The first step in achieving end-to-end synchronization often begins with the realization that modern supply chains have moved beyond enterprise resource planning (ERP). When ERP systems were designed decades ago, supply chains were much simpler and bound by the four walls of the enterprise. Now they are multi-enterprise, starting with consumers, retailers and distributors, and flow through an extended network of suppliers, contract manufacturers and other third parties. Managing the supply chain now means managing the end-to-end value chain, and requires visibility, planning, and execution across all trading partners.
In fast-moving markets, capturing sales growth now depends on the real-time alignment of demand and supply. It’s not enough to have good demand information if you can’t tie it back to a timely supply response. ERP wasn’t designed to do that across the multi-enterprise supply chain. Today, value chains are far more complex. You are no longer simply competing against other companies, you are now competing against their extended supply chains.
Here are five steps to turn your extended supply chain into a competitive advantage.
- Look beyond the enterprise and adopt real-time analytics that use real-time data. While traditional planning applications are restricted to historical data from within the enterprise, current data from retailers and distributors contains valuable information about future demand. Use it. Likewise, visibility to constraints at manufacturing partners allows companies to match demand with supply, and run what-if scenarios to evaluate and capture new sales opportunities.
- Automated algorithms are here to help. At this year’s Gartner Supply Chain Executive Conference, the opening keynote emphasized how algorithms are a key driver of change: “Algorithms define business processes and the way the world works.” Automated algorithms enable the next step in supply chain performance through the systematic analysis of masses of real-time data. It also frees professionals from mundane low-value activities to focus on more strategic areas, such as planning promotions or inventory policy decisions. The impact is significant. Consumer goods companies that use algorithms to sense demand typically see a 30 to 40 percent decrease in forecast error, as well as increased planner productivity.
- Connect logistics to sales and operations planning (S&OP). Finished goods are planned weeks or even months in advance, yet shippers are the last to know, often finding out as orders cross their desks. As a result, logistics is stuck in reactive mode, scrambling to secure capacity each day. New transportation forecasting algorithms can now predict logistics requirements that are synchronized with S&OP to ensure that the entire company executes against the same plan. The result is accurate transportation and warehousing forecasts by lane, mode, class and carrier. Advanced visibility to inbound and outbound logistics allows shippers to improve efficiency, proactively secure capacity at preferred rates and better plan warehouse staffing.
- Create healthy inventory across the entire value chain. Optimizing inventory in specific parts of the network often improves local performance, but shifts the problem to another part of the supply chain. Managing inventory to support the business’ growth requires the simultaneous optimization of all echelons of the extended supply chain. Removing unproductive inventory across the value chain frees millions in cash to invest in other parts of the business, lowers operating expenses by having the right product in the right place the first time and reduces waste from excess/obsolete stock.
- Better serve customers by accurately predicting demand and connecting it to a timely supply response. Growth through innovation and promotions is becoming an important strategy to drive sales, but new product sales are very challenging to forecast. For instance, while everyone likes to think their latest innovation is a winner, only 1 percent of new items becomes a top seller. Using up-to-date data from the supply chain to measure real-time demand is the only way to efficiently support run-away winners while, at the same time, avoid tying up capital in unproductive inventory for the remaining items that fail to meet expectations. Linking real-time demand with a timely supply response allows companies to commit with confidence and profitably capture growth opportunities in today’s volatile markets.
Greater end-to-end visibility and real-time data are helping companies become more agile and efficient, giving them a major edge over competitors. If your company is not already working on leveraging its extended supply chain, the time is now.
Michael Farlekas is the CEO of E2open.