What is the first thing that comes to mind when you hear the word ‘optimise?’ If you think that it only means ensuring one or two factories in your control are operating efficiently, then your definition needs a serious update!
According to google, optimise means:
- make the best or most effective use of (a situation or resource).
Furthermore, when one optimises, there is a fundamental law that they must adhere to. When you optimise you must optimise the whole independent system. If you do not optimise the whole, you are simply optimising one aspect of it and sub-optimising the other, so essentially you are sub-optimising the whole.
Are you absolutely sure that your optimised supply chain is indeed an optimised supply chain ecosystem and not simply a system which has been in some places optimised, which really means that your entire system is suboptimal?
Look to your organization. How far have your recent supply chain strategies truly incorporated all parties? Has it reached to include everyone from your company to your business customers and to their end-user customers? Have you really understood the real meaning of an industry supply chain? Has everyone else understood it in the exact same way?
If not, then it is high time that big thinking should be required up and down the hierarchy. Often times leadership has one idea of what optimisation looks like but then further down, managers dilute it with their own agendas and short-term goals.
We need to create a corporate environment where big thinking is shared all across the board. It should not rest solely on upper management to ensure larger collaboration is executed. Here are some fairly simple tactics you can use to ensure that your optimisation efforts are understood.
1. True Optimisation Benefits All
When creating an optimisation strategy, always make sure that it is not solely for the benefit of one link in your chain. For example, do not simply increase your number of designated depots without due consideration of how you will be able to have more transportation of goods to these areas.
The same goes for the speed of manufacturing. What good is increasing production when your shipping partners take weeks getting your product to market? Are you picking a slow delivery service to reduce costs? Where is the sense in that when you end up with an out-of-control expense in terms of holding inventory?
The danger of optimising one area is that managers have a knee-jerk reaction of trying to ‘contain’ its impact on other parts of the supply chain instead of letting this impact transform them. The result is that only select partners and third parties benefit at the cost of the rest!
2. Big Changes Means Big News
Look at McDonald’s recent Experience of the Future initiative. It’s an initiative that’s meant to assist customers with the inclusion of automated kiosks. It has been featured in a number of news outlets and its clear that even storefront managers have been effectively filled in on all the details. They know what the initiative represents, how it is meant to help the brand and their respective branches.
Similar initiatives deserve as much coverage and information relay in your company. It is not enough to simply make decisions that have a large impact on the entire supply chain. Everyone in the organization should be in the know about it and should be prepared to understand exactly how this affects the whole business.
For instance, suppose you are introducing a faster way for customers to order products. That means the rest of the supply chain should immediately see this will require them to also optimise their production in order to meet the demand. The news needs to spread and they must understand what it means for all of them.
3. Leaders Should Acknowledge Each Other’s Importance In a Cross-Functional World
Today, the most efficient supply-chain is a cross-functional process. A cultural shift needs to happen where leaders of all areas in the supply chain network need to acknowledge each other’s role in ensuring that this cross functional system succeeds. Never let one of them assume that a problem isn’t a ‘big deal’ unless they get every other person on the leadership team to concur.
Sometimes even something as innocuous as putting a bold claim on a product requires multiple consultation between different areas of your supply chain. For example, you don’t release a PR statement about the sustainability of your raw materials unless you have tapped your suppliers and manufacturers and they, in turn, have the documentation to vouch for your claims. Saying, “That’s not my department.” no longer cuts it in the 21st century!
4. Use Advanced Analytics and Competent Analysts Side-by-Side.
It’s beyond the human mind to work this out. You will need to use advanced analytics to determine the ideal state of your supply chain. This, in turn, will balance delivered cost, cash, lead times, investment required and on-time in full delivery (It might even cause them to trade-off in some cases!)
It is also possible to even have a number of ideal states. These will then need to go to a board or leadership team for them to decide on the best one that meets your business’ needs.
Thinking incrementally doesn’t cut it in supply chain optimisation. We need a big picture view of what we have now, where we are going , how we are going to get there and by when. Then, we need to stay the course, or at least check it annually.
This big picture view needs to extend to the corners of our supply chain ecosystem. So what does this mean?
- If you optimise within functions, without optimising between functions your supply chain will be suboptimal.
- If you optimise at the interface between customers and delivery your supply chain will be suboptimal elsewhere.
- If you optimise your end-to-end supply chain without optimising into suppliers and then the other into our end-user customers, your supply chain will be suboptimal.
We learn this regularly in our supply chain games aka ‘the beer game’ or ‘the Coke game.’ Real life is also fully of similar experiences. Think back on the times when we have a stock out or excess stock in the channel, or even when our market power becomes too great and our suppliers start to complain. (First in private, then publicly!)
We live in a globalised era where it is more important than ever to see the bigger cross-functional industry perspective. Up until now, many companies have taken this scale for granted and left it all as ‘too hard’ and that someone else should undertake.
It is time to stop prioritising solutions that seem to only consider a narrow scope or compartmentalise elements which are dependent on each other (like bubbles under plastic that only pop up somewhere else).
An increasingly global market requires increasingly global and holistic thinking, and this global thinking needs to be fundamentally seeking optimal (and winning) solutions for our entire end-to-end supply chain!