24 Industrial Engineer

Business leaders are only begin-

ning to understand the potential to create
value in a companys supply chain. Supply
chain management is growing more popu-
lar in executive suites, leading to questions
about how it creates protable growth.
The importance of supply chains and
their effectiveness, or lack thereof, never
has been more apparent than it is today.
Supply chains drive value, which ultimately
reaches shareholders and investors. Todays
CEOs and boards no longer can ignore the
end-to-end business impacts of the supply
chain.
New understandings have surfaced
about supply chains. The supply chain
megaprocesses plan, buy, make, move,
store, sell, return comprise the operations
of the business. And the four flows mate-
rials/products, information, cash and work
flow determine the effectiveness and effi-
ciency of the operations.
Traditionally, each megaprocess was
treated as a functional silo. Little infor-
mation crossed boundaries. Now, supply
chains likely have many interrelated trad-
ing partners spanning geographies, time
zones and cultures. Using what we call the
supply chain value framework which
encompasses the goals, objectives, actions
and value drivers for creating value is an
excellent way to engage these areas and
partners to create shareholder value.
As companies examine opportunities
for profitable growth, margin improve-
ment and capital efficiency, this framework
keeps process leaders focused on results.
Ensuring that key value drivers are identi-
fied and prioritized is vital. Benchmarking
and adapting best practices are essential to
ensure the right actions are taken. Compa-
nies can leverage their megaprocesses to
increase or create value by analyzing the
following 10 areas:
Procurement: Accept procurement as
a much broader responsibility, beginning
with strategic sourcing, to include all mega-
processes and encompass responsibility of
supplier relationship management.
Outsourcing: Focus on core compe-
tencies and outsource all other tasks.
Inventory: Increase inventory turns
and fill rates simultaneously. Put advanced
sales and operations planning processes in
place to unleash working capital and drive
customer service.
Transportation: Establish efforts to
develop core carrier programs, implement
transportation management systems,
decouple inbound freight and enhance
shipment planning and execution oppor-
tunities.
Network: Changes such as globaliza-
tion, mergers and acquisitions, and the
evolution of your marketplace all demand
an annual review of your network. Evalu-
ate the number of and justification for your
locations, along with the operation strate-
gies, to establish the lowest cost/highest
customer service network.
Service supply chain: View this as a
profit center. Assess reverse logistics and
end-of-life product opportunities with an
eye toward enhancing profitable growth.
Speed, agility and productivity:
Successful organizations will boost speed,
agility and productivity across the mega-
processes.
Tax-effective supply chain: Supply
chain managers need to understand the
effective tax rate, and tax managers need to
understand the supply chain.
Cash-to-cash cycle (C2C) manage-
ment: The C2C cycle is the length of time
a companys cash is tied up in working
capital before it is returned in the form of
collections of receivables. Consider the
C2C cycle in all supply chain improve-
ments.
Technology: Move forward with tech-
nology upgrades that provide a strong
business case.
For more details about achieving profit-
able growth through supply chain strategy,
download the white paper Leveraging the
Supply Chain for Increased Shareholder
Value from www.tompkinsinc.com/
publications. d
James A. Tompkins is president and CEO of
Tompkins Associates and Tompkins International.
He has written or contributed to more than 30
books, hosts the Global Supply Chain Podcast
series and writes the GoGoGo! blog. Contact him
at jtompkins@tompkinsinc.com.
Creating value
New understandings
have surfaced.
supply chain BY JAMES A. TOMPKINS
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