Effective Supply Chain Management for Improved Productivity

Supply chain management is a cross-functional approach to coordinate the inflow of raw materials into an organization, management of internal processing of materials into finished goods, and then moving these finished goods to the end-consumer.

In B2B environments the demand signal goes out of phase due to three reasons. The first is latency because the time has shifted when the demand signal is processed. The second is amplification – changes in demand become exaggerated due to each trading partner taking hedges out or adding hedges to the forecast. The third phenomenon is interference where market events add to the uncertainty. The best choice and only choice for us is to be very flexible and collaborative. That’s where a focused supply chain management comes into place. The main role of demand planning in a build-to-order, or configure-to-order environment is to allocate capacity and materials to forecasted demand as
opposed to making the end-items to stock. The key requirement is to forecast at multiple levels (end-items or components) as well as be able to bring in orders to consume the forecasts. Once the forecasts have been created, an important aspect is to track how they get executed and how well they performed. So visibility and performance tracking is key.

In addition, collaboration becomes an important issue because there is a need to involve the channel partners within the forecasting process. Lastly, minimizing supply chain cycle time from order processing up to fabrication and assembly process is one of the most crucial aspects.

As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts whose purpose is to improve trust and collaboration among supply chain partners, thereby improving inventory visibility and inventory velocity.