Every supply chain has a central purpose, regardless of size or industry: getting materials from their point of origin to the place they're needed as quickly and inexpensively as possible. Designing a supply chain to accomplish that task isn't as straightforward as it seems, especially when technology is involved.
A smart company pays attention to the way their supply chain operates, and that means working with a proactive design over a reactive one. Do you know for sure which way your current supply chain design sways?
The right setup makes all the difference when your supply chain encounters a road block. Simply put, the difference between proactive and reactive supply chain designs comes down to one thing: timing.
If existing scenarios and events have triggered an assessment of your supply chain flow, you're operating with a reactive design. If on the other hand, you're considering events that aren't in the process of happening right now, you're proactive instead.
For the sake of longevity and efficiency, the latter is the best design choice because it eliminates the effort and financial costs of reactive uncertainty. When a company only performs self-checks during milestone events––expansions, acquisitions, restructures, and so on––they miss a great deal of opportunities to eliminate waste and drive down costs.
Factors like global trade and a customization trend in manufacturing have altered the "straight shot" supply chain forever. No longer a simple line drawn from supplier to customer, the modern supply chain more closely resembles a web of intersections. While this interconnectedness means that the chain is less susceptible to disruption, it also means hidden costs are lurking behind familiar processes.
This is an especially common trap for legacy companies with many years in business; the larger the company, the slower change progresses within it, and the greater the reluctance to embrace change.
Thankfully, digitization of inventory and technology like real-time shipment tracking from 3PLs are taking the pinch out of switching for these companies. With a computer doing most of the difficult legwork, the only buy-in necessary from a company is the initial technology and the determination to implement it in their supply chain.
In the era of pencil and paper, reactive supply chain design was something of a necessity: supply chain managers were busy running the chain itself.
With such widespread advances in digital help both inside and outside the warehouse, the modern supply chain should naturally gravitate toward proactive design. If it doesn't, competition stands to bypass the companies that stay rooted in their analog pasts.
Figuring out if your supply chain is ready to handle a crisis is simply a matter of taking a long look at its foundation. Is there a point where multiple supply channels pass through a single location in your chain? What would happen if something catastrophic happened to that node? Could you recover quickly enough to prevent a disruption of product flow?
Remember: these are important questions that apply not only to international business operations but domestic ones, as well.
While civil unrest could slow down production or shipments in a foreign country, natural disasters can accomplish just as much shipping disruption in North America. Even Canada, a country that's not exactly famous for shipping disasters, was virtually cut in half by a single unexpected bridge collapse in 2016.
Planning for unexpected issues like these is a major part of a proactive approach; make sure you always have a well-documented "Plan B" for your supply chain. Include any approximate cost differences in your plan to aid your crisis decision-making.
Once you have addressed these major concerns, consider the current path that each of your incoming shipments takes to reach your distribution center, and answer these 3 questions:
By answering these questions before you need to, your company is more likely to spot lucrative opportunities to reduce, combine, and streamline supply chain processes.
If on the other hand, you only jump to "stop the bleeding" once a design problem manifests itself, you'll be cleaning up a larger mess than you need to.
The same brush cannot be applied to all aspects of redesign and improvement; there are two distinct pathways, and you'll need to approach each one differently.
Conversely, network optimization approaches look only at your existing supply chain design, using this data to form a baseline for future improvements.
Network optimization is also more intrinsically complex, encompassing a number of vital optimization subcategories. These include 6 basic segments:
A proactive design approach should take all of these factors into account at some level; each one is an important part of a top-down focus and a component to lasting positive results.
Optimization is a very delicate art because it depends so heavily on understanding moving parts. While companies are eager to spearhead their own optimization efforts, too often, they may use data-free "intuition." This leads the charge down unoptimized paths.
True optimization needs to gather and rely on data to achieve lasting, reliable results. This is why it's essential to rely on a holistic 3PL for expert advice and guidance.
You may already have a numerical goal in mind: for example, meeting a certain percentage of demand needs within a certain radius of a distribution center. At Kenco, for example, we can recommend where your distribution centers should be placed to meet that goal, and adjust those recommendations later if your needs change. We give you the results you need to support further optimization efforts and clarify findings for other departments.
If you're ready to get started on optimization, start with our guide to Supply Chain Network Design. We're looking forward to helping your supply chain become the best, most proactive version of itself possible, and leading your company to efficiency and success.