Creating A Happy Supply Chain

“Time isn’t the main thing: it’s the only thing.”

 Jazz musician, Miles Davis, was referring, of course, to music but this sentiment should also resonate with business leaders struggling with their supply chain.

If time is managed correctly, a business can run efficiently, save costs and have happier, more productive people and customers.

But many business leaders, their supply chain management and general workforce lack time. Poor data and poor operational visibility slows down performance, causing frustration, longer work hours and unnecessary costs. The result – nobody is happy.

A plethora of new supply chain technologies offers solutions, but big changes are risky, costly and often face internal resistance. Decision makers typically don’t have the time to explore and evaluate options and their teams probably lack the resources for execution.

But help is at hand. A team of experts with a combined 150 years logistics and supply chain experience created this guide to making your supply chain, yes, happy. That’s not to discount what Miles Davis said about time. Fortunately, this guide is just a ten minute read.

• Operating systems cannot function effectively
• Business analytics cannot be trusted
• Risk management and mitigation is jeopardized. 

Poor supply chain data threatens operating systems

Key data in operating systems is often wrong, aged or just missing. That translates to unreasonable time being spent on completely non-value adding tasks – for instance, determining current shipment status.

One of our customers has a service team of around 22 people in San Francisco and they were struggling in thoroughly servicing their customers in any efficient or effective way. They simply didn't have the information to tell their customer what the status of the shipment was.”

Heiner Murmann. Heiner has over 25 years' senior management experience in the supply chain and is the founder of Orkestra SCS.

Operational staff are often blindsided to the late delivery of a shipment, letting the customer down and threatening the sale. When this happens regularly, supply chain management and business leaders find themselves being dragged yet again into firefighting, trying to save the customer relationship and the business’s reputation.

Poor supply chain data threatens business analytics

Collecting, processing and analyzing data is becoming increasingly important for leaders wanting to make fast decisions, grow their business and stay ahead of competition.

 From recent Gartner research, 29% of organizations say they achieved high levels of ROI by using analytics. This will continue to increase now that more businesses are leveraging technologies to digitize and automate their supply chains.

But good analysis is impossible when data is missing or incorrect. Business analytics should not rely on collecting supply chain data from manual sources like spreadsheets or from disparate systems that are not connected in any way. 

Businesses are making decisions off systems that weren't built for that purpose. They have no way of integrating multiple solutions or data sets that are running across their business.”

Kevin Crawford. Kevin has 15 years' senior management experience in the supply chain and is the Head of Client Experience at Orkestra SCS.

Incorrect data compromises supply chain risk management and mitigation

Beyond data problems with in-house data, many businesses are highly dependent on receiving data-based information from third-party vendors and logistics providers to properly manage and mitigate supply chain risks. This dependency is especially acute when businesses hold lean inventories and rely on just in time manufacturing.

 However, most (87%) respondents in a in a Deloitte survey had recently experienced a disruptive incident with their third-parties (28% were major incidents and 11% a complete failure). A quarter of respondents had suffered reputational damage. Business confidence in the poor performing supplier was shattered, but so too was their confidence in their governance and risk management processes.

It’s clear, then, businesses wanting to make their supply chain happy, must first address their data issues. That is, they need to be able to rely on the data that supports their operations, business analytics and risk mitigation strategies.

Despite making it a top priority, only 6% of businesses have full visibility of their supply chain and logistics operations. The three key areas where visibility is essential are:

• Visibility of purchase orders for managing production logistics
• Visibility of shipments to deliver on customer commitments
• Visibility of inventory to meet sales targets. 
  
  

Imagine how frightening an air traffic control tower would be without full visibility! Air traffic controllers still use their windows, but they also heavily rely on technology for full visibility and to keep them aware and responsive. 

The same goes for a business’s supply chain. Outdated supply chain technology is like a control tower without a radar and modern equipment. If the supply chain team is flying blind, that’s when dangers occur.”

 Jonas Mehrhoff. Jonas has 13 years' senior management experience in the supply chain and is the General Manager Europe at Orkestra SCS. 

