Productivity and efficiency are topics that have historically been high on the list of focused activities for most businesses, and seems like common sense.
Productivity, by definition, is the ratio of inputs to outputs….so if we focus on minimizing inputs and maximizing outputs, we are more productive, and will see a positive impact on the bottom line.
While common sense, productivity efforts historically have been focused on the main process areas of our businesses….where the action is. Although this tends to make sense as these areas are often our biggest cost centers, and therefore have the biggest potential gains, that is not always the case. The reason being that
although these are the biggest areas of expense, they have also been studied, re-studied, and studied some more. As a result, the biggest potential gains may in fact be found in the support areas of the business.
This logic holds truth in the Supply Chain space as well. Supply Chain Professionals tend to see their value as a Professional in the amount of “spend” they control. Because of this optic, we often put our most inexperienced people in charge of MRO (Maintenance, Repair, and Operations) expenditures. The problem with this is that purchasing a large volume of small items (consumable supplies, parts, service contracts) is often the most complex of our spend activities, and if not carefully managed, can result in a “death by a thousand cuts” impact on the overall cost structure.
This is but one example of how shifting our focus into some of the areas that have been virtually untouched from a productivity and efficiency standpoint can potentially lead to significant gains.
It is also important for Supply Chain Professionals to recognize not only where we spend our money, but the value that key vendors can provide, as well as the cost of managing these vendors. Having to hire extra staff to manage vendors increases business inputs, and drives down productivity and efficiency, unless careful consideration is given to how their work will result in overall business gains. As s result, streamlining business processes and the work we need to do in support areas can also have a major impact on improving overall organizational productivity.