From the pandemic to now
and a pending recession. From no inventory to excess inventory—and trying to
balance demand and supply. Plus, throw in inflation. And so it went. It is
about your upstream supply chain.
Your challenge is to
adapt to the coming recession and your spending reduction to deal with it. And
add the chance of more disruption. There are the usual suspects here—the same
old. But think bigger on what to do. There
are limits to what you can gain from cost reductions with people and pushing
for lower purchasing prices and transportation rates.
Emphasize your upstream
supply chain—where the supply of supply chains begins. It is the critical, largest,
biggest cost, and most complex part of your company and touches more parts of it
than any other function. There are opportunities with inventory and process. If
you want with.
Procurement and transportation/logistics
(whether separate or included with the product buy) are your biggest spend. All
that inventory and bringing it in and the capital expenditure. Your
international buy is often the bigger slice than the domestic purchase.
Start with whether you
have made changes upstream in the past two years, why you did, what they are,
and how well things worked out. Note
that the pandemic did not create weaknesses in the end-to-end supply chain. It
exposed them. Just as it highlighted that the upstream supply chain is critical
and strategic. Remember, the last two years, both directly, and indirectly,
have been the upstream segment of your business. And that area is vital for
your building resilience.
STEPS:
·
Analyze how much capital you have invested
in inventory—your spend. How much money do you have tied up in buffer inventory
to cover time and inefficiencies?
·
Think of your inventory-related purchase
and cash flow.
·
Assess your inventory as to turns/days of
and percent of revenue. What is your ROI?
·
Focus that your supply chain, even your business,
begins upstream at Mile Zero and your purchase order.
·
Remember that if you struggle here, you
cannot fix it downstream. It is too late.
·
Consider your supply chain is in a time of
continuous disruption. Normal is a moving target and time can be your enemy.
·
Go beyond costs. Think how you do the
process, total time, and technology.
·
Recognize the inefficiencies that impact
your inventory.
·
Ask yourself. How efficient you are you?
How much handling and multiple handling of documents and information are there
among all the parties? How easily and well do you prepare and see your purchase
orders and what is happening with them?
Now think what it means to your inventory and inventory buffer.
·
Move from Excel to digital—a key to
gaining resilience, ESG, transparency for manufacturing and retail/sales, and procurement
and transportation efficiency. This is more of a requirement for you than an
option.
PURPOSE:
ü Draw
on lessons learned from the last two years and improve your operations and
technology.
ü Put
your focus where your spend is.
ü Streamline
your purchase order process.
ü Move
to a digital platform.
ü Gain
procurement process efficiency.
ü Provide visibility.
BENEFIT:
1) ompress time from PO placement to PO delivery.
Mitigate purchase order time variance.
2)
Reduce capital tied up with inventory. Remember interest rates.
3)
Increase inventory turns/reduce days of
inventory.
4) Improve your inventory capital investment ROI.
