Stop Wishing And Start Optimizing Supply Chain Performance

Chris Durkin

In manufacturing supply chains, inherent mismatches in speed, or cadence, can seriously impact agility and performance. While the pace of modern commerce offers businesses little hope, CPG_BIBif any, for balancing those mismatches, there is significant opportunity for improving performance. It lies in adjusting some pivotal business processes to compensate for the mismatches, keeping supply chains – especially demand-driven supply chains of consumer products companies – from taking performance hits. In fact, some specific, well-targeted adjustments hold the promise of performance optimization.

Traditions and transitions in supply chains

IDC research points out that the demand side of manufacturing supply chains have traditionally operated at a faster cadence than the supply side. Not necessarily a bad thing, and manufacturers have found ways (like inventory buffers) to compensate for these mismatches.

But for consumer product companies, demand volatility far exceeds supply volatility, so they experience the greatest cadence mismatch between the demand and supply sides of their supply chains. The mismatch is too substantial for approaches like inventory buffering to compensate – at least not well.

Compounding the issue is the steady transition in supply chain dynamics: The demand side of the consumer products supply chain is becoming even more demand driven. This is due, in no small part, to external pressures triggered by mobile, social connectivity, and e-commerce technologies – not to mention modern consumers who want yesterday what they purchase today.

Without some process adjustments, the resulting cadence mismatches within the supply chain could be great enough to deteriorate inventory quality, cause out of stocks, and reduce service levels.

The ultimate goal: A resilient supply chain

IDC defines a resilient supply chain as one capable of ensuring and preserving continuous, consistent product supply in order to meet product delivery and customer service obligations despite short- or long-term disruption. But if you’re a demand-driven consumer products company, how can you reach this state of supply chain perfection?

There’s no one-size-fits-all answer to the question. It would differ from company to company. It all depends on core principles of the business, the processes supporting those principles, and which processes lend themselves to the kinds of improvements that would compensate substantially for mismatches in supply chain cadences.

Adjustment possibilities

Business process adjustments that ultimately result in a resilient supply chain – one capable of responding quickly to market opportunities – can take many forms. The key lies in adjusting for longer-term supply requirements in a way that efficiently and cost-effectively satisfies the dynamics of near-term demand.

Based on real-world instances of cadence mismatches in supply chains, IDC research suggests some adjustments that demand-driven consumer products companies can make to eliminate those mismatches. These include:

  • Shortening supply lead time through a more balanced approach to global sourcing
  • Improving supply planning though adoption of modern, faster planning tools
  • Consuming new supply chain capabilities faster through the cloud

Evaluating current performance

Of course, before making adjustments, you’d want to evaluate current performance in some key areas to determine if cadence mismatches are taking a toll. IDC suggests evaluating:

  • Supply network agility: Does your company have long lead times, inflexible factories, and locked-down contracts with key suppliers?
  • Demand planning and forecast accuracy: Are forecast errors reflective of typical volatility or of actual flaws in your planning process? And can changes in demand be built quickly into a new view of the forecast?
  • Inventory management efficiency: Does your company have the right overall inventory level but the wrong things in the wrong places? Can you adapt your inventory quickly to meet changing business requirements?
  • Cost consensus: Are all areas of your business working from the same set of numbers? Or is lack of cost consensus across business functions interrupting product supply?

Answers to these questions might indicate that it’s time for some adjustments.

Tools for achieving resiliency

Tools that offer or enhance functionalities in some key areas can make achieving supply chain resiliency a more reachable goal. IDC research suggests looking at tools that support:

  • Demand sensing to improve forecasting by improving the downstream capture of consumer demand data
  • Sales and operations planning to align demand and supply plans with financial goals by giving all stakeholders in cost planning a unified view of demand, supply, and financial data
  • Inventory management and optimization to help ensure that goods are consistently available at the right time and right place
  • Cost visibility to gain a full view of costs that would also reflect benefits gained from shorter lead times achieved through proximity sourcing

And certainly, tools capable of leveraging newer functionalities – courtesy of social media, Big Data analytics, cloud computing, and mobile technologies – stand to bring even more options to the table.

For references highlighting the principles and suggestions offered here, check out the IDC infographic and whitepaper Clock Speed in the Consumer Product Supply Chain.