Effective frontier

Supply chains make good companies great however, ensuring this happens is easier said than done. As shown in Figure 1.1, each company has an effective frontier a unique set of trade-offs to manage to improve business outcomes. 

Over the last 30 years, supply chains have become more complex with implications for cost, working capital, social responsibility, and product quality. These interactions involve thousands of trading partners in interconnected and ever-changing relationships that stretch around the globe. Excellence is defined through trade-offs on the effective frontier. 

In the beginning, supply chain excellence was defined as the lowest manufactured cost. The belief was that supply chain excellence could be achieved by sweating the assets. This set of beliefs formed the foundation for the efficient supply chain. Through the evolution of supply chain processes, costs were reduced, inventory levels lowered, and waste eliminated however, each company reached a point where they could no longer just cut costs without trading off service to customers. They had reached their effective frontier. 

Early pioneers fought hard battles with finance teams that did not understand the concepts. IT projects were implemented with overinflated commitments that were not grounded in reality. In the early days, the principles of supply chain trade-offs and the effective frontier were difficult to conceive. The singular focus on costs resulted in failures in customer service. These failures drove organizations to define supply chain excellence as a reliable supply chain to focus on closing multiple gaps ... 

In this period, there was a belief that savings from operations could self-fund growth. At first, it worked. However, as the company reached its effective frontier of trade-offs, these continuous... 

Supply chain excellence is defined by the ability to use the supply chain to deliver the business strategy. The maturity of process allows companies to improve the potential of the supply chain to maximize opportunity and mitigate risks while raising the effective frontier. 

To understand supply chain excellence, these 10 cycles need to be viewed together with the measurements from studying the supply chain effective frontier (Figure 1.1) (to determine supply chain tradeoffs) for each supply chain. They need to be viewed by a peer group. 

Just as an athlete is bom with innate potential, the supply chain s potential is definedby this effective frontier. As the supply chain race progresses, the key decision is how to make sense of all the market data, and make the right choices to trade off these conflicting metrics to drive higher value through the execution of the supply chain strategy. 

Improving the effective frontier. Making the right tradeoffs. How many supply chains does the organization have What defines supply chain excellence for each What is the effective frontier How can the company organize to make the right trade-offs What is needed to raise the potential of the company s effective frontier for their supply chain ... 

As the issues bubble up in the boardroom, now is the time to realize that bricks matter. Companies can only be successful in the long term if they design for value, clearly communicate the goal, and understand the potential of their own supply chain (effective frontier). There has never been a better time to build a guiding coalition to redefine the supply chain as a value network or to map the supply... 

Advancements in predictive analytics. The rate of technology change for advanced analytics is staggering. Through investments in new technologies, companies will be able to get better answers quicker. This will allow leaders to better understand the supply chain effective frontier in the face of rising complexity. 

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