At Group50® Consulting, we have used this playbook to optimize dozens of global supply chains for companies ranging from start-ups to Fortune 50. Companies that implement it have realized:
- Hundreds of millions of dollars in lower cast
- Significantly reduced working capital
- Reductions in lead time
- Competitive advantage
We define the supply chain as two horizontal processes “Quote to Cash”, the technology behind the supply chain and “Raw materials to finished goods and services”, the required value-added activities. This playbook is focused on improving supply chain performance at the intersection of people process and technology utilizing Group50’s Supply Chain Hierarchy of Needs™ as shown below.
Utilizing a systematic approach to creating supply chain strategy that ties into the company’s Most Important Goal and its business strategies yields significant results. The elements of Group50’s Supply Chain playbook are shown below.
Supply Chain Strategy
- Create an approach to creating a lean supply chain strategy by utilizing Group50’s Supply Chain Hierarchy of Needs™
- Review supply chain strategies and validate that they support corporate strategies. Create one or modify existing strategy if necessary. Define strategic metrics.
- Review supply chain objectives and metrics – Identify problem areas and improvement opportunities.
- Assess Intelligent Enterprise – Control Tower initiatives and fit for use in enterprise
- The supply chain strategy defines the operational, structural and financial requirements to effectively and efficiently support the delivery of a company’s products and services: Quote to Cash and Raw Materials to finished goods. It should also define the future state of a company’s supply chain.
Strategic and Operating Gaps
- Complete a supply chain assessment against best practices
- Conduct a Value Stream analysis of supply chain processes
- Conduct a SWOT analysis
- Identify strategic and operating gaps – Create plan to address gaps
Supply Chain Resiliency
Supply Chain Risk and Mitigation
- Conduct a nodal network analysis through multiple tiers and create a supply chain risk register
- Review supplier certifications and assess risks: financial, geopolitical, regulatory, etc.
- Identify upstream supplier risks
- Identify financial risks and liabilities: inventory, tooling, contractual
- Create a risk mitigation strategy for the company
- Resiliency is the ability of the supply chain to quickly respond to disruptions that are caused by global events, acts of nature, economic turmoil and other unforeseen impacts.
Supplier redundancy and sourcing
- Review supplier concentration risk and make recommendations on how to reduce risk
- Model supply chain responsiveness
- Assess supplier capacity and capacity to accommodate demand fluctuations
- Supplier diversification (both countries and suppliers) is an important part of mitigating supply chain risk. Risk is mitigated by having multiple options for the same products.
Multiple vs. single supply chains
- Develop synergies between suppliers to reduce variation and risk
Working Capital Optimization
- Review working capital performance targets against corporate strategy
- Assess process of forecast working capital requirements
- Review excess and obsolete inventory and programs to reduce working capital
- Assess tooling management, inventory and ownership
- Assess inventory accuracy reporting
- The supply chain consumes the largest amount of working capital in a manufacturing and distribution company. It is important that companies minimize working capital to free up cash to support other business priorities.
Inventory stocking and replenishment points
- Review processes used to set Min/Max reorder points
- Analyze set point effectiveness
- Review lead times and replenishment processes
- Many MRP systems are not set-up correctly, providing the timely replenishment of raw materials
Inventory turns and expectations
- Review delivery expectations and metrics
- Identify methods for increasing inventory turns
- Analysis of product and component lifecycle controls in inventory
- Establish programs for reducing lead times
- Review Sales, Inventory & Operational Planning processes: cadence, models used, management interaction, etc.
- Review forecasting and planning models
- Test planning assumptions against operational capabilities and actualization of the plan
- Planning systems are fundamental to the effective operation of a supply chain.
Manufacturing or Contract Manufacturing
- Review Manufacturing P&L for performance
- Identify problem cost areas and recommend solutions
- Review inventory management systems and inventory accuracy
- Perform a labor and material variance analysis
- Review capital budgets
- Manufacturing financial performance provides insight to how well things are managed inside the value added portions of the supply chain
- Perform a Lean Manufacturing Assessment
- Review manufacturing strategic plan
- Review key operating metrics
- Assess effectiveness of manufacturing footprint
- Review effectiveness of cost reduction programs
- Assess the use of Six Sigma and Continuous Improvement tools in manufacturing
- Assess the use of technology in managing manufacturing operations
- Assess the supply/demand flex capacity for each manufactured product
- Identify levels of automation and opportunities to improve
- Complete a facility utilization assessment
- Review environmental reports if they exist
- Assess the effectiveness of work stations, work cells, assembly lines and material flow
- Group50 has a 200 point lean manufacturing assessment that looks at best practices across all supply chain operations
- Push / Pull analysis of manufacturing
- Perform a material flow analysis in each factory
- Assess use of best practices for material management – KANBAN, Bar Coding, WIP management, etc.
