The Incredible Shrinking Supply Chain

When I talk with colleagues, everyone talks about how long and complicated their supply chains are. Stretching across the globe, through multiple distribution nodes and stocking points, tracking and managing product flow can be a nightmare. While the game of “Who’s Supply Chain is Bigger” is fun to conduct over a beer, it is the opposite in terms of cost, lead time and overall value to the customer.


I recently conducted a 3PL survey for a client and I walked away amazed at the “Control Tower” war rooms at the major 3PL’s. Multiple flat screen displays can track shipments and point out trouble and potential trouble anywhere on the planet. Very impressive.

However if we want to be more competitive, we should be asking how we can be less impressive.

The Physical Supply Chain

I might be time to ask some “stupid” questions. Why is the company really operating in all of the countries and regions it is, at least on the supply side? Is it really necessary to be in 3 countries in Asia? Is it (heaven forbid) necessary to be in Asia at all? The State of Tennessee is touting itself as the New China, showing that with current levels of taxation and logistics costs it can be cheaper to manufacture there than in China.

Next, has anyone in Operations spoken to anyone in Sales about distribution strategy? I have seen product take several stops on the way to the customer from the factory that existed only to accommodate the organizational silos between Sales and Operations. Someone has to pay for those warehousing and logistics costs, and in the end it affects the company’s competitiveness.

The Virtual Supply Chain

Less obvious, and more insidious, is the process and data flow required to support this impressive supply chain. How many steps does it take to get an order from the customer to and actual order on an internal factory? How many people? How many approval steps? How about the same questions to status an order? In terms of cost and lead times this can be the biggest opportunity to improve.

In a recent study I was part of, a major B to B company, who’s name you would know, requires 3 approvals, 2 transcriptions of an order 3 emails and a phone call to enter an order. Statusing an order took a similar ordeal. We estimated that 25% of the headcount was caught up in non value added activity. Customer deliveries were 3 days to 1 week longer than required. Payback on the technology investment was measured in weeks.

The tools for simplification and process improvement have been around for a long time. Let’s use them to build an incredible shrinking supply chain.