10 things you should consider before writing any supply chain policy


Musah.jpgWhen purchasing materials the same routines are used on each occasion, even if each and every one of these purchases is unique. So why do we need supply chain policies or procedures? asks Muddassir Ahmed, Divisional Supply Chain Manager at Eaton.

Any supply chain policy or procedure involves teamwork, rather than assembly lines. Supply chain policies are largely a matter of co-ordinating people, that is, agreement between individuals who co-operate, and agreement about their competence.

When defining a supply chain policy, it is often a good idea to describe its characteristics. A supply chain policy should: have a first activity and a final activity; stipulate a customer and a supplier; consist of a network of activities; produce a value-adding result at the end; and be repeated time and again.

Proposed heading in any supply chain policy

1. Purpose

This defines the main reason, drive or why you are writing this supply chain policy.

For example, if you are writing a supply chain policy for ABC Analysis then you might want to say: “The purpose of this supply chain policy is to establish the rules of assigning market segmentation codes (ABC codes) to all the parts/SKUs in the business. ABC is driven by a consensus process balancing market needs (decided by historical patterns and future plans), customer agreements and supply chain characteristics”.

2. Scope

The scope defines what is included and excluded from the supply chain policy parameter.

For example, in the ABC segmentation policy example, scope can be defined as: “This policy does not cover part obsolescence or reactivation, replenishment and inventory management details, though these are tightly linked with ABC codes. These details will be covered in separate policies and work instructions”.

3. Background

This heading is optional. In this section you can outline why this supply chain policy is established, and what drove and directed the development of this policy.

4. Responsibility

In any process management there are three important roles, namely:

1. Process owner: Who is responsible for the strategic direction concerning the process?
2. Process manager: Who is responsible for how the process is controlled operatively?
3. Competence of supplier: Who is responsible for supplying the appropriate competence needed in the process?

The role and responsibility concept is very important for successful execution of any supply chain policy. Continuing the example policy on ABC Analysis, people and functions potentially involved are:

• Marketing/product management (target promise time, product lifecycle management, frequency of regeneration, new parts ABCQ determination, customer communication)
• Supply chain manager (ERP codes maintenance, ERP lead times, replenishment policy)
• Customer service manager (major customer commitments , firm time period, trade customer communication)
• Manufacturing manager (capacity availability)
• Pricing manager (price changes with ABCQ)
• Plant manager/head of operations (reporting and implementation timeline)

5. Adherence to policy

Who is required to follow the policy and related processes and procedures to their best abilities? In this section you can explain which functions are responsible for creating and maintaining a deployment roadmap document to address any compliance gaps to the outline policy.

Lastly, who will comprise the governing body or council that will be monitoring the supply chain policy?

6. Roles, input and output

Who are the key roles, and what input would they pass on to customers of those process steps? Continuing the example of ABC Analysis, it could be shown as:

• Supplier: Supply chain team
• Input: Invoice history, open orders, major customers, historical demand of all parts, previous ABC Analysis
• Process: Initial ABC generation and analysis
• Output: A, B, C classified parts, clear lead time segmentation
• Customer: Marketing or product management.

7. Policy – process steps and expectation

Here you illustrate each of the process steps, one by one. This is the most important part of the supply chain process in question. In this section understand customer requirements, how supply chain process adds value and, lastly, where the potential for improvement lies.

8. Related policy references

Explain the other business supply chain polices which can be referred. From our example ABC policy, you could mention the following support policies:
• Replenishment policy
• Inventory management
• Capacity planning
• Pricing policy

9. Definitions and acronyms

Most businesses have many acronyms and different definitions. Everyone in the business is expected to know them – or maybe we invent them just to confuse newbies?

Either way, list them all here.

10. Sign off

This is a simple yet important step. This section explains who is the sponsor of this supply chain policy, who has recommended this policy and, lastly, who approved this policy.
1. Sponsored by…
2. Recommended by…
3. Approved by…

To summarise: the above points seek to highlight the fact that writing any supply chain policy and procedure requires you to think about:

• Organising for improvement – Who are the owners and process improvement team?
• Understanding the process – Define the input and output, interfaces, customers and suppliers. Map the process, i.e. include the flow of work in the supply chain policy you are writing.
• Observing the process – Establish control points and implement regular measurement.
• Continually improving the process – Use and analyse the feedback from the measurement to improve the process.

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