Sleep products manufacturers can approach their time at ISPA EXPO 2020 March 18-20 in a couple of ways
You can hit the floor of the Ernest N. Morial Convention Center in New Orleans with a shopping list of specific products and services. The lowest profile, thinnest microcoils: Check. Better pricing on boxable foundations: Check. Performance foams and fabrics: Check.
Or, you can expand your mission to also include finding technologies and cementing partnerships that will allow you to refine — or even remake — your supply chain in ways that will prepare your company for unprecedented success.
The first approach will help you make and market better products, but it’s largely transactional. The second method could be transformational. Which will you choose?
A strategic supply chain
It should go without saying that an efficient, optimized supply chain is at the core of any successful manufacturer’s overall business strategy, but some numbers add weight to the argument. A 2014 study by global consulting firm Deloitte found that nearly 80% of “companies with high-performing supply chains achieve revenue growth superior to the average within their industries … (while) just 8% of businesses with less capable supply chains report above-average growth,” notes Rob O’Byrne, co-founder of Logistics Bureau, a logistics and supply chain consulting firm with offices in Australia, New Zealand, Thailand and Vietnam.
Yet, for many companies, this critical part of the business — really the foundational part of a manufacturing operation — “has never been subject to a design process, but has instead just evolved,” O’Byrne writes in a 2019 article for his company, “8 Reasons Why Your Business’ Success Depends Upon Your Supply Chain.”
“In 2014, a survey by Tompkins Consortium delivered a shocking revelation,” O’Byrne says. “Of the business leaders participating in that survey, more than 50% considered supply chain to be a standalone business operating function. In other words, the majority did not recognize the need for close alignment between supply chain and general business strategies.”
In fact, the idea of supply chain management isn’t even all that well-defined, says Stefan Gstettner. That’s true across industries, he says, and, BedTimes would argue, true even within the sleep products industry.
“I like to put it as ‘end to end synchronization of entire value chains,’ ” says Gstettner, partner and associate director at Boston Consulting Group, who was interviewed by Knowledge@Wharton for an article published in July 2019 by the online business analysis journal of the Wharton School of the University of Pennsylvania. “There are two new words in this — ‘end to end’ and ‘synchronization.’ Both are important. End to end means we need to think through supply chains from the end-customer perspective. For example, consumer goods companies would want to understand what is happening in the downstream end consumer market, at the point of sale, and also on the upstream side into a multi-tier supplier chain. It’s complex and end to end. … Synchronization means reacting to changes in the market. In the volatile world that we all live in, it’s essential that supply chains react to changes in the market and be synchronized with the market.”
Measure 2x, shop 1x
But, as David Kazel notes, you can’t improve what you haven’t assessed, so before hitting the ISPA EXPO show floor, measure “what is important to the business.”
“Go through the process to determine what metrics are important to meeting your supply chain objectives,” says Kazel, a senior manager with Centric Consulting, which has offices across the United States. Key performance indicators can include factors such as order accuracy and on-time shipping.
“One of the best overarching KPIs in a supply chain is known as the ‘perfect order’ metric,” Kazel writes in a 2017 article on logistics for his company’s website. “It is defined as the percentage of orders delivered to the right place, with the right product, at the right time, in the right condition, in the right package, in the right quantity, with the right documentation, to the right customer, with the correct invoice, in the manner the customer wants. This may be daunting but it is the new baseline to keeping your customer satisfied.”
With such an assessment of your current supply chain’s performance in hand, you can shop ISPA EXPO and meet with suppliers not only to find products and services, but to improve your overall supply chain to better support your company’s broader strategies and goals.
Strengthening your base
For instance, if one of your overall strategies is to move into new markets, gain market share or expand into a new sales channel, a strong supply chain is key to that effort.
“Customer satisfaction is highly dependent on the supply chain, and if you want to be successful, your business must manage its supply chain with that in mind,” O’Byrne says. “That means the customer must be a primary focus when considering supply chain strategy, network design and performance management.”
“Remember that in your customers’ eyes,” he adds, “there is no distinction between your suppliers’ performance and that of your own company.”
Have you had trouble getting new products to market on time? Do you ever have inventory shortages or delays in responding to customer service requests? Are component failures driving up return rates and warranty claims? All are linked to inefficiencies or deficiencies in your supply chain.
“If you recognize any of these problems within your own company’s supply chain, don’t despair,” O’Byrne says. “As long as you can identify the root causes and begin to address them, you will be on your way to a more successful supply chain and to creating an enhanced customer experience.”
Every company wants to reduce costs and increase profits, and asking suppliers to cut (and cut and cut) their prices can seem like a no-brainer way to accomplish both goals. But, as Cleveland-based operations strategist Becky Morgan says, squeezing suppliers — or overcharging your own customers — is a short-sighted strategy.
“Understand we all need to make a profit for the supply chain to succeed. Just because you can charge more or pay less doesn’t mean you should. Your supply chain partners must be financially stable to manage risk appropriately,” Morgan writes in an IndustryWeek article, “Is Your Supply Chain Improving You?”
What helps your business most is aligning with other strong, stable companies. “Consider not just price, not just total cost of ownership, but total supply chain cost,” Morgan says.
Rather than focus exclusively on reducing supply chain costs, O’Byrne advises companies to look for ways to trim “processes and activities which add no value.”
“It’s essential to recognize that the line between appropriate and excessive supply chain cost-cutting is a fine one,” O’Byrne says. Some common areas where you might find waste or other inefficiencies include:
- Inventory and storage
- Inventory management.
And don’t overlook potential problems in your forecasting methods and processes, which can lead to cost overruns, excess inventory and other problems.
Whatever your goals for your company, reliable and mutually beneficial partnerships with strong suppliers will help you meet them.
“To some extent, your suppliers hold your business success (or lack thereof) in their hands,” O’Byrne says. “That’s why it’s essential to work in collaboration — at least with primary suppliers — to try and minimize supply chain uncertainty.”
Uncertainty, of course, is unavoidable. Hurricanes happen. Coronaviruses happen. But “collaboration between your organization and its key suppliers is the only sure protection against supply bottlenecks and inventory shortages, both of which can otherwise get in the way of business success,” he says.
Morgan encourages companies to look to suppliers as strategic partners in improving your competitive capabilities. The emphasis is on working together.
“If they do not bring competitive advantage, are they the right partners for you?” Morgan asks. “If they are the right partner, but do not improve your competitive position, what can you do to help them become stronger?”
Put Your Strategy to the Test
When it comes to time and attention, is your supply chain front and center?
Rob O’Byrne, co-founder of Logistics Bureau, a logistics and supply chain consulting firm based in Australia, argues that it should be. He offers a quick questionnaire you can use to assess how effective your current supply chain management strategy is and how well it aligns with your broader business strategies. Use your responses to prioritize areas you want to improve — and issues you want to discuss with suppliers at ISPA EXPO 2020 March 18-20 in New Orleans.
- Do you have closely aligned supply chain and business strategies?
- Do you regularly review and optimize your supply chain network?
- Are you continuously and actively seeking supply chain service improvements?
- Do you have control of supply chain costs?
- Have you implemented a supplier performance management program?
- Are you taking steps to mitigate risk in your supply chain?
- Is your inventory being managed effectively?
- Do you have adequate, efficient processes for product returns?
Don’t feel bad if you responded with a few “no’s.” “In reality, few companies, even those long-established, can unequivocally answer all these questions in the affirmative,” O’Byrne says in a 2019 article for his company. “That’s no slight toward the professional capabilities of their leaders. Developing a best-in-class supply chain is no easy task, and it takes time.”