Viewing Your Business as a Supply Chain – and Acting on It
by Gene Tyndall, EVP Global Supply Chain Services at Tompkins International
The term “Supply Chain” has finally reached the C-Suites of many of the larger companies, yet most business executives continue to misunderstand what the supply chain really is, or what it encompasses. During an economic slowdown it is an excellent time to re-think your business, view it and act on it as a supply chain of business processes, events, costs, and competitive differentiations.
Any business that BUYS, MAKES, MOVES, OR SELLS products or services does so through supply chains. The supply chain starts when we sell a product or service, then works back to when we buy or design something to sell. Or, the supply chain starts when we design a product or service, then works forward to its sale. Either way – forward or back – we spend money to, hopefully, make money. Either way – forward or back – we try to make something that customers will buy, and buy with satisfaction.
With the supply chain, we spend money, and we do not recover it until the sale is made and we are paid. Thus the total time the product or service is in the chain is critical; we are financing that time. Each “link” in the chain – a business process, function, or activity – requires time and cost. It presents the opportunity for delay, errors, re-work, and waste. It also presents the opportunity for excellence, and thus competitive advantage.
Many in the supply chain profession, certain academia, software companies, and yes, the media, have caused us to think of supply chains as only “logistics” – moving physical goods over land, sea, or air for some purpose – and this has hampered the ability of executives to “think supply chain” when they re-think their businesses. Moreover, the “functional thinkers” (those that believe that functions, departments, and organizational charts are the answer) have also hampered the ability of executives to address the true differentiators of a business after its actual products and services, which are its costs, its speed, and its service levels to customers (and to suppliers) in providing these.
Yes, we see some cross-process goals such as “time-to-market”, “order-to-cash cycle time reduction”, and “perfect orders,” but these are spotty and rarely on the executive dashboard. Most companies – especially during downturns – only focus on functional or departmental cost reductions. The result: 10% cost reductions in each department, which at best may reduce operating expenses, but often reduces the very goal of the business, which is its competiveness.Thinking in supply chain terms can help executives and their companies in many ways. Let’s consider a few that help us better know our business:
- measuring the total time involved from concept, or design, or purchasing to money received for it
- understanding all the activities and events that go on to get the idea or product to market
- measuring the total costs of the chain – people, materials, time, errors, taxes, etc.
- understanding why customers buy and why they are satisfied – or not
- measuring the value impacts that supply chains have on our financials
These critical items of knowledge can open up numerous ideas for overall business improvement. For example, armed with this knowledge, we can:
- find ways to speed up the flow of ideas, goods, money, and work, to collect money faster
- find ways to simplify the activities and events that create opportunities for delays or errors
- determine true cost reductions that make sense across the business, not just some directed percentage within departments
- find better ways to connect with customers on what they really want, and how they really want to shop for it, purchase it, receive it, and pay for it
- focus on “measures that matter,” or those performance metrics that affect the income statement and balance sheet most importantly
The list of success factors for “learning, reflecting, and acting” can be much longer than these. Once you start thinking of your business as a supply chain, new ideas and new opportunities will surface. It doesn’t matter what your business is or does, supply chains are at the heart.
You don’t have to be a Procter & Gamble, a Dell, or a Toyota to think of your business in supply chain terms. Many successful small to medium-sized businesses are succeeding – even thriving – because their senior executives “get it.” Consider Amazon, which has perfected many effective supply chain principles and has grown amazingly. And, there are several smaller start-ups that compete on cost, speed, and customer satisfaction.
Supply chain thinking creates opportunities for creativity, regardless of your business type, scale, or industry. Isn’t this what we need, especially in today’s economic climate?
Gene Tyndall is currently EVP of Global Supply Chain Services at Tompkins International. Gene is a SmartSamantha expert who is a globally experienced and recognized management consulting and business executive, having advised over 100 corporations in over 40 countries. He has co-authored four books (including SUPERCHARGING SUPPLY CHAINS); written dozens of articles; and is frequently quoted in business and industry media. Contact Gene at genetyndall@aol.com.