Supply Chain Matters has often pointed out increasing occurrences where the impacts of supply chain strategy and initiatives contribute to either positive or not-so-positive financial media news stories influencing a company’s value to shareholders. The significance of efforts to simplify a supply chain supporting unusually large assortment of products with a corresponding complex global supply chain is indeed newsworthy.
Last Thursday, The Wall Street Journal headlined a rather positive story related to industrial manufacturer 3M Company, and its efforts to untangle “hairballs” across its global product supply chains (paid subscription or free metered view). The 3M supply chain has responsibility to plan, produce and distribute over 65,000 products ranging from tape, solar energy panels, dental braces and dog chews. The company has 214 plants located in 41 countries with nearly two-thirds of current sales originating outside of the U.S… With a continued challenged global economic climate and overall sales growth at just over 2.4 percent, 3M had no choice but to focus on cost control and efficiency as a continued source of profitability.
In the article the 3M corporate culture is described as risk-averse, leading to a philosophy of “make a little, sell a little”, meaning do not make hard commitments to capital and capacity until a product has proved itself to be a market winner. That philosophy drove product developers to seek out any available supplier expertise and capacity, regardless of ultimate product distribution strategy, even if certain sub-component suppliers were hundreds of miles distant from other upstream value-chain suppliers. The result was what 3M ex-CEO described as “hairballs”, value-chains that extended across multiple suppliers in multiple geographic areas, all adding to transportation and logistics costs.
3M has now embarked on a three-pronged supply chain strategy addressing simplification. The first is to have production located closer to customers. With two-thirds of revenue outside of the U.S. the implication is for a more international based production capability.
Second is the need for fewer, larger, more efficient “super-hubs”, plants capable of making large numbers of products. These hubs can also customize products to the needs of local markets. Ten of these hubs have been implemented with six additional planned. Ten of the total sixteen “super hubs’ will be outside of the U.S.
The third area of focus is overall efficiency which includes reduction in cycle times from order of raw materials to delivery of finished goods. As an example, the production of 3M brand Command Hooks was reported to be reduced from 100 days to 35, which is a considerable impact. Similarly, the cycle time for 3M’s Littmann stethoscopes will be reduced to 50 days from 165.
Between the lines, readers can discern that 3M shifted its supply chain strategy from one of total focus on efficiency and cost to that of time-to-market balanced with an overall supply chain flexibility and efficiency.
In the Gartner 2011 last listing of Top Twenty Five supply chains, 3M was listed at number 24. Perhaps at this week’s unveiling of the 2012 listing, 3M will advance. In any case, 3M provides another example of supply chain strategy and response that has a positive impact on business outcomes and performance. Perhaps the next emphasis will be on a reduction of overall product portfolio.