I recently took part in a management workshop, which saw two competing teams manufacturing a particular structure. This was a simulation exercise using Lego blocks in which we had to make as many structures in a minute as possible and deliver them successfully to the “customer.” The customer would then quality check the output and advise each team on how much revenue had been generated (you could lose revenue through rejections).
The first round came and in the excitement to deliver to the customer, we forgot about the supplier, we ramped up our stocks, we didn’t worry about the costs. We paid for it in profitability at the end of the round, the deductions for working capital really stung our bottom line.
At this point the two teams took very different approaches. The other team focused internally, making the “production line” more efficient, combining and segregating the assembly of the Lego blocks. Our team focused externally. After negotiations with the customer didn’t really help us out, we turned to the supplier with requests.
- What if we bought the pieces partially pre-assembled? The supplier could be working on the assembly in the down time between the game periods – that would enable us to ramp up production.
- What if we could return unused inventory at the end of the month? Then our working capital would be almost eradicated?
- What if we sent one or even two members of our team to work with the supplier? We could affect the supply from source – ensuring the quality, quantity and timing was just right for us.
What we were doing was focusing on procurement, but just like our management game, many companies focus only internally when doing this. ERP systems like SYSPRO enable companies to work collaboratively along the supply chain, both upstream and downstream. This allows businesses to work on both the internal issues and the external ones.
Tools like forecasting and inventory optimization help organizations understand the best stock holding patterns for our customers, enabling them to transition from make-to-stock to make-to-order environments, enabling them to maintain customer responsiveness whilst reducing their working capital requirements for inventory.
The LCT (landed cost tracking) module ensures that businesses understand the true cost of imports, whilst the SYSPRO database can be mined to create 360o views of supplier performance: on time in full, quality reporting, price comparisons, lead time adherence and so on.
Sub-contract, free issue materials and vendor managed inventory are all processes that can be supported within SYSPRO and are regularly used by SYSPRO customers to increase profitability.
Back to the workshop, of course our team romped to victory. The other team cited foul play, but we were providing supply chain innovation – something SYSPRO customers can do every day.