Supply Chain Management Strategies

Dec 1, 2009

Striving to take their business to a new level, or just keep pace with increasing competition, many aftermarket management personnel are realizing they need an expanded view of their company’s business environment.

There was a time when this meant looking deeper and harder into their own enterprise, or slightly beyond to their immediate trading partners. That’s no longer good enough.

Virtually every company-from manufacturer to logistics provider to retailer-is operating in a much more complex, multifaceted supply chain. This means their business is being impacted by a whole new set of factors.

The list of forces driving this change in supply chain dynamics is long, varied and, in most instances, not a surprise. It includes the usual suspects-globalization, a changing competitive landscape due to mergers and acquisitions, changing regulatory requirements, changing consumer expectations, and a high failure rate for new product introductions.

There also are forces that are less top-of-mind, including shortening of product lifecycles, skyrocketing product variety, rising energy costs, and increased congestion at ports and on roads.

Whether your company manufactures, distributes or sells products directly to WDs, jobbers or customers, it is critical to incorporate all supply chain business drivers into your decision-making. The strategy of a concept-to-customer supply chain management approach provides the conceptual framework for addressing business forces within the internal, external and customer dimensions of your supply chain-enabling a true multidimensional view of the factors impacting business performance.

With supply chain management and complementary solutions covering everything from product and network design, to exception management and performance analysis, to executing last-mile delivery, this concept enables companies to construct a conceptual framework to implement the business strategies necessary for leveraging the value of supply chain management-from concept to your customer.

A Stronger Chain

Implementing concept-to-customer thinking in supply chain management requires a set of actions and processes that are unique to every business. But the bottom line for each company is the same-the need to establish a more resilient supply chain that makes it possible to better-manage and adapt to all, not just some, of the business dynamics impacting the company.

This includes improving insight and control over your own operations; catering to, influencing, and responding faster to events beyond your control; and focusing on the customer and signals from upstream trends to plan and drive your supply chain.

To help implement and foster concept-to-customer thinking, I have incorporated and identified realistic supply chain strategies that enable enterprising aftermarket companies to take the actions necessary to build anticipation and resilience into their supply chains:

Step 1-Dynamically adjust your physical network.

For many companies, the physical ownership of manufacturing, warehousing, transportation, and/or retail capacity represents the largest fixed cost element of their business. Despite this financial and competitive importance, however, too few companies have a strategy to assess their networks on an ongoing basis to ensure they are optimized to meet their business needs.

Often, companies don’t sit down and design networks; they inherit them as a result of acquisitions or they evolve their networks over time as they expand their operations.

In some cases the gains from efficient manufacturing and distribution processes are negated by the physical location of assets or a company’s capacity to make, move and store products as the demand mix changes from year to year.

In addition, the effects of external pressures-rising fuel costs, differential regional tax rates, regulatory compliance and environmental concerns-”can be mitigated if networks are regularly assessed for effectiveness in meeting requirements.

Step 2-Work the supply network.

Working the network means dynamically making decisions about all the factors that go into getting products into your customers’ hands.

In an extended network, there are multiple routes by which product can reach customers. Effectively working the network necessitates making a number of strategic decisions such as whether to make or buy; whether to supply products using manufacturing facilities in America, Asia, or elsewhere; picking one distribution center over another; and determining how much stock to hold and where.

Today, supply chain leaders can take advantage of optimization technologies to make these decisions based on a holistic picture of demand mix and supply capacity factors. By taking this approach, you can increase the likelihood that you will choose the best option in terms of customer service and total cost of supply.

Network optimization affords you the means to manage the complexity stemming from the predictable external factors and customer mandates. These include factors such as regulatory constraints in shipping product from one region to another.

Where network optimization really scores, though, is in its ability to help companies react quickly to those unpredictable external factors such as disruptions in supply stemming from a manufacturing or supplier failure, rising fuel costs in specific regions, or the opportunity presented by unusually high demand for your products.

Anyone can plan in steady-state conditions, but optimization-based planning tools can give you the edge when it comes to steering your way out of trouble.

Step 3-Boost asset productivity.

For manufacturers, there is no substitute for effective planning and scheduling to maximize returns on critical assets such as equipment, materials and people. For logistics providers and retailers, there is no less a need for effective planning and scheduling to maximize the use of warehousing and transportation assets.

