Building your Supply Chain Strategy: The Five Tenets of High-Performing Supply Chains

Your roadmap to Customer-Centricity

The last 15 years have been a rollercoaster for supply chain professionals as companies embraced supply chain innovation, moving up the five steps of the supply chain maturity curve, supported by new technologies. During this time, JDA mirrored this vision of supply chain strategy that fosters competitive advantage and profitable growth based on the five tenets of high-performing supply chains.

These five steps are explained in Figure 1: Optimization, Segmentation, Business Agility, Synchronization and Optimization. Their significance has evolved and become increasingly important as more supply chain professionals adopt these winning principles.

Today is the right time to take a fresh look at these strategic pillars and to explore their full potential as part of your supply chain strategy.

In 2013, supply chain segmentation was described by JDA industry expert Puneet Saxena as the most fundamental evolution in supply chain thinking. Today (only two years later), companies are already taking the next step on the supply chain maturity curve, connecting their supply chains with customers, via big data and prescriptive analytics.

The five tenets are worth re-discovering to make sure you exploit all these opportunities in your supply chain strategy.  Below is a short explanation of how you can get started.

Optimization was the first great breakthrough for supply chain managers. Powered by new solvers, plant managers adopted new powerful production scheduling techniques based on complex heuristics and mathematics. The world of Constrained-Anchored Optimization was born with Alex Rogo, the hero of the novel ‘The Goal’ from Eliyahu Goldrat, promoting throughput and optimizing bottlenecks in the factory based on the Theory of Constraints. Soon these algorithms found their way from production scheduling into transport planning, inventory and spare parts management and all other areas of the supply chain. Intelligent decision-support had become a reality.

Synchronization, the second tenet, occurred when Manugistics and i2 Technologies, now part of JDA, stepped outside the boundaries of functional silos to synchronize plans across the extended supply chain. The Rhythm suite of i2 modules is the best example of how software started to align planning across various functions like procurement, manufacturing and distribution based on a statistical forecast.

It meant less inventory and less work for planners to hold up the service across the supply chain network. Management by exception, addressing alerts for stock-outs or any other defined supply chain problems, replaced firefighting, giving supply chain planners the opportunity to spend more time improving master data quality and supply chain parameters. The supply chain planner job had become fully automated and boringly predictable. Or not?

Business Agility, the third tenet, is a direct reaction to the instability of the global economy.  Markets have become more volatile and supply chains more subject to risks in recent decades. In this world, where anything can happen anytime and can lead to sudden supply chain issues, a forecast-based supply chain needs to be more responsive to the pull of the customer. Supply chain experts defined a new supply chain model driven by orders: the agile supply chain.

The quest for more agile supply chains forced supply chain professionals to look for different demand signals and postponement models, limiting forecasts to the parts of the supply chain with the longest lead times and allowing customers to consume from buffer inventory. These efforts put the emphasis on network design, inventory optimization and scenario-planning.

This set the scene for the fourth tenet of high-performing supply chains: Supply Chain Segmentation.

Supply Chain Segmentation has gained significant recognition for its ability to prioritize demand, supply and inventory for specific customer or product segments. JDA solutions offer a unique and consistent value proposition for leveraging these different predefined segments.

But service improvements come with a cost, and unless the trade-offs are predefined and embedded in your planning and execution software, lower priority customer orders will sooner or later overrule the intended prioritization. Thus, the software must not only help to define the segmentation rules, but also enforce them.

This brings us to the hot topic of the day: advanced customer analytics to support Customer-Centricity.

Customer-Centricity, the fifth tenet, represents a new gold mine for retailers and manufacturing companies. It transforms business models away from a product or channel focus to instead focus on the most important reason for having supply chains—to satisfy customer demand. It requires the removal of organizational silos, the integration of operations and inventories, and use of advanced analytics to understand true demand.

Today, with all of the analytical capabilities developed over recent years, we supply chain professionals are in a unique position not only to sense and react to demand, but to shape this demand to help the business increase its profitability!

Indeed, the greatest gift supply chain can offer your business today is better profitability. Whereas in the past, supply chain was seen as a necessary cost to guarantee service, new information from point of sales data in the stores, loyalty cards, revenues, budgets and transaction logs, or any other causal data (big data), can help your business detect  new sources of profitability.  The JDA Flowcasting solution’s unique shelf-level data capture and analytical capabilities are ideally positioned to help create this new level of customer-centricity.

Exploiting the five tenets of high-performing supply chains will set your business apart from your competitors while reducing costs and, most importantly, increasing profitability.

  3 Comments   Comment

  1. Great insights! Thank you for sharing Alexis. Over the next decade, we will see an uptick in more personalized buying experiences tied to highly customized micro-manufacturing. This contradicts old-school supply chain reasoning.

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  2. Amazing article. Very well written and explained to the point. In complete agreement with your view of the 5 tenets of a high performance Supply Chain!

    Reply

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