NETWORKING SERVICES GIANT Cisco Systems recently posted a 30 percent decline in sales, announced plans to slash 8,500 jobs and wrote off $2.5 billion in excess inventory.
Company executives insist Cisco was blindsided by the economic slowdown and declining demand. Others, according to Fortune magazine, say Cisco had a problem managing its supply chain.
Dell Computer, on the other hand, has fared well in the recent technology meltdown. Why? Dick L. Hunter, Dell's vice president overseeing supply chain management, told Business Week the difference is "Dell's super-efficient supply chain."
Simply put, a supply chain is the network of companies that work together to design, produce, deliver and service products. In the past, companies emphasized manufacturing and quality improvements within their four walls. Their energies now extend beyond those walls to manage the entire supply chain.
A Checklist for Implementing Good Supply Chain Management
- Identify and prioritize the links in your chain.
- Manage all three basic links in your supply chain – your company, your suppliers and your customers.
- Make sure the links in your supply chain align with your company's strategic goals and initiatives.
- Be flexible enough to meet market demand.
- Foster relationships by sharing information and resources. Be direct with your suppliers and your customers as to how you can benefit from each other.
- Develop long-term thinking – have a goal.
- Be proactive, not reactive.
- Invest in your communications technology.
- Move beyond thinking in terms of cost-per-unit.
- Involve top management.
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What, then, constitutes good supply chain management? There are three basic links in a supply chain-the company, its suppliers and customers, says Jacqueline Johnson, a regional office engineer for the Georgia Institute of Technology's Economic Development Institute (EDI).
"As you manage the supply chain, it is imperative that you try to manage both ends, as well as yourself," Johnson says. "Because as the old adage goes, the chain is only as strong as its weakest link." Johnson also emphasizes the importance of developing relationships within the supply chain, monitoring performance, and collaboration on mutual benefits and improvement.
Jennifer Trapp-Lingenfelter, EDI's region manager for west Georgia, explains what constitutes poor supply chain management. "One of the downfalls is when companies think supply chain management is just letting suppliers hold their inventory," she says. "Well, you haven't done anything in your supply chain, all you've done is push the load back onto the little guy."
Johnson and Trapp-Lingenfelter offer several suggestions for companies wishing to implement good supply chain management. The first step is to identify and prioritize the links in the supply chain. "You can't be successful by dealing with all the links in your supply chain at one time," Johnson insists. "You need to make sure there's an alignment with your company's strategies and initiatives because there will be much more energy and resources to support it."
It is also important to be able to meet market demand by working in a partnership with suppliers. "You need to be flexible enough so you're not holding all that inventory," Trapp-Lingenfelter says. "If a change in demand does occur, you won't be caught in a sticky situation."
One way to develop these partnerships is by sharing information and resources, Johnson explains. "Bring customers and suppliers onto your site, go to their site to gain and learn from each other," she adds. "Use those partnerships to enhance your overall process."
Building partnerships with suppliers and customers hinges on good communication. "I believe that at some point you need to make an investment into your communications technology to have a good supply chain," Johnson says. "The information age is critical, and it's going to be hard for some of these smaller companies to bite off on it. But I think you can take baby steps and have an evolution toward real-time information by using what's in your hands."
Good supply chain management also moves beyond thinking in terms of cost-per-unit and begins to develop long-term goals. "Everyone's looking for the silver bullet and that automatic thinking of dollars, dollars, dollars," Trapp-Lingenfelter says.
Johnson agrees, noting that relationships are not always going to be based upon cost-per-unit. "What is their technology strategy? What kind of communications system do they have in place? What are their quality records like? Are they good corporate citizens?" she asks. "If you're picking your suppliers solely based on cost-per-unit, then you're missing out on everything else they may be able to offer."
Trapp-Lingenfelter insists that good supply chain management cannot be implemented without the support of top management. "CEOs should be talking to CEOs," she says. "One of the biggest downfalls you have is mid-level managers trying to make strategic decisions where they can only go so far within that company."
— Nancy Fullbright Millett
For more information, contact Jacqueline Johnson, Athens Regional Office, Economic Development Institute, Georgia Tech, 1180 E. Broad Street, Chicopee Building, Athens, GA 30602-5413. (Telephone: 706-542-8902)
(E-mail: jacque.johnson@edi.gatech.edu);
or Jennifer Trapp-Lingenfelter, EDI, Region Manager - West Georgia, 31-B Postal Parkway, Newnan, GA 30263. (Telephone: 770-254-7591)
(E-mail: jennifer.trapp@edi.gatech.edu)
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Last updated: Nov. 12, 2001
