• Reduced procurement cost (purchases / purchasing process cost)
• Improved responsiveness / reduced lead times to their customers
• Improved warehouse efficiencies
• Improved order management accuracy

To be competitive, you need to address what is important to your customers.

Now the challenge – cash is tight, resources are limited, no time to make improvements – but we definitely need to improve. Where do we go from here?

We need to focus on what’s going to give your company the biggest bang for its buck – hence where and what should you improve that will maximise the greatest return for your company?

We could just focus on the 20% of markets that generate 80% of your revenue – but we need to isolate the opportunity more specifically to ensure the benefits are definitely going to be realised on the bottom line. If your divining rod is on the blink, we’re going to need to rely on the facts and figures to isolate the opportunity – which defines the scope of your supply chain project.

Let’s gather some data.

Customers / Markets: Which customers or markets have the most significant impact on your supply chain? Which 20% of customers make up 80% of revenue? Which products and services do you supply to these markets? How much annual revenue is each market generating per product/service?

Suppliers: Which suppliers or commodity groups have the most significant impact on your supply chain? Which 20% of suppliers or commodities represent 80% of spend? What is the cost of supplying these products and services to each customer/market?

(Bring this data to the Supply Chain Excellence Clinic)


Example Supply Chain Definition Matrix:

Supply Chain Matrix	Customer / Market 1	Customer / Market 2	Customer / Market 3	Annual Cost
Product 1	x		x	$value
Product 2		x	x	$value
Service 1	x	x		$value
Annual Revenue	$value	$value	$value

(‘x’ denotes which products/services are supplied to each customer/market)


Once we have this data, we then need to prioritise which supply chains to focus on.

In simple terms – from the above example – your supply chains consist of:

• Supply Chain 1: Product 1 to Customer / Market 1
• Supply Chain 2: Product 1 to Customer / Market 3
• Supply Chain 3: Product 2 to Customer / Market 2
• Supply Chain 4: Product 2 to Customer / Market 3
• Supply Chain 5: Service 1 to Customer / Market 1
• Supply Chain 6: Service 1 to Customer / Market 2

Hence 6 supply chains. Let’s now find your priority supply chains. (Rest assure that a good portion of your customers will benefit from many of the improvements you make.)


This next part gets a little tricky.

Step 1: We need to identify priority criteria that we can use to score your supply chains against – for example:

• Supply Chain Revenue
• Gross Margin %
• Number of different types of products / services supplied
• Volume supplied
• Strategic importance of supply chain

Step 2: Then we use a comparative analysis to assign objective weightings to each priority criteria (I can show you how to do this at the Supply Chain Excellence Clinic – works a treat). For this example, let’s just use a 20% weighting for each criteria.

Step 3: Retrieve the above data (listed as priority criteria) for each supply chain, so that we can make an informed decision when we rank each supply chain (bring this data to the Supply Chain Excellence Clinic).

Step 4: Now we rank each supply chain against each priority criteria. Considering we have 6 supply chains in our example, our highest ranking is 6 and the lowest ranking is 1. For example – with the first priority criteria – ask yourself: From the data you have on Supply Chain Revenue, which of the 6 supply chains ranks the highest? (give it a ranking of 6) Second highest revenue? (rank that 5) and so on. Then do this for the next priority criteria and so on.

Step 5: Then multiply each ranking by the weighting to get the weighted result. Then sum the weighted results to get the Overall Rating.


Example Supply Chain Priority Matrix:

 

 

SC = supply chain


Take note of the highest Overall Ratings to narrow the scope of your project. You may choose to focus the scope of your project on a market channel or a product family or location. Narrow the scope of your project to concentrate on 1-3 supply chains. This exercise allows you to make an informed decision about which supply chains to include in your project scope.

Our next step is to measure the performance of the selected priority supply chains and then benchmark this performance against a world stage of similar supply chains. Prior to having the benchmark conducted, we need to identify which strategic performance attributes are important to these priority markets.

Competitive strategic performance attributes include: supply chain reliability, responsiveness, agility, cost and asset management efficiency.

• For example, if Supply Chain 1 was a priority supply chain, we can see from our example that the market being served is “Customer / Market 1”.
• Ask yourself, which of these performance attributes is the most important to this market? If we say “reliability”, then we are aiming for "Superior" Level performance in “reliability” for this market.
• Then ask yourself, which of these performance attributes is the 2nd most important to this market? The performance attribute you select is given an “Advantage” Level performance target.
• The 3rd most important is given another “Advantage” Level performance target.
• The 4th and 5th most important performance attributes are both given a “Parity” Level performance target.

Once we have made these decisions on each market, we submit our performance results to a benchmarking organisation to obtain results which will show us where we sit on a world stage in comparison to similar supply chains. This will illustrate the extent of our performance gaps.

We then set about closing the “Superior” performance gap first, by identifying the issues and improvement opportunities in material flow, work flow, information flow, business operations and systems, as applicable to that customer/market.

This information is then documented in the Supply Chain Strategy Action Plan, which identifies each improvement initiative title, key tasks required, responsible officers and timing to complete each initiative.

If cash, resources and time are restricted, again we still need to prioritise the order in which the improvement initiatives are addressed.

We do this by categorising the initiatives into:

• ‘quick wins’ (high return, low risk)
• ‘nice to have’ (low return, low risk)
• ‘sponsor issue’ (high return, high risk)
• ‘consider carefully’ (low return, high risk).

A cost/benefit analysis of each improvement initiative may also be required to aid decision making. The timing of addressing the improvement initiative s in the Supply Chain Strategy Action Plan is then updated.

Then we get on with the job of fixing the highest priority supply chains with the highest priority improvement initiative s that will result in achieving Superior performance for the selected customer markets. Focusing here will maximise the greatest return for your company.

- Article by Sharyn Grant