Are your supply chains the bolt together variety?

If your supply chains are like many I see, they were created by great people who do great things. Unfortunately, those supply chains don’t work as well as they used to. You’re probably seeing a lot more spreadsheets created outside ERP or similar systems, functional experts consistently having to band aid processes that used to work, metrics that don’t reflect all the work that is being done to make the numbers, and so on and so on.

What is going on?

The likely culprit: your supply chains were bolted together – and that no longer works.

But wait a minute, you say, our supply chain used to work like a champ. The key phrase is “used to”. Even supply chains created just a few years ago have trouble working now because they were developed using what is now out-of-date logic. And the new logic is:

Customers

But wait, weren’t existing supply chains made to service our customers optimally and efficiently? Yes they were. Unfortunately, no customer cares about how optimal and efficient we are, only how well we cater to their current needs and values. And that is what has changed.

We’ve had a nice system in industry where: procurement brought in suppliers they found (many times under cost cutting initiatives), manufacturing made sure that waste was leaned out of its systems (also often under cost cutting initiatives), warehousing ran efficiently in the way items were picked and transported, and so on throughout all of our functional supply chain support areas. We now have lean, least cost, optimized, internal supply chains to make sure we protect our bottom line.

The problem: customers don’t care.

The old way of creating optimized supply chains (based on our internal opinion of what optimized should be) was to have each functional area develop their piece of the supply chain and then bolt everything together. This doesn’t mean care was not taken to get the best possible results – it was. Things just weren’t focused the way we need to focus now.

To get your supply chain running smoothly, we can no longer offer the equivalent of the Ford Model T (you get product based on the way I’ve decided to put things together and the way I want to deliver). If you are currently running around your processes to get things done, you can see that your customers aren’t buying your version of service.

You have to meet your customer’s needs by first using the data you’ve collected to figure out what the customer groups you actually have. They aren’t the old demographic groups we are used to create supply chains for.

Second, you have to set up multiple supply chains within your organization so that each customer group is serviced the way it needs and wants to be served. Different customer

groups may be able to be served by one supply chain. Different supply chain segments may be used by different supply chains. Your data will lead you. Your executive team will have to provide input as to what the focus of the company is (I like using SCOR as a major component of this part) so that you can relate whether certain supply chains are anomalies to your norm due to customer specific values. You can also relate what that means to the business.

To scale this, you will need to create customer acceptable supply chain options such as delivery options or each vs. pallet options – which means your processes will have to be reworked for certain supply chains and options.

In addition, your supplier base may need to be different for different supply chains (same product coming in, but different vendors chosen based on performance criteria for a specific supply chain). Same goes with your logistics. Yes, the external supply chain components have to be customized to the supply chain as well. You’re creating highly functional, specialized, value delivering supply chains. Once they are created, then you can begin optimizing and containing costs – just remember to never violate the customer requirements.

Gone are the days when one supply chain fit all our customers. Bolt together supply chains no longer work. Customized supply chains give you the agility you need to meet your customer needs.

Key works and concepts: supply chain, supply chain optimization, supply chain segmentation, segmentation, optimization, performance, SCOR, strategy, customer focus, value, Cynthia Kalina-Kaminsky Cynthia Kalina-Kaminsky with Process & Strategy consults with and provides training for organizations eager to increase their competitive value by helping enable growth, align performance, make and move product (even if the product is electrons).