With a new year fast approaching, there is no better time to think about new ways to strategically leverage your supply chain. To begin, we must learn to think beyond order fulfillment and meeting customer demand and consider instead how new-product introduction, improved business performance, and rapid customer response can be best positioned to expand business opportunities and increase revenue.
The following are five ways to maximize growth potential through the supply chain for 2012.
1. Reduce risk.
Global sourcing has provided cost-effective solutions for many organizations, but unfortunately most don’t recognize the risk hidden deep within the complexity of their global supply chain. During 2011 numerous industries have been affected by devastating events such as the Fukushima earthquake and the grounding of the cargo ship Rena off the coast of New Zealand. The first step in reducing risk is to identify those materials, products, or services that are critical to supporting business continuity. Take the time to uncover and understand the supply chain that supports these areas and implement mitigating actions to increase supply certainty. Potential options include secondary sources of supply, supplier-managed inventories, and alternative means and routes of delivery.
2. Reduce cost.
Ready or not, here come the January price-increase notices. Consider it a goal for 2012 to identify and market-test the top 10% of your spending to determine the relative competitiveness and quality. Do this despite any perception you may have relative to “security” with existing suppliers; include them in the exercise and identify the need to ensure you are achieving the best value for your investment. Where possible, use price-increase notices as an excuse to venture into such an activity. Try it and watch how fast the “increases” are rescinded.
3. Increase innovation.
Where would companies like HTC, Samsung, Apple, and Google be if not for the innovation of their supply base? The technology being introduced for smart phones may have been the brainchild of the parent company, such as Apple, but these ideas are only brought to fruition through the innovative ideas and solutions of their suppliers. What ideas do you have that could improve the value you provide customers, or that could set your products or services apart from the competition? Try reaching out to your key suppliers with thoughts and ideas to take your products to the next level. In addition, keep in mind that many suppliers will be willing to assist with funding of research and development if you agree to a period of exclusivity.
4. Enhance competitive advantage.
Building a competitive advantage requires setting your products or services apart from the competition. Some of the most effective means of doing so are to rapidly introduce new ideas and concepts, deliver them to the market faster than the competition, and maintain the necessary levels of inventory required to support new customer demand. Leverage these activities through your supply base utilizing supplier knowledge, strategic inventory placement, and favorable payment terms. Apple, for example, requires all suppliers to maintain a minimum quantity of inventory at all times in order to support its often explosive demand. You may not have the size or leverage of Apple, but aligning with fewer suppliers can provide the leverage required to initiate these solutions.
5. Improve customer service.
Customer service is about perception and response, plain and simple. By providing a vast array of high-quality products or services, it is not difficult to develop the perception of a highly successful organization. On the other hand, having the ability to rapidly fulfill obligations requires the consistent and prompt support of suppliers, contractors, and service providers, over which you have greater control than you likely believe. Restaurants such as McDonald’s have built their reputation based on expeditious order replenishment, all supported by strategically positioned suppliers with the capability of rapidly fulfilling and shipping orders, minimizing the on-hand inventory for McDonald’s while meeting or exceeding customer requirements. Consider a means to improve your customer service and determine how to best align your suppliers to support the initiative.
It is the time of year to be thankful for all we have, to enjoy time with friends and family, and to consider how to build upon our success of 2011. Consider reaching out to your supply chain to stabilize supply, maximize growth, and place your business miles ahead of the competition.
Shawn Casemore is the president of Casemore & Co., a consulting firm specializing in supply-chain management.