Each year, Gartner releases its Supply Chain Top 25 Ranking to recognize companies with the world's highest performing supply chains. And each year huge high-profile companies like Apple, Amazon.com, and Wal-Mart are ranked among the top performers. However, it is not just the size of these organizations that distinguishes them; it's their attitude about their supply chains that sets them apart.
These companies recognize that their supply chains, when properly managed, can be true growth enablers, not just vehicles for cutting cost as many, if not most, OEMs still perceive their supply chains. Now, you could argue that these supersized companies with resources to staff their supply chain departments with MBAs, supply chain gurus, and IT wizards have an unfair advantage over a typical Tier 3 OEM who may be lucky to have two full-time purchasers on the payroll. You'd be right, at least about the advantage part.
I'm not sure I would agree to the characterization of this advantage as “unfair.” After all, these companies did not start out as multibillion-dollar enterprises. Everyone starts somewhere, and it's the decisions and choices you make along the way that influence your outcome.
Which brings us back to the core point of this blog, which is that, big or small, all businesses can increase their chances of success if they recognize the value that their supply chains can bring and proactively work to extract that value.
I recognize that this can be particularly challenging for small, resource-constrained OEMs, so my advice would be if you can only focus on improving one aspect of your supply chain performance at a time, start with inventory availability and velocity. This is one of the most crucial capabilities within today's supply chain.
Creating more common processes and systems across these processes can go a long way toward improving your supply chain performance. Transparency into the supply chain is still something many smaller companies struggle with. If you cannot afford an advanced ERP or MRP system, look for some web or cloud-based solutions that will enable you to communicate more readily with your supply chain partners, and create greater visibility throughout your supply chain. As your organization grows, you can begin to tackle more advanced initiatives, including supply chain segmentation, simplification, and cost-to-serve analytics.
Still unconvinced about the supply chain's influence? Consider this bit of data demonstrating the financial benefits generated by a top performing supply chain: According to the 2013 PricewaterhouseCoopers Global Supply Chain Survey, companies that acknowledge supply chain as a strategic asset achieve 70 percent higher performance. These supply chain leaders deliver on time in full (OTIF) on 95.7 percent of occasions, have an average of 15.3 inventory turns (compared to 3.8 for laggards), and make average earnings before interest and taxes (EBIT) margins of 15.6 percent (compared to 7.3 percent for laggards).
All of that is good news for Avnet, since we were also named in 2013 Gartner Supply Chain Top 25 Ranking: The Next 25. In fact, Avnet is the only distributor to be recognized on the 2013 list. Further, we work with our supply chain partners to optimize their supply chains. It's not surprising that Gartner identified a number of these Avnet customers as other top performers.
The benefits are clear. It's time to stop making excuses and start polishing your supply chains. Let us know about your biggest supply chain challenges and strategies in the comments section below.