Achieving supply chain excellence

Posted on 25 Aug 2015 by Malcolm Wheatley

World class manufacturing begins with a world class supply chain, Diane Palmquist of GT Nexus tells IT Contributing Editor Malcolm Wheatley.

There’s a simple and straightforward difference between companies which are already world class manufacturers, and those that aspire to be world class manufacturers.

Diane Palmquist, vice president -manufacturing industry solutions, GT Nexus.Diane Palmquist, vice president -manufacturing industry solutions, GT Nexus.
Diane Palmquist, vice president – manufacturing industry solutions, GT Nexus.

Namely, supply chain excellence. So says Diane Palmquist, vice president for manufacturing industry solutions at GT Nexus – the world’s largest cloud based e-commerce network, which connects 25,000 businesses collectively carrying out more than $100bn in trade.

“You have to operate your supply chain as efficiently as you operate your factory – which is easily said, but surprisingly difficult to do in practice,” she stresses.

“It’s about having visibility into what’s going on in the supply chain, control over what’s going on in the supply chain, and being able to intelligently communicate and collaborate with the various suppliers and logistics providers in the supply chain.”

Which is no mean feat. And yet, says Palmquist, mastery of two basic skill sets goes a long way towards delivering the required capabilities. The two skill sets in question: agility, and innovation.

Take agility, for instance. From better supply chain visibility to better pricing, improvements in agility can deliver a surprising range of supply chain efficiencies.

Look no further than the responses to events such as the Japanese tsunami, or the recent disruptions to freight movements caused by the migrant crisis at Calais: by pooling information, and resources, companies can work around such difficulties.

Goods inward supply chain logistics inventory - photo courtesy of Matillion
Firms are advisted to proactively build resilience and agility into their supply chains from the outset.

But don’t be reactive about it, emphasises Palmquist: proactively strive to build this resilience and agility into your supply chains from the outset, as latent capabilities.

Nor is it solely about responding to events, she stresses: take the manner in which large electronics and automotive companies are exploiting their own economies of scale to secure better pricing from contract manufacturers, by buying directly from suppliers, and then having the goods shipped to the contract manufacturers.

“Companies used to do this just for key components such as microprocessors, but leading edge manufacturers are now starting to do it on secondary components as well,” says Palmquist.

“It complicates ERP processes, as you have to track multiple types and ownerships of inventory, but the gains can be substantial.”

Similarly, developing innovation as a supply chain skill set can build useful supply chain prowess.

Palmquist suggests companies should re-consider basic assumptions about what their supply chain looks like, and how it operates.
Palmquist suggests companies should re-consider basic assumptions about what their supply chain looks like, and how it operates.

So ‘think outside the box’, urges Palmquist, and re-think basic assumptions about what your supply chain looks like, and how it operates.

To avoid unnecessary SKU proliferation, for instance, manufacturers could consider redesigning products, packaging and product configuration so as to produce products that meet the requirements of multiple markets or applications.

From an individual product perspective, says Palmquist, the result is to add extra cost. But from the perspective of the overall supply chain, the result is usually lower inventory holdings as well as higher availability level and greater flexibility.

Another option is to exploit the ‘virtual warehouse’ aspect of inbound goods in transit, by actively including the relevant products and materials in inventory planning calculations, even though the vessel might not have docked in port.

Likewise, she adds, it’s worth looking at postponing the point at which ownership is taken over for inbound goods in transit – perhaps when a ship crosses an invisible line, for instance.

“It’s a very different view of supply chain management—but these are the sorts of things that world class manufacturers are doing,” concludes Palmquist.