I haven’t been in supply chain management as long as some, but I’ve been around long enough to have some observations on common errors supply chain practitioners make. Some are things many professionals can do better (such as continually learning) and some are very supply chain specific (such as managing by category). Here are my thoughts on some best practices for supply chain professionals.

Planning

Planning is a big topic and even has its own department at many companies. Yet this area is the most frequent opportunity I find when I conduct a supply chain 360 assessment for clients. As part of the full supply chain cycle, planning includes business planning, demand planning, and supplier planning. The most frequent thing I hear from supply chain and procurement practitioners is, “Operations doesn’t involve us in their planning.” While this is often true, it is a two-way street. When I hear that the operations team isn’t involving the supply chain in their conversations, I wonder:

• Is the supply chain team involved in regular operations meetings? If they used to be and aren’t now, are the supply chain team members truly observing and supporting, or did they become a “police force” to the point where they were asked to leave the meetings?
• How much analysis is the supply chain team doing on commodity trends, purchasing history, and macroeconomic factors? How many conversations is the team having with the sales team to talk about the direction of sales, potentially getting fresher information than that which is filtered through sales, then scheduling, then operations before finally reaching the supply chain? Once the supply chain team is gathering all this data, are they turning it into a forecast? A forecast probably needs to be vetted by the operations and sales teams, but that doesn’t mean the supply chain team can’t put it together to start. Too often I see supply chain teams sitting back and waiting for the operations teams to put together a purchasing forecast that never appears. 
• How much collaboration is the supply chain team doing with suppliers? Suppliers also see trends in their own industry, with their other customers, and are planning their own production. The connection to suppliers and their production is unique to the supply chain team as a planning resource. Even in the presence of other information for planning, this external information source is an important data point in planning. 

These three main sources of information (the operations team, sales team, and suppliers) together make up a powerful set of planning information. I very seldom see supply chain teams truly using all three and often supply chain teams aren’t even using one. 

Category Management

Category management is a controversial topic in supply chain teams. Should supply chains be managed by category? By location? By internal customer group (i.e. engineering, operations, HR)? Similar to the controversy around whether a supply chain team should be centralized or decentralized, there is a pendulum that swings between managing by category and managing by location or business unit. Most companies are currently swinging that pendulum toward category management for a few reasons:

• Managing by category leverages spend. When each location is buying the same category in small quantities separately, each purchase or negotiation is for only a portion of the total annual expenditure. For example, if each of three plants are buying one motor a year for their maintenance, they are always purchasing only one motor. If the category was managed as a category, the plant would be able to leverage the spending power that comes with three times the volume. While three motors vs. one motor is not a large spend difference, you can imagine how that applies to larger or more scattered spend categories. 
• Suppliers only have one point of contact to work with who is (usually) well-informed on their category. This can give a company leverage to ensure a supplier provides a single point of contact for both day-to-day and escalated interactions.
• Supply chain team members do not have to be a “jack of all trades” and know as much about all categories. They can instead gain more expertise in individual categories that can better serve them in tricky negotiations.

Negotiating the Majority of Spend

In a world where everyone has to continually do more with less, it’s hard to make time to pick up the phone after a Request for Proposal or Request for Quote and ask suppliers if they can sharpen their pencil. We reserve that kind of effort for large, strategic bids due to resource constraints. Yet with those increased constraints, there are also improved tools to keep this negotiation as part of the supplier conversation. My personal favorite is e-auctions, which can be incredibly effective to negotiate even small spends when implemented correctly. Either way, we do our business unit budgets a disservice when we simply run “three bids and a buy” or even skip the RFP entirely. 

Continuous Learning

It’s easy to be complacent as we progress in our careers, especially after we’ve been in our roles for a while. I often see supply chain team members stop seeking more information and training when they get too busy to “sharpen the saw.” This term refers to time spent on ourselves – either resting or continuously learning. This might include doing online trainings such as those offered by SCMDOJO or attending conferences, or even being a part of a professional organization like ISM. This is an issue that applies well beyond the supply chain and is important to being a working professional. Find ways to learn and advance your skills, and then teach those skills to others. 

Supply Chain 101

I’m leaving this one to last because it surprises me how many organizations are missing some or all of these basic things. The first or most basic introductory course on a topic in college is often referred to as the “101” course (such as Psychology 101 or Engineering 101), and I often see companies not practicing the most basic components of the supply chain. This includes:

• Part numbers. While assigning part numbers/item IDs/material numbers to absolutely everything (even service hourly rates) can also be useful, here I am referring to having part numbers at all. Part numbers are often perceived as cumbersome or difficult to set up. If this is truly the case, consider doing a full process review of creating new part numbers and see if it can be streamlined (if you would like a hand in doing this, drop me a line). Part numbers are a critical part of analyzing your spend, determining which suppliers are performing well, and walking into a negotiation well-equipped with information. Part numbers are critical to operating a company and it floors me every time I see a decently large company not using them (which is shockingly often!). 
• Running RFXs. This might mean a Request for Proposal, Quote, Information, Bid, etc. Either way, it is reaching out to potential and incumbent suppliers and asking for their current and competitive quotes on goods and services. If a company never tests the market, it is very hard to know if the price, lead time, or quality level are competitive. Not conducting RFXs also means over time the company loses the ability to go to market because no one has written a scope of work in so long they don’t have drawings or a specification anywhere in the company. The incumbent supplier has the only copy. If that supplier runs into trouble with supply or ceases to exist, the company is without this important information. 
• Writing contracts with suppliers. This doesn’t mean the boilerplate purchase order terms attached to every order, and it doesn’t mean accepting the boilerplate sales terms suppliers send attached to quotes. Not every supplier needs a written contract, but the key, strategic suppliers do. I am constantly surprised how many companies have few or no written contracts with suppliers, even suppliers in the top five for company spend. Written contracts are a critical part of doing business and well-written contracts reduce risk and cost for both parties. 

These are just a few of the larger topics I see supply chain teams doing and could be improved. We can’t all be a supply chain like Walmart or Apple, but the supply chain team is the glue that holds a company together. Everyone interacts with us, and we can be a strong liaison to the outside world. If you’d like to talk about incorporating a few of these things into your supply chain, let’s chat.