Are you making any of these common Supply Chain mistakes?
Learn how to avoid and fix 7 "easy to fix" pitfalls in your Supply Chain today. From not measuring P&L bottom line KPIs to not leveraging free resources, these mistakes can have a big impact on your business. In this article, we will cover how to identify and correct these errors to improve your Supply Chain performance. Don't let these mistakes hold you back. Get started on the path to success today!
1. Bottom Line KPIs
Not measuring bottom line P&L KPIs as part of the S&OP
One common mistake in Supply Chain management is not measuring bottom line P&L (profit and loss) key performance indicators (KPIs) as part of the S&OP (sales and operations planning) and/or IBP (integrated business planning) process.
The S&OP and IBP processes are designed to align and optimize the supply chain to meet the company's overall business objectives. Measuring P&L bottom line KPIs, such as gross margin, operating income and net income, are crucial in determining the financial health and success of the business. By not including these KPIs in the S&OP and IBP process, the company may miss important financial trends and opportunities that could impact the overall business objectives.
It is important to note that measuring just the operational KPIs like inventory turnover, fill rate, and lead time is not enough, the financial KPIs give a clear picture of the financial health of the business and its ability to sustain growth.
To avoid this mistake, companies should include P&L bottom line KPIs in the S&OP and IBP process and regularly review them to ensure alignment with the overall business objectives. This will allow the supply chain team to make informed decisions that positively impact the bottom line.
2. Customer Service
Service Level Issues only known and resolved by the Customer Service team
Another common mistake in Supply Chain management is having service level issues that are only known and resolved by the customer service team. This lack of visibility and communication across the organization, results in inefficiencies and missed opportunities.
When service level issues are only known and addressed by the customer service team, it can lead to a reactive approach to problem-solving rather than a proactive one. The customer service team may be able to resolve the immediate issue, but the root cause may not be identified and addressed. This can result in the same issue recurring and potentially causing further disruptions to the supply chain.
To avoid this mistake, companies should establish clear communication and collaboration across departments to ensure service level issues are identified and addressed in a timely and effective manner. This includes involving the customer service team, supply chain team, and other relevant departments in the process of identifying and resolving service level issues.
3. Free Online Resources
Not leveraging free resources such as MIT Supply Chain Micro Masters on EdX
Another mistake that can be made in Supply Chain management is not leveraging free resources that are available online such as MIT Supply Chain Micro Masters on EdX. These resources can provide valuable knowledge and insights that can help improve supply chain performance with better talents.
EdX is a platform that offers a wide range of online courses, including the MIT Supply Chain Micro Masters program, which is designed to provide students with a comprehensive understanding of the key concepts and tools used in Supply Chain management. The program covers topics such as supply chain design, logistics, and operations management.
By not taking advantage of these free resources, companies may be missing out on valuable knowledge and insights that can help them improve their supply chain performance. These resources can provide a deeper understanding of the key concepts and tools used in Supply Chain management and can also be useful for professional development and career advancement.
4. Forecast Accuracy
“My forecast is 70%; it is good.”
Be clearer… Is it for the whole business or a single SKU? And 6 months in advance or just a week?
Another common mistake in Supply Chain management is providing ambiguous or incomplete information about forecast accuracy. Simply stating that a forecast is "70% accurate" without providing any context can be misleading and does not give a clear picture of the forecast's accuracy.
When discussing forecast accuracy, it's important to be clear about the scope of the forecast. Is it for the entire business or a specific SKU? Knowing the scope of the forecast will help to understand the level of accuracy and its significance.
Additionally, it's important to specify the time frame of the forecast. A forecast that is 70% accurate for a single SKU within the next week may not have the same level of accuracy for the same SKU 6 months in advance. Knowing the time frame of the forecast will provide further context and insight into its accuracy.
This includes specifying the scope of the forecast (whole business or a specific SKU) and the time frame of the forecast (short-term or long-term). This will help to provide a clearer picture of the forecast's accuracy and its significance for the business.
5. Forecast Value Add
Not measuring whether the on-going tweaks from the demand planners is time well spent
Another mistake that can be made in Supply Chain management is not measuring the impact of the ongoing tweaks and adjustments made by demand planners. Demand planners are responsible for forecasting future demand for products and services, and they may make ongoing adjustments to their forecasts based on changes in the market or other factors.
However, if these adjustments are not regularly measured and evaluated, it can be difficult to determine if they are actually improving the forecast or if the time spent making the adjustments is worth the potential benefit. Without measurement, it's possible that the adjustments may not be making a significant difference, or may even be causing more harm than good.
To avoid this mistake, it is important to establish a system for measuring and evaluating the impact of adjustments made by demand planners. This can be done by comparing the forecasted demand with actual demand over time and assessing the accuracy of the forecast. Additionally, it's important to track the time and resources spent on making adjustments and evaluating whether the time spent is justified by the improvement in forecast accuracy.
Furthermore, it's important to have a clear process for making adjustments and a clear criteria for when adjustments are necessary.
6. Lack of Cadence
Not implementing a stable set of activities and meetings to manage performance deviation by exception
Another mistake that can be made in Supply Chain management is not implementing a stable set of activities and meetings to manage performance deviation by exception. Deviation by exception refers to a process of identifying and addressing variations in performance that fall outside of the normal range. This can include issues such as delays in delivery, unexpected changes in demand, or other disruptions to the supply chain.
Without a stable set of activities and meetings in place to manage performance deviation by exception, it can be difficult to quickly identify and address these issues. This can include regular meetings to review performance data, establish clear procedures for identifying and addressing performance deviations, and establish clear roles and responsibilities for addressing performance deviations.
7. Process Efficiency
Not measuring the actual efficiency of your operating model and let teams be busy fools
Another mistake that can be made in Supply Chain management is not measuring the actual efficiency of the operating model and allowing teams to be "busy fools" – working hard on tasks that don't add value to the business. This can lead to inefficiencies and wasted resources, as teams may be focusing on the wrong tasks or using the wrong processes.
To avoid this mistake, it is important to regularly measure the efficiency of the processes and make adjustments as needed. This can be done by setting clear performance metrics, such as on-time delivery, inventory turnover, and cost per unit, and regularly monitoring and reporting on these metrics. By measuring the efficiency of the operating model, companies can identify areas where improvements can be made and make adjustments to processes and procedures to increase efficiency.
