How to Improve Risk Prioritization in Supply Chain Execution

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While nobody could have predicted the challenges to the supply chain brought on by the pandemic, many companies are now investing in supply chain visibility and more advanced analytics for decision support. Leading companies have made dramatic improvements in their processes and technology to prioritize supplier risks in order to mitigate supply chain challenges in the future.

The pandemic exposed major complications and gaps in every supply chain. This includes:

  • The growing trend of offering more configuration and customization – leading to greater supply chain complexity
  • Manual shortage reporting that is both static and provides limited prioritization of critical shortages impacting production. Many companies use spreadsheets in the cloud with multiple users going in and doing manual updates without clear communication feeds. There’s often no clarity to prioritize the impact of demand changes other than planners sending routine email updates, followed by phone calls and more meetings.
  • The information used for daily decision making by planning and procurement teams is often siloed. This results in multiple material shortage meetings, different shortage reports, and a separate shortage meeting at each manufacturing location.
  • While ERP systems are great for integrating processes and helping run the business, they weren’t designed for optimized execution. Supply chain teams need something to help prioritize and make sure they are working on what is most impactful and time-sensitive.

Based on my personal experience in working with some of the leading companies in the world, it’s imperative that before rolling out an inventory optimization and execution platform you establish a level of data health that will ensure that the new software is set up for success. Leadership should be very engaged at all levels to ensure a successful implementation.

Unfortunately, there is rarely one source of truth across the company, so there is conflicting information; the process of untangling that is very slow and frustrating for all involved. The good news is that smart manufacturers are cleaning up their data and looking for technology solutions that will provide better visibility in predicting potential material shortages which will maximize their problem-solving runway.

Planners, buyers, and procurement professionals that have gone through this type of rollout report that one of the biggest impacts of deploying an inventory optimization platform with automated workflow is an increase in overall efficiency. Everyone on the team can quickly see what changes are happening, the most critical shortages, and review past historical performance data that used to be a mystery. This includes showing where spikes in demand occur as well as the root causes of shortages.

It’s important that supply chain team members feel confident that they’re tackling the right tasks and prioritizing their actions. It’s extremely helpful from an inventory standpoint to see very clearly what inventory actions will have the biggest impact on supply chain performance. Inventory teams need to strike a delicate balance between what they need for production while at the same time minimizing excess inventory to optimize working capital.

In order to turn manufacturing plans into action, companies need to close the technology gap between ERP/planning systems and intelligent execution. Rather than continuing to try to close that gap by working more hours, manually creating more spreadsheets, and having more meetings, smart companies are focused on  deploying this new strategy with the right technology. This approach leads to happier employees, better quality work, and more longevity. It also gives procurement teams more time to spend on value-added decision-making that improves the company’s bottom line.

 

Author Bio:  Richard Lebovitz is CEO of LeanDNA, a leading inventory optimization and execution platform.