By Gregory Cable, C.P.M.
Business leaders all over the world are pulling back by making cuts across their companies as a result of the coronavirus (COVID-19) pandemic. Supply chain departments, still part of the manufacturing operations in many companies, are some of the first to be reduced. That’s because many unknowledgeable business leaders believe supply managers “only order parts.” The logic is that since the business doesn’t need as many parts, it doesn’t require as many supply management employees.
The result of pulling back on the supply chain is a recipe for disaster. A business may survive the crash, but it will be ugly. Nor will the company be in a good position to compete effectively after the crash.
Instead, smart companies should look for opportunities that will give them an advantage over competitors that continue to downsize supply management organizations. Last week, this space discussed the three immediate steps — assess risk, evaluate supplier deliveries and assist suppliers when necessary — supply management organizations should take.
After the first three steps are taken care of, it’s time to ease back and level off, preparing for future high performance. Several activities can help your business be ready for the eventual economic comeback. A company’s supply chain is about its suppliers and its supply management employees.
Focus on creating or updating sourcing strategies. Strategic supply management activities are some of the first casualties when sales quickly increase. After all, no one has time — all effort is spent on ordering and expediting parts.
As a result, a business downturn is an ideal time to either create or update your commodity/category sourcing strategies. This requires a high amount of research, but much of the strategies formulation can be done from home. Part of that effort also involves potential supplier optimization — weeding out chronic poor performers and replacing them with higher-quality suppliers that meet business needs.
Evaluate material requirements planning (MRP) parameters. This activity — which includes such parameters are lead times, minimum-order quantities, time fences, lot sizes and safety stock — also tends to take a back seat during good economic times. These parameters are often examined only when parts are initially set up, and it can be years before they are looked at again. These fixed parameters are frequently independent of fluctuating order volumes, making safety stock levels most often misaligned with business needs.
Negotiate kanban processes. Kanban processes are not appropriate for every situation. Yet, if you want to decrease in-house inventory while establishing a more reliable supply of parts, kanban processes with key suppliers can achieve both goals. It’s much easier to achieve the changeover from MRP to kanban (or some type of hybrid system) when volumes are slow, versus when you’re trying to push product out the door. By establishing robust kanban processes with suppliers, you will be set up for success when sales begin to increase.
Train and develop employees. Has YouTube ever charged your company for watching a video? Employee training and development need not be expensive, but it does take time, and time never seems to be on employees’ side when the economy booms.
Encourage employees to investigate such relevant media as videos and articles, especially if they are working from home.
Supply management practitioners can benefit from business-related videos that range from understanding how injection molding works to improving Microsoft Excel or PowerPoint skills to understanding negotiation strategies. Have employees track what they watch and ask them to help create a library of videos to share. In time, you will have a department of world-class supply management professionals learning from each other.
It is well known among leading organizations that competition is no longer between companies, but rather between supply chains. Is your supply chain prepared to compete? Is your company going to be one of those that crash and burn, or will it quickly recover? What are you doing today and over the next several months to improve your supply chain, so your company can fly past its competitors?
Gregory Cable, C.P.M., is a supply management senior consultant and principal with CGHM Consulting in Fairhope, Alabama.