Last year, we did a piece on “The Top Supply Chain Technologies and Strategies” for 2007. We recently had a reader ask if we were updating the list for 2008, and my response is that I think these kinds of things are best done on a two-year cycle, as they don’t change that much year to year.

That said, it got me thinking: what are some of the top supply chain strategies and tactics that it just seems like almost everyone should/could be doing? To compile the list, I focused on comparatively simple things that (mostly) don’t have a strong technology component – basic steps to consider taking right now.

Gilmore Says:

Do you really know what is happening with SKU, cube and order profiles and velocities? Most companies don’t. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

I also didn’t include some tactics that today seem to me to be so basic and pervasive (e.g., global sourcing) that it would not add much value to mention. Rather, I am trying below to identify some comparatively simple, proven steps that can have a big impact on cost and/or performance, but which, from my view, a lot of companies still have yet to adopt.

Because I was focusing on the relatively simple, the majority of the ideas focus on basic execution. My top 10 list is below, grouped by functional area (transportation, sourcing, etc).

• Centralize Transportation Management: OK, maybe this isn’t simple, and yes it often involves new technology support (TMS), but I just can hardly think of any reason not to do this – and the potential freight and overhead savings are huge versus de-centralized approaches.
• Take Control of Inbound Freight: We’ve written about this before, and it’s somewhat controversial in the sense that any particular inbound shipment is someone else’s outbound. Taking that shipment away from them can lead to higher costs for the supplier, etc. (Yes, we should in theory look at lowest total supply chain cost to make this decision, but who does, really?) But the barrier most often given to me for letting suppliers control the freight is simply internal politics – purchasing managers want to keep the control and use freight as part of the negotiation process. Fine, but there is money to be saved, and control of the inbound freight decision should be looked at objectively. Leaders generally take control of inbound, in my view.
• Enforce Routing Guide Compliance: In company after company, I hear stories of routing guides that are regularly ignored not by suppliers but by internal transportation managers or others deciding the company’s own moves. This is especially true in a very decentralized scenario. The first place to start: measuring execution against what the routing guide recommends. Step 2 – focus on the resistors.
• Use Labor Management in Distribution Centers: This also is a bit more complex than some of the other recommendations, but LMS software is among the easiest of deployments, and the savings from standards, reporting and incentives can be huge. One of the first things I would do in any medium to large facility.
• Profile SKUs and Orders to Reslot the DC: Do you really know what is happening with SKU, cube and order profiles and velocities? Most companies don’t. Analyzing this data can lead to simple improvement opportunities in product slotting and warehouse layout that can drive big productivity improvements. Bring in some outside help as needed.
• Revisit Safety Stock Levels and Policies: Consultants tell me that in almost every company they visit, safety stock levels and policies are not maintained with nearly enough discipline – or hardly at all. The result: too much of some inventories, not enough of others, and a total cost to the bottom line that can be significant.
• Analyze Supplier Lead Time Variability: Do you know which suppliers and purchased goods have the most trouble with on-time delivery? Have you profiled that variance, looked for root causes, and systematically worked the problem areas? We all know the costs of this variability. Leaders such as Raytheon and Harley Davidson have gained huge benefits from reducing supplier variability, and the starting point is some fairly easy analysis.
• Use E-Auctions: Maybe there are some product categories where this doesn’t make sense, and companies will always have strategic supply relationships, but most companies are leaving a lot of dollars on the table by not making greater use of this procurement tool, which can be used as a hosted service. In a Videocast we did with Hallmark on this topic, the company said it thought it could use e-Auctions for almost anything, and was saving big time.
• Consistently Compare Actual Total Landed Costs with Forecasted Costs: Very few companies are doing this well in global sourcing operations, from my anecdotal discussions, and research presented by Penn State researchers at last fall’s CSCMP conference (see In Search of a Landed Cost Model.) Is it any wonder too many global sourcing initiatives fail to deliver expected results, if we can’t really measure how we’re doing?
• Start a Lean or Six Sigma Initiative in the Supply Chain: OK, maybe in some cases we’ve taken Lean too far, as readers have reminded me, and huge numbers of companies have already started to use Lean, Six Sigma, or Lean Six Sigma. But more have not, at least outside the four walls of the factory. The risk/reward ratio for starting some pilot efforts here seems very compelling to me. I’ve heard many stories of interesting supply chain improvements, some in some novel areas, from using one or both of these approaches to continuous improvement.

So there’s my list. With the possible exception of centralizing transportation management over a large network, I think all of them fall on the “easier’ side of the continuum than many other types of supply chain projects. I also tried to pick areas where results are consistently achieved from those that make the effort.

But that’s just my perspective. Please let me know what you would add or take away from the list of relatively simple, proven techniques for improving supply chain performance that a large number of companies still aren’t doing today.

What would you add or subtract from Dan’s top 10 idea list? What are the barriers to adopting often simple improvement steps? Let us know your thoughts at the Feedback button below.

Let us know your thoughts at the Feedback button below.