In an uncertain economic landscape out there, every penny counts towards a business’s bottom line. It follows that now, as we round out the first quarter of 2021, supply chain performance is being scrutinized like never before.
For some, it’s a case of transform or perish. For others, it’s a case of growing or getting left behind. But research backs up the imperative for transformation: companies that “aggressively” digitize their supply chains boost annual revenue growth by more than two percent, says McKinsey.
Nevertheless, digital transformation can be a daunting prospect, especially for those who need it most. Establishing a vision for a company’s supply chain, drawing up the right roadmap to get there, integrating operations and technology, hiring consultants and seeing it through to the end - there’s a lot to get right.
While complexity on the subject is unavoidable, here are a few rules of thumb you can use to navigate the next step of your supply chain transformation.
So how do you know when things aren’t working in a supply chain?
The most common sign that I see is the presence of errors, especially with a company’s invoicing. How often do you receive an invoice dispute instead of an invoice payment? The presence of invoicing errors is a big red flag that something is going wrong.
Another warning sign is miscalculated rebates. Have you ever been surprised by how low a rebate payment is once you actually receive it? Irregularities like this are a sign. (And if you can’t argue your case because you can’t produce the details to back up your claims, that’s a definite sign.)
Individually, these sorts of mistakes can be expensive. Accidentally overcharging someone $5,000 today, becomes $5,000 right off the bottom line tomorrow when the error is discovered. That’s a big impact for a lot of businesses.
But worse still, they are signs that a business’s system capabilities lack integrity.
Smart supply chains are transparent supply chains, and ideally, you should be able to see your customer, vendor, product, profitability - everything - in one place and with 100%, up-to-the-moment accuracy.
True transparency is transparency at the transactional level. Is that a part of your company’s capabilities, right now? Can you look at your sales records and tell what every single transaction is inclusive or exclusive of? What promotions, incentives, or other variables are in play?
Because when it comes to financials, opacity equals risk. A company’s financial results may look great every quarter for three quarters of the year - until it’s revealed that numbers have been overestimated, and they are off their annual target by 10%. Taking a ‘wait and see’ approach can get everybody fired.
Simply put, it should be easy to check the accuracy of any transaction at any time and to be able to pinpoint issues down to the actual invoice line that generated any price or rebate error if necessary.
No transformation is ever complete without some sort of operational, organizational changes. It’s one of the keys to the successful implementation of a new system.
Supply chain transformation is an opportunity (and challenge) to centralize everything and build a core team that understands how to manage it all - rebates, prices, and everything else - using a common tool.
Eliminate rogue operators in the company doing things differently, and replace them with a single best-practice center - a center of excellence - in the business.
This has the effect of moving critical pricing decision-making away from a customer service person in-the-moment (where they might be scrambling through spreadsheets to find out what the correct price of a product is) and allowing them to focus on the core parts of their job instead.
Instead, that decision-making is centralized, and for those customer service people, the numbers are just available right there, on their screen or at the click of a button, up to date and completely accurate.
‘Walk before you run’ is an idea we bring up quite often with customers, especially those that have basic systems today and need a lot of transformation to get to where they should be.
Why? Well, these sorts of transformations can be a little overwhelming, and for clients, there can sometimes be a temptation to rush to the end game without taking the time to properly understand how a system works, what really needs to be done, and what the best timeframe for doing it is.
On this, you need to trust your consultant. If they are questioning something you’re doing or suggesting you look at something, it really is in your best interest to do so. Listen to them, share as much as you can openly, and don’t try to overcomplicate things. These are experienced people who have been around the block.
Once you’ve created all these new processes, and you’ve got a new system in there, test, test, test.
Finished testing? Test again. And if you’ve been making tweaks, don't just test the two or three elements that you’ve adjusted. Rather, run the complete process from beginning to end to make sure nothing has been missed.
This seems like simple advice, but it can require some discipline to follow through on. It’s worth it though. The later in the process that you find out you missed something, the harder it is to fix.
It’s simply better to find out those things sooner.
To learn more, reach out to me here.
Check out the video where former CIO, Ken Lockhart explains how you can make the transformation with Flintfox.