Seven Cardinal Sins of Supply Chain Management
(October 22, 2018)
Meet quality expectations and increase your supply chain’s worth
The importance of supply chain solutions relative to a company’s efforts to maintain and improve quality are almost impossible to underplay. When enacting quality improvement programs, any company would do well to examine its supply chain model and processes as a fundamental means of improving quality with suppliers, partners, and customers.
Within the last 10 years, the bar has risen for supply chains in the quest for the “perfect order.” Perfection is expected in the product, condition, quantity, documentation, and location. What are some common symptoms of a supply chain that is not operating at peak performance?
Here’s a look at seven “cardinal sins” of supply chain management that point to a lack of efficiency or quality, but also provide opportunities for improvement.
Back order: This is pretty self-explanatory, but when products are out of stock, they are typically placed on back order. We are so conditioned to accept this phenomenon that we forget this likely means jeopardizing market share, revenue, customer satisfaction, and loyalty. Your supply chain solutions must be agile enough to adapt quickly to incorporate new geographies, delivery methods, and supplier networks to prevent back orders whenever possible.
Deadheading: In supply chain management, the nonrevenue-generating return of an empty trailer is known as deadheading. Not only is deadheading costly in economic terms, it’s also highly wasteful in ecological terms. Although there may be many different contributors (e.g., bad weather, incorrect manifests), access to real-time, location-based data combined with a powerful network of service providers can reduce deadheading, which ultimately leads to lower transportation costs, reduced carbon footprint, and fewer time delays. Efficient supply chains are not afraid to work across traditional network boundaries to find opportunities to reduce deadheading.
Demurrage: When a shipper or consignee causes a delay beyond the allowed “free time” in returning a carrier’s equipment, it is assessed a fee for demurrage. This often cascades through the supply chain, undermining a company’s quality goals, and incurring surcharges that add up quickly. Flexible supply chain solutions give shippers, forwarders, and logistic service providers (LSPs) the visibility needed to identify problems and make adjustments. Real-time positional data captured from satellite tracking systems, when integrated with supply chain solutions, also provide indisputable facts to help identify the true causes of delays and which party in the supply chain is ultimately responsible.
Empty repo: This term describes the movement of empty containers. Repositioning an empty container often happens even when empty containers are already nearby. Lack of visibility and tracking of containers contributes to this highly inefficient process. It is true that the logistics of empty containers can be difficult, complicated by multiple parties, import-export economies, seasonality, and container types. However, empty repositioning and the associated costs can be prevented or minimized with better visibility, timely information exchange, and collaboration—all of which are available to participants in a macro-optimized global trade network.
Inaccurate billing: Often not taken seriously enough, inaccurate or false billing occurs when shipping documents misrepresent key attributes of cargo. In addition to causing inefficient or even dangerous transportation configurations, this discrepancy can trigger extra charges from the carrier and is a clear violation of the goal of the “perfect order.” Today’s interconnected and real-time supply chain management (SCM) applications offer checks and balances to prevent this from occurring.
Inbound ignorance: One of the most inefficient areas of any supply chain is the process of bringing goods into a factory, distribution center, or retail location. Far too many supply chain operators allow this critical part of the chain to be managed by the supplier with no consideration of the cost and methods used. Oftentimes shipping and handling fees are used to recapture margin previously negotiated away in the price of the products. Effective supply chains are fully managed from supplier to end customer, powered by execution tools capable of managing each leg of the order’s journey.
Lack of benchmarking: Waste refers to any activity that does not add value to the supply chain, using resources that would be better used elsewhere. As mentioned, using analytics can be a huge benefit to eliminating this problem. Companies may assume they have negotiated excellent transportation rates, but without benchmarking against others in the industry, there is no clear way to validate this assumption. Leading companies are leveraging providers that gather data across industries to create anonymized benchmarks, so they can better understand how they perform relative to the competition and identify cost improvement opportunities.
As companies seek to improve supply chain quality, new infrastructure models also allow for continuous improvement. Utilizing cloud technology, for example, enables organizations to achieve rapid implementation, operational flexibility, pay-as-you-go services, automatic and regular upgrades, and updated security measures. These cloud or hybrid cloud solutions improve the speed, visibility, and integrated nature of the supply chain.
Cloud solutions can yield even greater benefits when combined with a supply chain network approach, moving away from a traditional logistics model and embracing a global trade network (GTN) model instead. Because a global trade network is a living ecosystem, the GTN will connect supply chain partners through one cloud-based technology platform, and focus on interactive collaboration among carriers, shippers, forwarders, suppliers, third-party logistics services, and even customers. This interactive collaboration provides real-time data, insight that can potentially offset back orders, deadheading, empty repos, and other transgressions.
To truly optimize the supply chain, an organization must actively work to identify the commitment of these “deadly sins” and work to combat them using technology and modern supply chain networks. Now more than ever, it’s critical for supply chains to deliver maximum value in order to achieve greater levels of quality, and ultimately, “perfection.”
ABOUT THE AUTHOR
Doug Surrett is Chief Product Strategist for BluJay Solutions, where he oversees the company’s product convergence and expansion strategy. He has been in the logistics industry since 1988, serving in leadership roles focused on transportation management, warehouse management, operations, and global trade.
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