General Colin Powell once said, “Great leaders are almost always great simplifiers, who can cut through argument, debate and doubt, to offer a solution everybody can understand.” This statement holds very true for for supply chain leaders. To simplify is to reduce complexity, and if there’s anything in the world that can be easily described as complex, it is supply chain planning and management.
At the root of Powell’s thoughts on the matter is the idea that simplifying makes things more clear. When the problem, issue, or task is clear, the action plan is evident and simple. Complexity causes confusion that can lead to organizational paralysis.
Simplicity Throughout the Supply Chain
In the supply chain, complexity hides the facts and the dynamics that are so crucial to understanding what’s happening and what can be done to change it. Simplification in the supply chain means minimizing clutter:
- fewer suppliers
- fewer items (materials, components, products)
- fewer process steps
- less movement and handling of goods
- less paperwork
- fewer people
- and, yes, fewer customers
Fewer customers in the supply chain?
Yes. It’s not about serving the most customers, it’s about serving the right customers. It may be difficult to admit, but not all customers are “good” customers. Not all customers are profitable customers. Many companies have improved overall business results by eliminating unprofitable customers (and products and markets) and instead focusing on building relationships with customers that have more profit potential. Those less profitable customers can be redirected to wholesalers, distributors or, frankly, to less discerning competitors. Time and effort is a valuable commodity. Don’t be caught in the trap of over-servicing unprofitable customers just to keep up the number of clients in your roster.
Fewer suppliers in the supply chain?
Yes. Reducing the number of suppliers is a long-standing strategy for simplification when it comes to the supply chain. Generally speaking, fewer suppliers is not only simpler but more economic. For example, giving more of your business to one supplier may qualify you for volume discounts or other preferential treatment. A word of caution, though: limiting yourself to just one qualified supplier for any given item can be risky—you should always have a backup supplier in case issues arise. That’s just good supply chain risk management practice.
Supply Chain simplification: the proof is in the numbers
A Pareto Analysis shows that 20% of products are responsible for 80% of sales, while a different 20% might account for 80% of profits. Maintaining low sales or low-profit products is not financially justifiable, although you may determine that it is strategically important to have those products available. But is it really a strategic decision or are those products still in the line because nobody has ever done the analysis and made the hard decisions?
As for materials and parts, engineers and designers should be educated in value engineering, group technology, and the real life cycle costs of maintaining multiple variations of similar, equivalent, or interchangeable items.
Nature provides a great example of the value of directing our energies where they are most productive. Commercial farmers prune their fruit trees on a regular basis to eliminate branches and shoots that are more distracting than productive. The trees are then able to direct the sap and nutrients to the remaining branches which are then able to produce larger, healthier apples, pears or peaches. Regular pruning is required to maximize the quantity and quality of production.
Let’s be honest…many elements of the supply chain are prone to unnecessary and unproductive growth leading to unnecessary and unproductive complexity, confusion, and cost.
We began with an inspirational quote from Colin Powell. Let’s close this with a related quote from another very smart fellow, Albert Einstein, who said,“Everything should be made as simple as possible, but no simpler.”
Be a great supply chain leader. Keep it simple.
