Get the Board onboard
Supply Chain Management can be an important market strategy differentiator but it needs boardroom commitment. Processes and planning need to change which demands approval from the top, according to several speakers at the 8th European 3PL Summit & Chief Supply Chain Officer Forum, held in Brussels.
Although SCM is an integral part of product innovation in many cases it only becomes an issue when it is time to scale-up. By that stage it may be too big to handle or the standard supply chain system will slow down the speed at which the new product can reach the market, Kris Van Ransbeek, vice president, Product Supply & Ingredients Business Europe of Chiquita, told delegates at the forum in November.
“The Supply chain is becoming more and more complex and we need to get this message across to the board simply and clearly. [ ] Up to 80 per cent of the supply chain costs are structurally defined during the design of a new product. Unfortunately, the wrong choices only become visible during scaling-up,” he said.
A supply chain representative needs to be embedded in the innovation teams, right from the very start, in order to avoid the key pitfalls associated with new product development, such as with the packaging or implementation of new machines and new technology, said Van Ransbeek. “This usually requires persuading the Board to create a dedicated team of young, multi-functional people who will communicate with the range of specialists involved in the launch of new products.”
In addition, it is important that the supply chain team is assigned different key performance indicators than the innovation team. “The supply chain needs to be measured in a different way, such as by speed of launch and speed of scale-up, rather than product quality and reliability.” And, equally important, if a product does not fly, kill it quickly, fail cheaply,” he advised.
Laurence Coudroy, Supply Chain Integration director for Johnson & Johnson in Europe, explained how achieving an optimal supply chain required a lot of internal selling and a good technical foundation in order to bring the key message to the boardroom. She has been responsible for the reorganisation of J&J’s European Distribution Network for the Medical Devices and Diagnostics (MD&D). Since the mid 1980s the company has grown mainly through acquisition which led to 11 different centres across Europe and 26 distribution centres. “These were not efficient,. We had high inventory and low service levels,” she said. The rationalisation programme to streamline the MD&D division started in 2005 with the centralisation of its distribution centres. This has led to a single integrated network and inventory, securing a saving of $41M.
Coudroy stressed that the rationalisation programme, due to end in 2011, has been “a step by step approach” and with 80,000 SKUs, no solution fits all. “It has been tough to implement change but afterwards the business is much easier to manage,” she said.
The annual European summit was organised by eyefortransport, a company which provides business intelligence, independent research, and networking and education opportunities for the supply chain and logistics industries. It organises more than 15 events throughout the year in North America, Europe and Asia details of which can be found at www.eyefortransport.com