Supply Chain Engagements

 

The simplest supply chain addressed is the distribution network. This network is characterized by a flow of finished products between origins and destinations. Origins are facilities that originate freight, typically factory warehouses or distribution centers. Destinations are facilities that receive freight, mainly customer locations. The network could, however, represent an origin of supplier facilities or manufacturing plants and a destination of distribution centers.

 

Simple network optimization typically involves direct shipments from origins to destinations. The analysis can easily be extended to cover multi-tier distribution systems. In this case, intermediate-level network facilities are introduced between origins and destinations for cost or service considerations. The advantages that may be gained through multi-tier networks typically include lower overall transportation costs and improved response times. However, potential disadvantages may include increased inventory and facility costs.

 

A more advanced type of network that can be addressed via optimization involves the broader logistics environment. Optimization for this type of network may involve simultaneously determining the number, location and mission of production facilities, supplier locations, as well as the previously described distribution network.

 

In order to provide an optimized solution for the supply-chain network -- one that provides the desired operating performance and the lowest cost� analytical tools must be supported by a thorough understanding of the business needs to be addressed by the supply chain. These business needs include:

• Customers and Markets
• Logistics
• Production
• Sourcing and Procurement
• Network Infrastructure
  
  

 

The ability to manage the supply chain enables a company to solve critical business problems, such as customer complaints. To do this, companies need to assess customer communications and the current rapport. To get started, ask the following questions:

• How many complaints do you get from customers?
• Are your big customers telling you what to do?
• How well are you able to serve your customers?
• Can you fulfill their requests in a timely fashion?
• Can you fulfill special requests from customers?

 

Most supply chains stretch beyond the lone enterprise. Organizations have always received inputs from a suppliers and delivered to consumers, either a company or person. Each organization provides an interdependent link in the value-adding process, otherwise known as the supply, or value, chain. In fact, this is seldom a single �strand� of activities, but rather an interdependent network comprised of many value-adding departments or companies, each of which receives many inputs and combines them in various ways in order to deliver numerous unique outputs for multiple unique consumers. Organizations that receive outputs (customers) pay for the value added process. It is more properly designated the value network through which many value or supply chains can be traced.

 

If each step or stop in the value network makes decisions in isolation, the potential grows for the total value in one or more supply chain strands to be less than it could be. In the best of all possible worlds, each step would eliminate activities that do not add value to its own process so that it can realise the highest possible margin with in the whole supply chain. This is the best way to ensure long-term profitability.

 

Of course, in the real world, that fails for several reasons. First, resistance to change �and the unpredictability of events enforce some level of non-value added activities on all organizations. Second, each department does not have an equal sphere of influence. The relative bargaining power of each department or organization can be quite different, resulting in a price (and margin) that is directly related to its bargaining position. Further, a poor bargaining position may mandate that an organization bear a disproportionate share of non-value adding activities. Third, learning and technology sometimes advance in stepwise fashion so that new ways of adding value make old ways wasteful by definition. Since such new advances do not meet with universal, simultaneous and continuous adoption, non-value added activities persist at some level in all supply chains.

 

Providing a company has a minimum level of efficacy in marketing and transaction capabilities, improving the decision process around inventory and supply chain flexibility will drive sustainable, measurable benefits in the near term that are disproportionate to the effort required.

 

It is assumed, of course, that the decisions made are executable. In many cases, the most important supply chain decisions can be actionable, even without new execution systems for order management, warehouse management, purchasing, costing or accounts receivable. In cases where good decisions cannot be executed because basic business transactions are not accurate or timely, then the sustainable viability of the business may be in question. Which leads to a fire drill for survival.

 

The future of SCM

 

Many predict that vendors will eventually move toward Web-based architectures, which will make SCM solutions easier to deploy and integrate. SCM vendors will work more closely with the EAI [enterprise application integration] vendors, so solutions are even easier to integrate. Another scenario, fraught with many issues, is the supply chain hub, where servers supply information from centrally located data marts to subscribing members.

 

 

Fields Stores
Marshal Wells
Kitsault Mines