The design of a supply chain can enhance profitability by utilizing company assets and resources in an efficient manner. Depending on what facet of supply chain you are designing, whether it's manufacturing, warehousing, sourcing, logistics etc, many different factors can come into play.
For example, lets look at a metal casting needed for a widget. The sourcing team needs to find a reliable, quality, and low-cost supplier that can produce the amount needed within the lead time. Cost is not and should not be the only factor when choosing a supplier, doing so can actually decrease profitability. For example a low cost supplier could also be low quality have you might have to spend quite a bit of money on rework.
From the supplier, the logistics team needs to get the castings to the plant in an efficient manner. This includes using parcel or LTL carriers when available vs. spending the money on air shipment. (The true cost of the part can skyrocket, especially if it from overseas, but sometimes it is unavoidable.)
The manufacturing team needs to make sure that it is properly utilizing all of its productive assets by looking at equipment up-time, utilization, and productivity. This will help to ensure the part is made efficiently and hopefully effectively in order to serve the customer whether it be a warehouse or an actual end user.
The warehouse should focus on slotting logic and WMS to quickly get out customer orders. This will help cut down on cycle time as well. By cutting down cycle time, it should help your absorption on overhead. A 50% decrease in cycle time is like doubling your workforce.
The focus should not be on just optimizing one or two links in the supply chain, but by looking at things from a global optimization standpoint, both the customer and business stand to benefit.
Nov 11th, 2014
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