Why Supply Chain Success is Key to Business Success
Find out how the impact of supply chain decisions affect supply chain success. Improve performance and increase over all business success with these tips.
What if you knew there was an area of your business that if you improved, you’d be all but guaranteed to improve the rest of your business? You’d likely shift priorities and resources to make it better. I’m talking about supply chain management.
The supply chain is important to success because the positive or negative effects ripple throughout the business. There are two core areas to the impact: customer happiness and cost.
Happy customer = happy business = higher performance
In 2020, as reported by Supply Chain Quarterly, 84% of survey respondents said the return experience with a company plays an important part in their opinion of a retailers. A smooth return process means an effective supply chain, one well connected and involves communication along the chain. When the supply chain meets or exceeds the expectations of the customer, it’s because of efficiencies. The entire business benefits through higher order rates, a positive sentiment in the customer’s mind, and lower cost-to-serve for the business.
Higher performance = more cost efficiency = higher pressure?
Higher performance is measured in terms of the efficiency of all of the processes and people to move goods and services to market along the supply chain, typically via the cost-to-serve. Increased supply chain efficiency can translate to pressure on the team and their capabilities, as costs and budgets are held flat or reduced when they’re expected to move the same or a greater volume of product at the same or a higher quality level. Improvements to profits for the business are measured via metrics like working capital turnover or cash conversion performance and as business health improves, profitable cash management and revenue conversion are the result. Flattening the cost curve often becomes a challenge unless two factors are considered: new capabilities (process and data) driving faster, higher-quality decisions and using a tool that scales favorably for the value it delivers for your business.
In my presentation “Connected Supply Chain Planning,” I explored what a connected approach to cost-to-serve management means, and how it drives cost improvement across multiple functions (including supply chain). It’s no surprise that improving forecast accuracy and perfecting the order percentage drives costs lower; there are significant gains in working capital, reductions in capacity, and lower logistics, warranty, and E&O costs.
When inventory, capacity, logistics, and suppliers are managed effectively through connected supply chain planning, total costs are lowered because there’s less excess and better collaboration, there are fewer costly fire drills to frantically expedite, and less of a bullwhip effect. Supply chain waste is reduced because of improved speed and collaboration across and between companies to control and monitor the execution environment.
Get on the right track
Here are a few high-level tips for bending the cost curve in your supply chain:
- Break down the silos. Using a connected approach to supply chain planning is key. This means incorporating input from all relevant business units as you build your end goals. It can mean more than just S&OP, though. It can be as simple as identifying and codifying the linkages between key and boundary processes across one or two functions that solve constant sore spots for your operations. Here’s another short clip from my presentation focusing on a few examples of real-life benefits from connected supply chain planning.
- Ditch the old tools. In a webinar with Anaplan, Mark Smith, CEO of Ventana Research, noted supply chain professionals are more likely to rely on spreadsheets for planning than their peers in other planning areas such as sales and finance. Although in some cases it may be impossible to entirely replace spreadsheets, depending on them to manage a complex, global supply chain and associated costs is foolhardy at best. Versioning issues, data freshness, formula errors, and security risks are a just few examples of why spreadsheets are an unwise way to run your supply chain. Replacing those tools with an always-on, connected platform offering the flexibility of a spreadsheet with the robustness of an enterprise-grade platform is key to improving scalability and eliminating waste.
- Unplug antiquated communication methods. According to our report with Supply Chain Management Review, 63% of supply chain professionals rely on manual communication methods like the phone, email, and faxes to collaborate with customers and suppliers. That’s a recipe for low scalability, making the whole business unhappy. Instead, consider solutions combining people, their data and input, and everyone’s process in a single platform to dramatically accelerate the speed of information-sharing and improving the trustworthiness of the result.
Anaplan partnered with Supply Chain Management Review to ask your colleagues to share their challenges and strategies for supply chain success. Read what they said, along with practical takeaways for improvement, in our new research report.
Topic: Supply Chain Management