Committing your company to supply chain execution is a good habit that will help keep customers, grow profits and make it more agile.
Lose weight. It's the perennial New Year's pledge, and I sincerely hope that manufacturing executives will put a similar vow at the top of their professional resolutions — for supply chain execution.
It's important to understand the distinction between the planning and execution aspects of supply chain management (SCM). Companies have long concentrated on planning, making supply chain management about as effective as a food diary or calorie counter: When focused on planning companies become aware of what's happening (consumption) and even what needs to happen (what and when you might want to eat), but that doesn't also mean they are taking action.
In contrast, supply chain execution comprises functions with suppliers and is driven by functions with customers. It includes business processes such as manufacturing operations, scheduling, warehouse management, customer service and so forth. Like running a circuit or tossing out all the cookies and potato chips, focusing on supply chain execution can have a positive effect on an organization by improving productivity and eliminating waste in and beyond the enterprise.
Demand-driven Supply Networks Run Rings around Supply Chain Management
AMR Research has proposed the Demand-driven Supply Network (DDSN), an infrastructure that "integrates demand data and processes across the supply networks of customers, suppliers, and employees to balance revenue against costs" ("Demand-driven Supply Networks: SCM Done Right," November 3, 2003).
AMR Research explains that conventional SCM addresses operations inside the enterprise without accounting for demand from customers or for suppliers' goods. In fact, most SCM tools operate on static, dated forecasts and lack any capacity for integrating actual demand as it changes. Consequently, conventional SCM does not scale well to handle changes in the supply chain, which in turn threatens profit margins.
Supply Chain Management: A Balanced Diet
I've walked factory floors for more than two decades and know how much time it really takes to build a car: just about 72 hours. Yet it takes weeks to deliver to the consumer because demand data takes about one week to travel from one tier to the next in the supply chain.
If a supplier can get to a lean, one-hour enterprise where it receives demand requests, schedules production and passes requirements to other vendors in a matter of minutes — not days — the returns will be tremendous. The car that took six weeks to deliver could potentially drive off the assembly line in days, and custom, customer-driven manufacturing would become a reality
Transforming your trading partner network into a DDNS is not the stuff of fantasy. Here's what companies can to do to achieve a balanced "diet" of supply and demand chain planning and execution for a more dynamic and cost-effective business network.
Recognize the Signs of SCE: Inventory Visibility
The public exchanges popularized in the late 1990s have given way to private exchanges — or electronic data interchange (EDI), the earliest form of order communication. Meanwhile, software vendors have introduced a number of products to streamline point-to-point communication. For example, in the automotive industry there are about two-dozen inventory visibility applications for suppliers to use to check their customers' inventory and proactively initiate orders for replenishment.
Though specialized, these kinds of applications are significant. Companies using them cut some of the steps involved in supply chain management. Instead of waiting for an order — while production continues to forecasts that may or may not be accurate — the supplier can see a customer's inventory. Are inventory levels too low? Or does the customer have excess material in supply?