Supply Chain Basics: Know Yourself & the Enemy

If I were to ask the most critical question with regard to what assures a company's success in its business sector, I would expect a variety of responses, including product quality, efficient operations, an aggressive and effective sales and marketing effort, key inside industry contacts, a good reputation, and, of course, innovative ideas for the products themselves.

These are all contributors to be sure, but may I suggest that the greatest advantage a company has over its competitors is knowledge. The company that has a thorough understanding of where it and its competitors are in the larger scheme of things has the best opportunity to take that knowledge and turn it into its greatest advantage.

No matter the nature of your "business," the goal is to exceed your competitor's performance. I think of the athlete or team that possesses the inside knowledge of their own strengths and weaknesses and can move to compensate and improve in specific areas of weakness. Likewise, if a team can learn of and exploit a competitor's weakness, it has a much higher chance of taking the top prize.

In business, the top prize is market share. To that end, how does the individual supply chain operation assure its own place in the sun and not be overshadowed by the competition? If a company looks at its basic "stats" and reviews its performance history with brutal honesty, it provide itself the advantage of working with reality. This business reality has names like: sales; selling, general, and administrative expenses (SG&A); cost of goods sold (COGS); cash-to-cash cycle time; inventory days; asset turnover; gross profit margin; operating income; net income; and return on assets (ROA). Failing to record and monitor these basic areas is like flying in a dark room without instruments. Sooner or later, you will hit the wall; your competition will have one less competitor to worry about.

If your business has excellent data gathering processes and records, you will increase your competitive potential by making the corrective adjustments necessary to keep your company's health at peak levels. Just knowing where you are starting from can help you get to where you are going. Your company should be organized such that you have this data readily available and kept up-to-date. As you analyze these numbers, you will get a feeling of what you need to change and what it will take to get to where you want to be.

This may not seem like a direct supply chain differentiator, but consider the following: Imagine your body as a child growing externally without growing internally. Too many companies try to manage the external market while neglecting or not making full use of the information available within their own organization. Think of a baby's heart trying to push blood through a full-grown athlete's body, and it won't be hard to realize why a company's infrastructure needs to be properly sized and staffed to support effective data gathering and the interpretation of that critical data that defines the strength, sustainability, and overall health of the company.

In our next article, we will look at each of these data fields and explain how each area can be approached for systematic improvement. The end result will make any high tech company's supply chain more competitive, assuming -- of course -- that it has a product or service that is in much in demand. That's another competitive differentiator for the supply chain that we will be treating in a separate article.