AUCKLAND
New Zealand is in a recession and capital is not just more expensive – it is getting harder to access.
New legislation, such as the supply chain register announced July 28, which is designed to reduce exploitation risk, will add to costs in an environment where the NZRB cash rate remains at 5.50 per cent – the highest it has been in 14 years.
Businesses are scrambling to adopt survival strategies. But a critical, if common, error they make is to assume optimisation is better left pursued when discretionary spending is abundant. While companies understandably want to impede cost escalations, it is critical to optimise their supply chain – or they will face bigger challenges later.
To that end, here are four key questions every decision-maker in supply chain should be able to answer.
1. Are you taking an agnostic approach to solution/s?
Incremental spend is the path that imbues the greatest feeling of safety. So large-scale, high-cost solutions are off the table. But you need to optimise. Tackling the underlying costs of inventory management, warehouse, and transport operations, optimisation can impact a project of between eight to 15 per cent, with a mix of both project savings and cost mitigation on price increases.
However – going for one solution because it addresses one component of a broader problem – is risky. For example, selecting a solution purely based on low cost may only yield short-term benefits. But the budget is what it is: what are you to do? Incremental spend and foundational improvements is one way you can improve and optimise without breaking the bank.
Due diligence to determine what key issues or processes first need to be improved sets your business up to receive the best solution, because the approach rightfully prioritises operational needs – not vendor offerings. Which leads us to asking:
2. Does your business select the right solution/s?
This is tricky, of course. There is no guaranteed way to make the right decision. But you can act to lower your risk of making the wrong one. A supply chain is a system, and solutions need to integrate into systems thinking: how does this system impact others? The features are sophisticated but are they relevant? How will the data be used throughout your business? What problem does it address? Is it a fit for your organisation? Does it solve a short-term problem but cause a long-term one?
When the pressure is on, and a convenient option is on the table, it is difficult to remain firm. But it is a better long-term decision to complete due diligence upfront and interrogate the options. How will one solution integrate with others? Does this solution consider your distribution strategy, service levels, product flow through the warehouse, or useability for all staff?
3. Does your business set and forget?
A “solution” is a misleading descriptor. Whatever the software, process, or system is, it is only the start. But benefits will only come with proper embedding, change management, training, implementation, and ongoing review and adjustment. It must be agile. And while this seems obvious – many businesses do not do this.
The transformation process starts but ends up stuck on ‘buffering’. Staff ‘set and forget’ and believe the solution doesn’t work, and mistrust further improvements.
Do not take implementation for granted. Basic principles make a significant difference. Has the business introduced, explained, and gotten buy-in for the new approach? Once implemented, does the solution do what you need it to do? Usually, solutions have other functions that a business fails to use.
4. Are you cutting costs wisely?
Partly because of ‘set and forget’ thinking, organisations underestimate the impact of project and change managers, and slash middle management roles during cost cuts. But experienced personnel who understand risks, nuances, interactions between departments, and have the emotional intelligence and technical capability to work with diverse stakeholders can make or break business success.
Strategic roles or processes also go. But we are in the business of supply chain. Imagine if you knew where your supply chain started, but you had no idea where it ended. Worse, imagine that your business does not invest in finding out. We hear and see this a lot. If you turf your strategy, you may be operating blind.
This article was originally written by Mark Rummins and published by MHD Supply Chain on August 23, 2023.