Customer focus at the heart of successful supply chains

In the search for the answer to the common question: “What makes for world-class supply chain operations? FTW quizzed Martin Bailey, director of Industrial Logistics Systems (ILS) and former academic logistics specialist, for the solutions. “Every week,” he said, “we read a great deal of stuff that is written on what hundreds of so called ‘experts’ believe are the best things you can do in your supply chain to become world class. “Third party operators will tell you that all you have to do is outsource, and they will take you to the ‘Promised Land’. Consultants will waffle eloquently about value chains and strategies that will earn them lots of money (example: balanced scorecards). Equipment suppliers will absolutely convince you that buying their kit will allow you to infinitely increase productivity, and the local IT salesman is sure that if you use his software you will halve your costs and double your throughput.” But finding the truth is a complicated issue. “Unfortunately,” said Bailey, “there isn’t a simple, all-embracing answer to creating a world-class facility – and there are many ‘false prophets’ trying to force you to go down a path that will not achieve the desired results.” But Bailey supplied a few guidelines that may help in trying to create a supply chain that truly has potential to be world-class. “Most really successful supply chains are customer-focused,” he said. “This requires a radical change in business philosophy – and the vast majority of organisations have extreme difficulty in changing their entire culture to refocus on customer needs, rather than their own internal needs.” As an example, Bailey suggests that customer focus means that customer needs are more important than supply chain costs. “It means that you need to really understand what the customer wants, likes and dislikes,” he added, “and you then need to restructure your supply chain around his needs – not around what you perceive is best for him.” Next on his list of guidelines is “quality”. “Really successful organisations have a core quality focus,” he said. “Everything they do is around maintaining high levels of quality. A total quality philosophy permeates the entire company.” And this quality philosophy must also include the supply chain. “It is no use making the best product in the world,” Bailey said, “and then giving it to a third-rate distribution infrastructure. When companies do embrace total quality concepts (including supply chain philosophies), they are on the road to success.” Costs are another area that is under the spotlight. “While service and quality must take precedence,” said Bailey, “any worldclass supply chain must focus on cost. “Depending on the available margins, supply chain cost may have a large influence on the success of an organisation.” And to reduce costs, Bailey added, organisations usually rationalise, consolidate (example: centralise) and re-engineer processes. In some cases, outsourcing or in-sourcing may provide short-, medium- and long-term financial benefits. Infrastructure and resource will also play a role in seeking a solution. Bailey feels that, to achieve a world-class supply chain, you need the facilities, resources and infrastructures that will allow you meet customer needs. “This,” he said, “means you need appropriate warehousing, transport and management facilities. If you don’t have the physical resources to receive, store, order pick, dispatch and transport you cannot react to market needs and thus cannot possibly have a world-class supply chain.” Information technology (IT) also fits under this same heading. According to Bailey, if you don’t have appropriate IT resources, you cannot achieve operational efficiency to make your supply chain world-class. At the core of any operation are its people. In Bailey’s mind, to have a successful supply chain, you need motivated, intelligent, educated and competent people operating the processes. You also need systems to manage the people and processes that run the core business without people interference. “Finding and managing good people is perhaps the most difficult task within any organisation,” he said. Bailey concluded that a world-class supply chain was, therefore, a balance between lots of components. “They range from a customer focus through intelligent business philosophies, along with enablers such as good infrastructures, people and information systems. Organisations that truly achieve world-class status are those that achieve excellence across all these areas.”