The worst Supply Chain practices must be confessed and not only by constraint

Hand turns a dice and changes the word

Responding to the ever-changing expectations of consumers in a highly competitive digital economic environment involves having a solid, agile, and cost-effective Supply Chain. After all, companies need to minimize and monitor the most harmful supply chain management practices. This can only be achieved by addressing the elimination of the worst practices in the organization, processes, and digital resources of the company.

The importance of a robust supply chain

Diagram 1

Some examples of worst practices

1/ Managing the quality of information

Non-updated product sheets in ERP (purchase price, MOQ, Incoterm,…) resulting in non-compliant supplier orders 

In the absence of good product data quality, non-compliant supplier orders systematically result in poor product availability, one solution to this problem is to set up an efficient communication system with the purchasing and supply divisions that can reduce data update times up to 90 %.

Stocks of raw materials, semi-finished products and/or unsuitable finished products that destroy exposure

The inability to provide daily updated data on inventories of raw materials, semi-finished products, and finished products presents two major concerns:

  • The decrease of the WCR for companies, the deployment of a dashboard tailored and user-friendly is essential in order to take charge of the management of a share of its WCR.
  • The improvement of CBN reliability and automation, resulting in the consolidation of production and scheduling plans, elements that can be disruptive to the supply chain.

Exhaust-data analyses (OTD, pallet volume, transport, suppliers, returns, etc.) that use unreliable data to misrepresent supply chain decisions

Uncertain data consistently generate biased analyses and therefore lead to actions that are not suited to the real issues.

2/ Order processing

Fixed orders placed with the supplier at the very early stage of the need, which generates overstocks

This approach impairs flexibility to cope with the hazards of the various downstream systems (production tool, customer demand, etc.). However, it is essential to react quickly in order to prevent harmful effects due to the overload of the operational system (Véronneau and Cimon, 2007) and also to preserve a certain agility in for the Supply Chain.

Diagram 2

Changing orders in the closed period (lead time supplier) affecting the supply chain and the supplier’s planning

A frequent worst practice that makes the supply process more difficult. In addition to the consequent extension of delays caused by these amendments, the supplier-customer relationship does not come out with less damage. The definition of clear and effective management rules contributes greatly to limiting this situation.

Diagram 3

Non-shared requirements with the supplier reducing exposure on future orders

A range of bad practices are observed on the visibility provided to suppliers:

  • Failure to share forecasts with the supplier: this bad practice causes suppliers to secure their lead time by prolonging it, which has a negative effect on the customer’s sourcing flexibility. The establishment of systemic sharing makes it possible to negotiate shorter lead times, up to 50%. Some studies (Cachon and Fischer (2000); Lee et al. (2000); Cachon and Larivière (2001); and Zhao (2002)) show that when demand and stock information is shared, this results in a significant reduction in stocks and costs
  • Absence of systematic summary sharing of fixed supplier orders: just like the previous one, the implementation of this communication makes it possible to comfort the supplier about their production and supply plan.

3/ Workflow Management

The failure to review the distribution plan in the light of logistical and commercial constaints in the stores leads to the blind disposal of warehouse stocks

The reduction of stock inventory is one of the major challenges of a sustainable Supply Chain, as long as the reduction is made under rules that take into account the logistical and commercial constraints of the company, its customers and the market, hence the need for a method to optimize this process of stock reduction that makes it possible to increase the sell-through rate.

Non-optimized storage options with the high national and low local turnover references placed in local storage

The process of choosing product storage streams must be the result of an in-depth analysis of the market, turnover, type of products, geographical locations of suppliers and customers, etc… This will make it possible to save storage space on warehouses, reduce operating costs and inventory valuation and thus optimize working capital requirements.

The lack of reliable in-line consumption preventing flow regulation

A failure to control IT consumption in production will hinder the delivery of components along the line, the waste management through the forcing of manufacturing orders and, ultimately, the calculation of the PRI.

4/ Performance Management: QCD element animation

The non-existence of KPIs and activity animation which impedes the attainment of the desired performance targets

A relevant dashboard and the ABC of a successful Supply Chain management and performance control. This allows to measure the discrepancies and therefore solve the problems related to these discrepancies within the concerned department and, if necessary, to report them to other decision-making authorities within the organization.     

Distribution between the different Supply Chain divisions is an obstacle to communication

Failure to communicate and establish roles is a major setback to supply chain performance. An in-depth integration of the Supply Chain through the exchange and coordination of information flows between all members of the supply chain, therefore makes it possible to better define their RACI (R: Director; A: Approver; C: Consulted; I: Informed) (Kempainen and Ari, 2003).

Cumbersome processes with no added value

One of the most common bottlenecks in supply chain management and burdensome processes (purchasing, procurement, preparation, etc.) with a large number of non-value-added tasks that are essential for the proper functioning of the process. One of the most efficient methods is the combination of VSM (Value Stream Mapping) to streamline the process with RPA (Robotic Process Automation) in order to automate it, which makes the error rate negligible and saves uptime. Two examples among others are the manual sourcing process or asset management to be applied on future orders from the supplier.

Sources

  • Cachon G.P. et Fischer M., “Supply chain inventory management and the value of shared information”, Management science, vol. 46,2000, p. 1032-1048.
  • Cachon G.P. et Lariviere M.A., “Contracting to assure supply : How to share demand forecasts in a supply chain”, Management science, vol. 47,2001, p. 629-646.
  • Garnier A. – 10 key trends to understand Supply Chain Management
  • Garnier A. – Supply Chain Management: is Blockchain the new RFID?
  • Lee H., So K.C. et Tang C., “The value of information sharing in a two-level supply chain”, Management science, vol. 46,2000, p. 626-43.
  • Zhao Y., The impact of information sharing on supply chain performance, Ph. D. Thesis, Northwestern University, 2002.
  • Kempainen K. et Ari P.J.V., “Trends in industrial supply chains and networks”, International journal of physical distribution & logistics management, vol. 33,2003, p. 701-719.
  • Véronneau S. et Cimon Y., “Maintaining robust decision capabilities : An integrative humansystems approach”, Decision support systems, vol. 43, p. 127-140,2007.