For my start-up…Supply Chain Management…seriously?
You may think your start up doesn’t have to worry about such things as supply chain management. But think again. You’d be surprised the things in supply chain management can apply to your start up. Look at the big picture and then decide on the factors you should consider to make things run successfully.
10 Key factors in Managing a Supply Chain
1. A supply chain must be managed horizontally across the enterprise. Nearly every business operation impacts the movement of goods, information and money. For example, a purchase order often dictates country of origin, time in transit and packaging details. Each of these three impact the cost of modes of transport and warehouse and equipment capacity.
2. A key inhibitor to proper supply chain management is that businesses almost always manage vertically. Each department has their own budget and compensation scheme. Management will often not allow changes to a budget once the fiscal year begins. This stifles creativity. An expenditure in more efficient warehouse handling equipment may reduce ocean detention and demurrage charges. Its overall impact may result in greater net savings for the company. If the import and warehouse budgets are separate, one manager may be penalized for the greater good of the enterprise.
3. Always include 3-5 competitors in any major bid. Insure that all have the capacity to manage your business and are financially viable.
4. Keep two major suppliers on all key lanes. This will insure price competitiveness and protect you from any one supplier’s operational disruption.
5. Treat suppliers with respect. Accept them as partners. Good logistics suppliers are an extension of your organization. You have a solid relationship if a new comer to a meeting with your suppliers cannot tell who works for your organization or the supplier. The free exchange of ideas leads to proper change management and success.
6. If your organization opens supply routes in new countries, do not assume you know how their business is conducted. Either travel to the country or speak with knowledgeable personnel about how goods move to and from these locations. Unusual customs or vendor practices may have a significant impact on your supply chains efficiency and cost.
7. If you want to be a serious logistics professional, take time to learn and understand all modes of transportation and warehouse operations. Different modes of transportation impact the cost of money and facility costs. The cost of a mode must be reflected against its secondary costs throughout the supply chain. In addition, understand the marketing goals of your company to insure that your supply chain meets the customer satisfaction objectives of your organization.
8. The logistics supplier base is a very competitive marketplace. Twice each year analyze the financial viability of your major suppliers. If your supplier is a private company ask for appropriate financial data. If they refuse, consider moving to a public company whose records are more readily available. Logistics companies can find themselves in financial difficulty very quickly. Losing a key supplier due to financial collapse will not only disrupt your supply chain, you can also be subject to many costs for cargo stranded overseas or ocean or customs bills left unpaid. Remember, even if your supplier has billed you for such charges, if they did not pay ocean or customs providers, you will have to pay again.
9. Information is the key to managing a supply chain. When evaluating suppliers, insure that their systems will provide you with timely and accurate data. This information should include current transit information as well as key financial measurements. Landed cost data for imports and average cost per billable unit are key to insuring that your logistics costs are on target.
10. When managing your own operations, insist upon regular audits and competitive bidding. Employees can easily be influenced by relationships and sometimes, financial favors. We want to be cordial with our suppliers yet our relationships must always be at arm’s length and professional.
Think about it for your start-up and business plan. If every aspect of supply chain management doesn’t fit for your specific business, some things will. Don’t ignore them. Seriously.