Supply Chain Management Consultancy
Supply chain management consultancy involves developing the performance of an organisation's supply chain from its suppliers to its customers, by identifying and then selectively improving supply chain processes and organisational infrastructure.
The scope of supply chain management consultancy is debated amongst professionals, but can include: sales order processing and customer service, outbound distribution, finished goods warehousing and inventory management, production planning and control, work-in-progress inventory management, raw materials inventory management, inbound distribution, supplier scheduling (or procurement) and purchasing (or sourcing).
A fundamental feature of supply chain management consultancy is that of strategic make versus buy analysis. Frequently organisations have evolved incrementally and the level of vertical integration in a supply chain is often a legacy of tactical decision making such as: whether capacity or space was available at key points in the supply chain's history or not. However, best practise suggests that make versus buy analysis should be a more fundamental strategic tool for improving business performance and specifically Return on Capital Employed (ROCE). Outsourcing non-core processes and technologies can not only mean lower supply chain costs and therefore improved profitability, but also reduced levels of capital investment - "a double whammy" as far as ROCE is concerned. Interestingly even outsourcing a non-core process to apparently more expensive suppliers can still improve ROCE if significant capital investment is transferred off of the balance sheet as the move occurs. That said though, understanding which processes and technologies are core to a business and which are non-core isn't always as obvious at it might seem. Traditionally vertically integrated businesses can find de-vertical integration a traumatic exercise. Processes and technologies which are not crucial to that part of the supply chain's performance and/or which don't have significant and sustainable levels of competitive advantage, often remain within businesses that should long ago have outsourced them. However, when they do outsource companies often make such decisions without really understanding the true costs of manufacturing components in-house. That is, usually the prices charged by external suppliers are compared to costs that are fully loaded with overheads. However, what is often overlooked is that although material and labour costs are outsourced; indirect labour and fixed overheads remain in the business. So whilst a strategic make versus buy analysis can bring about breakthrough levels of ROCE performance in supply chains, it is vital that the methodology used by a supply chain management consultancy addresses these and many of the other subtleties of this vital supply chain improvement tool.
The impact of purchasing strategies on supply chain performance should be profound. If they aren't there's something wrong. Purchasing should have a massive impact upon the effective performance of the business' supply chains and this is why strategic purchasing is such a foundational element of supply chain management consultancy. Not only is it vital in driving down cost, but it can be equally important in encouraging innovative suppliers to build greater value into the supply chain to maximise profitability and give a competitive edge to the supply chain. True strategic purchasing is far more than simply consolidating volume and "leveraging" suppliers or developing "partnerships". The best Supply Chain Management Consultancy purchasing methodologies involve: relentless and usually global supply industry research, cost breakdown and cost driver analysis, applying generic strategy models and the selection of appropriate relationship models (which arguably at one extreme include; "buy the supplier" and at the other more "arms length" models and various shades of gray in-between). Strategic sourcing should also include: supplier integration for new product developments, the development of appropriate specifications for purchases which can include value analysis and value engineering (VA/VE) and of the mitigation of supply chain risk through contract drafting and management. Whilst the list goes on, perhaps we should let the results speak for themselves. Truly strategic purchasing methodologies delivered by a supply chain management consultancy can mean the difference between routinely delivering single digit percentage cost savings and double-digit savings. E-Sourcing can be a powerful adjunct to benefits of strategic purchasing (which includes: e-RFIs, e-RFQs and e-auctions). It's not uncommon for e-Sourcing to deliver savings of circa 20% for supply chain management consultancy clients. On the other hand e-Procurement is a complementary technology that is often confused with e-Sourcing. e-Procurement automates repetitive transactional parts of the purchase to pay process, and by so doing ensures that it is just as easy for users to use a company's preferred suppliers as it is for them to behave like "maverick buyers". This ensures that expenditure is consolidated with the right suppliers and reduces the cost of individual order placement transactions.
