Supply & Demand Executive recently ran an article by Aatish Goel & Murali Krishnan Sundararajan on The Flat Supply Chain that noted that globalization has created a massive increase in supply chain complexity and that supply chain visibility is emerging as a critical differentiator for companies to stay ahead of the competition.
The article also suggested that companies should manage supply chain visibility according to the process-technology-organization framework, and recommended the following from the process angle.
- Effective S&OP Process Deployment
An effective S&OP process brings the right information in front of all stakeholders in a timely manner.
- Internal & External Inventory Turns Review
Use a multi-echelon inventory visibility system that allows for regular review of inventory status inside the company and inside the supply chain as a whole.
- Alerts & Exception Management
The amount of data produced by a well-run supply chain at any point in time is huge and almost impossible for anyone to review manually (even with great analysis and reporting tools). Thus, it is important to have exception reporting and alerts to bring critical incidents and issues to the immediate attention of the right person.
- Alignment of Supply Chain Metrics with Business Goals
Use process-based metrics that complement business goals to monitor and improve the process.
This was a good starting list, but I’d also add at least the following:
- Integrate PoS data and forecasting across the supply chain
A supply chain view of inventory is not very useful if you do not know how much product you should have at any given location at any given time, and given that demand can fluctuate, using static forecasts to plan inventory is not optimal.
- Use collaborative issue resolution processes
When a critical incident occurs upstream in your supply chain that effects you, it’s important not just to insure your supplier, or your supplier’s supplier, starts working on a resolution immediately, but that you work with the supplier to not only insure a quick resolution, but to understand why the critical incident happened in the first place. Then, you can pass that knowledge onto your other suppliers and make sure it doesn’t happen to them.
- Regular Review of Transportation Timeframes
When calculating inventory requirements, it’s vital to understand how long, on average, it will take to restock a location in order to insure that you can handle demand spikes and not lose sales. If it takes 7 days, but a demand spike due to an upcoming promotion could wipe out inventory in 3 days, then it might be wise to temporarily increase the inventory requirements of that remote location.
- Use Process Models
Standardized, Integrated, S&OP processes are good – but streamlined process that are sound and complete are better. A process model will help you analyze your processes to make sure they are of just the right complexity. If your process is too simple, you could miss critical incidents or key data that could significantly change your forecasts and inventory requirements. Too complex, and you could lose the ability to react quickly.
From an organizational technology angle, the article had the following to offer:
- Use an extended enterprise system.
This will allow you to create a centralized data store, on which you can execute the data mining applications needed to detect exceptions and critical incidents, the analytic applications need to determine required inventory levels and transportation timeframes, and the reporting applications necessary to insure key information gets to key stake-holders in a timely and comprehensible manner.
- Extend it with specific business solutions.
The article recommends inventory optimization tools, business intelligence tools, and master data management tools.
- Look at Service-Oriented Architectures (SOA)
This can enable flexible collaboration at a lower cost.
This is a great start, but you should also consider the following:
- Look at On-Demand SaaS
Building a completely integrated supply chain management framework, even using SOA, will be a very time-consuming and costly endeavor even for the most technologically sophisticated organization. Starting with on-demand SaaS can allow an organization to get a fairly sophisticated system of supply chain management tools up-and-running quickly and cost-effectively.
In conclusion, the authors have it right – with supply chain complexity having increased exponentially in the last decade thanks to globalization and increased outsourcing, visibility is becoming key to managing risk and total cost and the time to do something about it is now.