Every franc, euro, dollar from increases in productivity ends up unfiltered in the company's EBIT. This financial "cushion" in EBIT allows any additional costs caused by higher stocks of materials or multiple sourcing strategies to be viewed as an "insurance premium". In Part IIII of our Supply Chain Series, Top Fifty Interim Manager and supply chain expert Beat Buser answers questions about supply chain efficiency.
Beat Buser, what do you think are the most important points that SMEs in particular should consider when it comes to supply chain efficiency?
I always say:
1. Do the right things
2. Do them right
3. Do the right things right - right from the start, whenever possible
Because every franc (dollar, euro, ...) from increases in productivity ends up unfiltered in the company's EBIT. This financial "cushion" in EBIT allows you to view any additional costs that are caused by higher stocks of materials or multiple sourcing strategies as an "insurance premium".
That sounds convincing. But for more efficiency, an initial effort is required, and that could be considerable depending on the situation, right?
Not necessarily. Large public companies like to measure supply chain efficiency with the efficiency of tied capital (CNWC).
I tend to advise SMEs against this!
Why? While a sole focus on this metric will result in lower inventories and just-in-time supply chains, which in an ideal world work best, they are extremely vulnerable to events of all kinds (from pandemics/natural disasters to strikes and simple trade wars).
That's why I advise SMEs to take a look at the toolbox for clearly structured and straightforward business processes. On tools and techniques such as 5S, Kanban, quality circles, Lean Six Sigma, Kaizen and many more.
Not all readers will be familiar with these terms.
This doesn't matter. The experts must know the terms. And since not all companies are at the same stage of development, it makes more sense to first carry out an analysis of the current situation with the help of an expert. The expert then works with the management to develop an action plan with possible tools that is suitable for the company. Here the management learns the terms relevant to the company all by themselves (laughs). If the measures derived from the action plan are implemented in a structured and solid manner and measured in a meaningful way, this leads to a significant improvement in productivity.
It's all very theoretical. Can you give examples?
One Example was an industrial company in which we examined the existing tank farm infrastructure for its efficiency (use, turnover rate, etc.). With one-off investment costs in the five-digit range, annual savings in the six-digit range could be achieved. This was primarily possible for two reasons: First, the purchase of general cargo was switched to bulk goods, which led to significantly better purchasing conditions. And secondly, the process throughput times could be reduced by up to 50 percent.
Another example, the support of which I particularly enjoyed, also comes from an industrial company.
Here we have introduced autonomous working groups in the sense of quality circles. The groups independently examined their work processes and simplified them with mainly organizational measures. In most work processes, this has led to noticeable acceleration of the processes and less effort without any investments, and thus to significant increases in efficiency. The time required for these quality circles was low compared to the permanent increases in efficiency. And as a positive side effect, the commitment of the employees increased because they were closely involved and saw the successes so directly.
Click here for Part I and Part II of the Supply Chain series.
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