Supply Chain Management

This snippet looks at the complexity of supply chain management, how powerful it is, if this is managed well and the significant positive effect it can have on the bottom line. We also discuss process around inventory management and it’s effect on cash flow.
Transcript: "Supply Chain Management"
Hi everybody. It’s Peter Selby from Business Drivers and today I’d like to talk to you about supply chain. This is snippet number seven, from a growth and profit business series.

Supply chain is a topic is huge, huge topic, it covers and touches just about every aspect of a business. The power of good supply chain management is still probably one of the least understood, business disciplines in most markets actually, and certainly in the markets where we deal with our customers.

It is not unsurprising, it’s a really complicated topic. So again, today, I’m just going to give you some snippets of observations that we see, that really help people with the supply chain management. Which affects at the end of the day, margins, cash flow, sales, everything really, I mean, most of the key drivers and outputs of a business you can think of, connect in some way to the supply chain.

So, if we start at the front of the process, the procurement controls is one area, and you know, interestingly, in some organizations they consider supply chain as being only procurement. Obviously supply chain is far more than that, but procurement is a really important part of that and having some good controls around that procurement process is pretty critical. Not only the controls themselves, but the processes that you follow, making sure you really stick to those processes. Understand the performance of it, and you can get the information readily, report it and understand it, such as price variations across the organization etc.

Absolutely the pricing negotiations and all the stuff that goes with procurement is really critical when buying from a supplier. Whether it is a product or a service and how that can affect your profit lines and where those price breaks are etc.

Next part of the process is inventory and probably one of the most complex areas to understand how best to manage that. How you manage, the cash in the inventory, how you manage the terms of the inventory, cash flow through the inventory, you know, things like materials, resource planning, etc.

It is all about having inventory inside the organization for the shortest period of time, be it solid inventory or work in progress or whatever it may be. Not holding it any longer than you need to, procuring it in just before you need it. Getting it out or turning it into cash as quickly as possible.

There is a whole science around this, but analysing your inventory at any one time, understanding whether the inventory is in good shape, is it turning properly, is there obsolete stock? All of that stuff is absolutely critical.

There’s a thing called ABC analysis, which really shows you the best inventory you should be holding for the things that you’re supplying out to your customers and which and where the value is etc. It’s really quite complex, but understanding that inventory is so critical to driving some of the cash through the business.

If we then look out the other side of the inventory and how that translates into either a finished good or a product or a service and how that is distributed to your customer, is as equally as important. The control measures around that are also really important. Again, the visibility into that and being able to report back into the business, understanding it in as real a time as possible. How is the inventory performing now and around this, how connected is the planning around it?

So if you think of the operations and sales planning, S&OP or integrated business planning or whatever, in other words, understanding the demand from the sales, through the operational part of the business out to when you can deliver a product or service and bill the customer and get that money back into the business, is just as important as the supply chain controls themselves.

Again, a huge, huge topic and I could talk about this for a long time. We do a lot of work in this space because it’s so pivotal to the performance of a business and the profits of a business and the resilience of the business.

So, that’s all I’m going to talk about today, but again, if you want any further advice on this, we do hold complimentary sessions for people, if they want to understand more about some of the topics that have been discussed in the video, or generally bounce ideas, or ask questions around some of the things they are doing.

Please just follow the link book a time, give me a call. I’m quite happy to talk about it or any observations that we can share that will help you out right away.

https://calendly.com/business-advice/coaching

Okay, next time, I’m going to be talking to you about management systems and some of the wasteful processes we see and some of the tips around that.

Until then, I’ll see you next time. Bye. Bye.

As usual. if you have any questions about anything I’ve talked about, um, you can email us at enquiries@bizdrivers.biz or go to our website www.bizdrivers.biz. You can contact us there and we can certainly steer you in the right direction.