UK: Supply Chain Management

Last Updated: 1 March 2012

In the e-commerce age, it's important for companies to formulate and manage supply chain strategy, structure and processes. Since most products and services can be differentiated from the competition by superior customer service and delivery performance when price, design and quality are similar, the payoff for achieving supply chain excellence is high. You can minimise cost of goods, operating costs and inventory investment by designing and implementing efficient supply chains.

What steps are involved in supply chain management?

  1. Using the worksheet at the end of this article, you can construct a quick success profile of your company's supply chain by answering a series of questions that focus on metrics for customer service, inventory turnover, product movement costs (i.e. inbound, inter-facility and outbound freight), and product storage (warehousing) costs. Please note that not all questions will apply to all companies. Answer those that make sense for your organisation.
  2. The quantitative measures can be reviewed and analysed internally – essentially establishing your own benchmark.
  3. You can address areas for improvement in your company's supply chain.

What is the CEO's responsibility in the supply chain success check?

The CEO's responsibility is to:

  • support the initiative and the process
  • assign the proper individuals to collect the supply chain data (usually found in the chief financial officer's (CFO's) accounting group and management information systems (MIS) personnel)
  • review and confirm that the supply chain data to be fed back appears reasonable, complete and correct.

Who should lead the supply chain success check project?

Ideally, the CEO will be the project lead. If the CEO must delegate this responsibility, as is often the case, then the individual assigned should be knowledgeable about the company's accounting and MIS systems in the inventory, operational cost accounting and logistics operations. Often this individual is the CFO, but in some companies it may be the MIS director or the supply chain logistics head.

Who the best person is depends upon:

  • how your company is organised
  • your company's situation, size and industry
  • the role(s) your company plays within your industry's supply chain (supplier, manufacturer, wholesaler, retailer)
  • the segment(s) within your industry's supply chain in which your company operates (supplier, manufacturer, wholesaler, retailer).

What is the role of the project lead in this process?

The project lead's role in the supply chain success check is to:

  • assign other individuals close to the data in each question area
  • clearly and concisely define, using your company's terminology, the data to be gathered
  • ask questions of the TCii consultant to clarify any definition issues
  • collect the data
  • forward the data to the CEO.

Action steps to be taken after the supply chain success check

  1. Assess the need and priority for a supply chain strategy review.
  2. Assess the need and priority for a supply chain structure review. (The supply chain structure encompasses the plant and warehouse locations throughout the company's internal supply chain, plus the supplier and customer locations in its external supply chain structure.)
  3. Assess the need and priority for supply chain process improvements. (Two key supply chain top-level processes are "supplier purchase order to payment" and "customer order to cash").

Supply Chain Performance – Project Leader Worksheet

How does our customer service performance measure up?

(Fill rate = orders, line items, or units shipped, divided by orders, line items, or units originally ordered by the customer)

  1. What is our complete order fill rate percentage?
  2. What is our line item fill rate percentage?
  3. What is our pound and/or unit fill rate percentage?
  4. What is our on-time delivery performance?

What is our inventory turnover performance?

(Annual turns = inventory at cost of annual product movement divided by average inventory balance at cost)

  1. For raw materials?
  2. For work in process?
  3. For finished goods?
  4. For our overall total inventory at cost?

How much are our freight costs as a percentage of COGS or sales?

  1. For inbound freight as a percentage of cost of goods sold (COGS)?
  2. For inter-facility freight as a percentage of sales revenues?
  3. For outbound freight to the customer as a percentage of sales?
  4. For overall freight costs as a percentage of sales?

What are our warehousing costs as a percentage of sales?

  1. What is the cost of warehousing at the plants as a percentage of sales?
  2. What is the cost of warehousing in the field as a percentage of sales?
  3. What is the cost of outsourced warehousing as a percentage of sales?
  4. What is the total warehousing cost as a percentage of sales?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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