The well publicised plight of manufacturing businesses in the United Kingdom has resulted in an ever increasing requirement for reduction of internal prices and today, more than ever, the focus has been on the expense of supply chains. The nature of supply chains and their construction is nevertheless often overlooked, and lots of the internal costs can be removed by examining the total supply chain strategy. By creating a supply chain that reflects the requirements of the internal clients, many of those previously unidentified inefficiencies can be removed and following performance improved.
There are three classes of product which may be used to specify the supply chain strategy for a typical manufacturing company. Firstly there are the core products which are produced on a continuous basis and form the majority of production quantity in any given period. Secondly there are products which are fabricated regularly to meet customer requirements or to meet a recurring demand, and finally there are those products which are manufactured to specific customer requirements on an irregular basis. The 3 categories are sometimes known as Runners, Repeaters and Strangers.
There’s an unquestionable connection between the classification of those product types and the distribution chain organisation that’s required to support them. Each classification takes a different provider strategy and inventory policy to be able to maximise inventory turnover. By way of instance, replenishment systems like Kanban might be highly applicable to parts used in the Runners group due to the rates of ingestion but applied to the Strangers group may introduce higher quantities of stock on long lead time components. The choice of the proper supply chain plans will consequently lead to two different systems, one for the Runners and one for the Strangers. The Runners supply chain will often be extremely efficient with a focus on component cost, quality and the providers delivery performance. The Strangers supply chain though, will have to respond to the irregular customer requests and the focus will be on supplier lead time and the capability to satisfy these difficult to forecast demands. The Repeaters will probably incorporate both systems and need case by case decisions on which strategy to follow for each element. The Repeaters therefore typically lend themselves to tactical inventory holding which requires regular review but provides a defined capacity for production.
The classification of the goods this way identifies the requirements of production and consequently identifies the sort of supply chain support needed to reach the desired output amounts. More importantly, and frequently over-looked, strategies based on this simple analysis are more likely to support the clients requirements.
Having defined the groups of goods and the fashions of supply chains necessary to support the differing needs of the product groups, the distribution chains themselves must be developed according to these needs. The subsequent supplier development programme may therefore be tailored to match the various supply chain requirements and so encourage production needs and subsequently the end customer in the most suitable way.
There are lots of tools and techniques available for improving overall supply chain performance, but few have been developed to help establish a supplier development plan.
One technique referred to as’Supplier Positioning’ maps client perception of this risk and significance of its providers and also most of all, the suppliers understanding of the customer concerning importance and simplicity of business. This can provide useful information by identifying which providers are unlikely to support supply chain enhancements. By way of instance, a number of manufacturing companies continue to buy relatively low volumes of components from big retailers, whose part price, delivery and quality is beyond the client’s control as a result of supplier’s perception of the client being’low value’. These providers therefore have a disproportionate ability to detrimentally alter the manufacturing capability of the smaller customers.
In improving the supply chain and producing the growth strategy,’Supplier Positioning’ may be employed to ensure the integrity of distribution will be maintained by providing an understanding of how the many suppliers view the client along with the degrees of interaction needed to maintain good relationships. This technique has an additional advantage in that it identifies potential weaknesses or mismatches in the supply chain connections that, once emphasized, can be solved.
The program of product classification and then creating the supply chain to match the production requirements can certainly help identify the strategic direction for supply chain development. The resulting activities won’t only create a leaner supply chain but will present greater control of inventory and a better comprehension of the requirements of the internal clients.
There’s an extricable connection between the three chief influences within any production company. Identification of consumer demand, manufacturing capability and the flow of materials to fulfill this needs to unite with clearly defined parameters and procedures to create the required output. Failings in any one area will cause a domino effect that will lead to failure to deliver on time in total and finally unhappy clients.
The speed of requirement defines the requirements for capacity and substance flow but shouldn’t be isolated or ignored as is frequently the case. Changes in demand or customer requests can only be fulfilled effectively by having a balanced circle.
Each function in this model is determined by the others and must therefore work inside the exact boundaries to achieve a common aim. The key therefore to reducing the inefficiencies in a supply chain lies in understanding and managing these relationships that’s the beginning point for attaining a reflective supply chain.