How going global increases your overall efficiency

Customers want the right product, with the right quality, in the right condition, with the right documentation, delivered to the right place, at the right time, at the right price. Whether you call it efficiency, improved productivity or lean manufacturing, smart supply-chain management can help meet these customer expectations in both domestic and foreign markets.

Photo: artpartner-images

In a virtual summit called Operational Excellence: Diagnostics for Improving Business Operations, hosted in October by Export Development Canada, panelists talked about assessing the efficiency of supply chains, identifying problem points, eliminating waste and making constant improvements.

“There are great synergistic opportunities between lean manufacturing and strengthening your supply chain,” said panelist Scott Penner, director of productivity improvement services at Productivity Alberta. Penner cited the landmark 2003 book Lean Thinking: Banish Waste and Create Wealth in Your Corporation by James P. Womack and Daniel T. Jones as a good starting place to look for ways of boosting efficiency.

Panelists agreed that going after foreign markets can help manufacturers to up their game, not just because they must learn serve distant customers at a competitive price point.

“Foreign buyers are just as sophisticated as domestic buyers,” says panelist John McPherson, senior advisor in EDC’s trade advisory service group. Like all buyers, they’re looking for a company with cost-value ratio, provenance—that is, a track record in the industry—and local support, which can be anything from a local factory or good local partners to having stock readily available.

Much of the discussion focussed on the SCOR model, developed by the Texas-based Supply-Chain Council. Short for Supply Chain Operations Reference, SCOR has become one of the world’s most accepted models for comparing and analyzing supply chains. The model identifies five core supply-chain performance attributes—reliability, responsiveness, agility, costs and asset management—in order to meet the challenges of customer service, cost control, planning and risk management, supplier/partner relationship management and talent.

“It combines business processes, metrics, best practices, technologies all into one framework,” said Melinda Spring, director of global member programs for the Supply-Chain Council. “It’s designed to be very easy to use the data you’re collecting in order to measure supply chains globally, find the gaps and develop the strongest and most efficient ways to operate supply chains globally.”

Of course, there’s no one-size-fits-all approach to improving supply-chain management. Penner said companies need excellent metrics on where they are and where they are going. “You can compare your historical performance, observe trends and compare yourself to others,” he said. “Quality and cost are metric-ed in a way that can be applied internally and as a gauge for suppliers.”

McPherson said Canadian companies going international typically require additional investment in three main areas: scaling the model, trade compliance and contract management. While “scaling the model” focuses on growing efficiently with the right mix of people, processes and technology, trade compliance refers to meeting government requirements to move commercial goods into and out of Canada. For smaller companies eager to sign their first international deals, contract management can be an issue that reveals itself only after the fact.

“They’re quick to sign those deals without reading the fine print, and so companies move forward to gain market share and take additional risks that they otherwise wouldn’t have,” said McPherson.

If a company has a dollar to invest in improving its supply chain, where should it be invested?

“That one area of investment should always be around communications,” said McPherson. “Has the organization built the protocols to allow it to understand, as orders come through the door, how it must evolve and change? Externally, communication with suppliers and customers is important.”

Depending on the size and complexity of a company, Spring said it can take as little as six weeks to realize a payoff from adjustments to the supply change. “You can get the low-hanging fruit very quickly,” she said. “The SCOR model makes certain costs and inefficiencies evident that you may never have seen before. It can be very fast, but you can also do projects to a greater and greater level of detail.”

Despite the fast returns possible through some supply-chain adjustments, both Penner and McPherson emphasized a strategy of continuous improvements.

“Most projects that envision an entire supply chain, the question is not how long it’s going to take, the question is whether it ever gets off the ground,” said McPherson. “It’s hard to develop a return on investment on a large project…. It truly is about continuous improvement, about finding those little areas you can invest time and effort in to make a little bit better.”