Andrew Seay shares an article that identifies common obstacles to successful supply chain management.
At some point or another, every company will struggle to manage its supply chain. As sales volumes grow, companies face delivery issues with suppliers, customer expectations seem to increase almost daily and new, high-volume orders bring in much-welcomed revenue, but often add significantly higher complexity. Unless your company specializes in distribution and logistics, it’s unlikely that inventory management is the reason you went into business.
So, which applies to you?
- Supply chain management is the core value proposition of my company.
- Supply chain management is something we have to do in order to deliver the core competency of the company.
If you answered #2, you may want to consider bringing in outside help to get your supply chain under control. Outside support can help quickly drive financial improvements through taking a “hands on” approach with your team. It’s not unusual for a consulting firm to deliver 10-20% inventory reduction over a 10 week engagement, often delivering a 10x multiple on their professional fees. Additionally, through working with the team, expert support can help create systems and processes that create more repeatable performance over time. Finally, an inventory engagement can deliver ongoing value through developing team capabilities that simply did not exist before the project.
So, do you need outside support managing your supply chain? Below are a few indications that outside help could deliver big benefits for your company:
- Cash flow is constraining your growth
Growing a business requires a lot of cash. Unfortunately, so does inventory. Any dollar tied up in inventory is a dollar you can’t invest in growth. We often hear COOs admit that their current inventory levels are high, but they expect the value to decline at the end of the month, quarter, fiscal year or once a big order goes out. Regardless of when inventory is expected to decline, this is cash that cannot be used to grow your business. Even if the inventory is financed by a revolving credit facility, this is capital that cannot be reliably accessed to finance the growth of the company. Breaching your loan covenants, even for a day, can place your company into technical default.
Systematic, analytically-driven inventory management is the key to minimizing cash consumed by the supply chain while remaining confident that you’ll be able to fulfill orders as they come in the door. This approach also ensures that you stay within the terms with your creditors.
While the Board of Directors may only examine the quarterly balance sheet, available cash is an all-day, every-day challenge. It’s truly the “high water mark” that matters. External support can be focused on this critical metric, with less pressure to simply produce results at period-end.
Key points include:
- Lack of in-house skills
- Slow progress
- Space restrictions
Read the full article, 7 Signs Your Organization Needs Outside Help with its Supply Chain, on LinkedIn.