Solving the Five Biggest Supply Chain Challenges
The economic recession has had at least one positive effect: It forced companies to take an intense look at their supply chains, question some of their assumptions, and root out major inefficiencies. For example, ad hoc decisions to source low-price products from countries with the lowest labor cost may no longer make sense when the long-term increase in transportation rates, risks of disruption, and weeks of inventory in the pipeline are factored into total landed cost calculations.
Of course such analysis and restructuring is an ongoing requirement for effective supply chain management. It is our mission at the Supply Chain Council (SCC) to aid these efforts by advancing supply chain knowledge and its application to solve real-world problems. The following are five key supply chain management challenges and how we help supply chain professionals address them.
- Customer service
Effective supply chain management is all about delivering the right product in the right quantity and in the right condition with the right documentation to the right place at the right time at the right price. If only it were as simple as it sounds.
Solution: Developed and maintained by SCC members, the Supply Chain Operations Reference (SCOR®) model provides a framework for measuring and understanding current supply chain conditions and performance and creates a foundation for improvement. It can help supply chain managers evaluate cost/performance tradeoffs, develop strategies for meeting new customer expectations, and respond to domestic and global market growth.
- Cost control
Supply chain operating costs are under pressure today from rising freight prices, more global customers, technology upgrades, rising labor rates, expanding healthcare costs, new regulatory demands and rising commodity prices. To control such costs there are thousands of potential metrics that supply chain organizations can and do measure. Managers need to zero in on the critical few that drive total supply chain costs within their organizations.
Solution: Metrics provide the basis for an organization to measure how successful it is in achieving its desired objectives. SCOR metrics are designed to be used in conjunction with supply chain performance attributes, making it easier to compare different supply chains and different supply chain strategies. SCOR Level 1 metrics are strategic, high-level measures that typically cross multiple SCOR processes. Lower level metrics are associated with a narrower subset of processes. For example, delivery performance is calculated as the total number of products delivered on time and in full based on a commit date. To help SCC members use these metrics to benchmark performance, SCC offers unlimited, on-demand access to its SCORmark benchmarking portal.
- Planning and Risk Management
Supply chains must periodically be assessed and redesigned in response to market changes, including new product launches, global sourcing, new acquisitions, credit availability, the need to protect intellectual property, and the ability to maintain asset and shipment security. In addition, supply chain risks must be identified and quantified. SCC members report that less than half of their organizations have metrics and procedures for assessing, controlling, and mitigating such risks.
Solution: Organizations in all sectors—commercial, military and NGOs—have found that using SCOR as a planning and risk management foundation leads to faster implementation, more comprehensive identification of potential risks and easier coordination with customers, suppliers and other stakeholders. It helps users establish rules and strategies, assign responsibilities, coordinate responses, and monitor current conditions. The topic of risk is of such importance that SCC includes a special Risk section of the SCOR model to address member needs.
- Supplier/partner relationship management
Different organizations, even different departments within the same organization, can have different methods for measuring and communicating performance expectations and results. Trust begins when managers let go of internal biases and make a conscious choice to follow mutually agreed upon standards to better understand current performance and opportunities for improvement.
Solution: SCOR provides a common language for supply chain classification and analysis. Using a common language and framework makes it easier for teams to communicate, speeds benchmarking efforts, and enhances the evaluation of best practices.
As experienced supply chain managers retire, and organizations scale up to meet growing demand in developing markets, talent acquisition, training, and development is becoming increasingly important. Supply chain leaders need a thorough understanding of the key competencies required for supply chain management roles, specific job qualifications, methods for developing future talent and leaders, and the ability to efficiently source specific skill sets.
Solution: SCC members have developed methodologies for applying SCOR to human resource management, and even organized the capabilities of their global supply chain staff around the SCOR framework. Their work drove the release of SCOR 10 and has been further refined in SCOR 11. The new skills management framework complements process reference, metrics reference, and practice reference components with baseline skills, critical skills, job performance measures, and supply chain management credentials.