Intelligent Manufacturing € March € 1995 € Vol. 1 € No. 3

Supply Chain Reengineering:
Ten Questions

By Mike Donovan

Manufacturers can reap tremendous profit and customer satisfaction improvements from effective supply chain reengineering. In my role as a management consultant, I have suggested that companies use the following 10 questions to benchmark their supply chain performance improvement potential.

If you answer "No" to any one of these questions, it is a solid indicator that if you're not experiencing decreased profits and/or overwhelmingly heavy competitive pressure now, you will soon.

Your score from these audit questions can help you to generally evaluate your company's improvement rate in the following table. Remember, your careful consideration and accurate response to these questions are essential to gain any value from this self-assessment of your supply chain capabilities.

1. Have we reduced our total cycle time (order to shipment) by at least 50% over the past three years?
2. Have total inventories decreased by at least 50% over the past three years?
3. Do 98% or more of our orders reach customers on time?
4. Has our supplier base been reduced by 2/3 over the past five years?
5. Have our supplier lead times been reduced by 50% or more over the past three years?
6. Have we reduced scrap, rework and warranty costs by at least 50% over the past three years?
7. Has our cost to produce decreased by 20% or more over the past three years?
8. Have we reduced our cost of quality by at least 50% over the past three years?
9. Have we reduced direct material costs by at least 10% over the past three years?
10. Have we reduced our product development cycle time by at least 50% the past three years?

Scoring

9-10

You are in an elite class of highly focused and top performing manufacturing companies. Of course, "Yes" answers do not guarantee market leadership or profitability. Your competitors may be just as aggressive. Keep the improvement momentum in high gear.

7-8

You are in the high performance group of companies and may actually be outperforming most, if not all, of your competitors now. However, any "No" answer may present an unacceptable risk for which immediate action is mandated. Keep reengineering your business processes following a well thought out plan to make sure you are, in fact, out in front of your competition.

5-6

Some progress has been made but you need to reach new levels of performance. Delay will cost money and, most importantly, remember the competition has not stopped searching for how to win.

4 or less

You are in a very high risk category with a need to intensify or initiate a high priority supply chain reengineering effort. Delay most certainly has cost you money and limited or no action will ultimately lead to major problems.

Razor-sharp synchronization in your supply chain will undoubtedly be the major performance success factor in competitive markets. Customers are rapidly becoming more sophisticated and demanding. Manufacturers that offer customer-defined quality products, reasonable prices and quick-order turnaround outperform their competitors now and will easily gain more market share in the future as customers clamor for more.

The successful and most profitable manufacturers will have reengineered their entire supply chains from beginning to end over the next five years. Five years is not a long time given the magnitude of the effort required to get the job done right. By the year 2000, companies that haven't reengineered their entire supply chain to drive out the unnecessary costs, time and other waste so they can deliver high quality, best value products at lightning speed will be history. It's happening across the board with many consumer items going to the retail level on a just-in-time basis.

R. Michael Donovan is a management consultant based in Natick, Mass., and can be reached at (508) 655-4100.