Guest Blog: Supply Chains Compete
By Tim Searcy
I recently heard the CIO of Nortel say something very interesting: “Companies don’t compete; supply chains compete.” This concept makes a great deal of sense. It may change the way we design our strategies for business if we contemplate the partnerships that our companies maintain as an extension of what we do. What we buy, who we buy it from, who we use to service our organization, the functions we outsource and other relationships, including clients, are potential members of your supply chain…
Who is in your supply chain? This may be the hardest question to get right because we have to think of so many unique elements that contribute to what we do. Think of the supply chain as everything that makes the product or service that you produce possible. Once you’ve identified the players, consider the ways in which that supply chain can improve your competitiveness:
Speed – If your supply chain is able to decrease the time from order to delivery, your chain makes you more competitive on this key axis of performance. However, if raw materials, semi-finished elements or outsourced design in any way increase your ability to respond quickly, these are now liabilities. The real question in a competition set is, “Is this an area in which we can claim and prove a distinctly better outcome than our competitors?”
Quality – The old adage in computing is GIGO (Garbage In, Garbage Out). The same goes into the products or services that you deliver. Recently a client of ours stopped doing business with multiple Chinese suppliers because the components being purchased had a 15% defect rate. It no longer became an issue of whether the firm would “make good” on the defective parts. The issue was a combination of the wear and tear on the firm being forced to evaluate each and every part as well as the delay in delivery of orders because an insufficient number of components were satisfactory. You can measure the quality of the elements you receive by looking at issues like defect rate, re-work requirement, waste and wasted time. Any of these elements will create friction within your system costing you time and money, and ultimately making your supply chain less valuable and competitive.
Value – We talk all the time about the concept of a commodity. If two things are viewed as being good enough, all that is left to discuss is price which makes them a commodity. But the ability to deliver a competitively priced product often depends on your ability to secure the elements of the product at the lowest price possible. Finding firms that can provide you with qualified personnel, materials and components to make your supply chain output cost effective is an ongoing process. Your firm is not profitable just for the price you sell things at, but the rate at which you buy the inputs to the system. For this reason, a good supply chain is constantly working with you to reduce costs and waste so that you can remain competitive.
Innovation – Often the innovation in systems, process, technology, materials and other parts of our business must be driven by our suppliers. It is the supplier that helps us get better because of the unique knowledge each brings as a part of what you do, and the supplier network by the combinations of the little things they do separately to make a great benefit in the aggregate. In short, it is not one supplier doing something 1000% better, it is 1000 suppliers doing something 1% better.
How do you put supply chain management into action?
1. Work with your suppliers to understand the overall business and how their piece adds to the total.
2. Incent suppliers to improve Speed, Quality, Value and Innovation through compensation bonuses, greater business and referrals.
3. Consider whether work done internally would best be done outside your firm through a supply chain partner (new or old).
4. Compare your delivery using a supply chain map against your competitors to determine where the strength of their supply chain is versus yours.
5. Schedule a supply chain review as part of a regular process of continuous improvement.
Once we look at what we do as the some of all the partners we have, it is possible we can move the pieces with greater efficacy to create a more competitive outcome.