Robert Handfield, a professor of Supply Chain Management breaks down the concept of Supply Chain Management into two central ideas:
The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain.
The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their “four walls”. Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains.
Supply chain management, then, is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage.
Why should you place high priority on the management of your supply chain?
A supply chain that has been optimized for efficiency adds value to an organization through using mechanisms that provide goods to customers in an improved, quicker and more cost effective way.
Typical Supply Chain
Franco Aquila, entrepreneur and CEO of Iplayco in Langley, British Columbia, suggests 7 supply chain management tips.
1. Choose the right suppliers
Make your requirements clear to your suppliers from the outset. Aquila chooses suppliers who adhere to established standards for playground equipment safety performance, are the right size to supply the company’s needs, and produce consistent quality.
2. Have multiple suppliers for each product
“Never rely on just one supplier for each product,” says Aquila, whose company purchases a wide variety of items from upholstery to plastics, fibreglass, pipes and clamps. “Disasters, like fires or floods, can occur and prevent suppliers from delivering.” With more than one supplier per product, you are always prepared for the worst-case scenario.
3. Communicate regularly
“You don’t want to surprise your suppliers,” says Aquila. “We keep in constant touch them. We sit down with them, let them know what’s coming, what we’re planning down the road.” This ongoing dialogue helps build loyalty. “They love it because they can gear up and are fully aware of what to expect from us.”
4. Build mutual trust
Because Aquila keeps suppliers in the loop about upcoming projects, he can count on his suppliers to help him out if he needs something in a hurry. “We try not to let that happen too often.” But, when it does, he can depend on his suppliers to deliver.
5. Don’t penalize honest mistakes
When one of Iplayco’s suppliers realized they had produced fibreglass slides that were the wrong radius, they worked around the clock to redo the product and have it shipped by air freight to Sweden on time for a playground opening.
Aquila helped defray the shipping costs and kept working with the supplier. “We don’t want to create hardship for our suppliers. Everyone can make a mistake,” he says, “and I can guarantee you they have made sure nothing like this will happen again.”
6. Negotiate pricing
Suppliers who know what to expect in terms of upcoming business don’t have to be constantly on the lookout for new contracts. “We expect something in return,” Aquila says. This translates into preferential treatment on pricing.
7. Consider placing ongoing orders
Aquila places large stock orders with major suppliers for items such as the big plastic tubes that are used in play centres. “We adhere to a minimum amount and draw on that order for our needs,” he says. Ongoing orders help maintain the manufacturing flow.
Overall, Aquila compares his business to a restaurant or grocery store that people return to repeatedly because they know it will deliver. “Once we tell a customer we will deliver on a certain date, we want to make sure that happens.”
Robert Handfield (2011), NC State University
Business Development Bank of Canada