FIVE ESSENTIAL ELEMENTS OF INTEGRATED SUPPLY CHAIN MANAGEMENT
How the Best in Class Manage their Supply Chains
Manufacturers world over are frantically trying to improve efficiencies in their operations, the urgency further accelerated by the shrinking global economy. Falling customer demand, tighter credit, rising input prices and the economic uncertainty are forcing companies to re-evaluate their business plans especially with respect to investments in new capacities, markets and products. At the same time, there is a renewed focus on making current assets work harder and maximize the return on the already invested dollar. However, achieving operational efficiencies requires more than reducing costs, high utilization mandates, strict inventory control and rationalizing capacity or manpower. There is no denying the usefulness of these steps, but the key is to ensure every bit of the supply chain is performing towards meeting a single objective – right product at the right place in the right quantity at the right time. This requires all operational entities within the enterprise to be integrated through business processes and technological enablers.
Supply Chain Management exists to an end – satisfied customers at the optimum cost. And as markets and businesses have evolved, supply chains have become more complex, more global and a more critical business function than ever before. At the same time, many leading firms have realized that a well run supply chain can be a source of distinct competitive advantage in the marketplace, and have been in the forefront in adopting practices that deliver superlative efficiencies in their supply chain functions. While many have been successful in optimizing important supply chain functions, a few have managed to make their entire supply chain behave as a single linked entity – from end customer delivery to raw material procurements – to achieve truly synchronized operations.
How does a VP – Supply Chain today start building a vision for his/her supply chain in this new world scenario? This paper presents the five initiatives we consider essential in achieving operational integration across the supply chain and how businesses are leveraging these successfully to achieve operational success.
We start by talking about Sales & Operations Planning which fundamentally is bringing together sales and marketing function with the firm’s operations thus ensuring both are working towards a common sales target that has been agreed to be feasible under the given operational constraints. Next we discuss Collaborative Planning, Forecasting and Replenishment (CPFR) which enables accurate demand forecasting by facilitating information sharing between the manufacturer, retailer, and other involved parties. Then we shall discuss Concurrent Engineering that helps firms develop products by involving all internal and external stakeholders leading to more efficient concept to launch cycles. These initiatives require enabling technologies in terms of data and specialized
tools, which usually aren’t shipped as part of vanilla ERP solutions. This brings us to our next element namely Extended ERP, which essentially is an ERP core with peripheral specialized solutions for important supply chain functions. Finally we discuss about Supply Planning, which is about optimizing procurement and inventories.