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Supply Chain Best Practices: Companies must define what works for them
Wanting to find best practices for your business is just common sense. After all, finding a better way has been a proven strategy for success at least since the Greeks gave up frontal assaults on the Trojans and built the wooden horse. They adapted, worked smarter, not harder, and got a better result. If only identifying and implementing best practices were a matter of winning one battle! Instead, it's a lifelong mission for every company.
Everybody talks about best practices. Governments have centers of excellence devoted to finding best practices and spreading the word. There are millions of Web pages devoted to the topic. But what does it mean in your company in your supply chain?
"Best practices" does not mean always getting the latest merchandise on the market or doing exactly what the competition did last year. "Best practices" means understanding your operations and your costs thoroughly, getting the best return on investment, satisfying your customers and understanding that you are never done with the job.
It's critical to understand that when it comes to having the right building and the right systems on the right site in the right community, best practices are business-specific. The tools to implement best practices—manufacturing, warehouse or transportation systems, conveyors or sorters, new or remodeled buildings—are commercially available, but success depends on choosing them with a thorough understanding of the operation involved. Every operation has its own requirements and constraints that make it unique, that set it apart from the others. Your best practices are the ones that give the best return on investment in the context of your business.
We can, however, steer you to best practices for finding your best practices.
Today's supply chain best practices need to be fast, adaptable and integrated, but that will occur only after you've looked into all the nooks and crannies of your operation to see what they really tell you.
Technology Best Practices
When it comes to selecting and implementing warehousing technology, the first step is to define mission-critical functions and key business processes. Look hard at what you need to be able to do to meet customers' requirements. Take the example of a clothing retailer with a couple of hundred stores who knows how to handle merchandise at its distribution center (DC), but wants to start an e-business that ships items directly to customers' homes. This is a different goal for picking and shipping. To make the transition to direct-to-home shipments, the company must have a clear picture of the operations its technology will have to handle.
Next is understanding what the technology has to do to support the operations you've defined. Go shopping for technology only with carefully developed functional requirements and the financials for the systems under consideration.
This requirement can be tough, and many companies miss getting it right. According to John Spain, Partner, Tompkins Associates, "Companies often only identify direct costs and savings, such as labor or inventory. Many hidden costs are not identified or quantified." That blinds the buyers to the real costs and benefits of supply chain execution systems. Hidden costs, he says, can include management time spent running operations, customer service time, premium freight expenses, lost sales, damage, error corrections, reverse logistics costs, reclamation and restocking costs.
Spain also warns that leaders should not think implementation belongs to operations or to information technology alone. To succeed, you have to think broadly and deeply about all aspects of the business. "It must be a project that's jointly led," Spain says.
High-level best practices for warehouse technology can apply to any business, even though the operation is specific to the business, and they have to be considered first. Implementing a specific warehouse management system, for example, could be a waste of money if the overall operation is a problem. Automating a broken process does not fix the process.
A best practice for selecting any solution is to use return on investment as the touchstone. When it comes to material handling, the greatest need for integrated solutions is flexibility.
Material Handling Best Practices
Best material handling practices in today's economy minimize touch labor, handle diverse manufacturing or distribution scenarios, accommodate value-add operations, can be reconfigured with minimum effort and are technology-driven. Solutions today are much more complex and use a higher degree of technology than ones that worked in recent decades. Perhaps the best practice for material handling today is to make sure that solutions are just as logically integrated into your operation as they are physically integrated.
Material handling solutions must be affordable and supportable, but they must allow information to flow freely throughout the business and its suppliers. In an economy that is ever faster paced and e-based, another best practice in material handling is to seek solutions that are Web-based and use off-the-shelf hardware and software. All tools and processes that are installed today have to be as fully integrated as possible with other processes in the business and with supply chain partners up and down the line. If not, even the best operation will be trapped in a "worst" practice of maximizing only itself as a lone link in the supply chain.
Moving quickly on what you have learned is a best practice, too. Tony Gerace, Tompkins Associates' Partner specializing in material handling says, "Every one of our clients now needs an edge to survive. That edge might be a little more value-add or just being out front on a new product offering, but it means constantly reinventing their operations to support it," Gerace says. "Whatever a business determines are going to be the best practices for its operation, they have to be implemented in a fraction of the old deployment times so they're not obsolete before they even get turned on."
Supply Chain Performance
Flexibility is also the key for logistics operations, where being able to adjust all the time is a best practice.
The backbone of great supply chain performance is fulfillment—picking, shipping and delivering. Calibrating fulfillment to ever-changing business needs is a prerequisite of great supply chain performance—that is what all best practices are aimed at achieving.
For example, having the capability to provide your customers with product customization and differentiation through value-added services. The best practice is having an operation that does more than a good job. It does exactly what the customer needs.
The power exerted by change is the background for all advice about best practices. It is a big, yellow caution sign to businesses to avoid getting so focused on one best practice or one implementation that they take their eyes off their business environment and risk missing opportunities to adapt and stay on top.
Companies today must strive for continuous improvement for today and tomorrow. According to Spain, every company must investigate its operations with a well-informed memory of yesterday's challenges as well as a keen eye on tomorrow's improvements.
Today's business has gone from monthly deliveries to daily deliveries, from truckloads and pallets to parcels and eaches. Customization has gone from being an extra to being a standard feature that the customer expects at reduced costs. Flexibility is essential so the operation can be reconfigured to meet shifting demands.
How to do it, though? "Best practices," of course. But what does that mean for you? Where do you find them? Start in your own office, your own building, your own facility, your own company and craft them for what you do. In knowing your operations inside and out, you will be able to discover what practices are best for you and your customers.
Answered By: chocomylk - 3/17/2006