Poor supply chain visibility of purchase orders

Businesses need to rely on their vendors to fulfil their customer orders on time and deliver a great customer experience. But that can be a problem when operational staff do not have sufficient information or insights on the status of the orders they placed, whether it has been scheduled, already in production, even being ready for shipping. The result can be similar to looking down a black hole.

 With bad vendors, the ramifications can be catastrophic to the point of destroying entire supply chains. In a recent survey of procurement leaders, 93% had experienced adverse effects due to misinformation from their suppliers, and it is a regular occurrence for nearly half of them. 

Poor supply chain visibility of shipments

Similarly, businesses need to keep track of shipments to make sure the products arrive on time and, if necessary, act as early as possible should any deviations occur. And there can be plenty of deviations occurring on the journey from vendor to the customer.

 As for purchase orders, the black hole often continues into the shipment stage. Without having visibility in just one system, it is extremely difficult to keep track of the shipment. This problem is compounded when a business works with several logistics providers who each have their own tracking system.

 To get their required information, businesses regularly resort to emailing and calling their freight forwarder or carrier and shipment tracking is often managed in-house by spreadsheet. 

Poor supply chain visibility of warehousing

Most warehouse systems work well, or well enough, but often systems are not synchronized resulting in data silos and therefore poor visibility of stock levels. This problem is compounded when warehouses are operated by different logistics providers or when they are geographically spread out within a large country or even located in different countries.

Poor visibility of stock levels can make it almost impossible to replenish the goods at the right time. Ordering too early bears the cost of carrying more inventory than required and an increased risk of costs due to damage. Ordering too late bears the cost of paying a premium for rush orders and freight, failing to fulfil customer demand, or worse, both.

Kevin Crawford regularly speaks to customers who are lacking inventory visibility, trying to perform their logistics operations with blinkers on. 

No-one holds inventory if they can help it. Everyone is looking for ‘just in time’ solutions, and being able to manage their inventory levels. In particular, customers with a large customer service group or who have a large eCommerce outbound, need answers immediately. This is where logistics and supply chain management technology offers massive value through visibility and outbound integration.”

Poor data and visibility burns the time it takes to perform what should be routine operations. But, there’s more than time wasted in an unhappy supply chain, there’s money too. Businesses struggling with their supply chain are often unknowingly take on unnecessary costs and similarly forego revenue, in particular by:

• Losing out on business
• Paying too much for logistics services
• Accruing hidden or unknown costs. 

Losing out on business

The litany of supply chain problems don’t only affect supply chain operations they also risk damaging customer relationships. No business wants to lose existing clients to a competitor or miss out on sales from new business opportunities. Heiner Murmann understands why the supply chain is often blamed for losing a customer.

When shipments regularly miss connections and there is no understanding of shipment status, that’s not surprising. One too many missed deliveries will eventually play out to losing customers and to a business failing to hit their quarterly earnings target.” 

Paying too much for logistics services

For many businesses, there’s a real benefit of familiarity with continuing a long-standing relationship with the same logistics providers. When time and energy has been spent building up this relationship, there is a natural reluctance to throw away that seeming advantage. However, it could mean an opportunity for significant cost-savings is being missed.

Alternatively, baulking at their logistics costs, other businesses jump from one freight forwarder or carrier to another. They may save a few dollars on their logistics spend. But, lacking a strong relationship with their logistics provider, they probably also get an inferior service – a costly mistake.

The logistics industry has thrived for decades on a lack of visibility. Comparing costs between suppliers is difficult, comparing their reliability of service harder still. That makes it riskier to change suppliers, and besides many companies lack the resources to do this. Customers are in the dark and don’t realize they are being charged a premium because of it.”

Anders Nordahl. Anders has over 30 years' senior management experience in the supply chain and is the Head of Product Development at Orkestra. 

Accruing hidden or unknown costs

Up to half the cost of many supply chains lurks ignored and unmanaged in outbound logistics and behind the closed doors of distribution centers."

McKinsey & Company

 Against a background of faulty data and poor visibility it isn’t surprising that many businesses are often even unaware they are incurring unnecessary costs. The long list of suspects includes:

• Incorrect duty costs
• Low container utilization
• Unnecessary detention and demurrage fees
• Slow-moving or obsolete inventory
• Poorly structured returns process.

