2:22 AM
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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