How 2 - add value through effective supply chain management
Mark Stone is a Lead Practitioner for the Manufacturing Advisory Service (MAS) North West, which has helped the region’s manufacturing business generate financial benefits of £236 million. Prior to joining MAS, which is based at The Manufacturing Institute, he held senior management positions at Toyota, Vauxhall and JCB.
Where do I start in removing cost from the supply chain?
The key to removing cost is to take the time to analyse and understand exactly what is driving it in the first place. To do this you need to scrutinise your processes (including administration), product design and functions that can increase cost. By identifying and pinpointing cost drivers throughout the entire supply chain you can then prioritise the areas that will have the greatest potential cost savings and the rest will fall into place.
Many people will look at process waste as their starting point, but another rich seam of cost reduction is product. Using value analysis as a tool, you can examine the designed in functionality of a product and identify how to ensure it works and sells at the lowest possible cost. Savings can be achieved as high as 25 per cent.
How do we sharpen up our cumbersome supply chain to become more agile and flexible in meeting customer need?
To meet the service and quality needs of customers requires a lean and responsive supply chain. A thorough analysis of the path that material takes from its raw state to the finished product will highlight where lead times and inventories do not best support service level expectations. The supply chain mapping tool will assist in identifying the location, route and associated costs for each stage within the chain, enabling you to target lead-time and inventory optimisation opportunities.
It is not only the path of materials that you must pay attention to. The flow of information in your supply chain is often the common driver of lead-time proliferation and costly delays. Making improvements to the availability, accuracy and path of information is a quick and easy way to ensuring you can react quickly to customers’ demands.
What is the best formula for deciding what to make or what to buy?
The decision to make or buy a component or product is fundamental to determining how your supply chain needs to be structured and how it should perform. The decision to make or buy is one of the most important stages in the supply chain process. Making the correct business decision is not easy. A structured approach must be taken to eliminate the risk of making the wrong choice.
The make or buy approach is about making your decision based on an analysis of your own and a chosen supply based solution. Considering in both cases:
- Manufacturing technology and process capabilities
- Total acquisition costs – exposing all the hidden costs of both options
- Current supply chain performance
- The support infrastructure, including quality assurance, information systems and technical support.
Getting the decision wrong might result in increased cost, lower capacity, increased lead-time to the customer and poorer quality.
