07 February 2012

Viewpoint : The Blog

Six steps to supply chain success

Published:: 24 March 2009
Article Type:: Viewpoint
Byline:: By Malory Davies

It sounds really simply – get six things right and you too can have a top-performing supply chain. It’s only when you examine the six management principles identified by consultants McKinsey that you realise quite what a challenge you face. They are:

1. Link supply chain strategy to company strategy; set clear aspirations.

2. Segment the supply chain to master the product and service complexity that matters most.

3. Tailor supply network to optimise service, cost, and risk goals.

4. Use lean tools to optimise supply chain from end to end.

5. Create integrated and robust sales and operations planning processes.

6. Find top talent; hold people accountable.

In its study, “The race for supply chain advantage”, McKinsey says high performers enjoy lower distribution and logistics costs, better service outcomes and better inventory performance than the others.

The Supply Chain Best Practice project carried out in association with Georgia Institute of Technology covers more than 60 large multi-nationals with sales totalling some $66 billion.

Strategic supply chain alignment is a challenging task in its own right, while there are few who would not feel a little daunted (and excited) at the prospect of segmenting a supply chain.

McKinsey said that half of the top service performers used segmentation techniques to create distinct supply chains to serve different customer groups with unique products compared with only 29 per cent of average companies.

And top companies also excelled in optimising end-to-end efficiency while ordinary companies applied cost reduction techniques within individual functions such as transport.

It also found that companies with the lowest supply chain costs were more likely to entrust managers with end-to-end control over them, thus increasing the likelihood that management decisions will improve the whole business and not just certain functions.

Of course, in the current conditions, there is a temptation for companies to look for quick wins – for example cutting transport costs rather than looking at the supply chain as a whole.

Perhaps this report will help counteract that tendency and remind executives that there are bigger wins to be had with a little strategic thinking.

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