- Roy Strauss
Supply Chain Profitability – Key Data for Supply Chain Proficiency part 1
Having access to and the ability to correctly analyze key data is essential to optimizing company operations, customer service and profits. Many companies we encounter are under performing because of unavailable data or a lack of proper tools and/or software for data access, or the inability to analyze and/or report data properly. Executives and managers must understand key metric requirements moving forward so they can plan for and then execute growth, and then measure success whether for number of orders shipped, products manufactured, units sold, inventory levels, or information provided to management for better business organization and management. This applies to planning for growth, customer service, sales, inventory, operations, and unique company requirements
Regarding the data required to run a profitable and efficient business, we find that many companies:
1. Are not sure of what to measure
2. Do not know which data is required if they do know
3. Are not collecting the data
4. Have the data and do not know what to do with it
5. Have the data but do not have access to it
6. Cannot get timely access to the data
7. Do not make the time to use the data
8. Do not use it properly
9. Do not know what apps are available from dept. to dept.
10. Do not have a platform to manage and allow proper access to apps
It is essential for supply chain planning that one understands and properly interpret growth metrics. Many companies do not recognize how much higher the demand will be on resources based on compound growth and over time.
If a company experiences compounded growth:
1. 10% per year x 5 years = 162%; 20% x 5 years = 249%; and 5% x 5 years = 127%
2. So, one must know which processes, systems, and IT requirements will be required in the future to meet the speed required achieve those growth percentages continually and successfully over the 5-year period whether for manufacturing or distribution.
2.1 If one is shipping 100,000 orders a year at present, in five years one may have to ship either 162,000 or 249,000, or 127,000 orders a year for each of the 3 scenarios.
2.2 One therefore must know what the maximum order volume or manufacturing capacity of the present system is to determine how long the system can support the business successfully, what is the breaking point, and what changes are required for operations, space, equipment, staff, and IT support to guarantee meeting required customer service demands throughout the 5 year plan.
2.3 One also must start monitoring growth (should be by exception reporting) not only for the whole company, but for each department and or product group, growth may be uneven within the company.
2.4 If actual growth exceeds the plan, one will have to be aware to start upgrading operations, etc. sooner than expected. If growth slows down, it is a warning to reduce spending as revenues will be lower than expected.
2.5 One must perform a study now to determine which new systems will be capable of supporting increased business properly at different viable growth levels and what is the lead time to acquire and implement new systems so they are in place before current capacity is exceeded.
2.6 The cost of the new system must be within the company’s budget, and if not, other resources may be required to avert failed customer service.
2.7 The system must be within the staff’s management capabilities as well.
3. In addition to new processes one must know how much space is required; the proper amount of staffing; and which equipment and IT resources are necessary as well to continually meet future growth volume requirements.
3.1 Space – if my building is 100,000 square feet now, in five years will I need 162,000 or 249,000, or 127,000 square feet based on the growth models shown above or may be able to change systems or add automation to reduce the amount of space
3.1.1 If my lease is up how much space should I take or if my building is too small, what size building should I buy, again within the company’s budget but to ensure future operational success
3.2 Staffing – one must determine how much staff needs will increase for every job function throughout the company at different growth volume break points and budget for the requirement. Higher quality staff may be required to manage an enhanced system.
3.2.1 Will the larger business require new job functions and/or higher skill sets for existing job functions? Be sure to fund for increased staff and/or higher staff levels
3.3. Equipment and IT resources – again one must benchmark current capabilities vs. future requirements at the different growth stages and levels. A gap analysis should be performed to determine current capabilities vs. future requirements for equipment and IT resources.
3.3.1 How soon will we not be able to produce required volumes with current equipment and at what point will my IT resources be insufficient
3.3.2 Will one need to add or increase automation and/or need more sophisticated software/hardware and at what cost
3.3.3 How many new workstations, computers, and phones etc. will one need in a larger office and at what cost and with what staff
If any of the 10 conditions listed above exist within your company and the company does not have internal expertise capable of the meeting all data management requirements for Supply Chain proficiency, one may have to turn to resources outside of the company. Once data management systems are designed and implemented, the business can begin to experience optimal customer service and profits as the company grows.