How do you translate a strategic commercial vision into an effective supply chain? For that, you have to dare to differentiate. Senior Supply Chain Specialist Tijmen Muijs, associated with BLMC Supply Chain Optimisation, shows how to develop a supply chain strategy that supports the business and what the success factors are for implementation.
Tijmen is one of the practical experts performing in the Supply Chain Arena© during ICT & Logistiek on 7 and 8 November. Within the exhibition, the Supply Chain Arena is the hotspot for supply chain knowledge and contacts. Visit the ICT & Log istiek website for more information and registration.
Stop standardising!
'In a marketing strategy, everyone thinks it is quite normal: the marketing approach differs per target group. In the production and logistics environment, the idea that standardisation and efficiency are the best way forward still often prevails. This is an outdated idea. It is precisely a supply chain that is differentiated per product-market combination that can optimally support the business. Only that way can you be sure that you offer the different customer segments what they value. That leads to higher sales, more agility and lower costs.'
Step 1: what do you want to achieve?
'When I or one of my colleagues from BLMC Supply Chain Optimisation come to a company's table, it is usually because there is a problem. For example, declining sales or bottlenecks in the production process. It is always important to first find out the source of these problems. You can then distinguish between:
- Symptoms
- External influences
- The real, usually internal cause of problems
There is a temptation to see symptoms as the real problem and external factors as causes. Because well, competition has become very strong, or the market is collapsing, or the economy is entering a crisis. However, you can minimise the influence of those factors or even turn them to your advantage if you are alert and make timely adjustments.
So what is causing the problem? Usually it is a combination of internal factors:
- An unclear and often insufficiently differentiated strategy
- Poor translation of strategy into organisation and systems
- Culture, attitude and behaviour
'The good news, is that you have control over this, and so you can tackle this yourself.'
Step 2: what needs to be done?
'Every strategy starts from customer value. Which product-market combinations do you serve? And what is important to those consumers? For example, on the one hand you might have a custom-made, exclusive product line with a lot of margin. On the other hand, you might make some private labels with basic quality, lower margins and higher volumes.'
Service-driven or cost-driven
‘For the exclusive range, quality, flexibility and reliability are paramount. That means there must be robust quality control, production must be close to your market, and you must be able to respond quickly to developments. You need a ‘service-driven supply chain’. You prefer to keep production within Europe, and there must be excellent customer service that is easily accessible. That’s why I also refer to this as the ‘fast lane’. For private labels, low costs are the most important factor; you operate on the basis of a ‘cost-driven supply chain’. You produce as much as possible in bulk, maintain reasonable stock levels, and a basic level of quality is sufficient. A production site in the Far East can work perfectly well for this. I also refer to this as the ‘slow lane’.’
Translating this into operations
‘By translating strategic choices into production and distribution, you set yourself apart where it counts: product leadership for bespoke products and cost leadership for private labels. You give consumers exactly what matters to them. It also makes a big difference to costs: you only incur costs that deliver added value.’
Step 3: how do you do it?
'From the existing situation, you then have to implement that in practice. Working out the processes and determining which systems you need for this is important, but not the most difficult, as long as the choices made are consistently stuck to. Often der existing systems are a roadblock that needs to be addressed. What matters most afterwards is: how do you get employees to go along with the new way of working?'
Providing structure
‘This starts with a logical and clear project structure to implement the changes. People need to know where they stand and what they need to do. In the example mentioned, it makes sense to form two project groups: one for the fast lane and one for the slow lane. For each supply chain, these project groups determine the criteria relating to forecasting, production, distribution, stock levels and service. This leads to action points. Each action point is tackled by a task force dedicated specifically to that issue. The project groups maintain an overview of the overall coherence. In this way, you can make enormous progress in a short space of time, all of which stems directly from the strategy.’
Good communication at all levels
‘Change can meet with resistance. That’s only human, and it’s an integral part of any improvement process. The best remedy is good and frequent communication, focusing on strength and optimism. It is also very important to involve all stakeholders, from senior management to production staff and from suppliers to customers. This is not just about the practical aspects that are changing. You also want people to start thinking differently: moving from a horizontal approach (across roles and departments side by side) to a vertical one (working together for the customer, across the entire supply chain). That’s not something you can simply announce in the space of an afternoon. It’s a fundamentally different mindset, and you convey it not so much explicitly as implicitly: show what you’re doing, why you’re doing it, and what the benefits are.’
Success fraternises
'In implementation, it is best to start with small steps that are guaranteed to deliver results, start with a small product group, for example. That way, you prove that the approach works. That creates trust and enthusiasm. Don't dwell too long on how things were in the past or why something didn't go well until now. Look ahead and, above all, always keep the customer as your starting point. Supply chain management is not a purely operational matter, just as a commercial strategy is not only delivered by marketing & sales. The most successful companies understand this and ensure that the entire chain is optimally organised to achieve the business objectives. That way, together you create value for the customer, for your company and ultimately for the entire chain. That is the essence of supply chain management.'
Meet Tijmen in the Supply Chain Arena Tijmen is one of the speakers in the Supply Chain Arena during ICT & Logistiek. The programme includes many presentations on topics including supply chain strategy, processes, implementation and S&OP. Or discuss your own issue in a Supply Chain Speed Consult with one of the experts. The Supply Chain Arena is an initiative of BLMC Supply Chain Optimisation, Solventure S&OP Planning Software and Supply Chain Media.
Visit the ICT & Logistiek website for more information about the Supply Chain Arena, the programme and registration.
