Collaboration - the key to delivery

Source: Technology Digital

Date :29/05/2007 11:44:32

Chris Poole looks at a major goal of manufacturing and consumer products businesses: Speeding up operations

Speeding up operations has long been the goal of manufacturing and consumer products businesses. This is becoming even more important as supply chains become more global and more complex, with extended supply routes.

By Chris Poole

With so much written about the subject it is somewhat surprising that even the best held examples, Dell, Zara, Wal Mart have found it difficult to maintain and continually improve their supply chain performance. So what must companies do to manage their supply chain and continue to improve year on year? Delivering what the customer wants, when they want it with the most effective use of resources is the basis of an excellent supply chain so it’s no surprise that a good place to focus would be on the demands of the customer…and in this dog eat dog world, if you don’t start with the consumer in mind, you are really missing the whole point of the supply network.

So, in consumer-driven supply, focus on the consumer and deliver what you must to delight your customer – that really is the be-all and end-all – and once you understand this then you work to deliver it efficiently. Essentially what you do is to design and operate your whole network in order to win with the consumer.

To achieve this success, the importance of the supply network as a competitive advantage has to be recognised and called out at the very top of the company. In a world where business survival depends on differentiation, cost advantage, risk mitigation and flexibility, businesses have no choice - they must ensure their supply network is on the strategic agenda.

Collaboration is critical

But individual businesses cannot achieve this alone; collaboration is critical. This means working with customers to align strategies, exchanging capabilities, competencies and sometimes assets so all parties achieve turnover, market share and profitability higher than they could separately.

And this collaboration should aim for:

1. Increased flexibility by reducing information and product flow time - meaning faster, real-time flow of information up the supply chain and efficient product flow down it.

2. Continued and ruthless attention to non value-adding costs and to reducing inventory across the supply network. Vendor Managed Inventory and other approaches to sharing cost and risk across the supply chain are important approaches to removing non value-adding activities.

3. Creation of both supply and product differentiation efficiently.

So consumer-driven supply is about an aligned and integrated strategy, aligned measures and focusing on what it takes to win with the consumer. It is all about collaboration to jointly create and capture value by better serving consumers. It starts with a detailed understanding of what it takes to win with consumers and the retailer requirements and then integrates these with the manufacturer’s own business and innovation plans – all this then needs to be supported by flawless and efficient execution of the commercial strategies.

So how do you actually make all this happen? There are six key steps:

1. Start by being focused on the consumer, by understanding what it takes to win with target consumers and target retailers, then link all your metrics and measures to those target consumers and retailers. Integrate the whole supply network from end to end working back from the point of sale all the way through to raw material suppliers – do this through clearly defined go to market and operating strategies.

2. Ensure you get the basics right and have robust fundamentals in place – if you don’t you probably won’t get any further – retailers rightly will not entertain any kind of collaborative development work if basic service is poor. This means delivering orders complete, damage-free and on time, every time. This needs to be backed up with clearly defined and visible measures with single point accountability and robust work systems.

3. Collaborative value creation is where it starts to get interesting. This is about working together to create rather than transfer value in the supply network. The value needs to be captured and then re-invested into consumption.

4. Differentiation and increasing consumer demands means more complexity – so it’s necessary to ensure that whatever complexity is created absolutely does add value; once you have identified the critical complexity then you must manage it efficiently. Working to eliminate all non value-added time, inventory, cost and complexity is the way to achieve this. Specifically, you should institutionalise in-process measures to drive losses and time out of the network. Key analytical tools like time and value stream mapping across supply network stakeholders can help to identify where to focus effort.

5. Waste elimination is about cutting time from the end to end supply chain and aiming for it to be lean yet flexible. The ideal is to continuously flow materials, products and indeed innovation through the network based on actual consumer demand – shorter manufacturing cycles, faster order to delivery lead times and appropriate minimum order quantities all help here.

6. Of course, this all needs to be supported with information technology architecture and can facilitate faster, synchronised and more accurate information flow through the network, faster and more accurate information can replace piles of inventory and speed up the cash-to-cash cycle. Practically, this is all about common platforms to enable the end-to-end supply network with visible, real-time, integrated information.

Consumer-driven

These six steps are a framework but it’s really the organisation, the people, who glue it all together. It’s important to get the right organisation structure to have a chance for it all to succeed. Consumer-driven supply depends on fully integrated commercial and supply chain organisations, a true consumer-driven culture. This means investing in multifunctional customer teams including logistics experts who can work with retailers to deliver value in terms of improved service and reduced cost across the shared supply chain. And the chances of anything actually getting done are greatly increased with joint business plans and scorecards aligned with both commercial and supply chain leadership.

So what must companies do to optimise their supply chain and continue to improve year on year?

The answer is to deliver what the customer wants, when they want it with the most effective use of resources. Developing excellence in the steps that characterise true consumer driven supply networks is the target but ultimately the start is to believe in the key idea – that organisations must listen, understand and collaborate with customers so the supply network can be tailored to create real value and competitive advantage for the companies involved rather than simply staying focused on cost reduction and standardisation.

Chris Poole is a member of the PA Management Group, and leads PA Consulting Group's supply chain work. Chris was formerly Physical Distribution Director for Western Europe at Procter & Gamble.