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Supply chain audit changes MD’s views

Supplier News

TWO years ago if you had asked Ian Barr, MD of SSS Australia what he thought of supply chain consultants he would have shaken his head and muttered something about ‘waste of time’ and walked away.

If you asked him today, he would say that consultants can be an invaluable asset to any business.

The problem that Barr faced was actually taking those recommendations and turning them into tangible, achievable results for the growth of the company. He admits that unless the boss is prepared to listen and change then there is simply no point in bringing an external consultant in.

“To take a view of your business from the outside-looking-in is an old adage but one that is very true,” Barr said.

SSS Australia, one of the largest medical wholesalers in Australia employing over 50 people, engaged Supply Chain Solutions (SCS), to audit their business and whilst they were not prepared for the revelations, they have slowly initiated a number of the recommendations and have reaped tremendous financial results.

“Taking time to audit your business, internal procedures and practices, enables you to identify areas of weakness and proceed to identify the elements that are currently capping your continued growth. Audits identify what needs to be changed to deliver significant increases in your sales results and profitability,” he said.

SCS was introduced to SSS Australia initially to assist them with the purchase of a new software system to deal with their financial, accounting and warehouse functions. However, the principal of Supply Chain Solutions, David Ogilvie recommended that the first step was in fact a supply chain audit to truly determine the way the business was operating and to identify existing non-value adding processes to ensure they were not carried into the new system.

“Too many businesses think that upgrading software and accounting systems is the answer to all their internal issues, and not many understand that 90% of the time their existing software is more than adequate and it simply lacks training and understanding of its full capabilities,” Ogilvie said.

“Sometimes software systems get blamed as the root-of-all-evils and yet in many instances it is in fact a staff behavioural problem, or a management mindset, or another procedure that is in fact the issue,” he said.

Audit results

Investigations during the audit identified one major and critical failing of SSS; that they had been pursuing sales at all costs, and whilst this had resulted in sales growing at a healthy 23%, the audit showed that the profitability of SSS did not improve at a similar rate.

Previous attempts to improve profitability levels at SSS saw changes in purchasing practices which simply allowed them better pricing, by purchasing in larger quantities and less frequency.

This resulted in the company experiencing rapidly growing stock levels with inventory growing at a faster rate than sales.

The audit also identified significant internal practices and procedures that needed to be improved.

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