Excellence in Supply Chain Takes Time: Schneider Electric
Schneider Electric has been rated as having the top supply chain for 2023 and 2024, thanks to its relentless push for decarbonization and end-to-end visibility of its suppliers. By leveraging experts and meticulous supplier mapping, Schneider Electric has built one of the most successful supply chains in the world. Kenneth Engel provides insight into what it takes to achieve this level of success and underscores the impact on a company’s growth, focusing on the bottom line and increasing gross margin. The more aspects of your supply chain you can directly or indirectly control, the higher the quality standards you can maintain. Without the right tools, sunk costs can silently erode any company's material budget.
Shocking Your Supply Chain for Intensified Growth
Upstream Suppliers
Determining if a company can grow with your desired scale, and understanding the importance of customized suppliers to your business, is a complex challenge. Relying heavily on a single supplier can foster strong relationships but also risks production disruptions due to shortages, price increases, and scalability issues.
Taking control of this aspect is crucial. Many companies address these challenges by hiring more procurement professionals, analytics teams, supply managers, and business leaders. However, this approach can be costly, and businesses must be cautious about increasing labor costs to reduce material costs. Proper management can give you ownership of your supply chain, allowing you to focus on suppliers that can scale long-term with your business and mitigate risks associated with poorly managed suppliers.
Schneider Electric’s Approach:
Focus on Top Revenue Components: Start with your most successful regions. "We started with 70% of our revenue in North America," says Engel.
Identify and Document Key Components: Categorize and subcategorize your components, ensuring detailed documentation. "We identified 37,000 components that have historically been our biggest challenges," Engel notes.
Supplier Identification: Map your suppliers to each component. "We tied them to about 300 suppliers," Engel explains.
Set Ambitious Timelines: Aim for short-term success to build motivation. "We wanted to do this in months," Engel emphasizes.
Detailed Documentation: Record all supplier challenges and improvement strategies, identifying risks and opportunities.
Leverage Digitization: Utilize software, AI, and logistics management tools to empower your teams, enhance organization, and identify business aspects that may be overlooked. These tools can learn, improve, and support your decision-making.
Engel advises, "Always think about the purpose of your supply chain. How do you really generate value for your company, and how do you outpace your competition?"
Downstream Suppliers
Owning the vertical that delivers your finished goods to consumers—from manufacturing and distribution to end-users—requires optimization to ensure timely delivery without holding large quantities of aging inventory. Effective forecasting and inventory management necessitate detailed planning at each supply chain stage.
Key Steps for Downstream Suppliers:
Identify Top Distribution Partners: Define your key partners and analyze their success factors. Is it a unique case, or is it something that can be replicated?
Optimize Logistics: Ensure your logistics are streamlined, reducing unnecessary stops and costs.
Systematize and Experiment: Implement systematic processes and use fast feedback loops to test their effectiveness. Use data to inform and adjust strategies.
Utilize Technology: Adopt technology that integrates with your processes to visualize and manage success variables. Software, AI, and data warehousing can provide a competitive edge.
Conclusion
Owning your supply chain from end to end, as Schneider Electric has demonstrated, requires a strategic approach and the integration of advanced tools and technologies. By focusing on both upstream and downstream suppliers, companies can enhance efficiency, reduce risks, and drive growth. As Engel puts it, "Think about the purpose of your supply chain. How do you really generate value for your company, and how do you outpace your competition?"
References https://manife.st/- Kenneth Engel's Talk