Too much efficiency? There's a flip for you!

Just read an article in BRW (from last November, actually – thanks waiting room magazines!) that made a fascinating point about efficiency.

For years now – during the ‘high years’, as I call them – the mantra in supply chain management has been ‘efficiency, efficiency, efficiency’. And by efficiency, people meant less suppliers, less time from input to production, production to shelves, shelves to customer etc.

Interestingly, during the economic crunch, many businesses with heavily optimised supply chains felt the crunch, however, as if you’ve got a heavily consolidated chain and a supplier goes out of business, you have REAL problems with your inventory.

So maybe actually what we need in supply chain management is NOT necessarily efficiency, as much as flexibility. BRW used the example of SuperCheap Auto. With nearly 1000 suppliers, they don’t source more than 2% of their items from any single supplier, meaning they are shielded from suppliers going under. They’ve had to get VERY good at component substitution and a few other things – but it’s shielded them from the crunch better than many other vendors.

Goes back to a philosophy written about by my good friend and colleague Peter Sheahan: sometimes the best thing to do with conventional wisdom is to get the hell rid of it! Or AT LEAST challenge it!