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Supply Chain Management - Competing in an Uncertain & Complex World

Supply Chain Management - Competing in an Uncertain and Complex World For the past few years, manufacturing industries have been ... thumbnail 1 summary

Supply Chain Management - Competing in an Uncertain and Complex World

For the past few years, manufacturing industries have been in the doldrums. In a down economy, companies need to reduce their cost of good sold (COGS) and increase inventory turns to keep cash flowing – but market uncertainties and complexities have made this challenging. The following factors contribute to uncertainty, and dealing with them profitably requires far more robust supply chains than most companies have.

• The speed of economic upturns and downturns in the past few years creates demand volatility as well as fiscal pressure for efficiency. 

• Product proliferation makes the demand for each stock-keeping unit (SKU) more difficult to predict and makes supply and distribution more complex.

• Increased reliance on outsourcing means companies have lost some control and visibility over supply and logistics, and in some cases even design and sourcing.

• Internal production is less predictable, since product specifications and mix are constantly changing.

• Logistics disruptions based on carrier issues, war or its threat, terrorist attacks, and labor strikes have become almost commonplace.

• Globalization makes the supply, demand, and distribution for each SKU, product line and region far more varied and challenging to manage.

Most companies designed their supply chains in more stable times, and these  designs have now become obsolete. When demand spikes up, companies often suffer from material shortages and poor customer service. When the market suddenly lurches from boom to bust, many companies are caught with excess inventory. Product proliferation can also lead to inventory imbalances.

This broader view of the goals is important to remaining profitable. Collaboration and event management
(SCEM) with alerts have become the hot concepts for bringing various groups together for faster supply chain reaction. Collaboration provides cross-functional visibility, but still cannot ensure decisions will be financially sound. Alerts activate when an obsolete supply chain can’t handle the unforeseen. Until companies design their supply chains to accommodate uncertainty in demand, supply, service levels, inventory policies, and partner decisions, mismatches will continue to hurt customer service and profits. Using current supply chain software and concepts, companies can see an “efficient frontier” where inventory costs are as low as possible to achieve the target service level. However, uncertainty and change have prevented most companies from reaching that goal. As a result, managers are frustrated and companies’ financial performance suffers. Manufacturers now have the opportunity to reach and even improve on their efficient frontiers – by designing their supply chain, not just managing it. This can change the basis of competition for a company, its supply chain, and an industry. As leaders up the ante, their success may help to speed economic recovery.

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