Boris Felgendreher, GT Nexus, introduces a new series looking at supply chain agility
Supply chain management should do just that—facilitate the overall smoothness and synchronization of the entire chain. That means having better visibility into logistics, inventory positions, and demand requirements so that the entire chain can flex to customer needs or disruption on the supply side. Yet companies trying to meet these challenges often only have systems with an internal operations focus, or that only automate certain basic supply chain processes. The result can be a lack of agility that adds cost to a supply chain and makes it less competitive.
It’s not that companies lack systems: enterprise resource planning (ERP), materials requirements planning (MRP), forecasting systems and solutions such as warehouse management systems (WMS) are essential to managing transactions, orders, inventory, forecasts and other data essential to doing business as part of a supply chain. While these systems serve important roles, they may lack the inter-enterprise visibility and collaboration functions that supply chain operations increasingly require.
A large number of partners must work closely together to make a supply chain function smoothly. A typical manufacturer relies on component suppliers, logistics partners, and in many cases contract manufacturers, to make and get products to market. With global trade, multiple shipping, freight forwarding, and financial partners might be involved. On the customer-facing front, channel partners and distributors need to be tapped for insights into demand, and retailers also provide a vital stream of demand insights to the supply chain.
Coordinating all of these players and all of the associated data may be beyond the logic of internally oriented systems that use functionality like reorder points or standard lead times to trigger a few supply chain processes, but lack the ability to really orchestrate a complex, multi-tiered supply chain in an automated way.
Today, the unmet system needs often revolve around how flexible and agile a supply chain can be. This growing focus on agility can be seen in the inclusion of metrics for supply chain adaptability as part of the Supply Chain Operations Reference (SCOR) model. The effectiveness of a supply chain, in other words, increasingly hinges on how agile it can be to changes on the demand side, or disruptions on the supply side.
In a recent study conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review, 138 supply chain executives having management of or purchase decision responsibilities for supply chain operations offered input on their current supply chain infrastructures. Specifically, the research examined how supply chain networks are incorporated into organizations’ overall business strategies, and how flexible supply chains are at adapting to changes in demand, supply, risks, business strategy or other factors that influence performance.
Our own research reveals that many organizations do not currently have the technology in place to execute critical operational functions such as fulfillment processing, production and inventory management, customer relationship management and demand planning. Additionally, the research shows companies want their supply chains to be more adaptable with only one-third of respondents rating their supply chains highly on agility. The result: supply chains are falling short in satisfying their business objectives.
In the coming posts, we shall explore this in greater detail, looking at how businesses can become more responsive and agile.