By Curtis Roberts
Supply chain management is more complicated than just buying the stuff your operation needs at the lowest price you can find. It’s having the right material in the right quantity at the right place to make promises on delivery.
If you don’t keep your promises, you don’t get to hold on to your customers for long. And if you decide to play it safe by having lots of extra stock on hand (given the comforting name of “Safety Stock”) you get to go broke by having all your money tied up in inventory. You then run the risk of the stock becoming degraded and useless or obsolete, as product designs or service offerings change. This adds costs, time to replenish and wasted investment of cash and labour.
Right material, right place, right time, right quantity…this is all information that can and should be handled by your enterprise information system. If that information can be shared in a timely manner throughout the supply chain from your customers to you and from you to your suppliers and sub-contractors, then you can run your supply chain leaner. This allows you to substitute information for inventory and changes your strategy for servicing your customers.
The supply chain moves in two directions; information and money moves upstream and products and/or services move downstream. The stream contains hazards to navigation. Some of them are big, pointy and dangerous. If you could only eliminate the hazards, your supply chain could flow smoothly and thereby reduce the need to keep excessive cash-sucking “Safety Stock.” This will have the effect of reducing inventory and the delivery time of your product and/or service to the customer. Make no mistake about it – in customer service (and safety stock), time truly is money.