Helpful Strategies for Supply Chain Managers

by Patrick Greer, Partner

At the onset of the financial collapse, Supply Chain Managers everywhere responded quickly. Their objectives were clear: conserve cash, cut expenses, reduce overhead, and preserve capital while maintaining market share. As a result, inventories of raw materials, WIP, finished goods, and even MRO were reduced. When sales suffered, being lean resulted in reducing work force, closing facilities and idling logistics capacity. Just when it couldn’t get worse, it did. The credit crunch and reduced access to capital further restricted operations. Excess inventory and overhead was no longer an option. As a result, the pipeline of goods and materials drained to a trickle of its pre-recession flow.

Thanks in part to tax incentives and government programs, companies and consumers are once again beginning to buy. As manufacturing and retail sales increase, supply chain issues are resurfacing. For example, manufacturers face long lead times and/or shortages of key components. Importers tackle reduced shipping options and a longer delivery cycle.

Despite the recent economic improvements, recessionary factors still loom large. It is simply too early to declare that recovery is at hand. What are the strategies for a Supply Chain Manager in these uncertain times?

  • Assess the Risks in Your Supply Chain. Collaborate with key suppliers. Determine their abilities to meet your needs. Develop contingency plans that address risks such as: arranging for expedited shipping to reduce cycle times, locating alternative suppliers and considering potential substitute items.
  • Build Relationships with Customers and Suppliers. Identify key suppliers and customers. Rank your customers on profitability and strategic importance. Develop a plan to protect your most important relationships.
  • Avoid the Bull-Whip Effect. Recognize the difference between an increase in demand within the supply chain and actual consumer demand. The bull-whip effect may occur when a distributor runs out of an item and reorders enough to have a small inventory. If several distributors do this, the manufacturer may increase production levels to compensate when, in fact, there is no real change in true consumer demand. The key to avoiding this bull-whip effect is to monitor actual consumer usage.
  • Retain and Develop Skilled Talent. Layoffs and right sizing has put many highly skilled and experienced supply chain personnel out of work. Simultaneously, increased workloads and higher stress levels for remaining employees has lowered morale. Recent studies report that employed professionals are considering a job search as the economy improves. Supply Chain Managers, recognizing that talented personnel drive innovation, build strong customer relationships and enable growth, must work to retain key employees. A systematic, process approach is recommended to recognize, train and reward individuals. After all, your competition could easily be planning recruiting efforts to grow their talent at your expense.

Unfortunately, these are just a few of the challenges facing today’s Supply Chain Managers. Residual economical effects will continue to present challenges for the remainder of 2010 and into 2011, which is why Supply Chain Managers must proactively incorporate necessary strategies to survive in these uncertain economic times.

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