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Optimise supply chains to be competitive

Optimisation is concerned with the removal of supply chain inefficiencies and is defined as the management of complicated supply chains in their entirety with the objectives of synchronising all value-adding production and distribution activities and the elimination of activities that do not add value.

supply chain management with GIBSON SIBANDA

The objectives of supply chain optimisation is to synchronise all value-adding production and distribution activities, eliminating activities that do not add value in order for supply chains. the objective is to be competitive, providing the highest possible levels of customer service, delight customers by exceeding their expectations, increasing customer satisfaction and loyalty, increase responsiveness and value and achieving cost-effectiveness. Cost-effectiveness is also referred to as value for money and may be expressed as a ratio: value of benefit received divided by cost of benefit. Achieving maximum productivity from resources expected or assets employed — productivity is also a ratio, relating outputs to one or more inputs. An increase in output per unit of input is an increase in productivity. Thus, the total productivity of a supply chain is: total output divided by total input. The below factors in supply chain optimisation need to be implemented to achieve competitiveness.

Reduction of uncertainty
The three distinct sources of uncertainty that plague supply chains are: suppliers, manufacturing and customers.

Failure to fulfil delivery promises.

Machine breakdowns, computer foul-ups that route materials to the wrong place.

Uncertainty regarding order quantities and the “bullwhip” effect, thus the increase in demand variability further up the supply chain. that is when orders from distributors fluctuate more than retail rates, which are fairly uniform. All these increase waste through inventory.

Collaboration is normally most likely to be achieved by collaboration between cross-functional teams within the organisation and customers and suppliers external to it. Such collaboration may optimise product and process design and customers’ and suppliers’ satisfaction.

Before we can optimise, we must know what performance is possible. Benchmarking has been defined by Naylor as the practice of recognising and examining the best industrial and commercial practices in industry or in the world and using this knowledge as the basis for improvement in all aspects of business. Benchmarking is more than imitation as Naylor states, “it’s thorough analysis of success and a spreading of learning throughout the organisation.”

Key Performance Indicators (KPIs)
KPIs express abstract supply chain objectives in financial or physical units for the purpose of comparison. Data relating to various functions, processes or activities is assembled, quantified and transformed into physical or financial information that can be used to compare results — often against benchmarks — and then measure relative performance. The performance of both suppliers and customers with regard to delivery of orders on time can be expressed as a percentage of the orders placed. KPIs can provide not only objectives to achieve but also the motivation to achieve or better the required performance.

the impetus for supply chain optimisation and world class supply chain management must either derive from or have the support of top management. This requires two-way communication between top management and the senior manager responsible either for the integrated supply chain or functions and processes within it. Important leadership characteristics are the ability to articulate the vision of an optimised supply chain to other team members, set and motivate the team to achieve goals, innovate and introduce change, nurture the competences of team members, foster a culture of continuous learning and improvement, and display high levels of personal integrity.

Actions to improve supply chain performance
For products, these actions include the use of standard components and sub-assemblies, lower tolerances, fewer product offerings and the production of a generic product. For processes, typical actions may be to reward suppliers’ performance, subcontract inbound freight handling, remove bottlenecks, introduce self-managed work teams and device improved forecasting techniques. The strategic, tactical and operational level decision-making processes should all be influenced by the search for supply chain optimisations.

Gibson Sibanda is a member of the Chartered Institute of Procurement and Supply (MCIPS), Secretary of Cips Zimbabwe branch. The views expressed in the article are entirely personal. For feedback you may contact him on gibbiesibanda@gmail.com

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