A supply chain is a complex machine full of moving parts and a host of variables that can help or harm its operations. As such, it shouldn’t come as a surprise that supply chains have always been uniquely vulnerable to disruption.
Updating supply chains on a regular basis can help manufacturing leaders prevent prolonged disruptions and prepare their organizations for whatever the future might bring. But applying changes to such a complicated system isn’t always straightforward. It can be easy to make mistakes or focus on the wrong areas, doing more harm than good in the long run.
It’s not realistic to be constantly updating the supply chain, so it’s important that each update is as effective as possible. With that in mind, let’s look at some common mistakes leaders make when making changes to their supply chains and what they should know to ensure they’re steering their organizations in the right direction.
Common Mistakes While Updating Supply Chains
Businesses are traditionally managed by functional unit profit and loss statements (or P&Ls), which means there’s a view that if everyone improves a siloed function in their own right, it will compound into overall improvements. As a result, leaders of these kinds of organizations tend to be functional thinkers, trained to be good at their core responsibilities but not necessarily used to thinking about how all the moving parts come together.
However, when it comes to supply chains, it’s not enough to improve individual areas while ignoring the whole. This usually leads to more inventory and more headaches.
For instance, because disruption is such a major concern, it can be easy for manufacturing leaders to focus their attention on risk management when figuring out what needs to be updated. Though this is an important part of the process, enterprise leaders can end up with risk management tunnel vision that leads to difficulties in making decisions. When everything comes with a risk, using this type of lens to decide which moves to make can seem like an impossible task.
Another area that leaders often focus on without considering its impact on the whole is digital transformation. It’s easy to pour millions into digital transformation strategies without having any real understanding of operation constraints and the ways in which technologies and supplier rationalization can be applied to alleviate various choke points. As a result, a lot of time and money is often spent on digital transformation in areas that might not need it, while other areas that could benefit from new tech are overlooked.
The bottom line is that without a thorough understanding of how their supply chains operate as a whole, manufacturers can get bogged down with projects that continue for years but fail to deliver any real improvements. With the right knowledge, however, leaders can come up with tactical solutions that deliver the capital improvements that are truly needed in a matter of months.
3 Things Manufacturing Leaders Should Know About Updating Supply Chains
So, how can you overcome the obstacles and successfully revamp your supply chain? Consider these tips:
1. Understand what can be delivered in the short term.
While long-term overhauls of the supply chain can be necessary, if they’re approached as starting points, these overhauls can end up being overly expensive, time-consuming, and result in preventable layoffs. A better approach is to figure out what operational and financial impact you can deliver with your existing data in the next 60 to 90 days. This approach has the effect of freeing up working capital fast, reducing the potential for layoffs, and generating money to fund a comprehensive digital transformation down the line.
2. Know what sells.
A simple but effective way to streamline a supply chain is simply to get rid of anything that doesn’t generate margin or market share. Not only does this jettison anything that fails to deliver value, helping to improve P&L, but it also reduces the number of variables that can muck up the supply chain equation.
3. Don’t try to cut costs.
Cutting costs might seem like a reasonable goal in regard to improving the supply chain, but in reality, the costs that go into its management might be the exact things making your company money. Instead, focus on enabling capital expenditure cost avoidance. While cost cutting might give you bigger savings upfront, cost avoidance will actually generate more dollars and help prevent layoffs.
Updating the supply chain is a crucial part of keeping an organization running smoothly. But because so much can go wrong, it’s equally important not to dive headfirst into major transformations or focus in on any one area to the detriment of others. By looking at the big picture and ensuring you understand what makes your supply chain valuable, you can help bring about changes that truly deliver positive results both now and in the future.