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As regular readers know, I’m a strong proponent of analysis, modeling, and optimization because I know from experience the significant cost reductions these technologies can bring to any procurement department when properly applied. That’s why I was delighted to see this recent article in Industry Week on leveraging lean designs that illustrated the effectiveness of 3-D models.
The article noted how Chrysler Group LLC used 3-D simulation software to model it’s Toledo North Assembly plant during the design phase and came up with a model that cost only $54 per square foot, about 30% less than the industry average (at the time) of $75 per square foot. Not only can modeling software help you find plant designs that are more efficient and that allow your workers to be more productive, but it can help you save considerable dollars in their construction.
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Last year, Oracle sponsored the Economist Intelligence Unit to produce a report on the demand-driven supply chain: a holistic approach which was released early this year. The report, which noted that businesses must improve the efficiency of their supply chains in order to maintain competitive advantage, that the principles of lean manufacturing and inventory control may no longer (be) enough, and that today’s demand-driven networks must enable companies to be flexible in applying the full array of levers at their disposal didn’t really tell us much that we didn’t already know, primarily thanks to all the research that AMR provided us a few years back, but it did have a good list of best practices in the conclusion that could use repeating.
- Create solid, base-level demand forecasting tools, fine-tuned to eliminate anomalies and other “noise” before incorporating larger deviations and less predictable variables. You need to understand the base drivers of demand. Promotions, seasons, and unique events only serve to alter this base demand, not create it.
- Integrate new forecasting and demand management tools with existing supply chain and logistics systems to allow visibility of supply and demand all along the network in real time. The ultimate key is to be able to detect changes in near real-time and make adjustments to adapt to them before they become problems.
- Develop a collaborative sales and operations planning process that extends from customer-facing sales, marketing and service departments through fulfilment, procurement and logistics all the way into product development, to allow customer insight to inform all aspects of the business. Everyone needs to work off of the same set of numbers.
- Prepare a comprehensive change management plan to foresee and deal with organisational, cultural and technological obstacles. You don’t have time to trip over your two left feet in the middle of a change.
- Make profitability the prime objective, above simple cost cutting or revenue enhancement. Effective demand shaping helps companies to target their most profitable customers and promote their most profitable products and services, boosting the bottom line from both sides. It’s not about cost, it’s about value. It’s not how much you pay, it’s how much you make.
- Maintain real-time demand visibility. Companies can shape demand towards more profitable business only if they have timely and accurate information on customer behaviour. You need to see the trends and adapt to them.