Leveraging Supply Chain ‘Families’ to Gain an Edge
By Tim Brown, Principal, Supply Chain Strategy Practice, Chainalytics LLC
The Wii has become an obsession in my house. And also the source of anxiety and most of the tension. My son strongly favors Super Mario Brothers, but my daughter likes to play Dance, Dance Revolution. I have to admit, I like Wii Fit, myself. If we had 3 Wiis, we could eliminate this tension, but alas, my wife informs me this is not an option in our household. So instead, our family has to work together and share this resource to meet our family’s overall goals for peace and happiness.
Multi-business unit corporations are much like families. In a corporation, each business unit tailors its infrastructure to its own needs while staying within the overall framework of the corporate operating model.
Given the current economic climate, I am seeing more corporate “brothers and sisters” coming together to leverage their network infrastructure and reduce operating costs and fixed assets. I’d like to say that individual siblings are seeing the merits of teaming together – like exploring synergies across regional warehouses -- but in reality, it is the parent (corporate) that is working to develop cross-business-unit network strategies. Perhaps in the same way we are all trying to balance our interests on the Wii.
The benefits to these corporate families of cross-unit network design can be quite substantial. I’ve seen companies reduce their supply chain operations by over 8%. They’ve done it by:
- Reducing facility assets, and subsequent fixed costs.
- Investing in IT and other productivity enablers that an individual business unit may not warrant, but can still benefit from.
- Setting the stage for longer term collaborative tactics such as modal conversion (LTL to multi-stop TL, etc).
But this “coming together” is not without challenges. Here’s what you need to look for:
- Fear. Many may fear losing their position once the collaboration is complete. I’ve seen companies address these fears in a number of ways: from “participate to your fullest or you are terminated” to proactively defining the future organization chart early in the process.
- Closed-mindedness. Many business units see their operations as completely unique. And too often, they can’t imagine anyone being able to effectively replicate their processes. What can you do? Firms can overcome these challenges by establishing a corporate-level charter along with a formal cross-unit project team to conduct a quantitative network design project. Objective third party consultants can be brought in to drive the process, ensure a fair and quantitative approach, and leverage expertise to conduct similar analysis.
- Inconsistent comparisons. In order to support scenario analysis, companies must have a fair “apples to apples” comparison of supply chain operating costs. One challenge is figuring out a way to collect and manage the substantial data required to represent all the networks. Fortunately, established tools and techniques are available to help manipulate substantial amounts of raw supply chain data as well as optimize the product flows in alternative network scenarios.
With limited funds for capital investments and ever-growing demand to reduce costs and assets, supply chain executives will likely find that getting the family together to share may be the best thing to do. As for me? We’re still working on harmony when it comes to the Wii. Perhaps we’ll take up bike riding.
The Wii has become an obsession in my house. And also the source of anxiety and most of the tension. My son strongly favors Super Mario Brothers, but my daughter likes to play Dance, Dance Revolution. I have to admit, I like Wii Fit, myself. If we had 3 Wiis, we could eliminate this tension, but alas, my wife informs me this is not an option in our household. So instead, our family has to work together and share this resource to meet our family’s overall goals for peace and happiness.
Multi-business unit corporations are much like families. In a corporation, each business unit tailors its infrastructure to its own needs while staying within the overall framework of the corporate operating model.
Given the current economic climate, I am seeing more corporate “brothers and sisters” coming together to leverage their network infrastructure and reduce operating costs and fixed assets. I’d like to say that individual siblings are seeing the merits of teaming together – like exploring synergies across regional warehouses -- but in reality, it is the parent (corporate) that is working to develop cross-business-unit network strategies. Perhaps in the same way we are all trying to balance our interests on the Wii.
The benefits to these corporate families of cross-unit network design can be quite substantial. I’ve seen companies reduce their supply chain operations by over 8%. They’ve done it by:
- Reducing facility assets, and subsequent fixed costs.
- Investing in IT and other productivity enablers that an individual business unit may not warrant, but can still benefit from.
- Setting the stage for longer term collaborative tactics such as modal conversion (LTL to multi-stop TL, etc).
But this “coming together” is not without challenges. Here’s what you need to look for:
- Fear. Many may fear losing their position once the collaboration is complete. I’ve seen companies address these fears in a number of ways: from “participate to your fullest or you are terminated” to proactively defining the future organization chart early in the process.
- Closed-mindedness. Many business units see their operations as completely unique. And too often, they can’t imagine anyone being able to effectively replicate their processes. What can you do? Firms can overcome these challenges by establishing a corporate-level charter along with a formal cross-unit project team to conduct a quantitative network design project. Objective third party consultants can be brought in to drive the process, ensure a fair and quantitative approach, and leverage expertise to conduct similar analysis.
- Inconsistent comparisons. In order to support scenario analysis, companies must have a fair “apples to apples” comparison of supply chain operating costs. One challenge is figuring out a way to collect and manage the substantial data required to represent all the networks. Fortunately, established tools and techniques are available to help manipulate substantial amounts of raw supply chain data as well as optimize the product flows in alternative network scenarios.
With limited funds for capital investments and ever-growing demand to reduce costs and assets, supply chain executives will likely find that getting the family together to share may be the best thing to do. As for me? We’re still working on harmony when it comes to the Wii. Perhaps we’ll take up bike riding.
Labels: Tim Brown - Supply Chain Network Design
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posted by Chainalytics @ 8:56 AM
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