Companies Don’t Compete; Supply Chains Compete

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By Tim Searcy, Contributing Blogger

I recently heard the CIO of Nortel say something very interesting:
“Companies don’t compete; supply chains compete.” This concept makes a great
deal of sense. It may change the way we design our strategies for business
if we contemplate the partnerships that our companies maintain as an
extension of what we do. What we buy, who we buy it from, who we use to
service our organization, the functions we outsource and other
relationships, including clients, are potential members of your supply
chain…

Who is in your supply chain? This may be the hardest question to get right
because we have to think of so many unique elements that contribute to what
we do. Think of the supply chain as everything that makes the product or
service that you produce possible. Once you’ve identified the players,
consider the ways in which that supply chain can improve your
competitiveness.

Speed – If your supply chain is able to decrease the time from order to
delivery, your chain makes you more competitive on this key axis of
performance. However, if raw materials, semi-finished elements or outsourced
design in any way increase your ability to respond quickly, these are now
liabilities. The real question in a competition set is, “Is this an area in
which we can claim and prove a distinctly better outcome than our
competitors?”

Quality – The old adage in computing is GIGO (Garbage In, Garbage Out). The
same goes into the products or services that you deliver. Recently a client
of ours stopped doing business with multiple Chinese suppliers because the
components being purchased had a 15% defect rate. It no longer became an
issue of whether the firm would “make good” on the defective parts. The
issue was a combination of the wear and tear on the firm being forced to
evaluate each and every part as well as the delay in delivery of orders
because an insufficient number of components were satisfactory. You can
measure the quality of the elements you receive by looking at issues like
defect rate, re-work requirement, waste and wasted time. Any of these
elements will create friction within your system costing you time and money,
and ultimately making your supply chain less valuable and competitive.

Value – We talk all the time about the concept of a commodity. If two things
are viewed as being good enough, all that is left to discuss is price which
makes them a commodity. But the ability to deliver a competitively priced
product often depends on your ability to secure the elements of the product
at the lowest price possible. Finding firms that can provide you with
qualified personnel, materials and components to make your supply chain
output cost effective is an ongoing process. Your firm is not profitable
just for the price you sell things at, but the rate at which you buy the
inputs to the system. For this reason, a good supply chain is constantly
working with you to reduce costs and waste so that you can remain
competitive.

Innovation – Often the innovation in systems, process, technology, materials
and other parts of our business must be driven by our suppliers. It is the
supplier that helps us get better because of the unique knowledge each
brings as a part of what you do, and the supplier network by the
combinations of the little things they do separately to make a great benefit
in the aggregate. In short, it is not one supplier doing something 1000%
better; it is 1000 suppliers doing something 1% better.

How do you put supply chain management into action?

1. Work with your suppliers to understand the overall business and how their
piece adds to the total.

2. Incent suppliers to improve Speed, Quality, Value and Innovation through
compensation bonuses, greater business and referrals.

3. Consider whether work done internally would best be done outside your
firm through a supply chain partner (new or old).

4. Compare your delivery using a supply chain map against your competitors
to determine where the strength of their supply chain is versus yours.

5. Schedule a supply chain review as part of a regular process of continuous
improvement.

Once we look at what we do as the some of all the partners we have, it is
possible we can move the pieces with greater efficacy to create a more
competitive outcome.

Tim Searcy is the Shaman Coach for The Whale Hunters &
CEO of the American Teleservices Association

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