Warehouse

Part two in a three-part series: ditch the silos and optimize the supply chain

For stainless steel manufacturers and the broader manufacturing sector, 2018 could be a stellar year for improving efficiencies and reducing costs. The reason? Supply chain optimization. Written by By Jeff Eiben, Principal Owner, River Point Technology
 
Backed by facts 
Above the industry average in revenue growth and earnings before interest and taxes (EBIT): according to a Deloitte study1 of 400 company executives, this highly coveted designation is achieved by approximately 75% of organizations deemed to have superior supply chain capabilities, as compared to fewer than 10% of companies whose supply chains are performing at a less than optimal level. 

Based on those findings, it’s a safe bet that an investment in a data-compliant IT architecture and supply chain optimization will be a winning decision in 2017. 
Silos and stagnant data 
Decision makers are most effective when they are equipped with a comprehensive and accurate set of data. Access to sufficient data is not a problem. In fact, the sources seem limitless: orders, shipments, inventory, sales, invoicing, transportation, assets, downtime, staffing, salaries, and nearly every other aspect of daily operations. Unfortunately, many companies are operating in the realm of disjointed business systems, scattered data storage, and archaic recordkeeping. 

Without a central repository, data trickles in from one departmental silo at a time. Some data will be lost along the way, and even more will arrive in a variety of formats that make unified reporting impossible. Plus, a percentage of the compiled data will be outdated before it ever reaches the desks of decision makers. This incomplete and stagnant picture does little to help companies evaluate their risks and opportunities. 

Consolidation and real-time data 
Consolidation immediately enhances the organization and security of data, but its value extends much further into the role of supply chain optimization. Instead of viewing one supply chain link independent of all others, data consolidation provides insight into how the performance of one link impacts the performance of others. 

A robust collection of data can be analyzed in multiple ways, so that every “if this, then that” scenario can be considered. In turn, this vast amount of business intelligence can contribute significantly to informed decisions, operational efficiencies, and enhanced fiscal management. This level of business intelligence is in itself a virtual return on investment. 

Case in point 
A $225 million packaging and labeling company relied on historical data to manage equipment maintenance and parts inventory. After investing in an IT architecture that delivers real-time data and reporting, the company began to leverage that data to drive cost reductions. 

For years, the company had been purging information that would have provided valuable insight into facility-wide equipment repair and replacement. Once a real-time reporting structure was implemented, patterns of inspection, repair, replacement and downtime be- came readily available. Within one year, the company realized cost savings in both asset replacement and unscheduled downtime. 

A second manufacturing company recognized their need to reduce the costs of scrapped production runs and wasted materials. By organizing and analyzing their massive data base, they were able to move away from batch reporting and rely instead on data delivered in sync with each stage of production. The resulting data-based conclusions allowed the company to reduce material waste by nearly 12%. 

Strategic decisions 
Data-driven analytics provide benefit well beyond maintenance and repair. When equipped with the facts, decision makers can better answer questions such as:
Are we getting a better price from some vendors than others?

Are we taking advantage of volume discounts? 
Are we using analytics to negotiate optimum pricing? 
If we adjusted our flow production, could we reduce lead time and costs?

Will additional data help us more effectively manage inventory levels? 
Are we efficient in managing returns, disposal, recycling and sales fulfillment?
What supply chain improvements will reduce downtime? 

Data-driven communications 
One interesting but less recognized benefit of real-time data is its ability to improve communications among employees and departments. Better communication, in turn, improves accountability, responsiveness, and risk management. 
For example, real-time data can be used to trigger an immediate notification to everyone along the supply chain, whether that communication is about a change in delivery schedule, a production mishap, or an order change. Every team then has an opportunity to adapt accordingly to avoid the potential of interrupted operations. When consistent, these real-time notifications and “on- the-spot” adjustments can contribute significantly to improved efficiencies and cost reductions. 

When it comes time to squeeze a little more productivity and savings out of your business, supply chain optimization will again become a topic of discussion. No doubt you have made changes until it seems there is nothing left to squeeze. 
Good news, though. The evolution of real-time data and modern IT architecture has brought a solution into reach. That solution, supply chain optimization, can deliver exceptional value across every aspect of your business. 
Reference: 
1 Deloitte Supply Chain Leadership: Innovation, Collaboration, and Talent Alignment; https://www2.deloitte. com/us/en/pages/operations/articles/ supply-chain-leadership.html 

About the author
Jeff Eiben is principal owner of River Point Technology, a Pittsburgh, PA-based company that offers comprehensive data assessments and a unique implementation methodology that helps companies visualize the benefits of data-driven solutions. Eiben can be reached directly at jeiben@ RiverPointTechnology.com. More information is available at www.riverpointtechnology.com.

 

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