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Using Operational Levers To Boost Supply Chain Performance

To remain competitive in today's environment, manufacturing companies are looking at boosting their supply chain performance. One of the key levers for improving supply chain is 'cost reduction' at various stages of the entire chain.

One such stage is the manufacturing plant which, it can be said is the center of the supply chain. Optimal handling of plant operations can have a hugely positive impact on the upstream and downstream supply chain. Some of the plant level strategies that can help manufacturers improve the performance of their supply chain are -

  • Cycle Time Reduction: Organizations must optimize the various manufacturing operations (e.g., reduction in queue times at work center) to reduce cycle time. This leads to increase in throughput and lower inventory cost. Reduction in cycle time leads to improved time-to-market, thereby helping organizations to react to market changes quickly
  • Small Batch Size: This strategy can be useful to plants that produce a high product-mix. For such manufacturers, batch size reduction reduces the inventory cost. In order for small batch sizes to work, the changeovers must be quick 
  • Reducing Downtime: Unplanned downtime is a 'waste' and plant staff should minimize downtime.

The above strategies, if adopted will lead to reduced inventory in the entire supply chain.

ERP systems along with Manufacturing Execution System (MES) help organizations track performance of a production line, the overall plant level performance and also the performance on various customer and supplier related parameters. The extensive data that get captured in the ERP and MES systems, can be used to implement an improvement plan to achieve manufacturing excellence


In their journey towards supply chain operational excellence manufacturing organizations have to focus on three main areas – Upstream processes (supplier/procurement management), downstream process (customer and demand management) and the manufacturing processes. What I have discussed above is strategies related to manufacturing processes that impact manufacturing excellence.

Of the standard KPIs (Delivery Performance, Order Fulfillment Lead Time, Supply Chain Response Time, Total Logistics Cost, Asset Turnover, Days of Inventory Supply and Production Flexibility etc) used to measure the performance of a supply chain; Production Flexibility and Days of Inventory Supply are directly linked to manufacturing processes.

Production Flexibility refers to the capability of an organization to react to demand changes. Days of Inventory Supply refers to the stock of raw material and finished goods inventory. A significant improvement in these two KPIs can be done, by following the strategies of reduction in cycle time and smaller batch sizes. Smaller production batch sizes and reduction in cycle time go hand in hand – reduction in cycle time enables organizations to reduce batch sizes, thereby lowering the finished goods inventory as these strategies help organizations manufacture to customer demand. If the manufacturing batch sizes are small, the procurement process can also be optimized by reducing batch size but increasing the frequency (if it makes economic sense), thereby reducing inventory in the entire supply chain. Smaller batch size and cycle time reduction help organizations manufacture the desired product in the shortest possible time, in turn positively impacting the other KPIs of service delivery level and supply chain response time etc.

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