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Is Your Supply Chain
Competitive ?

BY Chris Anderson

February 13 , 2006

Last Month we discussed leadership metrics, leading teams and overall management leadership. But we cannot discuss leadership and teams without discussing supply chains. After all, your supply chain is a team too and in order to be competitive you need to lead your supply chain as a team.

Focusing too much on your own company leads to sub-optimization, which can hurt your teammates on your supply chain team and reduce your competitive advantages in the market.

Who Is On Your Supply Chain Team?

In basic terms, your supply chain consists of your suppliers, your customers and, of course, yourself – the producer. We refer to this grouping in our SIPOC diagram below. SIPOC stands for Supplier, Input, Producer, Output, and Customer.

Supply Chains as Competitive Advantage

You are the link to your supplier and your customer. Yet you are only as strong as your weakest link. If any one of you is weak then the whole chain is weak. How can you tell what your weaknesses are?

In our discussion of management leadership we showed how inventory turns is a composite measure of your raw materials + work in process + finished goods. These components are one measure of your supply chain’s overall strength and competitiveness. High turns are a measure of a strong chain.

Supplier Competitiveness

High raw material turns can only be derived from a supplier that can deliver quickly with little added cost. High raw material stocks are needed to compensate for long lead times or large minimum orders which constitute our supplier inefficiencies. These inefficiencies are supply chain costs that are passed on to the producer and customer.

Producer Competitiveness

High work in process stocks are used to compensate for unreliable or long manufacturing processes, bottlenecks, delays, or large manufacturing batch sizes which represent our manufacturing inefficiencies. The producer passes these costs on to the customer in the supply chain.

Customer Competitiveness

High stocks of finished goods are used to compensate for infrequent orders, slow moving products or chaotic demand, which represents our sales and marketing inefficiencies. The customer must pay for these too.

Supply Chains as Competitive Advantage

Your supply chain is a part of your competitive advantage. No producer is an island nor can any organization work independently from its supply chain. Every organization works in teams or supply chains. So if any part of your chain is weak then your whole business model becomes weak. Wastes and inefficiencies that cannot be passed on to the customer result in costs and low profits for the producer – an uncompetitive position to say the least.

So, the question is, what can we do about it? The answer: manage your supply chain.

Managed Supply Chains

You are a team. So think like a team. Bring together your suppliers and customers to discuss uncompetitive issues you have discovered. Brainstorm as a group to solve the problem. You would be surprised at how helpful suppliers can be once they understand what those raw materials you ordered are being used for in a customer product.

Once everyone in the supply chain is working together as a team then you will no longer have just any old supply chain. Instead, you will have a value chain – a chain that creates value for its participants. Value is at the heart of lean thinking.

This week we have discussed Competitive Supply Chains composed of your suppliers, you the producer, and your customers. In order to maximize your competitive advantage you need to strengthen your supply chain and lead it as an integrated team. The goal is to make it a value chain instead of a supply chain. Next week we will look at the steps to creating a value chain out of your supply chain.

To learn more about implementing continuous process improvement within your organization attend the next improvement class How to Align a System of People and Processes for Results . Or you can learn How to Create Well-Defined Processes to document procedures and processes.

ISO 9000 Quality Auditor classes are forming now for Internal Auditor or Lead Auditor. Call for information on having your own private in-house classes today.

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Read More Articles:

Leading Teams, 1/26/06

What Metrics do you Use to Lead?, 1/11/06

Management Leadership for the New Year, 1/4/06

Why do we need ISO 22000:2005?, 12/12/2005

Is our Food Supply Safe?, 12/05/05

Making the Impossible, Possible, 11/23/2005

Iron Law of Layoffs, 11/10/2005

Is Waste (Muda) Preventing you from Working Smarter?, 11/3/2005

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