- Perform a housekeeping audit
- Review capital budget forecasts
- Assess quality of maintenance function and use of predictive failure techniques
- Assess equipment condition – Downtime reports
- Review equipment utilization reports and operational equipment effectiveness (OEE).
- Review Purchasing Strategy
- Review supply chain metrics and assess performance
- Review purchasing processes and procedures documentation
- Review use of buying programs – Pooled buying, use of auctions, etc.
- Assess lead times and make recommend improvement
- Assess processes and cadence for requoting components
- Assess cost effectiveness of MRO management
- Identify processes used to validate regulatory compliance
- Review purchase order processes
- Review Terms and Conditions
- Assess contract management effectiveness – may include legal reviews of contracts based on geography and rule of law.
- Vendor collaboration metrics
- Purchasing plays a pivotal role in the cost effectiveness, resiliency and scalability of the supply chain.
- Review Key Performance Management Metrics – Identify gaps and improvement programs
- Perform a total cost of ownership analysis
- Review supplier certification and onboarding processes – establish cadence for reviews
- Assess methodology and cadence for management review of KPI’s
- RFP & RFQ process review
- Push / Pull analysis of supply chain
- Assess the utilization of vendor subject matter experts
- Most companies do not leverage the complete capabilities of their suppliers with an effective review and integration process
Warehousing and inventory management
- Review warehouse utilization metrics
- Review methods and standards for warehousing
- Assess inventory accuracy
- Identify VMI programs and opportunities
- Review programs for supporting replacement parts during each product’s life cycle
- Review efficiency and cost of DC footprint
- Identify operating gaps in DC performance
- Review operating KPI’s
- Assess DC capabilities and scalability
Logistics strategy (internal, 3PL to 5PL)
- Review Logistics Management – Shipment tracking, Distribution, Order Fulfillment, use of 3/5 PL’s, etc.
- Assess integration to logistic networks
- Review opportunities for shipment consolidation
- Assess technology utilization
- Understand quality of item masters
- Assess effectiveness of MRP utilization
- Assess effectiveness of document control
- Use of standardized vendors
- Report on the effectiveness of the utilization of supplier capabilities to support NPD and R&D
- Assess effectiveness of revision control and life cycle planning
- Establish effectiveness of Make vs. Buy programs
- Assess the utilization of Engineering BOM’s and interaction with purchasing in new product programs – Stage Gate Process
ERP, EDI, MRP, Etc.
- Complete a supply chain technology systems inventory
- Perform a capabilities review – technology and people
- Create supply chain systems architecture
- Identify gaps in technology
- Identify shadow systems
- Assess data reliability
- Review reporting capabilities to support KPI’s, visual management, etc.
- Match the maturity of the organization infrastructure and processes with the supply chain
Create a future technology roadmap
- Assess the applicability of new technologies – Blockchain, IoT, AI, Machine Learning, Warehouse Automation, etc. – Include addressing operating and strategic gaps in the roadmap
- Emerging technologies make supply chains more efficient and automate the management process
Visibility – Business networks – Nodal maps
- Assess systems for tracking PO’s, follow-up actions, shipping status, etc.
Supply Chain Quality Management
- Review Quality manual
- Asses supplier certifications – quality systems
- Review auditing processes and procedures: suppliers, in-process, finished goods
- Review supplier scorecards and performance to SLA’s, service levels, quality, etc.
- Assess effectiveness of management review process
- Review quality performance
- Assess utilization of Lean/Six Sigma techniques
- Review RMA systems
- Assess effectiveness of Corrective Action Systems (CAS)
- Validate quality certifications (ISO9000, etc.)
- Assess capabilities to integrate Voice of the Customer (VOC) into quality improvement programs
- Review programs to improve business processes using core tools such as Value Stream Mapping, etc.
- Quality Control and Quality Assurance are corporate risk mitigation functions. Robust quality systems are important to risk mitigation.
Contractual quality processes
- Assess effectiveness of flow down of requirements and tools for managing quality
- Assess order fulfillment expectations and roll down
Material Review Board (MRB)
- Review of supplier related quality issues
- Review use of Corrective Action Systems: Accountability, timeliness
- Assess systems to manage component warranty management to supplier assessment
- Review reporting lines and management
- Organization structure and capability is critical in the effective management of a supply chain and utilization of supply chain technologies.
- Assess skills and capabilities
- Develop a supply chain skills map
- Review turnover rates by employee category
- Assess union relations (if a union exists)
Jim Gitney, the CEO of Group50® Consulting, has over 30 years of operational experience in companies ranging from start-ups to Fortune 50 in many industries. He brings a unique view of how business is structured, measured and improved. Jim has served as a Chairman, Board Member, CEO and worked many C-Level executive and operational roles including financial and operational turnarounds.