Companies striving to achieve and sustain competitive advantage generally try to seek and implement supply chain best practices. It could be reasoned that these supply chain best practices significantly improve product quality, customer service level, increase market share and return on assets, and as a result, companies’ overall performance has been improved.
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The role of leadership, particularly transformational leadership, on implementing these supply chain best practices is difficult to explain and judge. However, what is visible that any efforts people make to implement supply chain best practices in pursuit of achieving competitive advantage will not go wasted.
There are many saying like
“it’s better to aim high and miss the mark than it is to aim low and make it”,
or as B.K.S Jyengar said,
“Do not aim low, you will miss the mark. Aim high and you will be on a threshold of bliss”.
In this blog I want to emphasis that whilst resources, time and money are the most common constraints in business, we as supply chain managers and leaders should strive to be transformational leaders to significantly contribute for implementing supply chain best practices.
McGarrie (1994) developed a strategy list of ‘ideal’ supply chain practices, which addressed most of the manufacturers requirements. His model is based on existing literature and detailed analysis of the approaches adopted by a number of manufacturers.
The focus of McGarrie’s model is where the manufacturer wants to be at a pre-determined point in the future. The manufacturer selects the main practices, from the list, that they can implement. As they improve they then select further practices and more after that.
These supply chain best practices are shown in list below:
- Single sourcing of supplies with suppliers having contingency plans in place.
- Relationship with suppliers based on mutual interdependence.
- Quality accountability pushed out to suppliers with the aid of the company.
- Education and training of suppliers.
- Value analysis along the supply chain.
- Set-up/changeover reductions.
- Agreed price reduction curves at the start of a product life cycle.
- Continuous improvement programs.
- Increased frequency of deliveries of supplies.
- Higher volumes to preferred suppliers allowing investment by suppliers.
- Research and development carried out by suppliers.
- Reduction in paper work via Electronic Data Interchange and bar coding.
- Synchronized production scheduling with suppliers and customers.
- Information sharing with suppliers in process and product design.
- Establishment of life cycle contracts.
- Standardization of parts.
- Packaging improvement.
- Loading docks design improvements.
- Accounting transactions reductions
McGarrie (1994) reported that by using his model the manufacturers achieved significant benefits like a reduction in inventory levels. Emphasis has been placed on the development of a supply operation strategy to enable the manufacturer to progress from their present situation to the ‘ideal’. The above list of can be a useful checklist for manufacturers when analyzing their supply chains.
Supply chain managers should try to incorporate as many supply chain best practices as possible into their supply chain. Despite such a checklist, there are no clear guidelines on how to implement such actions. However it should be done in a phased manner where each ‘group of practices’ as implemented and linked with other groups to form an integrated strategy.
The choice of a supply chain strategy and value focus should be supported by specific enterprise capabilities and ultimately result in intended supply chain performance. For excellent firms, a demand focus on customer service and proactive quality is more apparent at both the capability and performance levels than a supply focus on cost, productivity, distribution, and speed.
The 19 supply chain best practices described above do not represent a complete list of every action that top-tier supply chain management leaders are engaging in now. This list does, however, provide some ideas and perhaps a roadmap for a supply chain organization that is striving to be viewed as valued and relevant.
Even if you already have implemented many of these practices, the insights offered here will serve to validate your current strategy. And if you aren’t taking all of these steps, then adding the remaining ones to your lineup will help you complete your journey to a best-in-class supply chain organization.
Supply Chain Management Best Practices
The Supply Chain Game Changers: Applications and Best Practices that are Shaping the Future of Supply Chain Management (FT Press Operations Management)
Lean Six Sigma for Supply Chain Management, Second Edition: The 10-Step Solution Process (Mechanical Engineering)
A better practice in SCM should improve some financial initiator. Otherwise, it’s something nice to have.
Evaluate the SCM metrics that improve (Reliability, Velocity, Variability, Costs, Asset Use) and translate it into Financial Statements (EBITDA, P&G, Balance, Etc.).
Hi Manuel, whilst I agree with you. But in my experience, it is very difficult to measure the direct impact on financial metrics