For most of you who read this, the following is a true statement:

 

Your supply chain is not part of your business, it’s your whole business.WARNING Complacency.jpg

 

Without your supply chain, you would be out of business!

 

Many (read: most) supply chains are not ready for the future

McKinsey, the renowned management consulting firm, recently released a report stating that many “supply chains are not equipped to cope with the world we are entering.” The report says, “Most were engineered, some brilliantly, to manage stable, high-volume production…,” but, in a rapidly changing world, these approaches “can leave companies dangerously exposed.”

 

The reality is, McKinsey observes, that “the world is changing rapidly…. [and] that in turn will almost certainly lead to much higher levels of volatility in demand and supply, and greater levels of supply chain complexity than most of us have known to date. It makes perfect sense to argue that most supply chains as currently constructed are not well-suited to this new environment.” [1]

 

The Future is now!

Writing in their outstanding new book, Demand Driven Material Requirements Planning (DDMRP), Carol Ptak and Chad Smith [2] remind us that we are already in the new normal. The future is now!

 

In the new normal:

  • Experienced planning and purchasing personnel are very well aware that if they simply follow the recommendations of their traditional MRP systems, they will wind up in big trouble. Both shortages, on the one hand, and inventory excesses, on the other, will grow. Expediting will escalate. These supply chain professionals recognize that if they continue to use traditional practices, they will find themselves in a no-win situation.
  • For the Internet-empowered consumer, tolerance times have dramatically decreased, and supply chains must accelerate to keep up—or perish.
  • Product variety has increased dramatically. SKU intensity has risen. What used to be one kind of toothpaste has become dozens. Where companies used to be able to stock ‘styles’ of watches, they must now stock styles by color. Even cellular phones now come in different colors.
  • The regulatory environment has grown more demanding and complex. Consumer safety and environmental regulations have proliferated in the U.S. and abroad.

This new normal is today’s world, not tomorrow’s.

 

Complacency leads only to backsliding and failure

If your executive and management team is not already in the process of seeking out new, fresh and innovative ways to meet these challenges, then as McKinsey has already stated, your supply chain may be “dangerously exposed.”

 

If you are not moving forward, you’re backsliding. It is likely that your competitors will be—or, are already—taking over more and more of your market.

 

In the new normal, your ability to effectively guide your day-to-day supply chain decision-making in ways that you know assuredly will have a positive effect on your bottom-line, means everything. Traditional approaches have proven themselves ineffective at accomplishing this.

 

While the C-suite is busy watching the scoreboard (the financial results), only a handful have found effective ways to manage the “play-by-play” so that they have absolute assurance that the actions taken will lead to improvements reflected on the bottom-line.

 

We are doing our best to help our clients every day to move in this direction. Our fresh insights are helping our customers become truly demand-driven. This is critical to improving the only two metrics that reflect the performance of the whole supply chain:

  1. On-time performance, and
  2. Return on investment

 

If these two crucial metrics are not consistently improving, chances are you need help.

 

We would like to hear how you are achieving ongoing improvement in your company and supply chain. Leave your comments below, or feel free to contact us directly.

 

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[1] Gilmore, Dan. "Rebuilding Supply Chains for the Future." Supply Chain Digest. April 8, 2011. Accessed December 30, 2016. http://www.scdigest.com/assets/FirstThoughts/11-04-08.php.

[2] Ptak, Carol A., and Chad Smith. Demand Driven Material Requirements Planning (DDMRP). South Norwalk: Industrial Press, 2016.

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