4 keys to a successful supply chain
A successful supply chain is vital in a world that is becoming faster and more demanding
At the 2013 Association for Manufacturing Excellence Conference in Toronto in October, Michael Rackley, head of supply chain solutions for Ryder Systems, talked about the increasing demands by manufacturers and consumers on the supply chain. Rackley identified nine major trends affecting the supply chain today:
- Increasingly shorter lead time (“Speed is worth more than cash these days,” he said.)
- Impact of online and mobile information access
- Acceleration of social media
- Heightened susceptibility to natural disasters
- Political and currency turmoil
- Shorter product lifecycles (He noted that Apple has had seven new iPhone models since 2007.)
- Faster delivery
- More, lower cost competitors
- Demanding shareholders
“We have to perform even more efficiently than ever before. What does that do to the supply chain? Our 12- to 14-week lead times have to get a lot smaller,” Rackley said. “Speed is driving the supply chain. Customers are defining the mark we have to hit and the speed we have to hit.”
The key to hitting these new marks, Rackley said, is collaboration. “We have to create a new network, a multi-tiered network of people working together, rather than individuals creating plans for the supply chain,” he said.
The demand-driven supply chain, said Rackley, “has got to be around customer and consumer. We’ve got to listen to that customer. We now have to manage supply at the pull of the customer.”
It also, he noted, changes the relationship between sales and manufacturing. “Manufacturing, distribution, and sales all have to be working together,” he said. “Everyone has to have visibility to actual consumer demand. They need to know, what are consumers actually buying?
The dynamic of such a system changes from a linear process to a wheel-and-spoke system. “In a multi-tiered network, the consumer is actually in the middle, with factories, OEMS, distributors, Tier 1 and Tier 2 manufacturers around them,” he said. “Visibility is the key. The most difficult part is building the network, but you’ve got to build the multi-tiered network, and then get that visibility.” Where that system has occurred, Rackley said, companies have seen increased sales, a 5% to 10% reduction in operating expense, and between 20% and 30% reduction in inventory costs.
He cited four main ingredients in a successful system:
Rackley cited the example of two different grilles for a vehicle front—one with a V6 logo and one without. By making that logo a clip-on rather than a molded change, they were able to produce one grille and reduce inventory.
“You need to look at best-cost areas vs. simply the low-cost areas,” he said. By localizing the finished goods and spares, delivery times can be reduced, which can offset any piece price differences from a lower cost supplier with higher transportation costs or longer lead times to delivery.
Visibility and collaboration
Rackley noted the manufacturer who re-examined his logistical system for inbound supplies. The manufacturer created a material flow center strategically located to support the assembly plant, with material flow center sequencing parts to each assembly line. “It’s getting the parts to the right place at the right time,” Rackley said. “Sequencing is very important. It’s getting visibility to all that inbound material.”
That would include not just working internally, but with all parts of the supplier base. “You’ve got to take it out from the four walls (of the plant) and move it across the entire supply chain,” Rackley said.