The secret to boosting your supply chain in 2014

January 28 2014

According to the recently released December 2013 national report of the Institute of Supply Management (ISM), the manufacturing industry is continuing to experience healthy growth. These are welcome words after years of uncertainty in the U.S. market. Industrial output continues to grow, U.S. manufactured products are globally competitive, and the industry as a whole is generating a significantly higher multiplier effect than any other sector.

Perhaps most telling is the significant impact manufacturing has on the overall economy, with numbers showing that the manufacturing sector is leading the continued U.S. economic recovery following the Great Recession. But not all manufacturing indexes are created equal. And according to last year's trends, there's a secret behind those experiencing the fastest, healthiest growth.

Throughout the industry, there are four major indexes that experienced strong growth in the closing of 2013: new orders, employment, supplier deliveries, and prices. And they all have one thing in common: significant data growth. A significant increase in data means companies must find a way to quickly and easily measure and monitor the way they do business or risk losing control.

New Orders

Increases in new orders mean more shipments, more purchasing orders, and more deadlines to meet to satisfy customer demand. With increasing complexity in the supply chain, there's an inherent need for more data analysis to make sure that all orders will be supplied with the right product to the right people at the right time.

Measuring the overall performance of your supply chain can be boiled down to a few key questions. Is the supply chain acquiring the things your organization needs? Is it providing customers with the things they need? And is it doing it all in the right time and for the right price? There are several critical KPIs tied to both inventory and shipment that should be monitored daily in order to ensure your supply chain is meeting these standards.

Monitoring and measuring factors such as inventory turns, backorder percentages, service levels, on time delivery, average days late, rate of returns due to damage or error, and order picking accuracy require massive amounts of data to be continuously collected and analyzed.

Employment

In addition to more orders, there's a need for more employees in order to fulfill the growth without forcing the company's base structure. In theory, this increase in employees should be correlated to an increase in overall company productivity. At the very least, an increase in employees should keep productivity steady. It's necessary, then, to track more employees and their output more closely in order to measure and improve productivity, but with less or equal time and effort.

At its simplest definition, productivity is the ratio of output to input. In order to accurately measure this, factors such as physical quality, financial value, labor, and capital must all be included. The more employees, the more complicated this process becomes. Add in payroll, human resources management, and other performance measures, and managing a steadily growing workforce becomes a steadily growing headache.

Supplier Deliveries

Supplier deliveries growth means that you have an increased amount of input coming from your suppliers. As a manufacturer, you have more raw material to move through your supply chain. This growth requires a very close look at your procurement and inventory KPIs to ensure that numbers are staying within range and efficiency stays high.

Procurement should be measured on two planes: for quality and for cost. Measuring quality means taking defect rates, procurement cycle times, delivery, and contract compliance into consideration. Then there's the total cost savings, cost avoidance, managed versus total spending, and ROI to evaluate total cost efficiency.

The faster an organization is able to move input from raw materials to finished product to supply chain, the lower its total inventory carrying costs will become. This ensures your organization will be more capable of selling its inventory at the full price instead of having to discount it when it becomes obsolete or devalued. Furthermore, keeping the inventory in the warehouse for a shorter period of time means less costs for electricity, cooling, and inventory staff for each item.

These KPIs should be monitored every day. A manual report Excel spreadsheet that takes weeks to pull together is a breakdown in efficiency. This prevents you from getting a comprehensive, up-to-date analyses of the business.

Prices

Finally, prices are going up. And this is a tricky one. In an immediate sense, a price uptick of raw materials will translate to a price uptick on the consumer side. However, there has to be a close follow up on prices to make sure that your products are being priced accordingly and following a strategy.

When it comes to your customers, price is what you pay, value is what you get. It's important to remember that with rising prices, the value must also rise. Keeping the value equation requires strong pricing monitoring and market analysis to ensure your customers stay happy and loyal.

It all comes to data. Either when you have to measure the new orders and new raw material input, or you have to monitor your prices and you inventory, data is the secret behind the indexes. Some manufacturers and distributors will try to track and manage their data with clunky, outdated technology such as Excel spreadsheets and manual reports. That isn't Business Intelligence.

BI in 2014 means data analysis tools that give you an accurate, automatic, and reliable source where you can see and manage all the data affecting your supply chain. A BI and Analytics platform will give you access to data inside and outside of your organization in the click of a button. Get a comprehensive overview of performance broken down by sector, task, or individual employee. Check stats by quarter, week, day, or hour. Drill down to get to the bottom of deviations and see how to fix them.

Business intelligence and analytics puts the power at your fingertips so you can make important business decisions faster than ever before. Rapid decision making will be a key differentiator this year. And that means the ability to capitalize the industry growth faster than others.

2014 will be a key year for manufacturers and distributors. Better get your hands on and head around the data as soon as possible.

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About Dave Carleton

Dave is the U.S. Practice Director for Manufacturing and Distribution at TARGIT, www.targit.com. Dave has spent his entire career, over three decades, providing business solutions to the Manufacturing and Distributions industries. His practical experience includes program development, marketing, and sales with an education in accounting.

Dave's passion is twofold, providing and assisting individuals to reach their potential and helping businesses reach their potential through technology implementation.

Dave has spent the last five years consulting with Microsoft Dynamics ISV's to expand their businesses through channel development, branding, marketing, and direct sales. Prior to that, he was the founder and President of Maximum Business Solutions. Max Biz, as it was known as, was one of the fastest growing and recognizable ISV's in the Microsoft Dynamics eco system with solutions in WMS and Route Accounting. He proudly wears the title "Godfather of WMS."

Dave is married with three adult children.    

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