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Supply Chain Audit

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  • 1. Supply Chain Audit Discussion Guide The Context Group
  • 2. Supply Chain Issues
    • Offshore sourcing lengthens lead-times, reduces flexibility and makes control more difficult
    • Multiple sourcing locations create coordination challenges
    • Fast response to fashion change essential to drive sales
    • Customers expect faster delivery and better service
    • Finer customer segmentation, more seasons, more newness increases SKU count
  • 3. Common symptoms
    • Customer service levels unacceptable
    • Sales lost to cancellations
    • Margins under pressure
    • Low inventory turns
    • High markdowns
    • Inaccurate forecasts
    • Customer invoice deductions
    • New products late to market
    • Excess expedited shipping costs
    • Inventory discrepancies
    • Limited flexibility to adjust orders, schedules or shipments
  • 4. Supply Chain Improvement Opportunities
    • Capture lost sales
      • Reduce out-of-stocks
      • Fast response to opportunities
    • Reduce product cost
      • Materials
      • Manufacturing
      • Logistics
    • Reduce lead times
      • Replenishment
      • New products
    • Reduce inventories
  • 5. Supply Chain Process
    • Supply chain includes many processes from concept to market
    • Functional silos create barriers to flow
      • Different objectives and metrics
      • Batch vs continuous flow
      • Efficiency vs effectiveness focus
      • Information discontinuities
    Develop Plan Source Manufacture Distribute Transport Prepare Produce Deliver
  • 6. Process performance improvement
    • 3 essentials of superior process performance
      • Clear Strategy What is to be done
      • Optimized Process How it is to be done
      • Enabling Technology Maximize effectiveness
    • The essentials must be
      • Top down driven
        • Strategy determines process determines technology
      • Horizontally integrated
        • Seamless transition across intra- and extra-enterprise boundaries
  • 7. Strategy
    • Create competitive advantage
      • Better, faster, cheaper, newer
    • Establish clear objectives
      • Business level
      • Process level
    • Resource allocation
      • Allocate for highest impact
    • Organization structure
      • Clear lines of responsibility and authority
    • Performance management
      • Scorecards
  • 8. Process
    • Robust process design
      • Simplicity, reliability
    • Performance metrics
      • Time, quality, variability, cost
    • Continuous improvement
      • Eliminate waste of time, materials, manpower and money
    • Integration
      • Eliminate silos and bottlenecks
  • 9. Technology
    • Eliminate process “friction”
      • Intra- and inter-enterprise collaboration
      • Shared access to common data
      • Tracking
      • Improved decision making
    • Architecture
      • ERP platform
      • Point solutions
      • Internet
  • 10. Supply Chain Audit
    • High-level assessment of current SC performance
    • Benchmark key elements of SC processes
      • Supply Chain Scorecard
    • Identify capability and performance gaps
    • Identify improvement opportunities
    • Assess benefits of improvements
      • High/medium/low impact
    • Develop roadmap
  • 11. Supply Chain Matrix
  • 12. Supply Chain Scorecard
    • Evaluates current use of 80+ key management tools and best practices in Strategy, Process & Technology across the six core SC processes
      • 5-point scale
        • 0= not implemented
        • 4= Best Practice
    • Identifies possible improvement options
    • Estimates potential impact
    • Recommends priorities
  • 13. Current Practice Assessment – Prepare (Partial example) 0 1 Score
    • No evidence of flow path change required
    • Consistently update costs to utilize more realistic landed cost and profitability assumptions
    • We assume many global costs are hidden and difficult to manage
    Needs Low Medium Impact
    • Informal process
    • Utilize best case landed cost assumptions
    • Potential cost impacts include:
      • Significant lead time delays and service issues
      • Occasional mode shift changes (rail to truckload) from port to warehouse due to lead time problems
      • Additional storage costs
      • Container demurrage
      • Receiving costs
    Landed costing Plan Supply Chain Function Little or no considerations of flow path Supply chain flow path Current Capability Activity
  • 14. Current Practice Assessment – Source (Partial example) 1 1 Score Low – currently Medium to High - projected
    • No evidence of supplies inventory being a problem with exception of adding lead time
    • Relatively un-complicated inventory profile in current state
    • However, increasing growth rates of private label SKU’s will create more complexity and potential issues
    • No visibility; dependent on supplier
    • No inventory tracking
    RM Inventory Availability
    • Consider pre-positioning material supplies to reduce lead times
    • Consider bulk production with packaging postponed (related to inventory positioning strategy)
    Needs Low - Medium Impact
    • Materials dependent on supplier acquisition
    • Dependency on supply acquisition adds two weeks to supplier lead time
    Preposition Materials Source Materials Function Current Capability Activity
  • 15. Current Practice Assessment – Produce (Partial example) 1 1 2 0 Score Unknown Potentially high
    • Further evaluation to render opinion
    • Consider developing longer term sourcing relationships such as acquiring and locking into a percent of supplier production capacity
    • Order process appears to be more transactional rather than commitment oriented
      • Alternative suppliers considered on an order-by-order basis
    Contracts High
    • Implement supplier process
    • Supplier scorecard process is under development
    Supplier Certification Unknown Potentially high
    • Further evaluation required to render opinion
    • No evidence of long term supplier contract relationships
    Core Supplier Approach
    • Single agent may not offer sufficient coverage
    • Seemingly over-exposed: 80% of inbound supply with limited knowledge of capability or status
    • More precise control of container scheduling
    • More efficient and complete information transfer (spreadsheets & faxes) to manage production status
    Needs High Impact
    • Single agent (assumed process) utilized to interface with suppliers, gain production status information, and enter updates
    • Infrequent and incomplete supplier visibility
    • No supplier electronic visibility
    • No ability to control container scheduling
    Supplier Presence Manufacture FG Function Current Capability Activity
  • 16. Current Practice Assessment – Deliver (Partial example) 0 0 0 Score High
    • Complete visibility upon completion of supplier order
    • Poor and often none
    FG Inventory Visibility
    • Consider manufacture in bulk state (for medium and slow moving SKUs) with packaging in US
    • With multiple DC’s – need to allocate to DC either from supplier, or break orders by DC prior to US transportation
    Needs Medium High Impact
    • Finished goods inventory only available to customers at the end of the supply chain
    Upstream Inventory Positioning
    • No allocation capability until received at warehouse
    Inventory Allocation Options Fulfill Orders Function Current Capability Activity
  • 17. Summary – By Element Technology Process Strategy Priority Opportunities Key Issues Current Score (%)
  • 18. Summary – By Process 15 Manufacture Products 25 Fulfill Orders 19 Deliver 30 Source Materials and/or Finished Goods 16 Plan Supply Chain 22 Develop Products Priority Opportunities Key Issues Current Score (%)
  • 19. Project approach
    • Team of 2-3 TCG partners
    • 3-5 weeks
    • Data collection
      • Process walk-throughs
      • Interviews
      • Performance metrics
      • Scorecarding
    • Planning
      • Workshops
      • Documentation
  • 20. Next Steps
    • Identify key issues and concerns
    • Define scope
      • Business units
      • Processes to be included
      • Focal areas
    • Agree timetable and budget