Five Ways to Optimize Supply Chain Management

Oct. 31, 2011
Improve collaboration between manufacturer/supplier and retailer for demand data driven forecasting and inventory management.

The supply chain of the extended enterprise has become an increasingly complex ecosystem of people, processes and technologies.

Once exclusively comprised of internal systems, most supply chains have greatly expanded due to the proliferation of computer networks and Internet tools and technologies during the past two decades. These innovations opened the door for true collaboration between partners, distributors and suppliers that extended well beyond the four physical (and virtual) walls of the enterprise.

The most recent technology advancements -- the widespread usage of Web 2.0 tools and social networks, on-demand software, cloud computing adoption and the ubiquity of mobile technologieshave served to present further challenges (and opportunities) for optimal supply chain management.

Manufacturers have been forced to evolve or perish when it comes to optimizing the processes as well as navigating the new tools and best practices for supply chain management. Most have become acutely aware of the challenges and trade-offs that affect their increasingly complex, competitive and transparent supply chains. At any point in time, an optimized supply chain stays lean, manages costs and perhaps most critically, responds instantaneously to even minor fluctuations in demand.

While there is no single playbook to ensure success in an incredibly dynamic global market, here are five tips that should be considered for the manufacturing enterprise:

1.Think Globally but Act Locally
This is not only a geographic reference; but it is also an important point to consider when thinking strategically about supply chain or value chain planning. Companies increasingly must think in terms of global opportunities for procurement of goods AND services, and when considering the global needs of the corporation. Manufacturers should consider multiple channels and determine the optimal levels of inventory within the echelons of the supply chain process. This is also critical to consider carbon footprint levels and ensure the greening of the supply chain. However, during the execution of the supply chain it is important to optimize locally to maximize your investments in critical resources: infrastructure, assets and technology.

2. Focus on Core Strengths and Outsource all other Activities
Many organizations try to do too many things or don't realize that they can outsource repetitive or tasks or one-off projects (for e.g. determining the optimal distribution network; the payment and audit of freight bills or supporting enhancement of its information systems). Quite often it seems as though an organizations' internal resources are able to do better job in the short run. Most often, by relying upon a specialized third-party provider, a better value will be realized in the long term. Focusing on your organizations core competencies will help you grow your business.

3. Improve Collaboration Between Manufacturer/Supplier and Retailer for Demand Data Driven Forecasting and Inventory Management
This will help organizations reduce inventory, improve fulfillment rates and product availability at point of purchase and ensure a lean supply chain improving margins and profitability. Today, technology provides myriad opportunities to collaborate, there is a proliferation of data available to be mined and advances in computing power and connectivity allows us to test for optimality in ever increasing areas.

4. Utilize Mobile-Based Technology
This technology can help improve field sales, merchandizing and marketing, and enable direct services to the consumer (through customized location-based coupons or services that improve employee productivity in the field). Providing information such as provenance, origin, item contents and specialized information on demand about sustainability, local content or manufacturing methodology enhances the brand and allows companies to connect directly with the consumer.

5. Build a Responsive Supply Chain
Utilize source data such as POS sales, as well social media information to identify trends and demand changes much earlier and enable your supply chain to respond faster to increase sales, improve service levels and reposition inventory to maximize true benefits. Multi-channel programs will change expectations from supply chain forecasting/planning paradigms to building responsive supply chains.

Ravi Sankar is practice director of the Consumer Products Group for HCL Technologies.

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