Improving productivity in the supply chain is not as straightforward as it may seem. It involves not just doing more work but doing it in a way that adds value, maximizes output, and aligns with the company’s broader objectives. Let’s dive into how supply chain managers can boost productivity by focusing on the right processes, tools, and strategies.
Understanding Supply Chain Productivity
Productivity in the supply chain is essentially about the ratio of output to input. This includes evaluating how efficiently the workforce, equipment, and time are used, and how these contribute to achieving business objectives. However, it’s important to note that while cost control focuses on reducing expenses, productivity aims at increasing value without necessarily cutting costs. The goal is to achieve more valuable results from existing resources, which has a stronger link to profitability than simple cost reduction.
Why Relying on Aggregated Productivity Figures Can Be Harmful
Looking at overall productivity numbers might seem useful, but it can hide critical issues. For instance, many businesses find that only a small percentage of their operations are profitable, and the rest are disguised by broad financial metrics. To improve overall profitability, it’s essential to drill down into specific activities and measure productivity at the individual level—whether it’s people, machines, or processes. This granular approach helps uncover inefficiencies and determine where the focus should be to optimize the supply chain.
Managers must assess the productivity of the assets they oversee and ensure that each activity directly contributes to creating value. This means understanding whether the materials, services, or logistics activities are truly helping the business achieve profitable outcomes.
Cost to Serve: A Granular Approach to Productivity
Cost-to-serve analysis helps supply chain managers understand how much it costs to serve each customer or market segment. This granular approach can expose hidden inefficiencies that affect profitability. By analyzing costs at the customer and SKU level, businesses can make smarter decisions about which products or services are worth continuing and which ones should be reevaluated.
Alongside cost-to-serve analysis, the concept of business reengineering encourages companies to focus on doing the right things rather than just doing things right. It challenges businesses to analyze their processes critically and make necessary changes, driving improvements at every level of the supply chain.
Motivating Teams for Greater Productivity
For any supply chain to become more productive, the motivation of the workforce is key. Employees need clear incentives and an understanding of the behaviors and results the company wants to achieve. Productivity can be significantly improved when employees are focused on the right objectives and rewarded for achieving them.
Too often, supply chains operate on a reward system that doesn’t align with productivity goals. For example, sales compensation might focus on total revenue rather than profitability, leading to misaligned priorities. Companies should consider implementing systems that encourage productivity across all departments, including sales, to ensure that every part of the supply chain is contributing to the overall success.
Creating an Optimal Environment for Productivity
The environment in which employees work has a direct impact on their productivity. A clean, safe, and comfortable workplace can reduce distractions and increase focus. Here are some areas that can be improved:
- Cleanliness and organization: A cluttered, disorganized environment slows down processes and reduces efficiency.
- Lighting and temperature: Comfortable lighting and temperature can help employees stay focused and work more efficiently.
- Safety: Ensuring a safe working environment reduces absenteeism due to injuries, helping maintain productivity.
Effective Communication and Training for Better Results
Once a conducive environment is established, communication and training are critical factors for improving productivity. An engaged workforce, which feels valued and understood, is much more likely to contribute to the success of the business.
Key strategies include:
- Objective productivity measurement: Use clear performance indicators aligned with business goals.
- Goal-setting and performance management: Establish accountability and ensure that everyone knows their role in achieving the company’s objectives.
- Open communication: Encourage feedback from employees and act on it when possible.
- Training and development: Provide continuous learning opportunities, especially cross-training, to improve workforce flexibility and skill sets.
Focusing on Workforce First, Technology Later
Before investing heavily in new technology, businesses should first focus on improving the efficiency of their workforce. In the context of supply chain productivity, this means effective management practices, employee motivation, and creating an environment that supports high performance. These foundational improvements can often yield better results than implementing expensive IT solutions without first addressing these core areas.
Steps to Enhance Productivity in Supply Chains
Improving supply chain productivity requires a structured approach, and supply chain managers should focus on the following steps:
- Training: Ensure that everyone involved in the supply chain understands the importance of productivity and how it impacts business success.
- Data collection: Track productivity metrics, including inventory levels, order fulfillment rates, and the costs associated with each customer or SKU.
- Focus on high-impact activities: Identify which activities are most beneficial and focus on optimizing those.
- Optimize operational methods: Find the best practices and most efficient ways of operating, ensuring that every step adds value.
- Collaboration: Coordinate with other departments, such as sales, to ensure that everyone is working toward the same productivity goals.
- Monitor and adjust: Continuously monitor performance and make adjustments as necessary to maintain or improve productivity.
These steps may take several months to implement, but once in place, they will lead to significant improvements in overall supply chain performance.
Productivity Gains Through Packaging Innovations
Packaging plays a significant role in supply chain efficiency. It can affect everything from warehouse storage to last-mile delivery. For example, a manufacturer of consumer cleaning products improved productivity by integrating the production of custom displays into regional distribution centers, reducing costs associated with packaging and warehousing.
Tesco, one of the world’s largest retailers, streamlined its packaging by ensuring that products were “retail-ready” from the beginning of the supply chain, reducing handling time and improving store shelf efficiency.
Using Time and Motion Techniques to Improve Efficiency
Warehouse operations, in particular, can benefit from time and motion techniques. These include optimizing warehouse layouts to reduce travel time, using automation for repetitive tasks, and improving processes for faster picking and shipping. Technologies like RFID and pick-to-light systems can further accelerate operations and reduce errors, contributing to better productivity.
Leveraging IT and Automation for Further Gains
For repetitive manual tasks, automation is key to improving productivity. Systems like warehouse control systems (WCS) can optimize picking and packing, while robotics can streamline processes, making them faster and more reliable. The right IT infrastructure is crucial for handling increasing volumes of data and ensuring smooth coordination between all supply chain elements.
Improving Productivity Across the Supply Chain
A key element of competitive advantage is helping customers improve their own operations. Suppliers who understand how their customers’ internal processes work and tailor their supply chain to align with those needs will build stronger, more productive partnerships. For example, companies like Walmart have optimized their supply chain by organizing pallets in ways that streamline the movement of goods directly from trucks to shelves.
Conclusion
Improving supply chain productivity is a multi-faceted effort that involves optimizing processes, engaging employees, leveraging technology, and focusing on high-impact areas. By addressing these fundamentals and continuously refining operations, companies can achieve significant gains in efficiency and profitability, ensuring long-term success in a competitive market.
