“Supply chain” refers to your suppliers and their suppliers, and your customers and their customers. Every great manufacturer does a good job of working both directions to understand and improve so that all can benefit. Many struggling companies buy and sell things but don’t look outside themselves to get better.
While a fine place to start, that is a shortsighted decision, frequently made by small companies that don’t want to invest in professional supply chain management personnel or the efforts required. Many supply chain departments are merely renamed purchasing departments, so that on a resume doesn’t assure improved performance.
Local optimization of each link in the chain will NOT generate global optimization of the chain.
The real question is can your supply chain management talent (regardless of title) ensure that your supply chain is in fact improving your performance, and you its?
Here are 3 tenets in creating that capability:
Understand we all need to make a profit for the supply chain to succeed.
Just because you can charge more or pay less doesn’t mean you should. Your supply chain partners must be financially stable to manage risk appropriately.
Consider not just price, not just total cost of ownership, but total supply chain cost.
If it’s not moving down, your chain is losing competitive position. Local optimization of each link in the chain will NOT generate global optimization of the chain. Look to the connections, the cross-company processes, to make major progress.
As you work internally to improve your competitive capabilities, look to your suppliers and customers to help you become better.
If they do not bring competitive advantage, are they the right partners for you? If they are the right partner, but do not improve your competitive position, what can you do to help them become stronger?
If you and your supply chain are not improving together, you are declining together.