Today, advanced planning solutions take manufacturers, logistics providers and retailers beyond the confines of traditional planning and into fast, responsive, problem-solving engines that are cognizant of constraints from the internal dimension-the things you can control. These capabilities routinely provide greater visibility and control over capacities, material availability, labor skill deployments and task sequencing to ensure that you make the most of your capital investments.

It is important to recognize that the route to capital asset productivity varies dramatically within manufacturing, logistics and retail industries, and even between the types and styles of any one of these industries. Therefore, boosting the productivity of your capital assets involves choosing the planning and scheduling technologies that best fit your business model. The same is true in deciding the warehousing and transportation management capabilities you need.

Step 4-Expand your visibility.

Today, product travels more miles, passes through more hands, and crosses more systems on its journey to your ultimate customers’ hands. This adds numerous points in the supply chain where the smooth movement of goods can be disrupted.

By extending your visibility up and down the supply chain, you can create a resilient supply chain that enables your company to adapt more quickly to the forces of the external and customer dimensions.

Initially, this might mean gaining visibility of inventory wherever it might be-at a plant, in a warehouse, in transit or at a store. Supply chain visibility solutions and technologies can facilitate real-time visibility of inventory, regardless of where it is, and improve your ability to predict and plan for product arrival.

Demand visibility solutions can help manufacturers see what retailers are selling, so they can adjust their production to optimize business results and, in doing so, accommodate more requirements from the customer dimension.

Conversely, retailers can implement solutions that provide visibility further up the supply chain, so they can understand when product will be delivered to their stores and even further back to what is being produced.

Step 5-Design to deliver.

A holistic view of the supply chain is incomplete without consideration of the design of the product itself. Because supply chain leaders know that up to 70 percent of new product introductions fail, product lifecycle management is increasingly being incorporated into supply chain thinking.

The critical factor is that product lifecycle management is being used to get product designs right the first time, so the incidence of failure and time to market can be reduced.  This is a design improvement, as the supply chain cycle is becoming much more complex and more stratified.

Step 6-Track performance for continuous improvement.

To sustain the concept-to-customer supply chain approach, it is necessary to measure and track how well your company is addressing challenges from all dimensions across your business and against your key performance indicators.

There are a number of analytics and performance management solutions available that can streamline the way information is collected, analyzed, shared with supply chain partners and reported to government agencies. Simply improving information flow can help to significantly reduce ongoing operational costs, in addition to facilitating better overall decision-making.

Concept-to-Customer Benefits

By implementing some or all of the strategies outlined, companies can derive tangible business benefits from the concept-to-customer approach. At the fundamental level, concept-to-customer thinking leads to improved decision-making, because you have more complete, more accurate and timelier knowledge of all the factors influencing your business.

In addition, this type of thinking improves visibility and your ability to anticipate and respond to both risk and opportunity in the management of your supply chain. More specifically, supply chain leaders who adopt the concept-to-customer approach can count on optimizing the flow of information and products throughout the supply chain.

This, in turn, sets the stage for several business benefits, including:

  • Reduced operational expenses. The clearer picture of end-customer demand and greater control over manufacturing and logistics capacities help companies reduce total operational costs, while varying the mix between the different cost elements of inventory, production and transportation expenses.
  • Improved profitability. The concept-to-customer approach can improve profitability by increasing the success rate for new product introductions and making internal operations more efficient and cost-effective.
  • Improved customer service. Manufacturing, logistics providers and retailers who adopt the concept-to-customer approach have more visibility up and down the supply chain, and better-understand their role in meeting end-customer demands.
  • Improved competitiveness and faster growth. The disciplined, strategic approach to understanding the internal, external and customer dimensions of your business facilitated by concept-to-customer supply chain management puts your company in a better position to outperform competitors whose decisions are based on less complete and less insightful information.

Mastering the principles of supply chain management will help your business grow and thrive.

As an aftermarket manufacturer or supplier, consider operating under the guidelines mentioned and you’ll notice a more seamless transition to completing this primary company strategy. Such strategies will not only improve your company from within, but will enhance the management character of your business.

The lack of prudent planning is only a step backward.  The issues addressed are suggested for businesses of any size and can be seamless as part of your organizational makeup.  As they say, time waits for no person.  It’s time to take action steps.