60 seconds with...Mike Gray

Mike Gray on why you do supply chain.

By Staff -- Modern Materials Handling, 9/1/2006

While everyone is doing supply chain, few step back and look at the real value of what they are doing. In fact, most people overlook the fact that they do supply chain to liberate cash.

The more inventory you have, the more cash you have tied up. Now if you reduce that inventory and continue to maintain or even improve customer service levels, that's good.

The trick is to develop a rapid response system. You shouldn't be covering up problems with inventory. Instead, you need to focus on what the customer wants and delivering it only when they need it. If you're a manufacturer, that would include improved forecasting, inventory management and shop floor scheduling processes.

But you don't get good at those things for their own sake. Oh, no. You do it for the sake of cash.

When you're selling the idea of a better supply chain at your company, you need to tell people you're here to liberate cash. Say you have 30 days of inventory and it's worth $300 million. For every day's worth of inventory you save, that's $10 million that you've liberated.

Take out 20 days of inventory without hurting your customer service levels, that's $200 million. Better yet, that's a gift in perpetuity to your company. That's why you do supply chain. And we live it at Dell – delivering value to our customers, teammates, and shareholders … that's what I tell people as I travel around the globe evangelizing about the supply chain.