Home' MHD Supply Chain Solutions : MHD Mar-Apl 2017 Contents help build momentum and focus efforts on
moving towards overall goals. For example,
many organizations only record a customer’s
order in terms of what the enterprise can
actually supply. Yet a simple change to
the process to capture the customer’s first
request or “unconstrained order” can be
highly advantageous, because it shows what
real demand exists. The business can then
make its plans accordingly, instead of taking
a blinkered view that relies solely on what it
has supplied so far. Customer satisfaction
and supply chain profitability are both likely
to increase as a result.
3. Cooperation to amplify
Supply chains often have many moving parts.
Compromises must be found to balance
one component properly with another. For
instance, stocking levels must be high enough
for satisfactory availability to customers.
Yet they must also be low enough to avoid
expensive increases in working capital.
Transport budgets should be managed
properly, but a finance department too eager
to slash transport costs may cause inventory
costs to rise instead. After convergence by all
on enterprise goals, cooperation between all
is also needed to avoid actions in one area
having negative effects on another.
Cooperation applies to systems, as well as
people. Used without due care, the software
applications that increasingly drive supply
chain operations can create functional silos that
are bad news for supply chain performance.
Separate applications to manage warehousing,
transportation, manufacturing and other
functions may hinder overall cooperation.
Take the example of a customer order for
multiple items with different lead times for
picking or kitting in the warehouse. When
such an order is received, it may be sent off
to a warehouse management system (WMS)
for preparation and a transport management
system (TMS) for shipping. The WMS
allocates time and effort to picking, which
may be done immediately, and kitting, which
may take a number of hours. Meanwhile, the
TMS allocates space on the next available
However, if kitting has not been finished before
the truck is due to leave, the enterprise is faced
with a dilemma: should the truck leave partially
empty with the part of the order that has been
finished, or should overall departure be delayed
while the kitting is completed? Neither option
is satisfactory. The situation could, however, be
avoided if the WMS and TMS work together as
systems to synchronise the processes involved.
While your supply chain director should already
be alert to such problems, it may also take your
clout as a CEO to get the IT department to make
the different systems cooperate.
How to measure supply chain
In a perfect world, all the functions of a supply
chain cooperate fully to create the ‘perfect
order’, maximising customer satisfaction and
supply chain profitability. The ‘probability of a
perfect order’ is then a measure of how well
all the functions involved are pulling together.
It can be calculated by simply multiplying
together the percentage levels of success for
the stages of the supply chain:
1. Order entry accuracy.
2. Inventory availability.
3. Warehouse DIFOT (delivery in full on time)
4. Carrier DIFOT.
5. Customer accepts order.
6. Accurate invoice paid.
Note that even if each stage scores 99%
success, the overall success rate is significantly
Probability of a perfect order = 99% x
For the ‘probability of a perfect order’ to be
100%, each stage must score 100% success,
Probability of a perfect order = 100% x 100%
There can be no doubt. Cooperation is a key
attribute of a successful supply chain.
Although supply chains can be complex,
especially when your enterprise is part of a global
supply chain spanning several organisations, it’s
crucial to be able to fall back on simple, relevant
guidelines to pick your way through the maze.
It’s at times like these that our handy 3 Cs for
you, the CEO, can help to keep you and the
business on course for success. Clarity on what
your enterprise needs and what your supply
chain must deliver, convergence of people and
systems on those goals, and cooperation to keep
each contribution constructive can provide you
with an effective platform for supply chain and
Rob O’Byrne is a consultant, coach and
author in the field of supply chain and
logistics. He publishes regularly at
Visit booth C10 @ SMART Conference
Call 1300 WMS 000
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“In a perfect world, all the functions of a supply chain
cooperate fully to create the ‘perfect order’, maximising
customer satisfaction and supply chain profitability.”
MHD SUPPLY CHAIN SOLUTIONS — MARCH / APRIL 2017
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