Supply chain professionals must adopt a new approach to management to tackle the complex challenges posed by the expanding globalization of manufacturing. That was the advice consultant Kim Doyle offered to those attending the Women in Manufacturing Summit last week in Dearborn, Mich.
Traditional management approaches must be replaced or at least altered to reflect the evolving business market, said Doyle, a senior manager at Plante Moran, one of the nation’s largest consulting firms.
Manufacturers are outsourcing and expanding their markets and as a result logistics have become more complex. “Think about the activities that people have moved outside of their four walls,” Doyle said. “It could be engineering, distribution or production. It adds complexity when you add new partners involved in your supply chain.”
An increase in demand and overall economic volatility may also require sudden changes in supply chains. And as economic uncertainty continues to play a role in consumer purchases, “customers are becoming more price sensitive and less loyal in some cases,” Doyle said. With consumer demand and higher expectations on the rise, manufacturers need to top their competition, whether that means customization, quicker turnaround times or improved service.
Innovation and marketing strategies pose additional challenges for manufacturers. “Introducing new products has a lot of complexities for the supply chain,” Doyle said. “You need to get the right product at the right quality, at the right cost.” Cost reductions are also fundamental for price sensitive customers, she noted.
Doyle outlined four steps that professionals should take to conquer the new challenges in supply chain management:
Improve Supply Chain Visibility. In an ideal world, supply chain visibility would entail providing key data to suppliers, customers, and such other relevant parties as logistics providers. The data would in information on product orders, shipments and inventory.
Manufacturers are not excelling in the area of supply chain visibility, according to a 2012 Economist Intelligence Unit Survey of global manufacturers. Only 9 percent of the respondents said they could assess the impact of unplanned disruptions within hours. More than half said it would take more than a week to assess damage.
Lost time could be devastating to business, as reflected by various supply chains that were crippled by Hurricane Sandy a year ago.
“Not everybody is going to be [able to respond] in the matter-of-hours category, but to wait two or three hours, or to have no visibility whatsoever, think about it [if you] were in that situation, and your competitors could respond,” Doyle stressed. “Your disadvantage would be pretty extreme.”
Become a More Agile and Flexible Supply Chain. While most organizations might recognize flexibility as a priority, many know that they need to work on a better strategy. Organizations with an agile supply chain have the ability to quickly adjust their plans, tactics and operations within the supply chain to adapt to a changing environment. Changes that impact the flow of the supply chain could be considered an opportunity, such as increased consumer demand, or a disruption, such as a production failure or a delivery setback.
Doyle stressed that supply chains need to focus on a few key areas, including anticipation and awareness, which give companies the ability to detect changes. Speed is also essential. “It’s not enough to have the information, analyze it, and make a decision,” she said. “You need to actually be able to implement on it, and that’s the key differentiator.
“If you need to quickly adjust your production to meet increased customer demand, but if your production capacity and your supplier’s production capacity are fixed, you have no ability to flex to that increased customer demand,” she said.
Focus on Risk Management. ”Nobody is really immune to supply chain risks,” Doyle emphasized. Supply chain risks can originate internally, such as supplier shortage or delivery problems, or externally in the form of government policy changes or environmental disasters.
Doyle advises supply chain professionals to identify all sources of risk. “Pull in as many cross functional groups as you can to go after this exercise,” she said. Manufacturers working with a sole supplier should try to identify all the risks that could occur with them and be proactive by establishing a formal risk monitoring process and developing a plan to respond to problems, she said.
Establish ownership of risk management across different groups, Doyle advised. “You don’t want this to become a pet project that one person owns, and you don’t want to put it up on a shelf and pull it out later,” she said. “It really needs to become part of the overall supply chain management processes.”
Get the Right Supply Chain Talent. Just as the industry environment has changed, so has the skill sets required to manage the supply chain. “You need people who are able to think and look across the end-to-end supply chain, and understand the implications that their decisions will have on other functions,” Doyle said. “Being globally oriented, obviously, having those deep analytical and strong technical skills are important. And because of that strong ability to collaborate and coordinate with other groups internally and externally, they need to have strong communication, and coordination skills.”
More than ever, Doyle said, the incoming and current talent — who can benefit from job shadowing to see all sides of the supply chain processes — need to have the ability to adapt and respond to changes.
“There’s talk about potentially mandating some type of supply chain certification some day, similar to the CPA, because organizations are truly looking at skill sets as such a competitive advantage for us,” she said.