What’s the Difference Between Good and Great Supply Chain?
In today’s competitive world, good is no longer good enough.
Companies must pursue “great” in all aspects of their business, and in logistics “great” is critical.So how you do go from “good to great?”
Let’s define good first. A good company has metrics and visibility across its entire supply chain. Let’s say I produce chemicals. On the inbound side, I should know the cost of purchase of my raw materials, the cost of transportation, perhaps some risk element around how secure my source is, how secure my transportation line is or how vulnerable it is. I should know how long those raw goods are in my supply chain.
On the outbound side, it’s essentially the same. What is my cost of delivery to a customer, the transportation time, and am I managing shortages and outages? In a good supply chain, there is somebody who can measure those pieces on the inbound and outbound sides. The movement of these goods is completely visible and I understand my costs.
Great supply chain goes further.
It is constantly looking at the supply chain from the perspective of five years from now, and asking what would be different and where do I need to be? It’s a continuous improvement drive to an evolutionary growth path. I have to ask myself how I can make this better and better and better from where I am today.
The second thing that a great supply chain does is to examine it from a revolutionary perspective and ask how we can acquire entirely new business. What are the strategic things that the corporation is looking at? How would this new acquisition affect my supply chain?
An excellent example is what typically happens when a company acquires another business that has its own supply chain distribution centers, loading points, warehouses, etc. The worst thing that the supply chain team can do is to let the two operate separately and lose the opportunity to consolidate their systems. We’ve seen companies that were a series of acquisitions with one parent company, and each division operating separately. Each has its own warehouse in the same city and each has its own distribution points. They covered the United States but none of the operational facilities in the local metros were co-located except one. Great supply chain would merge those facilities to gain the benefits of consolidation.
Great supply chain watches what is happening in the world. What technologies are available that are changing the business? How do I employ those technologies in my supply chain to get myself both a cost reduction and also a strategic advantage?
Companies that ask these questions and pursue their answers experience greater efficiencies, higher margins and a meaningful competitive advantage.