- On February 28, 2014
- control, duty, failure, mistake, traceability, turn back
With the increased pressure on businesses to run as efficiently and profitably as possible there is a need more than ever to optimize your business in all possible areas. The supply chains are an often neglected aspect of many organisations but optimising them can significantly improve your organisation’s performance by reducing cost, increasing revenue and most importantly increasing market share and customer value. With our help in reducing costs and improving performance, you can achieve significant benefits throughout your organization – now and in the future.
The top managers usually focus their efforts in sales and marketing as these activities bring the profit to the company. But if the engine called supply chain does not move, the sales cannot show their real potential nevertheless how good experts strive for results. To reduce the upheavals effect accompanying each firm, we have to plug the gaps in operations departments. Below are the 10 main mistakes which may prevent your company growth.
1. Lack of procedures
Abuses and negligence – these are the results from lack of written procedures. The clear written procedures guarantee that every employee may work without our constant presence. These are the written laws in our firm and everyone is obliged to comply with them. Otherwise there will be always excuses for the gaps in the work and the chances for misusages are unlimited. The rules on other hand motivate the conscious employees to drive for better results. When writing the procedures we clarify the process first to ourselves, think of variants for optimizations and identify the gaps. The benefit of the procedures is they to be written in a way that the horse is in front of the wagon, to determine smooth consequence of not duplicated activities and to point the controlling mechanisms.
2. Improper process flow
The improper process in supply chain messes everything and leads to out-of-stock or overstock. In many factories the process is not structured. There are even cases when planning and sales are adjusted according materials on stock. And of course this brings artificial decrease in orders fill rate, waste of customers and market share. The correct process supported by a planning model guarantees:
– Over 98% orders fill rate
– 100% traceability
– Materials orders accuracy
– Accurate production schedule attainment
– Control over the entire supply chain
3. No planning
The chaotic production wastes our resources – time, materials, labor and money. Without a clear plan and stable production program the maximum utility is under 50%. There are cases when machines’ utility is 18% only and the personnel receive salary for time spent for smoking in the yard instead of producing goods. Do we plan properly? The production doesn’t work 24/7. Apart the technology time for change of formats, there are also prophylactics periods, technical issues with machines, holidays and vacancies. One structured approach gives a clear view over the activity of every department and balances the overstock and out-of-stock. The more variants we have the less surprised we shall be. Of course 18 versions are absolutely unnecessary and confusing for the whole team but pessimistic, optimistic and realistic version for 12 months and per quarter are wise to have. The weekly plan actualization helps us to adapt quickly to market needs and to manage the risk related to production, purchasing of raw materials and cash flow. And again – the plan allows us to control and manage the factors depending on us nevertheless the outside factors.
4. Lack of unifying IT system
When unifying IT system is not available or not working for data processing, the left hand doesn’t know what the right hand is doing. The options for abuses are unlimited and the chances for control – none. One company had ERP system but it was used from time to time by few employees only. The thefts there were with pallets.
5. Breaching the contracts
I have a contract but I shall not pay now, let the supplier wait. Or, I have a contract to purchase from one supplier but I’ll purchase from another supplier at lower price. Frequently met, right? Only that the world is small and Bulgaria is smaller and if we play with the suppliers one day we stop to deliver to our customers because we don’t have raw materials or transport. And then to recover our image cost much more than complying with the contracts.
6. Lack of segregation of duties
We are limited staff so one employee is responsible for several serial activities – big mistake. If we give the knife and the loaf in the hands of one employee, how much time will it take him to withdraw our business from our hands? One main rule in supply chain is to apply segregation of duties for the activities and the records and the ERP system to trace who is doing what and when. The constant control and inventory checks help us to appraise the employees and know whom we may trust to build the company future.
7. Compromises with human resources
We should not underestimate the human resources! If our employees (and especially the Planner) are passive, not engaged or incapable – we should not accept this. We need proactive, thinking people, willing to develop themselves and the company. Wise guys who chase their own interest only, ruining the company image and the lazy people are not welcome. There are cases of unions between the Planner and the Production manager – the results from such unions are:
– Loose production program
– Over-usage of raw materials
– Redundant labor
In other words the employer plays the role of a charity organization.
8. Ineffective communication
Has it happen to you, the marketing department to plan a promotion but to inform the operations departments just before the campaign start? What is the result? – Lack of plan, lack of production capacity, extraordinary labor, chaos. At the end we have one very expensive marketing campaign and insufficient or more expensive production which cannot bring the needed income. Every not communicated change is the bottom of resources waste. The long meetings and e-mails support the correct tasks understanding. May be or maybe not. We are all busy and we know that long e-mails are usually read by diagonal and during the long meetings we do other things (like reading e-mails for instance). On-time communication among all departments is the very important for the work done but the long meetings eat our time for projects realization. It is recommendable the meetings to be fixed once per week – there we agree about the projects direction and then we start working. Unfortunately everything requires attention and does not happen just like that. So, the structured, tightened communication helps for the successful projects realization. And when the crises happen, there is no need of accuses. We’d better first together take the wagon out of the bog and then learn the lesson.
9. Refusal to get external expert’s opinion
The owner of firm “I know and I can everything” for sure knows everything he needs. And in the best case scenario he keeps the same market position for years. Nowadays, if we don’t check the trends, don’t make researches, don’t exchange experience, don’t seek ways to apply the better practices, it is less likely to keep our market positions stable. And to go ahead we have to actively seek and implement improvements. The world company-leaders use every year external experts who evaluate the current status and apply better models for optimizations and respectively increase of profit.
10. Lack of results traceability
How can we be sure that we are moving in the right direction? – By initiating clear and measurable KPI for each activity. The KPI are reported monthly by head of departments, results are compared to targets and corrective actions (if any) are applied immediately. Measuring the company pulse and keeping an eye on market trends and limits, it’s us and only us who build the future of our company.
In conclusion, there is no way not to find a way for optimization and profit increase. With the proper structure and processes, the right staff, the control mechanisms and tracing the results, we can protect our company from serious problems and we can achieve even the highest targets.