Mid-market manufacturers play by different rules

You’ve read the book. You know the book I’m talking about.

Steve Vecchiarelli

It’s the one that tells you what wonderful things Toyota and Dell Computer have done with their supply chains and how you and your company can do the same if you employ the same procedures and techniques.

While everyone knows running a streamlined supply chain, regardless of company size, helps drive down business costs and improves productivity to boot, things that work for Toyota may not necessarily work for your company.

Middle-tier companies have their own issues and it’s the proper adoption of the right methods put in place to address these issues that determines the difference between success and failure.

Setting realistic expectations

Too often, large company supply chain methods are held in high esteem by middle-tier companies. Middle-tier executives want to emulate the methods only to be frustrated with poor results due to fewer economies of scale.

While many companies don’t have the resources to replicate methods at Dell and Toyota, there are places middle-tier companies can look at when developing a roadmap for success.

For instance, an open exchange of ideas with someone from a similar company in another industry might result in some ‘best practices’ that can be applied by both companies.

Executives embarking on supply chain initiatives should also place considerable emphasis on setting realistic goals.

Too often, middle-tier companies focus on supply chain gains they anticipate they will obtain and then plunge head first into implementation without proper planning or, they set plans so rigid they leave little room for mid-course corrections.

Few, if any, companies develop a perfect plan right out of the chute.

Constant monitoring of supply chain capabilities must be in place in order to be able to tweak phases that are not moving toward accomplishing desired results.

Well-developed plans need to be cross-organizational — including all functional departments touching any material function. Sales, marketing, and logistics as well as manufacturing must each be taken into account to create a clear picture of what must be included in plans of action.

Risk-reward analysis

As part of company planning, executives need to develop a risk / reward analysis. A move toward setting the framework for this could include asking questions such as, “By altering stock levels, what risk does this pose to my production line flows?” Sir Isaac Newton’s law where every action produces a reaction certainly applies here.

Mapping out anticipated risks and what benefits can be obtained by addressing such risks in advance can greatly improve thought process and reveal any potential flaws in thinking.

However, to perform these types of balancing acts best, companies must thoroughly examine their true needs and core capabilities. Once completed, executives can assess stress points and determine what rewards can be derived from exploiting particular areas.

Measuring success

Certain measurement criteria are standard. Inventory turns and how turns are calculated will not create much opposition from most executives in industry.

When deciding on metrics and setting targets, look to key indicators for your particular business and how these fit best with your objectives.

Company criterion should clearly define the executive’s interpretation of success while asking: “Are these goals attainable goals for our situation?”

If careful evaluation determines these are not attainable, initial planning strategy should be reexamined.

Sometimes, especially when it comes to supply chain, the rules are meant to be broken.

Steve Vecchiarelli, vice-president of supply chain for Digi-Key

Tom Wilson

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