The supply chain management is an essential part of any company and knowing when to make a change will mean the difference in many cases between a successful business and being out of business. Supply chain management has traditionally been all about tactical strategies that helped the company keep deadlines, offer differentiated services and gain customer loyalty. But today it is so much more and companies need to recognize the transition and begin taking steps towards it. A strategic approach doesn’t encompass the daily operations that make the business run like a number of trucks that are dispatched or the problems that were solved. Instead, the focus of strategic procurement will focus on looking towards the future and preparing ahead of time for the needs the company, suppliers or customers may have so the changes can be made opportunely. This will require that the company to focus on the chain as a whole and make use of the metrics to carefully make decisions and capitalize on opportunities.
The first thing that companies have to recognize is the fact that every day the supply chain becomes more complex and this will require a different kind of approach. The tactical approach can only get so far when the supply chain takes on so many different changes. Some of the reasons that the supply chain ecosystem is inevitably changing is first and foremost the expansion of the global market and trade, which obligate the companies to abide by different national and international laws and regulations. Additionally, more and more companies are implementing JIT (Just-in-Time) inventories which have a huge impact when stocked inventory is kept at a minimum and any inconvenience in the supply chain can have massive consequences on the end product and delivery. You can find out more about whether JIT is right for your company at the David Kiger website. Everything from unexpected rise in demand or a delayed shipment will become a logistics nightmare overnight. Although traditionally manufacturing has been all about mass production, this new era of business aims towards customization and it doesn’t seem to be slowing down anytime soon. Profit margins will begin to have much more weight on the supply chain when there is an increase in competition in the market and there is a constant pressure to reduce costs. With all of this in mind, you need to start evaluating your organization and determine if and when it is the right time to begin the transition towards a more strategic procurement process.
The transition can easily create havoc in a company, like any major change. It will all come down to finding a way to do it right for your company and minimizing the culture shock from all of the changes that will begin to occur. The foundation of the new stage in the company will come down to setting up automated procedures and basing all decisions on verifiable data. So, if your company is at the point of starting the process, there’s no better place to start than finding and fixing procedures that aren’t working. These broken procedures could be costing your company money, so starting with a complete assessment of the current state of the company and all of its procedures will bring out the inefficient and unnecessary procedures. It can’t stop there, the complete assessment process will also require you to evaluate possible solutions. At the same time, your company should be looking for opportunities that could reduce costs and help set volume pricing. Make all of the necessary comparisons to determine the costs involved and then be able to make decisions that can help to eliminate redundant costs. Once the change begins to occur, don’t think it’s over once things are implemented. The after effects of the change process will continue to be felt by employees and will show through if not dealt with correctly from the beginning. There should be a comprehensive change management plan in place so that once everything is implemented, it’s only just beginning.
If your company is not prepared to deal with the after effect it may not make it through the change process. These changes will have a significant impact on the bottom line of the organization, but it will come down to how it’s implemented and how the people who will be changing jobs, procedures, and responsibilities deal with the change day in and day out. Either due to an evident need to transform your company or because there is a specific change that needs to be dealt with before the company faces this external change or situation, the motivation behind deciding to make the change will come down to cutting back costs, becoming more efficient in established procedures and finally increasing profit margins.
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