Let’s face it, we are all under continuous pressure to reduce costs and improve performance. Places such as the internet and LinkedIn posts are great ways to start looking for guidance. The supply chain is no exception to this, and a quick search of your needs delivers many articles offering tips and lists of things to do to increase supply chain efficiency.
“15 tips for reducing supply chain costs”
“7 ways everyone can cut supply chain costs”
“10 tips for reducing supply chain logistics costs”
But on closer examination, although all of them are right, every tip can become a significant task that often will need resources, investment, and time to investigate and deliver. Furthermore, the changes can cause disruption to the normal workflow and expose the business to additional risks.
So, where do you start? Well…
Have you ever wondered just how much time and effort are spent correcting errors in your supply chain? Have you ever measured the direct costs of the resources fixing them or the longer-term financial impact on the business?
All supply chains rely upon accurate and timely data. Data visibility is often one of the highest priorities of the supply chain, but isn’t it better to have a gap in your information which you know to be concrete, than to act upon data that is flawed? Technology has been a double-edged sword: it has reduced errors getting into the system, but when they do manage to infiltrate said system they propagate further and faster with less opportunity for correction.
An address misspelt can cause the rejection of a letter of credit resulting in failure to pay. An error in a product code can cause a substantial delay in customs clearance. Failing to update a price can result in invoices being rejected. In global freight forwarding, over 40% of documentation can have errors and require rework.
Today’s global supply chains are increasingly uncertain and complex. New data is constantly being generated and information needs to be updated. But people are also losing sight of their role in the whole supply chain and the impact they can have. It used to be the case that an error made by the transport department would be spotted by accounts. As they were in adjoining offices, a short discussion quickly resolved the mistake. Now people are in different companies, in different countries, and in different time zones. It’s easier for people to pass on the error, and the blame, than to correct it. And so they do.
It doesn’t take a huge amount of effort to start creating some awareness and understanding of a person’s role and impact upon a supply chain. And the effect is immediate. It’s also a virtuous circle. As errors reduce, the amount of rework reduces, allowing more time to focus on improvement.
This isn’t a top-down project either. You need to start at the heart of the organisation with the individuals who generate and manage the data. The people, not the tech.
The operations manager in a UK office of a global freight forwarder started such a programme. From an office of roughly 100, he selected 12 individuals most able to benefit and demonstrate change. He put together a series of half-day events over a three-month period which covered some training and awareness in the supply chain, some skills training such as team working, and some tools such as root cause analysis. Towards the end of the three months, he challenged the group to identify opportunities to eliminate errors and reduce rework in their workplace.
The group presented three opportunities to the senior management and so impressed them that they got the approval and encouragement to implement their ideas. Not only that, the manager got the support and encouragement to extend the programme over the whole team. The result was a substantial reduction in errors and a more motivated and empowered workforce. The individuals also now act as examples for their colleagues, even expecting and requiring suppliers and customers to pay the same attention to eliminating errors and reducing rework.
So after surfing the internet and collecting the best advice from all the supply chain experts around the globe, you will have a comprehensive list of the things to change to reduce supply chain costs and rework. But I would suggest you return first to your own organisation and focus on getting everyone to do it right before you change it.
Neil is experienced in helping businesses develop and grow global markets through strategy, outsourcing and international supply chain.