A recent study concluded that few companies achieved any return on their supply chain project investment. More than 850 companies were surveyed, including those that had highly publicized supply chain failures. One of the authors of the study, Vinod Singhal, said, “Much of the evidence [for payoff] is anecdotal.”  Robert Austin of Harvard University, says, “Only a few lucky companies can prove that they achieved any real payoff from their SCM (supply chain management) efforts.”

Fundamental Mistakes in Supply Chain Management

Is there way to ensure your supply chain improvement initiative results in real, bottom line improvement?  There are never any guarantees of success, but you can avoid many fundamental mistakes, the first being that supply chain management is about efficiency.  It is not.  Management should be focusing not only on the efficiency of the supply chain, but also the reliability. Yes, we should be cost effective, but if we can’t deliver consistently, our customers and our shareholders will punish us severely. Many managers underestimate the value customers place on reliability.

Second, an effective supply chain is not about technology, it’s about process. Many times, these projects are approached as "technology" projects, instead of business projects. The problem with that approach is that most of the technology being offered is transaction support, not decision support; doing things better.  What it doesn't offer, is the ability to do the right things.   Thus, all that is accomplished in a typical implementation is streamlining activities that are wrong in the first place. 

How can we expect a change in results if we do not change the design of the system (business processes) that produces those results?

Third, you can’t delegate supply chain design. It’s not something that happens “in the back room”. The performance of the supply chain affects every stakeholder in your business. As the research (and the marketplace) shows, SCM practices can make or break your business. Successful supply chains are customer-centric and built around the value proposition of the business. That kind of integration is not going to happen unless the entire management team is involved.

Achieving Results in the Supply Chain

The real results in Supply Chain Management are derived from business processes that are specifically designed to deliver those results. Technology is important and will help you do things you can’t do today, but it can not deliver the results you need unless you also rethink your chain design and processes. Your supply chain project must take place in the context of your market mission and global goal. As in all projects you undertake, remember to measure your results on throughput, inventory, and operating expense. If you can’t demonstrate or justify a change in these metrics, find something else to fix.

Pinnacle Strategies Delivers Supply Chain Results

We combine best-practice supply chain management processes with practical application of Theory of Constraints, Lean principles and Six Sigma to create supply chains that deliver concrete results to your bottom line.