The boom in shale plays and natural gas has created a new crop of producers while creating opportunity for energy industry veterans. The often-rural nature of onshore shale plays, the geographically dispersed nature of the shale plays and the recent resurgence of onshore production dictates a different approach to supply chain and procurement.

Among the challenges for onshore producers are differences in scale, which means managing greater numbers of deliveries that contain smaller quantities of supplies to geographically dispersed facilities, and the rapid pace of development and activity in shale production, meaning shorter lead times and competition for resources of all kinds.

Many companies think they use supplier partnerships for warehousing and fulfillment, but in reality they are just one-sided relationships. I once asked a Fortune 500 company if they used partnerships and their response was, “Of course! If you provide the price, quality and lead time we want, you can be our partner.”

Partnerships built on that kind of foundation typically don’t lead to breakthrough results. In a real partnership, success is measured in terms of both parties increasing their revenue, profitability and cash flow. A company I know embodied this model by striving to be their supplier’s most profitable account, while the suppliers gave them world-class pricing and the chance to dramatically increase inventory turns. A true partnership is about collaboration and mutual success.

According to the International Food Service Distribution Association (IFDA), it takes 2,500 companies operating thousands of warehouses and massive transportation fleets to power the foodservice distributorship in the United States, a $200 billion market.

Getting the right things to the right place at the right time in the right quantity to achieve perfect work flow – while minimizing waste – is the classic definition of supply chain lean technology.

Lean is perfect for making cars, selling beverages or moving commodities. But what about treating patients?

Proving Ground

Dartmouth-Hitchcock Medical Center in Lebanon, N.H. is proving that being lean can improve patient care and save millions of dollars in the rapidly changing world of healthcare.

As supply chains evolve and adapt to meet increasing customer demands in a more dispersed and volatile business environment, the notion of supply chain visibility is emerging rapidly as a hygiene need.

Today, analysis of common supply chain challenges in the global distributed supply chain paradigm clearly brings out the need of three critical interventions across all supply chain processes – design, source, make, deliver and service, namely:

One of the most revolutionary changes in manufacturing and supply chain management was the shift to just-in-time (JIT) inventory. With this methodology, “carrying inventory” became virtual profanity; entire new industries and consultancies sprung up to help manufacturers shift to this leaner, more optimized operating model. Once the kinks were worked out, JIT helped manufacturers walk the fine line toward greater profitability. They were able to meet market demand while dramatically reducing their inventory and materials costs. No inventory and no stock-outs - what a dream!

No business hurdle is harder to jump than clear communication that’s in line with business strategy. This is true in retail, as supply chain communication is the difference between profit and loss. Logistics and the number of participants in the system make communication a challenge.

Due to the complexities, it’s amazing that products and materials from far away make it to retailers’ shelves.

The efficiency and reliability of modern supply chains is thanks to technology, leadership and sound strategy. But conversation enables and empowers participants throughout the supply chain to optimally accomplish tasks and meet goals.

Most B2B companies do not use price sensitivity to set prices because they assume they can’t. They think it’s out of their reach because the textbook approaches — such as price testing or win/loss conversion analysis — just don’t work very well in B2B.

Price testing is operationally challenging and the risk of losing customers during testing is too great. Conversion analysis requires excellent win/loss data, which is often unavailable or unreliable in B2B companies.

 

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