Supply Chain Goals: Are Yours Balanced?

Can Clashing Supply Chain Goals Be A Good Thing?

PurchTips Edition #400

One supply chain manager’s goals may be to save money, reduce inventory, and improve cash flow.  Another’s may be to decrease supplier defect rates, improve on-time supplier delivery, and increase fill rate.  In these cases, each supply chain manager has synergistic goals – none really conflict.  But, it’s not always optimal if all supply chain goals are synergistic.

Supply chain’s impact on the overall performance of an organization is multi-faceted.  For an organization to succeed, it may actually be necessary to have supply chain goals that seem to compete with one another.  Here are two examples:

Cost Savings vs. Quality:  Cost savings seems like a logical supply chain goal.  There are a multitude of cost savings techniques.  But, some are counter-productive.  One technique would be to seek out and procure lower-priced products and services without regard to quality.  By doing so, your unit price may decrease.   But, your organization may then face an onslaught of returns due to defects, angry customers and/or lost market share. It’s easy to see how cost savings goals and quality goals can appear to conflict.  However, you should welcome the challenge to drive improvement in both areas.

Fill Rate vs. Average Inventory Value:  Fill rate is your organization’s percentage of outgoing orders that are fulfilled on-time.  Like achieving cost savings, there are a multitude of techniques to improve fill rate, some more desirable than others.  You could increase inventory to improve fill rate.  But that can be a costly solution compared to other options like improving supplier performance.  So, ideally, you want to improve fill rate while also decreasing inventory and its costs.

Top-performing supply chains find ways to succeed despite seemingly conflicting goals.  They don’t totally sacrifice progress towards one goal to reach another.  Balanced supply chain goals can lead to the most sustainable results for organizations.

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Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3