Another key feature of Supply Chain Management Consultancy Supplier Cost Reduction Programmes. We refer to this as Supplier Cost Drilling. It involves the sponsorship by the client of a series of diagnostics/health checks for certain strategic suppliers, which are sponsored by the client. The diagnostics identify likely opportunities for either taking out cost or delivering greater added value. Often the opportunities which are identified are very much win:win in nature.
The accuracy of sales forecasts can make a huge difference in supply chain performance, which is why Supply Chain Management Consultancy must make forecasting a crucial component in its arsenal of tools. Meeting contractual commitments for volume take offs from powerful suppliers can mean the difference between an all important extra percent or so reduction on price that competitors can't achieve as well as more obviously reducing the risks of lost sales because of under-stocking or burning cash by over-stocking. Understanding buyer behaviour is also crucial in forecasting sales patterns. Supply Chain Management Consultancies use various methods to determine, influence and change how various factors effect buyer behaviour in the supply chain. Supply Chain Management Consultancies can help clients to develop brand policies which acknowledge consumer preferences, and supported by appropriate supply contracts maximise the profitability delivered to the business for the available "shelf space".
For those businesses without infinitely flexible supply chains, a Supply Chain Management Consultancy can also help to manage the trade off between a business' investment in its inventory and the level of customer service which that inventory can support. Because to satisfy 100% of customer demand implies always having enough inventory, which costs more. An often helpful course of action is to manage the trade off between the two; optimising the level of inventory held and the level of customer service that it can support.
Robust capacity planning processes are also important. Overloading systems, whether in manufacturing or in office environments simply increases work-in-progress (WIP), and therefore lead-times, which in turn, tend to encourage more work to be loaded sooner than it would otherwise have been, thus increasing WIP and lead times still further. Capacity planning helps to avoid this lead time inflation cycle, but modeling capacity is not always as easy as it sounds. The challenge for Supply Chain Management Consultancy is to ensure that capacity models aren't overcomplicated, yet at the same time aren't too simplistic either.
Materials flow and handling is another key component of good supply chain management. Best practise may include simplifying material flow patterns by eliminating wasteful material movements and thus reducing lead-times by introducing cellular manufacturing architectures, which may often be supported by simplified material control systems e.g. Kanban/2 bin/Direct Line Feed. Changeover times for processes can be reduced to further improve material flow in batch manufacturing environments and this can also facilitate level scheduling, which then reduces peaks in the workload for specialist resources, and therefore the capacity requirements for them and hence cost. The identification and subsequent management of bottlenecks can also make a huge difference in the performance of a supply chain. In addition to the application of good supply chain improvement methodologies like Just in Time and Lean Manufacturing, manufacturing processes and materials handling can also be improved by the selective application of technology; and Supply Chain Management Consultancy can support clients specifying (not over-specifying), sourcing, installing and commissioning the right technology for their needs.
Warehouse Management is another important feature within the scope of Supply Chain Management Consultancy, as is the optimisation of both inbound and outbound logistics networks, the mix of the most appropriate modes of transport, and the implementation of enterprise wide IT systems e.g. ERP to manage data and transactions.
The consolidation of warehouses throughout a region like for example Europe , usually eliminates otherwise duplicated headcount, inventory and other resources albeit which usually significantly overshadow the cost of augmenting the distribution network.
A purchasing and supply chain diagnostic or health-check is often the first step in understanding and modeling an organisation's requirements. This help to benchmark a company's current level of performance against best practise and therefore suggest a selection of targets for improvement.
Engaging Supply Chain Management Consultancy Services
In addition to providing interim management services, Executive Interims - Supply Chain Practice provides clients with consultants formerly from "Big Four" consultancy firms, including:
Looking for Advice About Supply Chain Management Consultancy?
If you're considering using supply chain management consultancy services and you'd like to know more about what our supply chain consulting and interim management services can do for your business, feel free to contact us to explore the subject further.
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