Fine-tuning your supply chain

The McKinsey Quarterly is out with an interesting point, in regards to the challenges of consolidating supply chain data — and some advice for focusing IT resources to make sure you’re capturing the data that matters most.

The problem is, according to the report, is that companies today not only buy more from far-flung third parties in an effort to cut costs, but they also rely more on third-party contractors to move these goods around the world. That means critical supply chain data (such as quality, inventory, and capacity) is “locked up in the IT systems or spreadsheets of a dozen or more companies.”

Aside from the inefficiency of redundant IT investments, the problem is that companies lose horizontal visibility — they can’t see the whole picture. In search of solutions, McKinsey interviewed several global, high-tech companies that have outsourced their manufacturing and logistics, and identified the following best practices for reuniting supply chain data:

1) Fit information flows to supply chain types. For fashion-oriented products such as iPods, for example, focus on IT connections that help you “chase demand rapidly by providing repaid coordination between designers and suppliers.” But for commodities such as TV tubes, focus on cost and inventory data.

2) Develop deep monitoring capabilities, or systems that allow you to pull key data from both your suppliers’ systems and their suppliers’ systems (you’ll probably have to give suppliers incentives to invest in this, McKinsey warns).

3) Think cross-functionally and use detailed scorecards. Your purchasing people may be rewarded for selecting the lowest-cost supplier, but the manufacturing group may be rewarded for keeping inventory low and fill-rates high. They must get in a room and agree on performance metrics to make sure you get all the data you need from your suppliers.

Although the report makes sense, it misses the boat in one key area: human nature. Companies, as do people, sometimes don’t want to pass information on to partners for competitive reasons, control reasons, or just for no reason at all. If you’ve got the power to force them to do so, great. But if not, you’ve got to find the win-wins first before IT can re-connect the dots.


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