Supply Chain Management
by Ken Lind
Early in my management career a mentor taught me, “The devil is in the details.” This saying is embedded in supply chain management. It is your worst nightmare when not managed properly. It can be a tremendous savings to your cash flow when it is managed properly.
What is supply chain management and why should you care about it?
Supply chain management is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service, manufacture that product, and ultimately deliver it to customers.
The following are the five basic components requiring management expertise:
Planning. This is the strategic portion of supply chain management. You need a strategy for managing all the resources that go toward meeting customer demand. A big piece of planning is developing a set of “metrics” to monitor the supply chain so that it’s efficient, costs less, and delivers both high quality and value to your customers.
Sourcing. This stage is where you choose the suppliers that will deliver the goods and services you need to create your product or service. It requires you to develop pricing, delivery and payment scheduling criteria, and create metrics for monitoring and improving supplier relationships.
Making. This is the manufacturing step where you schedule the activities necessary for production, testing, packaging and delivery. Many companies may be “outsourcing” their production to an external manufacturer, however this doesn’t make this step any less critical. You must continually interface with the manufacturer to make sure that you work in concert with them for raw materials and time on the lie production line.
Delivering. This is the part that many insiders refer to as “logistics“. It involves coordinating the receipt orders from customers, developing a network of warehouses, selecting carriers to get the products to customers and setting up an invoicing system to receive payments.
Returning. This has been referred to as the “problem” part of the supply chain. However, it is vital to address this area quickly and effectively by creating a network for receiving “defective” product back from customers who no longer want to be part of your company.
Paying attention to your supply chain management details can make the difference between winning and losing customers and the success or failure of your business model. Properly managed, you will effectively utilize your critical capital and deliver products on a timely basis to your valued customers. As Mr. Sheffield preaches to all Sheffield clients, “There are only two things that you need to protect in this industry: Your integrity and your momentum.“ Mismanaging your supply chain can result in both, but smart, vigilant management will enable you to mine all the gold that is in the details.