Multi-tier supply chain visibility can enable an organization to reduce costs by achieving operational and innovation excellence, reduce supply risk and improve profitability from newly introduced products.
Better Plan Quality
One of the biggest challenges in fast-moving industries is that the planning cycles of various constituents are misaligned and starved for information, so the planning cycle takes a lot longer than the execution cycle of flow of actual products from contract manufacturer to the consumer retail point. Multi-tier connectivity can accelerate the velocity of information flow, which not only improves the quality of information used in the planning process, but also reduces the overall planning cycle time across the supply chain.
Better Supplier Performance Tracking and Metrics
In order to measure the performance of key suppliers (irrespective of what tiers they belong to), OEMs need to be connected to them so they can get better quality of data that is always current. By tapping into events as they occur (due to connectivity within the supply chain), they can measure not only ongoing performance metrics but other information such as supplier’s flexibility and effectiveness in executing against electronic signals (vs. phone calls) so that cost of processing within a supply chain can be reduced. Better supplier performance information also allows them to improve their sourcing process.
Reduced Supply Chain Risk
A recent McKinsey report identified that reducing supply risk is one of the top priorities of industry executives. By improving visibility into a supplier’s delivery plans, shipments and status changes, organizations can more closely coordinate their activities with a supplier. This enables them to improve predictability, proactively address issues and have more time to react faster to any surprises.
In its research report on the top 25 supply chains of 2012, analyst firm Gartner came to a similar conclusion: “Beyond absolute financial performance, the ability of a company to consistently post industry-leading results year after year, despite demand and supply disruptions, is an indicator of resiliency.”
Better visibility into and coordination with suppliers and using it to proactively take actions, as well as better communication of demand/changes to suppliers, can enable organizations to get closer to their goals of operational and innovation excellence. Figure 1 shows the hierarchy of supply chain and innovation metrics in an organization. Multi-tier supply chain connectivity that leverages a business metwork can significantly improve these metrics for any organization.
Combined with a business network, multi-tier supply chain visibility is one of those capabilities that can enable an organization to reduce costs by achieving operational and innovation excellence, reduce supply risk and improve profitability from newly introduced products – all sources of competitive advantage in any industry.
Siddharth Taparia is the senior director of portfolio and strategic marketing at SAP.
