38. Responsive Supply Chains

You know what I think about supply chain management? The ultimate goal of SCM is interenterprise integration and the goal of interenterprise integration is reducing inventory, production, and distribution costs. So, how do companies achieve these goals?

The types of interenterprise integration are responsive, enterprising and intelligent supply chains. First, a responsive supply chain, as the name implies, quickly responds to customers’ needs with little or no error. A key factor in the success of this integration model is “available-to-promise” which provides real-time integrated checks of products throughout the supply chain to ensure the company can adequately meet its customers’ needs. Next, enterprising (or adaptive) supply chains seek to bring changes to the supply chain in response to changes in customer demand as quickly as possible. Adapting the supply chain to changing situations allows the company to strengthen weak links in the supply chain. Finally, intelligent supply chains are dynamic and formed quickly to enable companies to take advantage of opportunities that provide an edge over the performance of competitors supply chains. A company selects an integration model that best enables it to get the right product, to the right customer, at the right place, and at the right time.

The rapidly changing e-marketplace is forcing companies and their enterprise partners to become more responsive to their customers. There are several forces in play putting pressure on companies to better manage their supply chain, improve logistics operations and manufacturing efficiency while remaining responsive to customer demands and constantly changing market conditions. These forces are:

  • The trend toward worldwide dispersion of manufacturing and distribution facilities due to the increased demand for customized products.
  • Channel unpredictability resulting from the new technologies that allow companies to better manage customer demand. This requires coordination of several distribution channels.
  • Responsiveness over efficiency is disrupting traditional inventory management processes as customers drive the need for faster deliveries and increased product customization.
  • Companies’ willingness to accept lower margins to increase market share as they redesign supply chains to increase efficiency and eliminate delay, error, excessive cost and inflexibility.

These forces are driving manufacturers and distributors to transform their operations to become more responsive to retailers and customers. Under pressure to reduce costs, decrease order cycle times and become more operationally efficient, companies are implementing new technologies to integrate processes and attain collaborative information sharing and planning capabilities. This means that in a real sense, information is replacing inventory.

With the advent of growing supply chain capabilities, companies are facing the prospect of managing external inventory that it never actually sees and does not own. To maintain adequate control of this ghost inventory a company must become adept at controlling information about this inventory, specifically, where it is in the supply chain at any given time. Failing this, a company is forced to maintain a physical inventory of products, which increases overhead and inefficiency.

The rapid growth of the Internet over the last 20-years and the adoption of its use as a platform for business operations around the world has enhanced the ability of companies to integrate their business processes through collaborative planning to synchronize internal assets and production with external demand and supplier capabilities. Today, as Internet technology is adopted globally and supply chain strategies converge, companies glean a competitive edge by reducing the cost of goods sold, improving customer service, building global brands and increasing global supply chain visibility as they move products to market quicker.

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