Heard & Overheard

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Heard & overheard

Rebecca Jasper, president of the consulting firm JASPERsolutions (www.jaspersolutions.net), has identified 10 fallacies of supply chain management — misconceptions about SCM that far too many people accept as gospel.

You're wrong if you believe that:

1. Full truckloads are cheaper than less-than-truckloads. Ain't necessarily so, particularly for those companies ordering large quantities just to get the truckload discount. When quantities are too high, product turns into inventory, and the carrying costs can quickly negate any perceived “discount” from shipping by truckload.

2. You should always have at least two suppliers of a material to get the best price. Don't ever purchase just by price, Jasper says. Also, the goal of SCM is to transition from adversarial relationships with suppliers to developing partnerships.

3. Technology will resolve communications and process problems. Technology placed on top of a poor process just makes the process even worse. The corporate culture needs to be aligned toward an SCM state of mind for an application to be effective.

4. Annual budgets are an excellent tool to manage, forecast and plan. Market conditions need to be analyzed at least monthly.

5. Operations is not a part of the supply chain. If anybody still believes this, they haven't been paying attention for the past decade or so. Since the goal of SCM is to enable the efficient flow of goods and services, all facets of operations and manufacturing need to be included in all supply chain activities, Jasper insists.

6. Logistics is a cost center, and inventory is an asset. The quicker you move inventory through your supply chain, the better off you'll be. Consider the example of PC giant Dell Computer, which carries only four days' worth of inventory when many of its competitors carry between 20-30 days of inventory.

7. Scheduling and forecasting are an essential part of the supply chain. Jasper advocates going to a just-in-time manufacturing model, which essentially flip-flops the information flow from a supply chain to a demand chain.

8. You should bend over backwards to please all customers. If customers are unreasonably demanding to the point that it's not profitable for you to do business with them, then your best bet might be to simply cut them loose.

9. Traditional financial ratios are an essential metric to measure performance. Each department should use measurements specific to their — and not just the chief financial officer's — needs.

10. If it ain't broken, don't fix it. “If everything looks great today,” says Jasper, “look out for tomorrow.” Proving she is a keen observer of the entire field, she recommends professionals stay current by reading articles in logistics publications.

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November, 2003

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