However not every firm has been impacted. Some industries have been, so far, immune to these disruptions. But that has not excluded them from the need to improve performance and/or reduce costs.
A technique for such firms is Supply Chain Granularity Analysis.
Concept of
Granularity
A company is not homogeneous. It has granularity. Granularity reflects the size of the units being assessed, whether large or small. Think of the United States as a country, then each state and then counties within a state; each level reflects a degree of granularity.
A company is not homogeneous. It has granularity. Granularity reflects the size of the units being assessed, whether large or small. Think of the United States as a country, then each state and then counties within a state; each level reflects a degree of granularity.
For businesses, product categories may be considered
coarse-grained and individual products can be fine-grained. Fine-grained,
smaller units are the surprises of the analysis. Note, granularity is a term
often used with information technology-related applications. That is not the way
it will be discussed.
The firm’s granular content is defined by and within its
different divisions or business units, if it has them; or by different
department or product categories. It means looking deeper into a company to
gain insights, especially with regards to smaller, less recognized areas or
products of the company. It means looking for the gold nugget among the rocks
and gravel.
With granular analysis, the company can identify key
performance areas to compete in. Profit contribution, return on investment or
revenue growth of divisions or product categories is a good way to assess the
granularity of a company. The revenue, profit or return metric should be
compared to overall GDP (gross domestic product) or some similar measure.
Results that exceed the comparative measure are what need to be identified and
exploited.
A granular review may find opportunities that traditional
analysis could miss. Conventional analysis often stays within the context of
the present organization or within terms such as strategic or tactical. To some
extent, such rigidity in approach can predetermine the results of the analysis
and overlook hidden drivers within the business.
With the granular analysis, the firm looks at customers,
customer types, market segments, geographic regions, individual SKUs and other
sub-levels. As a result, the company can find performance areas that they
compete in and in which they outperform. As such, it may identify areas within
business units or product categories that are less emphasized by the overall
company organization or portfolio and that may be otherwise overlooked. The
company should then work to understand the opportunities and focus on the
identified and prior unrecognized areas or products.
Application in
Supply Chain Management
Granularity
has value for supply chain practitioners and for 3PLs and other logistics
service providers. For supply chain management, it presents two options. One is
how to support and to effectively handle these fine-grained opportunities. Two
is the use of granular analysis within the supply chain process where there are
likely granular opportunities.
There can be a challenge in the supply chain support for
fine-grained company opportunities. This would involve costs to support smaller
customers or markets. Operations effectiveness often includes volume as a
driver of velocity. This can be seen, for example, in the transit time of a
truckload of products versus a less-than-truckload shipment or a parcel size
shipment. This method also stays within traditional accounting practices where
cost spread over more units means lower costs per unit. Similar implications
are with warehousing large volumes or picking large orders. Such issues need to
be recognized before the specific supply chain support for the company's
granular growth or related opportunities are developed and implemented.
The second option is reviewing the company supply chain
for granularity. For example, the analysis may proceed with the firm's
assessing the first level, the inbound supply chain. Then it looks at the next
level, imported products and orders. Then to imports from a certain geographical
region.
The supply chain practitioner then looks at the container
movements. Then at the ocean carrier and/or freight forwarder who handled the
container. Nothing is outstanding there. There are nominal differences among
the logistics providers. He then looks at it be inventory priority-A, B and C.
That review may be masked by the performance of the logistics service
providers.
So another cut is done by suppliers. This part of the
analysis shows a supplier that ships its orders at 100% on-time. That is good
for the company. Overall suppliers have been shipping about 50% of the orders
on-time, with some having a supplier performance as low as 30% on-time. Here is
that gold-nugget among the gravel.
Now learn more about that supplier and why his
performance is so good as compared to others. This result can be important to
the supply chain and to the company. Not shipping orders on time to the firm
affect its customer service by not having needed products available for sale,
by having too much overall inventory on-hand at the same time there is a
certain product(s) not in stock and by impacting warehouse picking and costs
with the extra travel time to move around slow-moving inventories.
A review of the outbound supply chain may show a carrier
that is outstanding overall or in certain routes. A certain warehouse or labor
shift may perform at near mistake-free levels of operation. Process transitions
within distinct organization segments may be quick and flawless. Such
operations opportunities present benefits have discernible and may be applied
and the potential for adapting and expanding them.
There are also two values of granular analysis for 3PLs
and other logistics service providers. One is the benefit of doing it and
finding opportunities in its own organization as to market or logistics
segments or other sub-levels. A global 3P: may disaggregate his scope and find
unrealized opportunities in a geographic region or in a select market. A
freight forwarder may find them in certain trade lanes.
Two is for the provider to understand what it can mean to
a customer in developing and delivering services that more closely match their
real requirements. Logistics service providers, or with the assistance of a
consulting firm, can offer to do a granular assessment for customers. The end
result would be to create a value proposition with a customer that goes beyond
standard definitions as to freight costs or other criteria, a proposition that
is stronger than such criteria and makes the provider an integral part of that
customer's logistics needs and operations.
Conclusion
Granular analysis can yield benefits to all companies, regardless of their industry or service. It is good to do for wholesalers, manufacturers, and retailers and for their company’s supply chain. It is likewise good for 3PLs and other logistics service providers. Granularity does not follow the usual ways of looking at a company or its operation based on its organizational structure and sales. These approaches can miss the smaller opportunities that can be developed into a larger impact.
Granular analysis can yield benefits to all companies, regardless of their industry or service. It is good to do for wholesalers, manufacturers, and retailers and for their company’s supply chain. It is likewise good for 3PLs and other logistics service providers. Granularity does not follow the usual ways of looking at a company or its operation based on its organizational structure and sales. These approaches can miss the smaller opportunities that can be developed into a larger impact.
For more on Supply Chain Management, go to www.ltdmgmt.com
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