Tag Archive: APICS Ventura

Why Supplier Management is More Important Than You Think

June 17th, 2019

Supplier management has been a theme this week. I taught a CSCP (certified supply chain professional) class session about supplier relationship management and SRM software recently. An attendee had a great example of the impact of poor quality.  Her company was sending an entire container load of product back to Asia with defective parts.  This was bound to have negative impacts on the customer. After all, they were already delayed.  Now, they were spending another month on the water to start over again. That led us to discussions on backup suppliers.

Next, I spent quite a bit of time on webinars and calls one day talking about the critical importance of supplier lead time, reliability, safety stock, lot size and how these factors impact our ability to maximize service, profit and cash flow. And, I presented to APICS Ventura on “The Resilient Supply Chain” We had intriguing discussions on the trends of vertical integration, supplier consolidation, allocation of key materials (and how consumer products are gaining priority access with the leftovers being allocated to industrial companies), the impact of tariffs on sourcing, and several more topics.

The bottom line of each of these discussions is that proactive management of suppliers is of ever-increasing importance in today’s Amazon impacted business environment. If you don’t have what you need, when you need it, where you need it, in good quality, and within cost guidelines, you are likely to lose vs. your competition. And, this includes last minute changes! Do you consider your supplier your partner or someone to negotiate with and gain an advantage over?

What Should We Consider and/or What Impacts Could Arise?
It is NOT all about cost. Of course, the hot topic on executives’ minds is how to achieve scaleable growth, so profit and cost are important topics.  Yet, smart executives realize it is quite easy to sacrifice the future by saving pennies in the present. Similar to the mistakes made several years ago when it didn’t matter whether it made cost-sense or not (ie. Boards were demanding outsourcing regardless of the financials), many Boards are demanding supplier concessions without looking at the extended supply chain impacts. Instead, stick up for looking at total cost and taking the value viewpoint! Of course, this means you’ll be focused on costs but it won’t be your sole focus.

We talked about several scenarios where you had to invest financially upfront in order to achieve longer-term success. For example, we talked about keeping a more expensive backup supplier and giving them 20% of the volume. Boards and private equity backers weren’t too happy with the extra cost yet this risk mitigation technique saved the day on more than one occasion. When the material went on allocation, the main supplier struggled or the ports/transportation infrastructure broke down, those who planned for the inevitable bump in the road had uninterrupted supply from the backup supplier and satisfied customers while the competition fell further behind. Are you thinking about your suppliers like a cost or a partner?  You’ll find more information on these types of topics on our resilient supply chain series.

 



Inventory Management Remains Core to Success

February 9th, 2016
cycle counting inventory management

Inventory management may be a less exciting supply chain topic but it is the linchpin in a manufacturing or distribution business.

No matter how many engaging conversations I have with clients, contacts and trade groups about emerging supply chain trends, the less exciting topic of inventory management often-times can deliver a higher value than the latest and greatest most-talked about trend. As the Programs chair of APICS Ventura Chapter said when requesting this topic for a recent speech, inventory management is core to success and remains a timeless topic.

3 Reasons Inventory Management Matters

This prompted me to think about what I see across all types of clients: Whether a $5 million fast-growing manufacturer in the building products industry, an $80 million dollar food processing company or a multi-billion dollar aerospace company, I’ve found inventory management to be vital to bottom line results. Three of the top reasons inventory should be seen as core to success include:

  1. Inventory accuracy – If you cannot find the product, you cannot ship it. It can be as simple as that; however, it often goes much further. If you think you have more inventory than you do, you will not purchase or produce what you need to in order to fulfill customer needs. Certainly, this will prompt higher costs, poorer service and a host of other issues. Additionally, a critical asset is not valued correctly. Do I need to go on?
  2. Inventory levels – Most accountants prefer to hold less inventory as it ties up precious cash. Most Sales folks prefer more inventory because they don’t have to worry about it being available to sell. Most Operations folks prefer to run larger quantities so that they can optimize efficiencies and minimize downtime. Lean gurus prefer to resolve process issues so they can reduce changeover times to run less inventory. Managing risk could dictate more inventory if you are concerned about service if natural disasters or political events hold up your inventory. Managing cash flow certainly dictates less inventory. No wonder it can be such a tough challenge for often-times under-appreciated planners!
  3. Customer service – One of the goals of inventory management is to have the right product in the right place at the right time. It sounds easy enough yet rarely is easy. Oftentimes, inventory is available somewhere in the system but isn’t at the right facility at the right time to satisfy customer requirements. What good is it if you have inventory in Miami when you need it in Seattle? Worse than none since you have cash tied up without the benefit. Since customers have little patience as there are typically competitors waiting in the wings, poor customer service (or even mediocre service vs. the competition) can have a detrimental effect on your business.

Inventory can be a strategic advantage or a weight around your ankles when treading water.  Take a proactive stance to take charge of your inventory and planning processes. If you are a distributor or manufacturer, there is nothing more fundamental to success. If you’d like to talk about your inventory strategy, email me. 

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

Is Your Inventory System Working?

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