When will companies see the big picture of supply chain and begin to collaborate between purchasing, warehouse, suppliers and sales divisions? I talked recently with a logistics colleague in another company who told me that they were investing several hundred million SEK in automation. They needed to increase the efficiency and capacity both in and out of the warehouse. They also needed to be more volume effective.
I asked the colleague, what have your company done until now to make your flow more efficient? He told me that each department and specially the warehouse have tried to optimize the flow on their own. Of course, the warehouse have find a lot of annoying stuff in the goods receiving. For example suppliers who send their pallets with no thoughts behind the packing and insufficient documentation. Sales departments afraid of losing customers due to insufficient service with no regulations in order types for goods out and so on. However, they have done nothing to optimize the whole flow. Each department manager only see his or her opportunities and problems. No one take responsibility for the whole picture.
I can’t stop wonder how much could be done if the company start to work cross-functional. A project group who identified all the costs and time thieves from the order sent to the supplier to the products reached the end consumer. I am one hundred percent sure that there is a lot of money to save in projects like this.
Maybe it will still be necessary to invest in automation. However, who knows how big the investment would be, and what type of technology would be most optimal if you first make a cross-functional optimization project through the whole supply chain. I think it is strange how easy some investments is accepted in companies instead of analyzing what could be done before investing in expensive technology that make the supply chain pretty often inflexible and static who is the opposite to “agile”.
To get maximum effect in supply chain and utilize the skills of your employees optimally you need a leadership that encourages critical thinking and a holistic approach. A leadership that encourages cooperation and avoiding financial incentives that stimulate sub-optimization of department managers. The goals and KPI´s of each department should always consider the bottom-line for the whole supply chain.
For some reason warehouse is often blamed for their costs but remember, a warehouse production cannot be better then what you put in and out. What I mean is the purchase department need to collaborate with suppliers to optimize the goods to the warehouse. Same with sales department, before changing to more liberal ordering rules for the customers, value first is it necessary. Will the sales really increase?
Collaboration is an important success factor for every supply chain. My experience is that small companies are better to collaborate between departments. Large global companies lose the holistic approach and perspective. Walls created between departments. Each department manager look after his or her own interest unfortunately. One way to avoid this is an operational general manager who has a holistic approach and is responsible for all departments (each department manager report to general manager). He or she is always looking at the bottom line, not what one department can save if it have a negative effect on the total bottom line.
A very competent LinkedIn colleague who work with logistic development asked the right question, where is the SCO? (Supply Chain Officer). Every company that want to be competitive should have an SCO in the board. The supply chain is one of few areas that many companies still not prioritize, specially the importance of an efficient warehouse. It can be a very significant margin enhancer.