KEY POINTS:
Q. What is supply change management?
A. It is the process of managing a company's supply of goods and services required to keep the company running. This can cover day-to-day purchasing through to international logistics, such as getting a grape grown in Martinborough into a bottle of
sauvignon blanc and on to the supermarket shelves in London - and make a profit.
Q. What benefits can a company expect from investing in supply chain management?
A. Every dollar spent on marketing may yield an increase in sales in the future that might add 10 cents profit to the business. However, a dollar saved in the supply chain will see a dollar go straight to the bottom line.
Q. Is this all about saving the business money and reducing costs?
A. That is important but there are many other issues involved - how to select suppliers, how many to have, how the product is delivered and how often ordered are just some of these. Every aspect can be improved.
Q. A company may already have established supplier relationships. Why change them?
A. Many companies have grown organically over years with entrenched practices and supplier relationships, so change can be challenging. But any investment in supply chain can bring significant returns. Any programme needs to start with some analysis of the business spend. There will be some areas identified as business critical - and hence high risk - while there will be others where initial savings and success can be grasped fairly easily.
Q, Does this mean moving closer to suppliers, such as Asia, and is this a process to replace suppliers?
A. Total cost is the key. Local suppliers can compete with overseas suppliers based on their proximity and local knowledge. Companies can also benefit from buying from overseas suppliers if that is where customers are. Supplier analysis from requesting a quotation through to an on-going programme can help a business develop internal processes and build supplier relationships. Stating your expectations of delivery performance, response to quality issues and on-going price reduction can form the basis for constructive discussions between the customer and supplier. This can lead to longer and stronger ongoing relationships.
Q. Are there other benefits a company can expect from supply chain management?
A. In choosing new suppliers there is also a chance to reduce the number of suppliers a company deals with. This can lead to savings in transaction costs, and to faster new product development and time to market because there are fewer partners in the chain to deal with. The process of competitive tendering can also develop existing suppliers to improve their performance - be it in terms of cost, quality or delivery performance.
Q. What types of company would benefit most from investigating supply chain management further?
A. It is not just limited to manufacturing industries but applies to any business that spends with other companies. Setting out a goal of reducing overall spend and improving supplier performance can assist any business.
Q. This all sounds like common sense. Does my business need a consultant for this?
A. As with any expertise, most of the benefit comes from having an external viewpoint of your business. A new set of eyes can see things in the light of the consultant's expertise and can quickly focus on the main points of the issue. The savings you could achieve in a short space of time, which remain in place all year around, could be many times the initial investment of working with a consultant.