Supply Chain – Keys to Success

First and Foremost: What is the definition of supply chain?                                 The Supply Chain is the process through which a company creates and distributes its products and services to the end user. This process includes a number of specific elements such as: production planning, transportation management, material sourcing, warehouse management and demand management. When these functions are tightly integrated they provide products and services to the end user in an timely, efficient and profitable manner.

As experts in this topic, Millennium Logistics Management believes that the following 3 keys are instrumental to a successful chain process:

Key#1: Demand triggers must be identified as quickly as possible.                   Speed is oftentimes the primary concern of anyone who manages a supply chain. The faster stock moves, the better the chain is perceived to be. Getting the right part to the right place at the right time (as quickly as possible) is the number one priority of a supply chain. This requires you’re business to always have the right parts (and the right amount) in your supply chain. To understand why, we must look at how stock arrives in a supply chain in the first place. Stock exists in a supply chain for any or all of these three reasons:

1.) It is the most economical way to move materials from point A to point B (and
points C and D and E…)

2.) The variable nature of supply, in terms of late delivery, quality failure rates, etc.

3.) The variable nature of demand, both in timing and quantities
The variable nature of demand is what many people believe is the primary culprit to having too many or too little of any given part in a supply chain. This belief has driven many system providers to focus on improving their forecast models. An improvement in the response time of the supply chain is as valuable as an improved forecast. The quicker you can transfer information about actual usage back to the supply chain, the more quickly you can adjust to increases and decreases in demand.

Having more time to react also provides you with the ability to ship and store parts more efficiently (further decreasing your overall costs). This requires visibility of the entire materials flow, not just within your own plants and warehouses, but also on the actual assembly floors.

Key #2: Mechanisms for clarification are critical.                                                   Let us assume we have seen an extraordinary trigger (for the sake of this example) fifteen days earlier than expected. Specifically, fifteen days earlier than both the forecast and the historical data have led us to believe is ‘normal.’ The supplier sees this, sends their recognition of the trigger, and knows that this is abnormally early. On its own, this early demand is manageable, but we must make sure to ask the following question: Is it an early indication of something more major? This question leads us to another key basic need of a supply chain: a mechanism for clarification.

For this purpose, there needs to exist a way for the supplier to ask the direct line customer and their customer(s) to explain (as in the above case) the unusually early trigger. This can be as simple as an e-mail from the supplier or as robust as a shared portal. Without the opportunity for clarification, most suppliers will miscalculate on the side of “just in case” which means that they will select the possibility that results in extra stock ‘just in case’, which puts us back where we started. Therefore, maintaining good and constant communication is the most effective mechanism for effective clarification. Simply put, effective clarification equals a successful supply chain!

Key #3: Motivation should be a foundation, not an afterthought.
Before implementing any change (whether it’s an upgrade, a new technology, or even the elimination of a step in the process) it is important to keep in mind that people, unlike technology or spreadsheets, make up the backbone of every supply chain. People, contrary to machines and materials, require motivation to function at their best.

So, how can you help make sure that the “human wheels” are always well primed? There is no such thing as one method and that is because motivation is a moving target. Additionally, morale rises and falls in unpredictable ways for unpredictable reasons beyond anyone’s control. For instance, just as an example: On an assembly line, The logistics provider notices that operators are hoarding parts, which is costing the company money, hurting their ability to predict usage, and slowing production. he logistics provider collects all the hoarded parts and implements a more controlled and traceable flow to each station. While the plant had a record number of orders (due to the adjustments), the line workers could only judge the amount of future work by the parts they had near their station. The more parts they had, the less they were afraid of losing their jobs. But the fewer the parts, the higher they perceived risk to their job securities. The more they were afraid of job losses, the slower they worked to help stave off the day when they would have nothing to do.

What did the logistics provider do in this situation? The logistics provider called a meeting and outlined the entire situation. The operations manager explained that the increased efficiency leads to a more controlled number of parts to each station were due to the higher levels of orders. The operations manager showed the stocks of open orders to make the point. After the meeting, the company saw the expected increase in productivity.

There are two lessons to be learned here. The first is that the more transparent you make the process to every member of the team, the more they can see how their part in the process is critical. And secondly, we learned that people are the most important part of any supply chain and we should never take their efforts for granted.

Millennium Logistics Management can look at single aspects of your supply chain or the entire supplier network and help you manage the new processes, or we can manage it for you. We analyze existing processes, from initiation of an order through fulfillment, and evaluate modal selection, carrier utilization, and existing cost structures. We formulate a customized solution for your unique needs. Contact us to find out how we can assist you and your business.