by Phil Schoepke

Over the last 10 years, "Supply Chain Management" has emerged as a top priority for manufacturing companies. Success stories from Dell, Walmart, and FedEx have pushed supply chain to the forefront of capabilities that best-performing companies must have.

What is supply chain management and why is it important to Vermont companies?

Supply chain management grew out of the capability established by information technology applications such as Material Requirements Planning (MRP), Enterprise Resource Planning (ERP), and inventory management. Newly available information helped in slashing lead times and allowed better scrutiny of inventory and costs throughout the organization. Reduced lead times required concurrent business processes, and company boundaries blurred as organizations quickly transferred information to enable lead-time reductions. Company operations expanded beyond the four walls of manufacturing to the logistics network, procurement processes, customer service, outbound logistics, all the way to suppliers and customers. Maintaining short lead times required close coordination across all these areas - thus "supply chain management" was born.

Simply defined, supply chain management represents the processes and information transfer necessary to supply products and services to the customer.

The benefits of good supply chain management are well documented. Recent benchmarking studies conclude that companies that employ good supply chain practices spend over 20% less on the supply chain, leading to 15% lower cost of goods sold and 25% higher profitability. These companies also tend to grow 20% faster!

Many of you might say, "I am a small company - how can supply chain management be of benefit to me?"

Small companies have the same supply chain challenges as large ones - if you find it difficult to meet stringent delivery performance and lead time goals at reasonable cost, you will benefit from better supply chain management. Beyond these benefits, good supply chain management yields a competitive advantage, especially when selling products to larger companies. Using good supply chain principles to forge tight customer/supplier relationships can help secure revenue sources for years to come. Finally, supply chain management is now a top priority in government arenas, including the U.S. Department of Defense (DoD) which recently awarded VMEC, along with the other New England MEP Centers, a grant to help match Vermont companies to DoD supply chain needs, and help enhance seamless collaboration between members of manufacturing supply chains with connections to any of the six New England states.

So what are the first steps toward supply chain excellence, and how can VMEC help?

There are three simple steps to get started: 1) understand, 2) baseline, and 3) improve. VMEC's Supply Chain Essentials workshop teaches the fundamentals of supply chain management, the best practices used by top-performing companies, and a method to test your supply chain sophistication. All companies can benefit from this workshop, especially companies seeking business in the DoD supply chain since the workshop tools and concepts mirror those accepted as "best practice" by the DoD. Companies can also take advantage of the VMEC Supply Chain Improvement Jumpstart, a two-day, on-site process that assesses supply chain performance and identifies improvement opportunities. Finally, VMEC offers a full suite of manufacturing and business consulting services to help companies resolve key challenges across the supply chain and organization wide.

The world is shrinking as global competition enters an increasing number of manufacturing sectors. Understanding and improving operations, especially supply chain management, must be priorities in helping Vermont companies remain competitive and grow in this new reality.

About the Author

Phil Schoepke is an independent consultant in operations and general business management, with expertise in supply chain management. Phil has been active with the Supply Chain Council, which developed and maintains the Supply Chain Operations Reference-model (SCOR).