The Flat Supply Chain

Is visibility a challenge?


According to Aberdeen's June 2006 study benchmarking more than 150 manufacturers and retailers, almost 79 percent of companies reported that their top concern is the continued lack of supply chain visibility due to manually-driven processes. Approximately 77 percent of the companies put supply chain visibility as their top technology investment priority over the next 24 months (4). The second highest concern was the uncoordinated nature of global supply chain processes across all the parties involved.

Below is an example of a European pharmaceutical company adopting visibility technology that resulted in cost reduction and boosted sales (4).

We believe that companies should manage supply chain visibility in the following manner, as described in the process-technology-organization framework.

"What to Do" — The Process Angle

The process piece of the framework guides the business users and advises what needs to be done to improve supply chain visibility, thereby overcoming some of the stated challenges. The critical ones are described below:

  • Effective deployment of Sales & Operational Planning (S&OP) Processes — Conduct fortnightly/monthly S&OP meetings:
  • As companies mature in a flat supply chain, an effective and a successful S&OP process provides a forum to bring right and timely information in front of all the stakeholders. It is a very integral component in building transparency and trust in the system. The ideal scenario would be to conduct S&OP meetings as frequent as possible to align it with the market dynamics, thereby capturing the latest information in the system and taking suitable actions.
    • Review inventory turns internally and externally:
    Inventory management in a flat supply chain has its own challenges. Due to multiple players, it is difficult to optimize the inventory levels and maintain total inventory cost to the minimum. One of the significant requirements to do this is to have a clear multi-echelon inventory visibility system. Companies need to review the inventory status periodically and that, too, both inside and outside its four walls of operations. Because of the dynamic nature of the business, business users should periodically revisit target service levels and inventory norms at various stocking points in the supply chain. Based on analysis, corrective actions can be planned such as: liquidation of inactive inventory, appropriate distribution of active inventory, and sharing ageing analysis with concerned stakeholders etc.

  • Alerts and exception management:

  • Align supply chain metrics with business goals:

ConsumerCo, a $1 billion manufacturer of household goods, had issues with low demand forecast accuracy, below-par perfect order fulfillment capability,and high inventories (5). By adopting the DDSN metrics hierarchy it was able to target the critical issues through a root-cause analysis. Poor demand visibility was the main cause for all these problems. So, with proper alignment of metrics, ConsumerCo reduced cost and improved service at the same time.

"How to Do" — The Technology and Organization Angle:

Technology will play a pivotal role in providing visibility in flat supply chains. The business cannot be supported by a rudimentary way of capturing information.

It needs to look toward an extended enterprise application systems and standardize processes to have a single source of data. Companies can also look for specific business solution applications for immediate and low-cost benefits such as inventory optimization tools, business intelligence tools and master data management.

One of the leading fashion retailers demonstrates the capability to use technology for competitive advantage (i.e. reduced time-to-market at less cost). The company spends heavily on sophisticated technology such as PDAs for all its store managers to monitor customer preferences that are sent to a central planning office. This has resulted in reduced execution time, allowing it to postpone design decisions to incorporate feedback from its stores. It has also helped in adapting to new designs when unforeseen events occur.

  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required