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Optimizing Your Supply Chain Management

Posted by Dave Kravitt

supply chain managementAn enterprise supply chain is a complex system with a number of components that need to work together efficiently and effectively to ensure that planning, procurement, production, inventory and distribution processes flow smoothly. By optimizing SCM, companies will see a number of benefits, including increased productivity and reduced costs. 

In the past, the supply chain was primarily a series of integrated internal systems, but in recent years technology has enabled external partners and customers to be included, greatly expanding the supply chain. The Web, globalization, mobile technology and specialization have increased  the opportunity for innovation and collaboration. For manufacturers, this also requires the expertise and tools to optimize and manage the supply chain to stay lean, keep costs under control and respond in real-time to changes in supply and demand. 

While the ability to expand your visibility into your vendor and customer requirements is now available through technology, and that information will only make you more effective, it is most important to have your own house in order, especially if you are now part of someone else’s supply chain and they are looking for real-time accurate information.  The foundation for success in expanding your visibility across the supply chain and making yourself visible to someone else’s supply chain revolves around these core fundamentals, determined through a study of 1200 manufacturers. 

Here are five tips for optimizing your supply chain management: 

Target 95% inventory accuracy, by lot and location

Many inventory problems are caused by a lack of education and training. By that we mean many managers don’t grasp the true cost of excess inventory, importance of traceability and the significant effects of poor inventory control. These and many other companies don’t invest enough time and money in worker training to ensure correct inventory transactions and improve inventory accuracy. This can be remedied by either investing more in training and/or investing in process automation technology. 

Target 99% bill of material and routing accuracy

Many manufacturers have a firm grasp on exactly what it takes to manufacture their products, but they can get a little fuzzy on other required materials, such as packaging or the amount of waste typically produced.  It’s important to assign a department or individual with the task of maintaining and managing the bill of material to help prevent the purchase of unneeded materials, or worse, shortages during a production run. It’s also important to develop and maintain an accurate routings often that moving routing “tribal knowledge” out of someone’s head (such as the production manager’s) and into your ERP system for accurate processing.  Professional consulting assistance is also available to determine these critical data elements. 

Achieve real-time transaction processing

Transaction processing is tightly linked to inventory accuracy. Production, purchasing, customer service and planning/scheduling all use current inventory to determine their own operating plans. Real-time transaction processing means any materials received – whether finished goods, components or raw materials – is recorded in the inventory control system immediately and available to stake holders. 

To fix a problem in this area (which occurs in 60-70% of our clients) takes the right mix of technology and properly-trained personnel that’s determined in part by the availability of appropriate human and technological resources. 

Focus on lock-step coordination between planning/scheduling, purchasing and production

Many companies have mediocre or unrealistic production plans, even though they should be targeting the highest degree of production plan accuracy possible. Inaccurate plans create a domino effect of mistrust so individuals make their own decisions, ignoring the overall plan.  Lock-step coordination between planning, purchasing and production makes the organization more efficient and agile. 

Automate and validate master production plan-to-finite schedule

The role of demand management has recently become increasingly critical for responding to forecast and market changes, controlling costs and improving customer satisfaction. When changes occur, that information should flow seamlessly through scheduling and production without any manual intervention, enabling the changes to have minimal negative impact on productivity, efficiency and cost. 

To learn more about optimizing supply chain management, download our 5 Characteristics of a Competitive Manufacturing Supply Chain white paper, email us, or call us at 877-677-5776.

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Tags: Supply Chain Optimization, Business Process Optimization