Recession Buster # 1: The Supply Chain

[David Blanchard]

Let's say you're a major brand-name manufacturer, watching the recession suck 20% of your sales right down the tubes as consumers hold off on big purchases, and you're stuck with so much inventory that you've got 15 warehouses full of unsold stuff. What do you do?

If you're Whirlpool, you leverage the power of supply chain management to deliver some rather impressive results. Try these:
* a reduction in annual inventory by $250 million a year
* savings of $100 million annually due to improved efficiency
* product deliveries in 48 to 72 hours

According to this story in the Wall Street Journal, the supply chain is one of the few areas of the company that hasn't suffered from budget cuts, and that's for one main reason: The supply chain delivers results. Thanks to a new state-of-the-art distribution system revamp (a program launched, of course, before the dog days of the recession set in), the appliance maker's warehouse is much more efficient these days, with slow-moving items pushed to the center of the facility while fast-moving goods sit near the loading docks.

Nice to know the value of a good supply chain is still being recognized.

[ez_at_large]

Excuse me David but could you please explain how Whirlpools finished goods wharehouse is part of their supply chain. I guess I am under the false assumption their supply chain sends them raw materials, parts and assemblies to be made into finished goods. Rather a company's supply chain is their distribution system them as you so eloquently described it? Sorry, but I confused about this.

[David Blanchard]

Originally Posted by ez_at_large

could you please explain how Whirlpool's finished goods warehouse is part of their supply chain.

I haven't gotten this question for a while, but it addresses exactly the premise that I cover in my book, Supply Chain Management Best Practices (as long as I'm plugging my book, I might as well also plug the fact that a second edition will be coming out in April 2010); namely, what exactly constitutes a company's supply chain?

The Supply Chain Council has the pithiest definition imaginable of the supply chain: plan, source, make, deliver and return. The last two of those -- deliver and return -- refer specifically to the transportation, distribution and reverse logistics components of a company's supply chain. While many companies outsource those tasks, just about every company maintains control and oversight of what happens to their products after they've been manufactured. If a company maintains its own private fleet of trucks, for instance, then the transportation leg of the supply chain is an extremely important consideration. Similarly, the efficiency with which a product is warehoused can be a competitive advantage for a company.

The term "supply chain" sometimes can be confusing because it seems to suggest that it refers mainly to the suppliers, but that's not the case. A supply chain extends from dirt to dirt, from the point of origin to the point of final consumption (or disposition).