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Supply chain analysis

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Which is the goal of a successful supply chain? How do you measure this (e.g. financial metrics, delivery accuracy, etc.)? Which are the competitive advantages when successful?

Supply Chain
Finance
Product Launch
Delivering Results
Challenges
Paolo Beffagnotti
36 months ago

5 answers

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Highest level - right product in the right place at the right time.

This is measured by perfect order rates and driving high fill rates is an advantage.

Mike Strong
36 months ago
Thanks. Don't you take into account any financial indicator? - Paolo 36 months ago
Yes, but none that would be appropriate to share on an open board other than typical COGS / SGA metrics. Sorry about that. - Mike 36 months ago
ok thanks for clarifying - Paolo 36 months ago
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Dear Paolo,

To my point of view, it is difficult to answer your question straightaway as it would depend on: the sector (B2B or B2C), the distribution model (direct, indirect, hybrid, complex...), the manufacturing model (manufacture-to-stock, design-toorder... i-e- SCOR model)....

The competitive advantage of a supply chain is clearly the Customer Satisfaction because when it works badly, it shows immediately and the Customers are directly impacted and are complaining.

In terms of KPIs, I can suggest a non-exhaustive list. The level of performance should be sized according to the external / internal customers’ requirements (normal, express). 
Business requirements should address the following topics: 
- To define rules: make-to-stock / delivery-from-stock, make-to-order, assembly in shipping, 
- To set parameters, 
- To support exception handling and trouble shooting, 
- To provide some operational planning. 
Inbound and outbound logistics performance can be measured by the following indicators: 
- Inventory level (security stock, minimum stock), 
- Delivery time (lead-time, transportation time), 
- Delivery capability, 
- Delivery reliability (including transport reliability), 
- Delivery quality (number of complaints). 

Finally, I agree with Mike, no financial indicators except for the costs of the Supply Chain compared to the competition (competitiveness benchmarking), or as derived measures from the previous ones for comparison reasons.

Sincerely,
Patrice

Patrice L. Tiolet, INPG, MBA, CPSM
36 months ago
Let's try with this example: B2C with a hybrid distribution model. Any advice? - Paolo 36 months ago
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Thanks for your first replies. What about the impact of inventory in supply chain?

Paolo Beffagnotti
36 months ago
My experience is that customer satisfaction increases proportionally with inventory. If there's off-the-shelf stock to meet demand, customer get their orders delivered when they want. - David 36 months ago
Indeed customers will get their order when they want but the inventory can't be unlimited. Based on your experience which could be the right level compared with the products on the market? - Paolo 36 months ago
Paolo: It depends on the product. I ran chemical businesses and we would have 100t storage tanks for inventory. Of course, I was measured by working capital and couldn't hold limitless stock but we pus a lot of work into forecasting and this usually gave us the balance of production and inventory. - David 36 months ago
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Hi Paolo , love your question. The goal of a successful supply chain is to do what it is supposed to do all the time every time, cost effectively(lowest delivered cost), efficiently(with no waste) and accurately. Most importantly it needs to be resilient(it needs to do this under all sorts of circumstances and be 'disruption proof'! What does this mean? Well, let me ask you - Do you want to be the next Nando’s chicken with no chicken, the next Hyundai or Krispy Kreme caught unaware and publicly embarrassed because you had child labour in your supply chain, the next retailer in the US to enter into chapter 11 bankruptcy because you had only 1 single strategic supplier(based in AP and unable to recover from an incident) or even the next Apple (dealing with allegations of poor treatment of employees via your partner Foxconn?).

There are so many more examples that I can provide however, in an article by Charles Orton-Jones Feb 2017 he has neatly summarised 10 more supply chain disasters, which I have summarised below from the Olympics brought to it’s knees by a slow customs service to Boeing Dreamliner build stopped because they ran out of something as 'small and insignificant' as fasteners.

Yes, all the things that we as supply chain managers work on are important, lead times, inventory, warehouse design, system optimisation, infrastructure, cash,  but we also need to understand the risks in our supply chain and ensure that our work mitigates those risks. Have we really learned from the top 10 supply chain disasters of all time? I don’t think so.

What are you doing in your supply chain to ensure you dont appear in one of these case write-ups about the top 10 supply chain disasters of all time!

A successful supply chain has identified risks and mitigated risks to the best of their ability,(of course these often end up turning into opportunities!), has a plan B just in case, and has learned from the mistakes of the supply chains of the past.

I look forward to hearing my colleagues further comments and feedback on this thread!

More of Charles examples include:

The parcel delivery start up YODEL who grew so fast it couldn’t actually deliver it’s parcels, Sony in 2004 when it couldn’t deliver it’s Playstation 2’s because they were stuck on a ship in the Suez canal,(missed the Christmas peak) or in the developing USSR, dairy farms were sent sheep (instead of cows) ,and factories sat idle for years waiting for ball bearings, Historian Robert Conquest says: “As recently as the 1980s, it was found that a leading factory wishing to use the chassis of their buses for lorries was unable to get them sent from their own factory of origin except in complete bus form. After years of failing to get decisions from the ministry, they had to accept the complete buses, knock their bodies off with steel balls and install their own lorry bodies instead.”

Be careful about pricing adjustments. They send messages across the supply chain, warning of shortages. 'The most famous lesson of this power is from the 1585 Siege of Antwerp. The Spanish blockaded the city. No goods in or out. So the price of bread soared. The mayor of Antwerp became aggrieved by profiteering. So he capped by the price of bread. This immediately killed smuggling. What’s the point of risking death through a blockade if there’s no material reward? But no smugglers, no bread. So the city starved.'

In 2012 NYEtimber showed great integrity by not producing a wine when there was too much rain and were able to differentiate themselves positively from everyone else. They still had a season with no new wine.

Even Ed Sheeran now understand that he cannot even control his ticket availability beyond the end of his supply chain, tickets  were sold out before the real consumers were able to even buy them.

Lisa Mitchell MApp Stats MBA FAICD
36 months ago
Further to the above, I'd be asking whether you have identified the risks in your supply chain, analysed them in terms of potential impact, prioritised the in terms of most significant to least, and are reporting on what is being done to mitigate these risks. This needs to be part of your supply chain analysis. - Lisa Mitchell MApp 36 months ago
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Paolo Beffagnotti
36 months ago

Have some input?