Experts in Supply Chain Management Unlock The Key to Operational Success
Supply chains have become a major topic of discussion in recent years in an unprecedented way. Due to crises such as COVID-19 and the war in Ukraine, markets have experienced inflation, transportation and shipping delays, and stock-outs. The resulting supply chain disruption has impacted businesses, industries, and individuals around the globe.
We spoke to three supply chain consultants on the Catalant platform about the issues supply chains are facing today and how business leaders can unlock the key to operational success amidst these challenges.
Supply Chain Management Challenges Today
Supply chain expert and consultant Serge Milman says, “Supply chains are responsible for ensuring availability of raw materials at the right price, in adequate quantities, and on a needed or ordered basis.” Despite recent crises — most notably, COVID-19 — causing supply chain disruption, these are still the three major goals of a well-oiled supply chain. To ensure supply chains deliver on these goals no matter what society endures, we must change the strategies and discussions around them.
Although global supply chains were mostly reliable prior to the outbreak of COVID-19, they did have underlying issues that surfaced as a result of the pandemic. Experts Kara Yokley and Benjamin Grant say complacency may have set in when it came to “relatively reliable” supply chains, and that it took the pandemic to highlight aspects of supply chains, “where myopic focus on cost minimization, lean, and ‘Just-In-Time’ — without hedging and planning for downside risk — exacerbated disruptions.” Additionally, Milman says, “Most supply chain and procurement organizations lack the expertise and sufficient resources to succeed.”
The Need to Adjust Supply Chain Strategy
In the past, supply chain leaders may have simply altered pricing to combat the issues that define supply chain disruption. They might have lowered costs while focusing on what was only the near-immediate delivery of goods. However, this strategy alone is no longer enough according to Yokley and Grant. “Today, managers and planners need to view cost as a component within a multi-objective framework that balances resiliency, cost, customer service expectations, and other factors like sustainability.”
Milman adds, “The overarching principle firms should use is the formulation of how they can extract maximum value from their purchasing power (e.g. vendor spending), with value based on a cost reduction, quality of service, and risk mitigation.”
5 Keys to Supply Chain Management Success
To adjust supply chains in 2022 and make them more sustainable for the future, here are five keys to success according to the three expert consultants we interviewed.
1. Consider sourcing and supplier fitness.
Begin by evaluating your sourcing strategy. Yokley and Grant recommend identifying any “redundancy and multi-sourcing needed to shield against disruption.” Then assess your supplier’s fitness with a holistic view of the supply chain. For example, if your lowest-cost supplier is mainly serving you, keep some reserve capacity with a supplier that has a broader portfolio of customers.
2. Change mindsets and strategic conversations around supply chain.
Rather than only focusing on cost, work to change the mindsets around supply chains to improve their flexibility, resiliency, and redundancy. According to Yokley and Grant, this shift makes room for more sustainable and adaptable supply chains as well as new negotiation strategies that are dynamic, adaptable, and responsive — especially in industries that “rely on commodity inputs upstream.”
Reassessing mindsets around supply chains may also entail having conversations about how to diversify them. By diversifying their geography and/or logistics, you will position the supply chains your business relies on to withstand unforeseen challenges or roadblocks.
3. Evaluate vendor management.
Milman says simplifying “the vendor universe” allows supply chains to better meet global needs. To do this, “Identify spend areas, map services provided by incumbents and services that could be provided by incumbents, and identify challenger vendors.” You can also set up a vendor management office. To do this effectively, focus equally on internal compliance, identification of needs, and vendor compliance. You should also monitor performance and ensure your vendor office is managed by those with the skills and personality necessary to have, “what often are difficult conversations with senior executives.”
4. Enable better information sharing.
Information sharing between suppliers is critical. Yokley and Grant say, “When firms don’t share upstream cost and downstream end-product demand with suppliers, the result is less profit in the overall supply chain.” You might invest in supplier relationships by engaging in more open communication and information sharing. You can also reiterate to partners that their long-term viability is of great mutual interest.
5. Stress-test the supply chain.
Yokley and Grant believe in stress-testing the supply chain using scenario and sensitivity analysis. “Reassess the probabilities for various outlier events that would cause supply chain disruptions.” To assist with this evaluation process, you may want to lean on modern tools and technology in simulation, machine learning, and artificial intelligence. Milman points out that technology is best used and most helpful when a business case is established and change management is defined. “In my experience, dedicating more time and resources to change management than you think is necessary is nearly always a smart decision.”
About the Experts
Serge Milman is a Managing Partner at Sourcing Advisors Group. Serge has over 20 years of Supply Chain experience that allows him to help his clients reduce supply chain disruption risks, reduce costs through the restructuring and renegotiation of vendor contracts, and enable effective strategic sourcing.
Kara is a founder, author, and specialist in finance, analytics, and operational and digital transformation. She is Principal at RRDS Chicago — a Data Science and Quantitative Research Company.
Ben is an Assistant Professor at Clemson University’s Wilbur O. and Ann Powers College of Business. He is also Chief Data Scientist at RRDS Chicago — a Data Science and Quantitative Research Company. His specialties include Operations Management, Optimization, Data Science, Computer Programming, Financial Modeling, Risk Analysis, and Applied Statistics.