When the various costs components within a supply chain are not fully transparent and properly understood this can lead to incorrect product pricing. Unprofitable products will appear profitable. This can even result in the business losing money for each sale, should the product price come in lower than true cost.

Add together unnecessary costs and foregone revenue, poor visibility and poor data amounts and the end result is an unhappy supply chain. But, what exactly is a ‘happy supply chain’?

Unsurprisingly, a happy supply chain means everyone is happy (customers, operational staff, supply chain management and the business leader) although each party benefits in different ways. But everyone benefits from time – an efficient supply chain means an efficient use of time.

Customers enjoy a world-class experience

Think about a company that you are a long-term customer with. It’s likely that one of the biggest reasons they have your brand loyalty is because of the customer service they offer. One of the key drivers of customer loyalty is the service they receive. A superior customer service, that potentially outranks competitors includes:

• Queries being quickly responded too
• Transparency of order status at any point from procure to pay
• Early notification of potential Issues that might impact delivery
• Orders being delivered on time.

In other words, delivering an outstanding customer experience is grounded on world-class supply chain performance being the glue between production and the customer.

Supply chain teams are highly productive

If customers are happy, the workforce is happy and can be highly productive. Orders can be tracked with precision from when they are placed until they are delivered in one system. Potential problems are apparent early, most likely as an algorithm based alert.

Your supply chain management team is less caught up in daily operational processes and fire-fighting tasks. Whether it’s budget planning, human resources or business growth, they have a supply chain solution that allows them to work more strategically and focus on the big picture.

Not only this, but, without the constant distraction of order and shipment updates or crises to navigate they have the ‘gift of time’ so they can focus more on business planning. And even that activity has become so much easier. Anders Nordahl puts it this way,

When businesses are looking at budget planning for the next year, looking at the savings they can achieve and financial planning, they will want to find out why a product isn’t selling and what they can do to help. That is when they simply open up a dashboard, dig in and get those answers very quickly.”

Business leaders more effectively lead the business

If customers and the workforce are happy, so too should be the business leader. The days of being regularly dragged into firefighting supply chain activities are in the past. Business leaders have the time to do the things that really matter, strategic planning for the future, nurturing customer relationships and carving out a better work-life balance.

Happier customers and teams are a sure sign that the supply chain is working well. Reaching happiness across the board, the supply chain and the entire business can achieve sustainable success.

Many business leaders know their supply chain is running sub-optimally, and are often painfully aware of exactly what their customers feel about that. They may have some familiarity with the underlying problems and want their supply chain teams to have much better visibility across the supply chain. They are aware of at least some of the impacts on business profitability. They shouldn’t want to lose any more time stuck in this malaise.

 At the same time, they are probably wary of embarking upon big infrastructure projects, and the disruption this causes. Certainly, big IT projects are very expensive, take years to fully implement and are notorious for cost blowouts. These types of projects might work well with large corporations. But, they are not fit for purpose for most midsize businesses, especially when the supply chain is not their core business.

 Feeling the pulse of the supply chain is key and a prerequisite in getting to a happy supply chain. That means getting answers to key questions like: 

• How well does your supply chain compare with comparable businesses?
• Are you getting good value from your logistics provider?
• Is your warehouse distribution strategy the right one for your business?
• How to improve data quality and availability?
• What key connections between systems will have the biggest improvement to business operations?

There are any number of outcomes from this diagnosis stage, for instance: 

• changing the logistics provider business model
• further automating internal operations
• leveraging external expertise.

In most cases, the solution will include harnessing technology. Even then, one size certainly does not fit all. Fortunately, in recent years a profusion of new supply chain technology that aims to help out has come onto the market.

Technology aside, there’s another aspect a business leader must consider. They will need to gather together the right expertise before they can embark upon this journey. Most business leaders will probably already have a good feel as to the extent this diagnosis process can be resourced internally or externally.

These, then, are the five steps in getting to a happy supply chain:

• Conduct a supply chain diagnostics to identify improvement levers, outcomes and a catalogue of initiatives
• Identify internal team supplemented with external experts (if necessary)
• Design a clear roadmap, define future state and set clear targets
• Implement modestly but with an eye to significant impacts
• Create a tech roadmap with the vision of achieving a digitized supply chain.