In short the answer is yes; of course technology can help towards creating a more efficient supply chain. However information systems must be designed around efficient business processes. Get this part wrong and it won't matter how good the technology is. Reengineering all of the processes involved in the supply chain must be the first step towards an optimised supply chain.
Why might you consider optimising your supply chain? Here are a few questions that might help you decide whether you need to or not.
- Is your turnover increasing but your item gross margin is either static or being eroded?
- Are your customer’s orders being fulfilled and delivered by the agreed delivery date?
- Have you as a business owner ever looked at your supply chain and concluded that it’s not as efficient as it could be.
Before jumping into supply chain B2B technologies, managers must understand the existing state of their company’s supply chain and design information systems around their re-designed business processes. A web-based application cannot fix the problems associated with a large and poorly performing supply base, a fragmented logistics and distribution network, an adversarial set of supplier/customer relationships, and an unwillingness to share information due to a lack of trust.
Despite all the ‘noise’ about C-Commerce (collaborative commerce), supply chain management’s sourcing and physical distribution elements remain building blocks for the supply chain model. In fact, the model includes three major pillars:
- Managing relationships
- Managing supply chain material flows
- Managing information.
Driving supply chain innovation within an organisation is no simple task—but in today’s economic environment, it may mean a company’s very survival. As Charles Darwin noted, those who survive are not the smartest nor the strongest—but those who are best able to adapt to change. Can your company be among the fittest and adapt?
The process of mapping your supply chain and business processes is a bit like a medical check-up for your bottom line. Just as a doctor studies the critical measures (pulse, temperature, blood pressure), interviews the patient to review symptoms, and identifies the location of aches and pains, managers must begin with a complete assessment of the company’s physical and information flows.
Before determining the systems requirements to “fix” things, you’ll need to determine the status of such critical supply-chain metrics as inventory levels, cycle times, vendor/item lead times, customer demand, customer complaints, and quality issues.
Many executives have done this successfully by literally “stapling” themselves to a customer order, and interviewing all the participants they pass along the way through the system.
Another useful metric used to measure the performance of the supply chain from a customer's point of view is a DIFOT percentage (Delivery In Full On Time). An efficient supply chain will have a DIFOT percentage that exceeds 98%. The DIFOT score is calculated by dividing the number of orders/lines/units delivered in-full and on-time, by the total number of orders/lines/units. The DIFOT percentage is a key performance indicator that’s needs to be embraced throughout the entire supply chain.
Once optimised business processes have been put in place as well as appropriate measures, a business can then focus on how technology might be used to create an even more efficient supply chain. A good ERP system such as Microsoft Dynamics GP, that is scalable for growth, as well as integration with other systems such as Microsoft Dynamics CRM, may be a great place to start towards a collaborative commerce platform.
If you'd like to talk about how we can help to optimise your supply chain, then please contact me.
Eddie Gardien is a business consultant focused on helping customers to succeed through the use of technology. Eddie specialises in the areas of finance and supply chain management. You can follow him on Twitter, connect with him on LinkedIn or contact him at eddieg@olympic.co.nz.
