Turn Global Supply Chain Challenges into Competitive Advantages

By Richard Howells

The dynamic and complex global web of networks in which your organization operates is increasing the need for collaboration and responsiveness both within and outside of a company's four walls. To quickly sense and profitably respond to network events by capturing, analyzing and resolving supply chain issues to best serve your customers, you will need the support of integrated processes, systems and technology.

The critical aspects of this business network transformation include letting demand drive decisions, adopting an integrated logistics and fulfillment model and minimizing risk by becoming more responsive.

Drive Decisions with Actual Demand

Now more than ever, the old adage that "the customer is king" is a business reality as companies strive to improve demand sensing, deliver demand visibility, enable demand shaping and focus on a profitable demand response. This can be achieved through a focused effort to capture and manage real-time demand data that are leveraged to detect and take corrective action to improve customer service, by balancing push and pull planning processes.

Moving toward this "demand-driven" approach requires a series of steps. First, companies must capture and manage data from the diverse channels they serve using point-of-sale (POS) systems, radio frequency identification (RFID) tags and other sensory technology so that real-time demand signals drives replenishment processes.

The next step is to implement a cross-departmental sales and operations planning (S&OP) process to leverage this improved demand accuracy. This involves creating and comparing your demand plan and your supply plan, then reconciling these with your financial plan. This cross-departmental team evaluates the risks and assumptions involved and produces one aligned plan that addresses key tradeoffs between sales, production and finance.

The final step is to leverage integrated planning processes that enable organizations to synchronize demand and supply plans and respond to network events and changes. This involves setting goals and forecasts, as well as optimizing and scheduling time, materials and other resources at the strategic, tactical and operational levels across the entire network.

Deliver the Perfect Order

Companies plan in a perfect world but execute in the real world, where things do not always go according to plan. To thrive in this environment, companies need to develop fulfillment processes that balance efficiency with the lowest possible delivery cost. And when real-world events throw plans off course, they need to readjust their distribution, transportation and logistics channels.

Companies striving for the perfect order can start by better managing both static assets (like distribution centers and warehouses) and mobile assets (trucks and inventory). There is a tipping point, however, where asset reduction alone is not enough to fulfill customer expectations. Companies today need integrated logistics processes that span order promising, warehousing and transportation functions into a single, real-world aware fulfillment network. The goal is to monitor information, measure activities, notify involved parties and execute flawlessly so that customers receive that perfect order.

Minimize Risk

Today's distributed supply chains make it critical to have visibility and control across a network of internal and outsourced manufacturing locations, logistics providers, distribution centers and customers. To achieve this, information must be managed across heterogeneous systems and disparate silos separated by departmental, geographic and even organizational boundaries. The result: fast, cost-effective response to network demand changes, disruptions or unanticipated economic events.

To be able to sense and respond faster and more intelligently to demand and supply dynamics, companies must transition traditional supply chains into open, configurable and responsive supply networks. Responsiveness is required at strategic, tactical and execution levels. Strategically, to maximize profit, companies need to match long-term demand and supply with available capacities. Tactically, they must synchronize supply to demand across the internal and external network to drive efficiency. And ultimately, at the execution level, they must sense and respond to demand changes instantly to drive revenue and market share.

About the Author: Richard Howells is senior director for supply chain management at SAP. He can be contacted at richard.howells@sap.com.

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