A common problem in supply chain management is that companies still optimize within departments, without regard for the supply chain as a whole. For instance, in one project, it was found that delivery schedules were aligned with store wishes without considering transportation costs or distribution centers. By optimizing deliveries based on costs and timeliness across the entire chain, savings were achieved in transportation and distribution without compromising store deliveries.

Another example involves a supplier of fruits and vegetables where specialized teams handled unloading, quality control, and repackaging, with little communication between them. This led to products being placed in illogical locations in the warehouse, causing delays and extra costs. The key here was to look at the big picture first, rather than optimizing individual departments. There is enormous potential for savings and optimization when companies approach the chain as a whole, rather than just optimizing functionally.

Many companies make commercial choices without considering the implications for supply chain costs. A supplier of bottled gas and gas tanks treated all customers the same, delivering within twenty-four hours regardless of their needs. By distinguishing between customer types, such as poultry companies that couldn’t go without gas and others that were more flexible, the company increased efficiency without compromising service.

That same supplier based its pricing on tank size, with smaller tanks being cheaper. However, from a supply chain perspective, larger tanks are more efficient to supply, saving time and costs. A pricing structure that incentivizes larger tanks was found to lead to better cost efficiency and resource utilization. Uniform processes do not always fit different customer needs; differentiation can provide a better balance between service and costs.

Many companies follow outdated policies and rules. For instance, a retailer restocked shelves when inventory fell below 50%, without considering demand variations. This led to inventory issues when demand fluctuated. Similarly, some companies maintain a standard two-week inventory regardless of demand fluctuations, which can result in either excess or insufficient stock.

Companies often use the same resources and schedules for both standard and custom orders, leading to disruptions. Adjusting workflows to accommodate diversity in portfolios can improve efficiency and quality. Rules and policies must evolve with the organization; entrenched routines hinder innovation.

Many companies base their production on a point estimate of demand, which can lead to waste or shortages when actual demand deviates. By factoring in uncertainty, companies can better respond to fluctuations. For example, a baker who produces based on expected demand might have waste on some days and shortages on others. By accounting for variation, they can adjust production to minimize waste and meet demand.

This issue is not unique to the baker; it is something frequently observed in practice. Many companies focus solely on achieving higher forecasting accuracy, but even a more accurate forecast does not guarantee a match with reality. By building in buffers, companies can schedule more certainty, preventing small deviations in the forecast from leading to large operational disruptions.

Companies can use buffers like inventory, capacity, or time to handle demand deviations. Maintaining extra inventory, having flexible production capacity, or agreeing on longer lead times can help manage uncertainty. Flexibility may cost more initially but prevents waste and improves performance.

For a future-proof supply chain, companies should start with their strategic goals and align processes accordingly. Technology can be beneficial but should support well-thought-out processes that align with business objectives. Often, companies use tools to improve planning quality without defining what “quality” means in the context of their goals. In the gas supplier example, the current process ensured 24-hour delivery and small tank sizes, but extending lead times and encouraging larger tanks could yield greater efficiency. Optimizing both the process and using the right tools can create more value. Start with strategic goals, align processes, and let technology enhance the results.

The future of supply chain management lies in balancing efficiency, flexibility, and purposefulness. By evaluating policies, focusing on customer needs, and embracing uncertainty, companies can build agile, robust supply chains that withstand disruptions and seize opportunities. In a constantly changing world, a dynamic and purpose-driven supply chain offers the greatest competitive advantage.