Applying Supply Chain Thinking in Operational Turnarounds

How can you leverage supply chain principals to improve business performance and achieve operational turnarounds?

In my last post, “Supply Chain Performance – a lead indicator for business success”, I noted that Supply Chain Management is all about optimising activities across various partners, to satisfy a customer’s needs in the most effective and efficient way. I also provided a few characteristics and reasons for optimal and underperforming supply chains.

In my experience, supply chain metrices are generally good lead indicators of financial performance. The question is how to leverage the concept of Supply Chain Management to effect business improvements and operational turnarounds?

The first step is to assess a business’ supply chains to understand demand signals – that is: What will be required by which customers, where and when?

Then the challenge is to master and leverage the following five key functions:

  1. Create supply chain visibility across partners – schedule information sharing, redesign of mutual processes and future system integration to enable automated sharing of data
  2. Improve forecast accuracy – know exactly what to produce, when and in what quantities to avoid unnecessary and/or wrong stock build-up (which locks in your working capital)
  3. Plan and schedule production to optimally meet the expected demand – scheduling labour and other resources and achieving most economical production runs
  4. Strategic procurement and ordering of raw material – based on most economic order quantities and/or optimal production plans
  5. Planning and scheduling of logistics – load consolidation and route optimisation

What is the ultimate goal in applying supply chain thinking?

Without a doubt to unlock cash tied up in operations and stock, hence shortening the cash-to-cash cycle. This refers to shortening the elapsed period from investing in raw material for production to receiving payment from customers.

You can achieve this by mapping the cause-and-effect relationship between lead (supply chain) indicators and lag (financial) indicators to create visibility of how and where to achieve maximum leverage for performance improvement or operational turnaround.

During the early stages of a review, the financial indicators or lag indicators will be the key driving force. As the process progresses, the focus will turn to the lead or supply chain indicators and their improvement.

The benefits are clear: if leveraged well, Supply Chain Management is a very effective tool to ensure operational turnarounds and achieving sustainable business success.

Vantage Performance is a national performance improvement and turnaround firm – Winner of the 2011, 2010, 2009 and 2008 Turnaround Management Association – Turnaround of the Year Awards.

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