Supply Chain Management Failures-Suggested Solutions!

Earlier this year I had the pleasure of presenting at the Pacific Northwest Aerospace Association Convention.  Since most of the attendees were small to medium size manufacturing and supplier/vendor organizations, I felt this was an opportunity to get firsthand feed-back on how well their supply chain management processes were benefiting their organizations; a subject I was researching for an article.  They surprised me!  Not one had a positive comment on the benefits to their performance.  Maybe it had to do with the industry, the size of company, or more than likely, it had to do with the force-fitting of a process in order to “qualify” as a supplier/vendor.  Let’s explore their comments;

What went wrong?

• “We have a computer application but we are short on processes.”
• “The cooperation with our customer is no better; orders still arrive with insufficient delivery time.”
• “Our only communication with the customer is with the purchasing department demanding lower prices.”
• “They (the customer) still want us to warehouse advanced orders without any compensation to us, which we can’t afford.”

The overall sentiment was not a ripping endorsement of their supply chain management process and their customer relationships.

Why?

There are always two sides to every story, but there certainly seemed to be a consensus on the issues above at this particular gathering.

• It is all too common for organizations to look at the topic of supply chain management as a system or application, versus a change in the way they conduct business with their customer and their suppliers/vendors.
• Customers that view supply chain management as a new fangled order processing mechanism are spending a great deal of time and cash on a process that may not produce their intended results. They are failing to either understand or fully embrace the implementation of an effective supply chain management process.
• Failure to nurture an effective and open communication environment between customers and suppliers/vendors will perpetuate higher rejects, increased expediting costs, longer inventory turns, surplus inventory, short or late shipments, and a tense relationship that is not conducive to productivity enhancements for either party.
• Customers that treat their suppliers/vendors unreasonably, will see the relationship deteriorate and impact their ability to perform.

What to do?

Resolving issues of this type is not simple, but it is critical if the enterprise wants to perform effectively.  The key responsibility to bring a positive result to these issues must fall at the feet of the leadership at all levels, not just the CEO.

• There are three key factors that must be synchronized in order for a supply chain management process to be effective. These factors, in order of importance, are the people, operating processes and systems and applications. Supply chain management processes cannot be effective without these factors working in unison with a common purpose—improved performance.
• The relationship between customers and suppliers/vendors is the lubricant that makes the supply chain management process function smoothly. Customers need to take an interest in their suppliers/vendors, sharing in the responsibility for their success. In turn, suppliers/vendors should always take a vested interest in their customer’s ability to perform—that is a definition of a “stakeholder” relationship.
• An open communication environment between customers and suppliers/vendors is a two-way platform, not just “flowing down hill”. Surprises are not permissible, but they happen, and it is up to both parties to work together to minimize them. One CEO I talked with said “just give me the bad news as quickly as you know it, then I have the best chance to fix it and still meet your needs”.
• Collaboration means to work together for each others best interest. If either party makes a mistake, own up to it and work through it together. Just don’t make it a common occurrence. Going the extra mile for either company builds a buffer of “trust” that will carry each organization over those unpredictable problems when they occur. I believe that long term trusting relationships breed higher performance opportunities for both entities. If you have a customer or supplier/vendor that does not want to participate in this form of supply chain management-–find a way to terminate the relationship and find those that will. They are out there.

Tags: business, change, Leadership, management, Operations, performance improvement, problem solving, process improvement

This entry was posted on Wednesday, July 22nd, 2009 at 8:19 pm and is filed under Operations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.