Understanding Supply Chain Excellence

Last Updated February 14, 2020

Since the early 1980’s when Keith Oliver of Booz, Allen, and Hamilton first coined the term “supply chain management,” the concept of harnessing the power of a company’s supply chain to drive business growth has been rapidly evolving. Through the expansion of more comprehensive software and holistic management practices, improved supply chain management techniques have become a smart, yet still under-utilized tool for today’s most savvy executives.

Excellent supply chain strategies provide ways to move ahead of the competition in an increasingly complex marketplace. To achieve supply chain excellence, organization leaders need to pay particular attention to the details of their infrastructure. Viewed collectively, these details can support a more efficient and effective supply chain management process that can promote more aggressive performance goals across such areas as purchasing, general operations, distribution, and integration strategies.

Excellent Methods of Managing a Supply Chain

Today’s best practice methods involve a more integrated approach to the entire supply chain. Taking the time to build a holistic perspective can give corporate leaders the information they need to identify challenges and build solutions to mitigate revenue lost due to redundant or inefficient supply chain methods. From professional networking to achieving specialized training through online courses, executives with an interest in building stronger supply chain management skills have more learning options than ever before.

Using today’s most popular software applications, business leaders can gain keen insight into the details of suppliers, factories, storage and warehousing, distribution and customer feedback. Integrating all these data points and making sharp observations about the flow and patterns of goods and services is at the heart of excellent supply chain leadership development. Viewing management as partners and building open and responsive communication protocols at each step in the process can go a long way to closing the gap between current and potential profit margins. Working with supplier alliances, building better rapport with managers and seeking more strategic sourcing options can allow leaders to contribute to the positive outcomes needed to stay competitive in growing market.

Best Practice in Action – Case Studies

In addition to working more closely with managers at all levels of the supply chain, both in and outside the organization, several other components contribute significantly to a more responsive and profitable supply chain management. Among the top two areas where large companies have made the biggest gains is in cross-docking and improved distribution management/integration. In cross-docking, companies save storage costs because the goods arrive on pallets or in containers and are loaded onto trucks or railroad cars directly without first going to a warehouse. Integration utilizes current software tools to maximize product quality and consumer value while reducing infrastructure waste and redundancy.

Designing efficient methods for distributing goods, while at the same time reducing warehousing costs, is a big money saver for executives running companies of any size. At the same time, building strong integration between activities and performance metrics allows leaders to view all parts of the supply chain individually and comprehensively.

Here are examples of how two corporate giants, FedEx and Amazon, have excelled in their SCM processes.

Fed-Ex

Global giant FedEx provides business solutions to fit a wide variety of customer needs. Well-developed communication strategies allow for responsive adjustments to business processes when necessary. Fed-Ex assists clients in scheduling shipping to help them utilize cross-docking strategies and maximize warehouse dollars. In one creative solution, FedEx worked with a U.S. automotive part distributor to essentially create a “flying warehouse.” Renting a permanent storage facility for a long-term contract in Japan was cost prohibitive for the parts distributor who chose instead to use FedEx services to fly parts overseas daily. In the end, this solution saved the company money. FedEx has built its own reputation on tight logistics and responsive customer service management practices. They are leading the way for other companies to grow through their example with controlled flexibility and SCM procedures that are able to seamlessly evolve in times of change or uncommon need.

Amazon

The company’s focus is on growth based on, “its holy trinity of price, selection, and availability,” as explained by former Amazon executive John Rossman in his book The Amazon Way. One of the company’s strengths is that they built their own supply chain management tools from the ground up. As a result, they were able to build a system where communication in real time is standard practice and making adjustments is inherently part of the way the system works. While other big box giants and mega superstore companies are scrambling to retrofit outdated and disjointed IT, Amazon is efficiently zipping ahead of the competition. Communication in real time means convenience for customers. Orders can be filled and shipped from a variety of locations to maximize efficiency and customer satisfaction. When a process is deemed no longer relevant it is abandoned for more responsive solutions.

Of course, few companies have the supply chain budget of companies like Amazon and FedEx, but the strategies these companies use can be applied to drive growth at any level.

Benefits of Integrated Supply Chain Management

No matter the size of an organization, a more responsive SCM strategy focused on adding more value for the end customer can directly impact company growth. Whether it is integrating current technology to make better use of existing software for tracking and customer feedback, or identifying alternative product sources and shipping routes, staying abreast of SCM best practices and applying innovation is a powerful way to boost corporate growth. Even minor adjustments can lead to strong ROI when it comes to saving purchasing and inventory costs, making shipping services more efficient and addressing customer service concerns head-on.

Just as FedEx and Amazon case studies show, focusing on a comprehensive approach to SCM can result in great products or services offered at the most competitive prices for consumers who are more Internet savvy and product-educated than ever before.