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Issue No:08/03/2

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Improving customer service and reducing costs are not unknown objectives. The important aspect is to coordinate among different functions of the organization, synchronize their efforts and realign the whole supply chains to customer's customer requirements keeping in mind the supplier's supplier constraints.

Organically grown organizations have functions like Marketing, Manufacturing, Procurement, etc. to manage the operations. Such organizations generally develop COMMON strategic objectives for the whole company, but at operational level, functional managers pursue their functional goals. The focus, therefore, shifts - customer remains the focus at the organizational level, whereas, functions loose sight of the end customer. It is primarily for such reasons that Supply Chain Health Check/Assessment (SCHA) is used as a tool for designing a roadmap for improving the Supply Chains.

SCHA looks at the whole organization as ONE and assesses how well this entity of supply chain is organized to serve the customer requirements. Then customer service no longer remains the objective of customer service or marketing department, it runs through the whole organization.

For assessing the health of Supply Chain, it is essential to map, measure and improve the five management processes of supply chain - Plan, Source, Make, Deliver, and Return. These processes are across functions and their measurement tells how well they are synchronized with each other to satisfy the customer needs.

The whole process of making the goods or offering the services, and delivering to the customer, is viewed at three levels - Planning, Execution and Managing. The PLANNING element maps the planning activities across the supply chain and identifies the gaps for synchronized and optimized planning. The EXECUTION element identifies the day-to-day execution. The plan or actual demand triggers the execution activity. The MANAGING element is the most important enabling process. It includes the processes established by the organization to enable effective planning and execution. Some of the managing elements include - Management of business rules, Managing Inventory, Managing Assets, Managing Information etc.

The health of Supply Chain can be assessed as per the five-step approach:

  1. Measure Supply Chain performance using end-to-end metric
      • Adopt end-to-end metrics like Cash to Cash Cycle, SC Cost, response time etc.
      • Break up the key elements across processes to identify lower performing processes
  2. Analyze the basis of competition and set targets for improvement
      • Identify the Organizational objectives and Key Success Factors for the Supply Chain
      • Benchmark the SC performance and set targets to achieve parity or advantage against competition
  3. Map the Supply Chain Processes
      • Use standard methodology to map the processes (e.g. SCOR methodology)
  4. Understand the Customer requirements
      • Segment the products and customers
      • Identify requirements of each customer segment
  5. Identify the opportunities for improvements to achieve the set targets and to meet customer requirements
      • Adopt best practices
      • Evaluate opportunity areas on the basis of Returns and Implementation complexity

The outcome of a good Supply Chain Health Check exercise is a step-by-step roadmap for building a world-class supply chain.

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