In today’s competitive environment, consumer goods manufacturers expect their suppliers and co-manufacturers to bring them innovative ideas, new approaches to market, more efficient processes, access to the latest innovations and new technologies, and to provide assistance in new product development. Suppliers often feel caught in the middle; keeping their customers delighted while still achieving their own profit, growth, and operating goals begins to seem nearly impossible. But what is frequently overlooked is the opportunity to leverage the supply chain itself to create sustainable, differentiated value.
I worked in supply chain operations at Procter & Gamble for over 40 years, both within their owned operations and at the interface with co-manufacturers and suppliers. During this time, I’ve witnessed firsthand the potential and the power of the supply chain to create competitive advantage. By following the four steps outlined below, suppliers and co-manufacturers can unlock this value and move closer to becoming an indispensable supplier of choice.
- Map It. Start by documenting your supply chain and the operational work processes from start to finish. But think broadly about where the “start” and “finish” line is. As a supplier, the more you understand what happens from the time your product arrives at your customer’s back door to the time it goes out their front door (and beyond), the better equipped you will be to identify opportunities for innovation and efficiency. What do you know about the supply chain of the inputs you receive? Could simple changes in packaging configurations, delivery timing, load configurations, sourcing regions, or other specifications create cost, process, or innovation advantage for you?
An extremely effective method to begin to answer these questions is through mapping your current processes. For example, consider the packaging operation for the primary package of a consumer product that you have been contracted to co-pack. Process Mapping (PM) begins by simply documenting the flow of this process through the use of connected blocks that represent each action taken on the product, from the point it enters the packaging line to the point at which it moves to the next step (i.e. packing into a shipping case). This continues until you have documented all the actions required to deliver the product to your customer’s warehouse. Once the process flow diagram is completed, metrics can be assigned to each operation, thus quantifying the value gained and time required to advance the creation of this product. And, you now have the foundation upon which to apply the remaining three steps.
- Measure It. The saying “if you treasure it, you must measure it”, and its corollary, “if you can’t measure it you can’t manage it” are particularly relevant in identifying opportunities for supply chain advantage. Consider the Process Map of the packaging operation described above. For each step you have documented, identify the metrics which will verify its completion or success. These metrics will ultimately become the levers of control for the operation as it is managed for profit, quality, customer service, and safety.
- Master It. Once you’ve mapped and measured your supply chain, begin to look for opportunities to optimize…time, material, labor, yield, etc. Think about the connections into and out of your facility and at your customers…where could you reduce cost and/or improve efficiency? Are there opportunities to reduce inventory, increase turns, or otherwise improve working capital and cash flow? Build on capability and understanding of the operation. Listen carefully to those who have knowledge about it, including your material suppliers, equipment manufacturers, logistics managers, internal team members, etc. How could this packaging operation be more closely integrated between you and your customer? Can dual inventories, created as the result the current process, be eliminated by improved product/supply chain designs or operations? Can the operation become more streamlined for reliability, sustainability, or speed?
- Market It. Supply Chain optimization isn’t just about cost cutting and savings…it’s about creating competitive advantage for you, and ultimately, your customer. How might you use your supply chain processes to improve customer service? Can you increase speed to market? Is a technology or other innovation you’ve created and deployed applicable upstream or downstream? New revenue opportunities, as well as strengthened customer relationships, often result from this process. They just need to be identified, valued, and marketed.
For example, consider this co-packing operation beyond its current boundaries and adjacencies. How does its operation ultimately impact the marketplace? Can steps be taken, either leading into or out of this operation which could even eliminate it? Broad scale, systemic thinking to benefit a customer will not kill business opportunity for a supplier. Rather, by partnering and broadening the knowledge and skills across all participants in the supply chain, even greater value can be created.
Relentlessly following these four steps will deliver mutually beneficial value and enhance B2B supplier-customer relationships. Getting started is sometimes difficult, particularly with Process Mapping and thinking “outside the box” about opportunities for optimization and revenue creation. If you find this to be the case, you may want to consider leveraging outside experts with proven expertise, models and approaches, such as the YourEncore SupplierAdvantageSM program. Click here to learn more.
About Dennis J. Trchka: Dennis spent over 40 years in Global Supply Chain Operations and Business and Supply Planning at Procter & Gamble. He was one of the original creators of what is now Supply Network Operations within P&G, one of only four Business Planning and Supply Planning Masters in the Company, and a certified Class A MRPII Professional. As a YourEncore Expert, Dennis helps consumer goods companies and their suppliers and co-packers leverage the supply chain for competitive advantage.