Wednesday, 11 December 2013

How Strong Is Your Supply Chain?

There’s a well know proverb that goes “A chain is only as strong as its weakest link”.  We apply it to many situations, but how often do we stop to think about how it applies to the products or services that we provide or on which we rely to provide our own products and services?

Recently, our home internet service went down.  Where we live, this is starting to become a “regular” occurrence, and we have the service provider’s helpline number committed to memory.  We can’t switch, because there’s only one service provider in our country.  So we have to live with and make the best of the situation.

The impacts of when we lose internet are that I can’t:

·      Work from home
·      Send emails
·      Surf the web
·      Attend conference calls
·      Order goods
·      Do research for clients
·      Stay up to date on current news
·      Do electronic banking (e.g. making payments or checking I’ve received them)
·      … and lots more

I have two children who are students, so they can’t:
·      Do research for projects, homework
·      Keep up with friends
·      Submit homework
·      Check emails form their teachers

We’re lucky in that we can go to the neighbours next door and ask if we can use their wifi, and my office isn’t too far away so I can use the internet there.  It’s not a total disaster, just inconvenient until it’s fixed (and our provider got us back up within 3 days).

The point is that all organisations dealing with customers have a “supply chain”, that is, a series of activities and processes that, when put together in the right order, result in the production of goods or services for which customers are willing to pay.  When something happens to disrupt this harmonious coordination of people, processes and production, there’s a problem.  Organisations then realise how vital a seemingly minor (on the face of it) aspect of the chain can be.  That’s when they identify their “weakest link”. 

The weakest link is often in the most unexpected place.  There’s a great story about a company which built its production plant on high ground to make sure that it didn’t get destroyed by floods.  The floods duly came, the plant was unharmed, but the workers all lived on lower ground.  Equally, suppliers’ warehouses were on lower ground, so workers couldn’t get to work and neither could supplies be delivered. 

Another company realised that the two staff who received telephone orders from customers were they key to its operation; with no purchase orders, they didn’t make money.

How do you go about identifying your “weakest link” (or links)?  To start with, look at what it is your organisation does.  Look at the: 
  • Customer base (who are they and what are their needs?);
  • Outputs (what it produces, and for whom);
  • Quality standards of outputs demanded by customers;
  • Where they go;
  • How they are delivered (road, rail, truck, courier, air, internet);
  • How your organisation gets paid for them (bank transfer, cheque, cash).

 Now step back one pace:
  • Where are these outputs produced (factory, call centre operator answering questions, etc)?
  • How do they produce them (machinery, computer, paintbrush, etc)?
  • How long does it take to produce?
  • Who else is involved in the “assembly” line?
  • What tools do they need?
  • Where are they stored/how are they accessed?
  • How many stages are needed to produce products/services?

Finally, look at the inputs (what is needed to for the production of goods):
  •  What do you need (it may just be electricity, internet service, a laptop and mobile phone)?
  • Who provides it?
  • How do they deliver it?
  • How do you pay for it?
  • How often do you need it?
  • How do you order it?
  • How long does it take to get there once the order is received?
  • What quality standards are needed?
  • Do you have more than one supplier available in case things go wrong?

Do this for both internal and external suppliers and customers.  It’s all very well to be focused on end buyers and suppliers, but remember that a team producing something may also need input from other departments or teams.  To this end, look at:
  • How they communicate;
  • Does one team produce output faster than the receiving team can handle it?
  • Do teams need “buffer stocks” of material to accommodate a team that produces more slowly?
  • How is quality assured between teams?
  • What happens if a mistake is spotted?
  • How many stages are needed to produce products/services?
  • How do staff get to the place of production?

 Think of the structure as “Output”, “Process”, “Input” (OPI for short).  I start with “Output” rather than “Input” because your goal is to deliver (output)  products/services to customers for which they may (or may not, if your organisation is a voluntary one) pay.  This order of looking at things puts the customer (the most important person) first and lets you plan backwards to secure your chain.

When Bangkok gets flooded, PC manufacturers who rely on “just-in-time” stock delivery have problems because a number of hard disk drive manufacturers are located there.  If you rely on just-in-time as well, bear this in mind.  Find out what plans your suppliers have if things go wrong.  Your output and process may be first-class, but you could be knocked over by a supplier who can’t deliver or by not having a backup supplier, and that will be your “weakest link”.

I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy to offer solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.  For strategic questions that you should be asking yourself, follow me at @wkm610.

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