Of all the possible ways or getting the greatest direct benefits to your enterprise, supply chain management is, without a doubt, one of the best choices. However, it is also the one that carriages the greatest challenges to implement and it involves several risks to work with: wrong decisions may imply a sharp failure in your business that could drive you to bankruptcy.
Some people consider that supply chain management (SCM) is the most difficult system to implement in any company; even more than ERP. At least with the latter you always are aware of everything you’re buying. When taking SCM into practice, there are some severe mistakes you absolutely must avoid at all costs if you still want to be successful at implementing this interesting tool. Let’s explore the most important in this post.
- Analyzing risk management must be a continuous process, where there is no place for the “once and done” attitude. It is absolutely not a project you do, finish and forget. It is very important to evolve and adapt to the different market conditions. “Be like water, my friend”, said Bruce Lee.
- The cost cutting obsession is a real mistake. Nowadays, every company is looking at lean manufacturing as the ultimate trend in the industry world. Nevertheless, being obsessive on the cost cutting matter may produce awful effects on the supply chain of your business. In first place, your broken links may be exposed. In second place, the flexibility you need to adapt to the continuous changes of the market could be I danger: in particular, when it comes to demands, products and orders. Remember the thin line between cutting your supply chain muscle and just trimming the fat. It’s very blur.
- Excessive “operational noise” focus. It is almost a common sense warning that most people just don’t pay attention to. Even though there is certain (others may say “wise”) tendency to focus on dramatic risks (like the recalls of products), almost everyone ignores smaller risks that could actually deteriorate all your processes by creating apparent trivial frictions in the supply chain (yield busts, for example). The Devil is in the detail.
- Partial or total absence of risk management strategies. No matter how dangerous or scary it may sound, every risk is avoidable. Every single one of them. The thing is that you always have the choice of defining the path your company runs for adapting to the market and every day’s life unforeseen changes; and, in addition, to make the most of any circumstance. It is a well-known fact: in every industry, drastic order cutbacks can happen. The rain falls, demands and trends just change all the time. The question is how do you face the coming obstacles. Better than being reactive, being proactive is a priority, and it implies to have a plan A, a plan B and sometimes a plan C. Reactive people usually generate more conflicts than the original one, and sometimes, more complex. If you manage a solid strategy for handling risks (at least the most common) and maximizing opportunities by it, the common failures would be simply avoided. Sounds easy, but you would surprise of how little this principle is implemented in real life.
- Ignoring other strategic initiatives. This is linked with the prior point. If your company just ignore customer service, because it seems unnecessary of expensive; if you consider that worrying about costs or working capital makes you waste your time, you are simply shooting yourself in the foot. It’s a bout improvement and being ready to different situations: if you can’t see the value of it, there’s no point for you to be reading this post.
- Taking no notice of the place conditions where your business is functioning. In first place, it has to be with offshoring. Many businessmen love it, because of tax benefits in favorable countries like Latvia, Andorra or the Isle of Man, but it really makes it progressively hard for any corporation to watch their supply chains carefully… and doing it online is never the same thing than visiting your company yourself. Another potential problem is geographic clustering. This is Art of War basics: know the territory where the action is taking place. If you choose a territory that makes manufacturers vulnerable to known and irresistible disasters (tsunamis, earthquakes, terrorist attacks or something worse), you need to sharp your business vision, pal.
- Wrong Demand Forecasts. The best way (and maybe, the only way) of determining whether you have a surplus, a shortage or a smooth running supply chain engine is a demand forecasting model. Without a dissecting eye on the actual usage and infrequent activity, it’s easier to be hit twice by a lighting than the possibility of an accurate demand forecast. You can just throw off your whole demand forecasting accuracy, that you have being building for years, thanks to an uncommon out-of-scope sale embedded in your historical data.