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Refining Your Supply Chain, One Supplier at a Time

We have an abundance of forward thinkers in the supply chain world. It seems we have more consultants than implementers when it comes to dishing out advice on how to best manage the supply chain.

Further, advice comes from camps with differing strategies. One corner encourages us to remap the entire supply chain process to gain leverage. Another voice tells us to reduce the number of supply chain links so we can have better oversight and control, while yet another philosophy encourages us to totally rethink our entire supply chain methodology.

If that weren't enough, here is another voice — but with a less stressful approach and a simple message: Refine and relax; match your supply chain with your real needs.

Most companies have spent years developing their supply chains and have built partnerships that serve their market needs well. If your business has not changed its primary model, your needs probably haven’t changed dramatically either. However, if changes have occured, a quick backward look to ask what drove the change is probably warranted. You may find that your management team has changed. Your cashflow may have changed. Your locations or geographic demands may have changed. Even your products or services could have changed. Yet, none of this necessarily dictates the monumental task of reinventing your entire supply chain methodology.

I suggest this approach: Refine and relax.

First, look at your supply partners one at a time and ask yourself the simple question: “Is this supplier adding enough value, or should I look for an alternative?” How do you determine if you're getting enough value? I use the age-old 80/20 principle: If you spend 80 percent of your time working with 20 percent of your suppliers, then the 20 percent obviously represent your target group ripe for refinement.

So, one way of defining value is by the amount of work you don't have to do yourself. Ask your supply partner to take on the problem with you. If it can’t or won’t, then it's really not providing you enough value, and it may well be time to move to someone else. If the problem cannot be solved by a new supplier, then it is time to consider how you can change the playing field.

As always, finding the balance between problems and profits is what we are paid to do. As an obvious example, many products with the best cost come from small manufacturers in Asia. There is the profit. But these manufacturers often have little domestic distribution support. And there's the problem. Finding a partner that will help you to manage the inherent headaches associated with this type of supply would be adding value and changing the playing field.

So, refine your supply chain. Consider consolidating these suppliers with a supply chain management partner that can capably manage the headaches of offshore suppliers and still deliver product — and profits — to you.

Then initiate my favorite strategy: Relax.

5 comments on “Refining Your Supply Chain, One Supplier at a Time

  1. AnalyzeThis
    January 20, 2011

    Great article with some good advice Todd, thanks!

    Once you think about it, if you've properly done your job… you'll be able to spend a lot of time relaxing. Of course, there is always optimization to do and problems that pop up, but if you truly have an efficient supply chain… you should have very few worries!

    I long for the day when I able to sit back and do less refining and more relaxing!

    Also, I agree with what you wrote about the 80/20 rule: if you're having issues, that 20% is probably where you should be focusing on revamping.

  2. Barbara Jorgensen
    January 20, 2011

    Hi Todd–you don't hear much about “relaxing” and “supply chain” in the same sentence! 🙂 A quick question: when you mention: “Finding a partner that will help you to manage the inherent headaches associated with this type of supply would be adding value and changing the playing field,” what kind of company do you have in mind?   I'm thinking distributor, of course, and if that's the case, doesn't the proft margin erode?

  3. Taimoor Zubar
    January 21, 2011

    “Ask your supply partner to take on the problem with you. If it can’t or won’t, then it's really not providing you enough value, and it may well be time to move to someone else.”

    While this may be an effective move in some cases, the problem in the real world is that there is no such thing as a perfect partner. Some supply chain companies may be strong on one aspect and may be weak on other. While your current supplier may be lacking in technology and innovation, the one you switch to may not be that reliable despite the heavy use of technology. I think organizations need to evaluate carefully before they make any switches. Many a times the decision may backfire.

  4. Todd Ballew
    January 21, 2011

    Dennis, I appreciate your comments.  My hope is that the management of the supply chain can be a refining process instead of what feels like a three-alarm fire.

    Management needs to focus on improving internal efficiencies that would help with improving forecasting and allow time for better sourcing of “A-list” materials for supplier improvement or cost reduction.  That takes time.  Unfortunately the time is usually being spent on putting out fires with B,C and D-list suppliers.

  5. Ms. Daisy
    January 30, 2011

    To avoid imperfect relationship with suppliers is why the supply chain is a multi-partner relationship. Each link serving specific needs to the company with the expectation of value from the supplier in the relationship to solve the problem identified.The criteria for selecting a supplier must be to provide enough value for the company.

    You are right on careful selection to avoid making costly mistakes.

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