Demand variability, globalization, new product introduction and increasing customer expectations will all contribute to continued volatility in 2012. That being said, supply chain managers should seek strategies that deliver profitability, reliability and agility. This requires synchronization across two dimensions: 1) from business plan to operations, and 2) from demand through supply.
Based on my own customer interactions, here are four key strategies that I believe are critical to achieving these goals:
- Segment for profitable, differentiated customer relationships.
Establish one-on-one relationships between customers and your supply chain. Understand how each customer should be profitably served and implement differentiated policies for promising, fulfillment, inventory, forecasting and production.
- Drive the supply chain from real demand.
Reach downstream toward your customer and your customer’s customer to understand real demand and then drive your operations from it. Real demand is independent demand for a product that actually gets used by a customer. If your product is a component that goes into your customer’s product and then eventually gets used by a customer, you are dealing with dependent demand. Incorporate analytics to filter and understand real demand from the many downstream demand signals that are now available: point-of-sale, point-of-use, replenishment, orders, Internet and social networking.
- Synchronize and provide visibility.
Provide visibility of demand and supply at multiple levels of detail from aggregated views for the business plan to specific products and components for specific channels and customers. Provide continuous visibility of demand and supply changes and their impact on your ability to meet your plans. Deploy sales and operations planning to synchronize operations from business planning to execution and use this visibility to drive courses of action to meet your plans.
- Optimize the use of resources.
Optimize the resources necessary for profitably delivering the right product at the right price to the right customer at the right time: suppliers, plants, inventory, distribution centers, trucks, ships, planes, ports and people. Create optimal plans that include the resources you own and those owned by your partners. Drive these plans from an intimate understanding of real demand and profitability-driven segmentation policies.
Manufacturing companies have typically followed an evolution curve in the implementation of these strategies from bottom to top. Planning and optimization platforms are implemented and then visibility and synchronization capabilities using sales and operations planning have been built on top. Now companies are adding analytics to understand and drive their operations from real demand. Finally, companies are segmenting products and customers and deploying aligned policies throughout the supply chain.
I look forward to continue discussing and expounding on these strategies in 2012 and beyond, but in the meantime, I’d love to hear how you are successfully doing this and if there are any other strategies you think you might be missing.