Over the last decade I have heard several interesting answers to the question, “Where does the supply chain fall short?” Most common answers include “forecasts,” “supplier performance” and “part shortages.”

As you are probably aware, these are unpleasant outcomes and not the root causes. I have met with companies who use build-to-stock, build-to-order and engineered-to-order business models to service their customer demands. In the discrete manufacturing world, vertically integrated factories have largely given way to assembly shops, or assembly shops with some component manufacturing. This has led to factory floors becoming even more reliant on their global supply chain. Additionally, this means that the manufacturers’ ability to dictate to their suppliers has declined while their dependency on them has increased. While this is not a “gloom and doom” situation, it definitely warrants a different approach to deal with the evolving supply chain.

 

Collaborate rather than Dictate

For a long period of time, purchasing and procurement have been comfortable sending forecasts and purchase orders (POs) to suppliers based on their material requirements planning (MRP) system’s recommendation. The more frequent the MRP runs are, the higher the probability that POs are sent on one run while generating exceptions to expedite, defer or cancel the same POs in the next. This invariably keeps suppliers on tenterhooks while leading to poorer delivery performance.

In most cases, the inputs to these MRP-managed runs are customer forecasts and sales and operations planning (S&OP) plans. It is not uncommon to hear a plant manager lament, “If only our customers purchased based on our plans.” This process has become complex and unruly because end-customers (retail stores, OEMs, or distribution channels) have their own forecasts, manufacturing companies have their production plans, while multi-tier suppliers live in a seemingly separate world. The consequence of this disconnect is communication failure, as no amount of faxes, emails, phone calls, EDIs, file-transfers, etc., can bridge the open-loop process across the value chain.

With the evolution of the Internet and cloud-based solutions, there is clearly light at the end of tunnel. We now have an opportunity to communicate in real time through collaborative portals to establish a single version of truth via an interactive closed-loop communication. Through personal involvement in supply chain management across more than 100 deployments, I have seen more commonality in the supply chains irrespective of their manufacturing business model.

Below are a series of case studies that highlight how cloud-based solutions have helped various companies to accomplish their respective goals.