Every organization in a supply chain — from sourcing and manufacturing to distribution and logistics — is facing significant competitive challenges. The move to globalization combined with eroding profit margins, increasing customer demands and burdensome regulatory standards are demanding that companies drive more speed, efficiency and productivity from the supply chain.
In almost every case, this involves modernization and digitization — using the latest technology to integrate supply chain processes, eliminate waste and drive down costs. The issue for many organizations is that introducing new technology on top of an underlying, broken or inefficient supply chain will magnify those problems rather than solve them.
Signs that Your Supply Chain Needs to Modernize
There are plenty of reasons to introduce new technology, but here are some of the more common ones:
- Poor integration between supply chain organizations leads to issues with communication and data transfer
- Lack of insight into where you’re spending money leads to less cost control and greater expenses
- Inefficient quality control leads to manufacturing issues and a greater need for rework
- Delays in the logistics networks means that customers don’t get their goods when they’re expecting them
- Issues with stock levels results in overstocking or shortages of products
- External supply chain risks create significant challenges for sourcing, transportation, cost and logistics
These are just some examples of supply chain challenges, and they’re a strong indicator that you need to make changes. Beware though, introducing new technology too soon can create more problems than it solves. To avoid that, you need a supply chain audit.
The Benefits of Auditing Your Supply Chain
If you want to get the most out of digital transformation, auditing your supply chain is a necessary starting point. This drives several benefits, including:
- A deep understanding of your supply chain processes and how they fit together
- Gaining performance metrics and other measures to identify what’s working
- Identifying inefficiencies and other issues in the supply chain from data
- Creating a baseline for your supply chain and being able to compare it against industry benchmarks
- Employing supply chain data to track the improvements of digitization and modernization
You can use audits in several ways, including to:
- Identify systemic issues that impact large parts of the supply chain
- Deal with one-off issues, that although rare, can cause disruptions and delays
- Provide a health check of the supply chain process
- Understand how your supply chain is performing overall
The approach for each of these is slightly different, but auditing is almost always useful in identifying and resolving supply chain problems.
Focusing Your Supply Chain Audits
Supply chains are some of the most complex, far-reaching and opaque processes across industries. These factors make wide-ranging audits difficult, eating up significant amounts of time and manpower. That’s why we recommend significantly narrowing the scope of a supply chain audit — you can identify self-contained problems through specific data and fix those issues before moving on to audit something else.
An audit solution might involve steps like:
- Identify an area where you have a specific problem (e.g. delays in handoffs between a particular supplier and manufacturer or unreasonable delays in sourcing raw materials).
- Understand what you want to achieve from auditing and improvement — what is the ideal end state?
- Define all the parties, processes, information and other factors that you believe could be contributing to the problem.
- Map out every step of the process, including the relevant organizations, handoffs and other areas.
- Identify the data that will help you to understand how well every part of the supply chain process is functioning (e.g. the time to complete a function or the accuracy and quality of that part of the process).
- Gather the relevant information for every part of the process, including snapshot data and trends over time.
- Analyze the data so you to understand the key factors that influence supply chain performance.
- Identify potential problem areas.
- Continue to track performance as you modernize and make changes.
Using Audits to Drive Improvements in the Supply Chain
Audits only provide a starting point for improvement — they need to be followed by action. No supply chain is perfect, and you’ll discover the underlying measurements that indicate waste, inefficiencies and broken processes. Even if you don’t find specific problems, a supply chain audit will help ensure everything is working as it should before you introduce new technology.
Here’s how to make those changes:
- Create a dedicated, well-funded and resourced program of work to make supply chain improvements.
- Use the audit data you’ve discovered to analyze problems in the supply chain.
- Prioritize those problems in terms of the issues they will cause if you introduce new technology or by some other criteria like reducing costs or waste.
- Make specific, self-contained and discrete changes to one part of the problematic process at a time.
- Measure the results to see the impact the change has on your data.
- Once you’ve solved that particular problem, move to another part of the process.
This is an iterative approach and will allow you to continually improve your supply chain process.
Supply Chain Analytics and Auditing
It’s worth briefly exploring the different types of analytics you can use to identify problems, track progress and measure improvements. Some types to consider, include:
- Historic trend analytics to identify changes over time
- Diagnostic analytics to deeply analyze underlying data and identify problems
- Predictive analytics for forecasting how supply chain changes affect underlying processes and measures
- Prescriptive analytics that let you model possible future scenarios
- Risk analytics to understand the likelihood and impact of a particular issue occurring
You can use a mixture of these disciplines to understand, measure and analyze your supply chain.
Getting to “Good Enough” Before Introducing New Supply Chain Technology
You’ll hit a point of diminishing returns with your supply chain audits and improvements. When you’ve streamlined as many processes as practical, that could mean it’s time to introduce your new technology. We recommend updating self-contained parts of the supply chain, one at a time and checking the technology is working properly before doing more. That way, if there are problems you haven’t identified, it’s much easier to roll back the technology so you can make further improvements to the underlying process.
Ideally, you should continue gathering information from your supply chain processes as you put the new technology in place. Analyzing that data can either confirm everything is working as intended or provide early warning of potential issues.
Make supply chain audits part of your improvement toolset, and you can deal with problems, drive up efficiency, lower costs, remove waste and deliver better services to your customers. This all builds your competitive advantage and helps your organization to thrive and grow.
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