Part 1 by Geoff Chambers
Director, Supply Chain Services
A division of Scarbrough Consulting
The Purpose of Supply Chain Modeling
In the past few years, there have been increasing difficulties in navigating as well as forecasting a fluid supply chain accrual. Both on a micro and macro level, the undercurrents of an economic slowdown, interest rate hikes, and the insecurities on a geopolitical level have left many SME’s cross-examining all opportunities to improve ROI, increase market-share, and validate efficiencies.
Too many companies are still developing supply chain budgets that are almost instantly obsolete as a result of the changes in the marketplace. Therefore, we need to link long-term business strategies with day-to-day execution and operations.
The overall goal of this two-part series on Supply Chain Modeling & Integrated Business Planning is to bring you an understanding of modifications most SME’s need such as methodologies to transform their business holistically and to create both resiliency, and sustainability. Unequivocally, companies who embrace transformation will have a fundamentally strong foundation to encompass streamlined processes – connecting people, information flows, data systems and other key elements to establish and convey value to their customers in the years ahead.
It is critically important to view supply chain modeling as a holistic business initiative (not a supply chain objective). Simply put, the supply chain has a direct nexus to every department in your company. Therefore, assessing your company using a holistic approach is paramount. And the first step in the process is accepting the importance of transformation.
Transformation & Circular Dynamics
From my early years in the industry working with Toyota Motors, I learned lean methodology and to view business on a circular rather than on a linear basis. In other words, we can certainly learn from what lies behind us. However, circular process improvements applying lean methodology always result in forward momentum and inherit next steps to continually develop and advance. This is where transformation has its greatest significance - circular motion and advancements holistically across your business units and departments.
Understanding the concept of uniform circular motion in its fundamental interpretation represents consistent acceleration. When applied to the realm of business, there exists an ongoing dynamic in the form of transformation and continual improvements.
Nevertheless, while company transformation is necessary not only to stay competitive, but to improve efficiency and visibility, change can create challenges. The top 10 challenges to company transformation can include one or more of the following obstacles:
Insufficient budgets or unrealistic project time frames established for transformation
Competing or conflicting functional priorities
Inconsistent data management across operational and financial reporting
Lack of the right talent to leverage technology and solve business issues
Lack of time to partner with the business due to daily work volume or responsibilities
Lack of interdepartmental process coordination
Status quo ways of working or resistance to change
No clear road map or plan
Lack of change management maturity
Lack of collaborative planning and performance management
The Value of a KPI Tree
One of the most successful ways to advance directives across your company is to develop a tree of Key Performance Indicators (KPIs) relative to the supply chain and respective business units. This tree will allow input from every department with collaborative recommendations. There should be a harmonic approach with parameters, such as measurable objectives that express company guidelines and goals. KPI’s should not be confused with Performance Attribute Metrics (PAMs), which cannot be measured on a circular level. (KPI Chart below)
There are multiple levers within an organization to unlock savings and promote transformation. The identification of cost reductions, improved processes and visibility build a scalable and agile business model. While technology does have an important role to play in the overall success, there seems to be an overwhelming focus of what a specific tool can deliver, while underestimating the people and
change aspect of the holistic picture. Moreover, the mechanics of change and implementation tend to create an obstacle on its own. However, it is a key principle to have engaged leadership conscious of its duty to get the right people or outsourced supply chain professionals into strategic positions. Management must understand what will be different, and why change will be worth their while.
The Statistics of Outsourcing
Oftentimes, Supply Chain Modeling and transformation can be augmented by hiring a supply chain consulting group. The statistics from Oxford Economics provide a picture of over a 1,000 SME’s and their responses to specific areas of their supply chain where outsourcing proved to be the best option.
It is very important to conduct due diligence when outsourcing, ensuring the company you hire has the capabilities to be pliable in implementing principles that both compliment and advance your internal directives, along with the vision of long-term resiliency and sustainability.
In our next article, we will dive deeper into the different supply chain models such as Functional Siloed Planning, Limited Manual Collaboration, Demand Planning, Collaborative S&OP, and Holistic Integrated Business Planning which will include processes to linking business units and forecasting to empower you with a successful business plan and a complete Supply Chain Model that parallels your enterprise.
The Scarbrough Group
International • Logistics • Transportation • Consulting • Warehousing
7280 NW 87th Terrace, Suite 300, Kansas City, MO 64153
Geoff Chambers gchambers@scarbrough-intl.com
O: +1.816.584.2400 | D: +1.816.683.8457