Obtaining supply chain excellence in manufacturing is not as straightforward as it may appear. Recent industry trends such as globalisation, volatility in demand, supply chain instability, and internal misalignment make it more difficult for manufacturers to realise the full value of their supply networks.
While volatility and disruptions are difficult enough to manage independently, most firms also face internal misalignment. The departments of sales, marketing, engineering, operations, and finance all have distinct aims that are occasionally at odds with one another. For instance, a sales leader’s requirements may not necessarily coincide with production timetables or industry best practices. As a result, it’s challenging to get all parties to agree on and act in the organisation’s best interests as a whole. Naturally, this has severe and detrimental repercussions. According to an IBM research, three out of four businesses identify a “lack of internal alignment” as a hindrance to customer service.
When manufacturers are unable to agree on and implement the best course of action swiftly, and when the complexity of the supply network makes it difficult to make adjustments on the fly, it simply takes too long to adapt to changing consumer needs. Because demand is becoming more variable and customers have an abundance of competition options, this can negatively impact sales. Even minor errors can have a detrimental effect on an organisation’s margins.
Establish a manufacturing planning process
Before embarking on a supply chain journey, a manufacturer must first establish a plan. The plan must take the following factors into account.
- Forecasting the items, product variants, and quantities required for production are some key factors to keep in mind while designing a plan. While this may appear to be a straightforward process, it can be rather complicated depending on the number of sales channels manufacturers have, and the diversity of their product offers and client base.
- Creating a supply plan entails deciding how things will be manufactured to satisfy demand on time. To accomplish it, industries must first understand what needs to be produced and maintain visibility into existing inventory, their suppliers’ ability to supply materials, parts, components, and the availability of assets such as trained labour, factories, equipment, and energy. A supply plan can be quite complex, depending on the number of items manufactured, the number of manufacturing facilities, the availability of raw materials, the number of suppliers and distributors, and so on.
- Creating precise production plans that outline how facilities, equipment, people, and materials can be combined to manufacture items at the lowest possible cost and in the shortest possible time. A delay at any step might cause manufacturing and delivery to be delayed. Additional challenges can arise due to factors like equipment upkeep, working with perishable items, and labour regulations.
- Keeping an eye on plans and adapting to changes. Typically, preparations are developed 18 to 24 months before the date on which items are required. Numerous issues can develop over this time period, including swings in demand, asset availability, changes in financial condition, and supplier changes. One method to mitigate the effects of these changes is to constantly reconcile demand and supply plans.
Choosing a New Path Forward
Consumers, distribution methods, markets, and products are not all the same. To respond to shifting requirements in meaningful ways, producers must abandon a one-size-fits-all approach to planning. This requires subdividing consumers, markets, and products and matching each segment’s appropriate supply chain strategy. Organisations must anticipate consumer needs across segments, forecast demand and supply risks, and build their supply chain to serve each segment profitably.
Additionally, manufacturers’ internal departments, including sales, marketing, engineering, operations, and finance must be aligned around a common purpose of customer service. To accomplish this, businesses must eliminate emotional and gut-level decision-making that all too frequently separates internal stakeholders and results in ineffective action or worse, no action at all. Rather than that, fact-based research and cause-reason scenario modelling can be used to objectively weigh tradeoffs and select the quickest, most lucrative way to address client requests. Then, manufacturers must be able to execute that decision via their fulfilment network efficiently.
When manufacturers simplify their supply chain and manage their business’s complexity in this way, they can improve reaction times, increase sales by delivering items to consumers in the manner they desire, and maximise profits while mitigating the negative effects of volatility.
Supply Chain Segmentation
A supply chain segment calculates one or more categories such as customers, products, channels, or locations based on their economic significance to the firm. This value may be quantified in terms of volume, revenue, profit margin, strategic significance, or any combination of these variables.
Segmentation of the supply chain is one of the most fundamental breakthroughs in supply chain theory. Manufacturers must meet a vast range of client needs as they serve an increasing variety of markets in dynamic global economies. Understanding these needs and developing compelling value propositions to meet them is crucial for profitable growth and business retention.
When manufacturers can separate consumers, goods, locations, or channels based on their needs, they can improve service levels and profitability by developing a unique supply chain model for each segment. This would encompass demand forecasting, supply chain management, manufacturing, order fulfilment, and distribution.
Improving The Supply Chain Science
While all supply chain technology aims to optimise the supply chain to some extent, it is the supply chain science embedded in the technology that enables the business to unearth previously undiscovered opportunities. This level of optimisation can result in increased efficiency and cost savings across your organisation.
Consider how inventory optimisation might work.
Consider that you currently have 40,000 units of a particular product in warehouses located throughout the world. As orders exceed available inventory, optimisation algorithms can be used to identify how to coordinate order fulfilment so that costs, time, and labour are minimised. This requires complete insight into existing inventory, orders, and service levels to establish the optimal distribution of inventory depending on its location and destination, as well as the projected flow of goods and your receiving capacity for finished items.
While this example focuses on inventory management, this type of optimisation may be applied to any component of the supply chain, including order cycle times, transportation processes, and warehouse operations. It is at this level of science that supply chain excellence is achieved.