By Tom Cisewski | Principal, Supply Chain Design
About this time each year, my wonderful wife asks me if I have made an appointment for my annual physical checkup. The question is a good one, but I don’t welcome it for many reasons: it takes time I really don’t have to spare, it is expensive (since health insurance isn’t what it used to be), and I am doing just fine, thank you very much!
Similarly, every year or so, companies should ask a similar question of their supply chain: Is a supply chain health check needed? Most companies avoid the question for the same reasons I do. But it’s an even more compelling question if your supply chain is showing symptoms of stress that indicate a poor prognosis.
9 Symptoms That Indicate You Might Need a Supply Chain Health Check
While an annual “supply chain health check” is a good idea, several circumstances can make doing one all the more important:
1. Operating strategies have changed.
- This doesn’t just apply to the supply chain. If manufacturing or sourcing strategies, paths to market, or commitments to customers have changed, it’s important to examine the supply chain’s ability to deliver effectively and at an optimal cost.
2. The company has undergone a recent merger or acquisition
- In the rush to integrate operations, many companies take only a cursory glance at supply chain integration. In our experience, a well-thought, data-driven analysis of the combined supply chain usually results in a 5-10% cost reduction oftentimes with improved service.
3. Leases or 3PL contracts are up for renewal.
- A bad choice on a long-term commitment can bring years of pain to the bottom line.
4. Fuel costs have changed dramatically (30% or more) since the last supply chain analysis.
- As my colleague Dan Sobbott discussed in his blog, significant fuel costs changes can mean changes to optimal supply chain configurations.
5. Business is growing (or contracting) rapidly.
- Supply chain configurations that worked well at previous activity levels may not be the right choice at current or planned volumes.
6. The customer base or product mix is shifting.
- Many Chainalytics’ manufacturing clients have seen a significant consolidation in their customer base. Configurations and strategies that served them well in the past are no longer optimal.
7. Capacity is tight.
- Often the best way to free up scarce capacity is many steps removed from the site of the pain — a shift to customer sourcing in the Northeast may be the best way to free up capacity in Texas. Many of the best strategies are overlooked or poorly assessed in a simple spreadsheet analysis.
8. There are new tools in the supply chain toolbox.
- A new or enhanced TMS, WMS or ERP system may mean that you can implement strategies previously not available. If you couldn’t do things the last time you assessed your supply chain, you probably didn’t consider them.
9. You have to hit performance improvement targets and have no viable plan to do so.
- Many supply chain executives and managers are seeing the performance bar raised in an increasingly challenging environment.
If you are experiencing three or more of the “symptoms” above, a supply chain health check — a data-driven analysis of the supply chain network — is warranted, irrespective of the last time you did one.
If it has been three years or more since the last supply chain health checkup, now is the time. Like my wife says, it will be time well-spent, costs less than doing nothing, and you will feel all the better for it. I could say more, but I’m already late for my doctor’s appointment!
Health advocate Tom Cisewski is a Principal of the Supply Chain Design competency at Chainalytics. In addition to leading client engagements, Tom is responsible for advancing Chainalytics’ project delivery methodology and mentoring consulting staff within the practice.