Four ways to keep pace with complexity in the marketplace.
by Stuart Roy, February 2011
Over the past two decades, supply chain organizations have become much more responsive to customer demand. This evolution was largely achieved by eliminating inefficiencies, integrating processes, and manufacturing products only after receipt of an order. But globalization, outsourcing, complex sourcing relationships, and a volatile economic climate have limited the competitive advantage of simply automating the supply chain. It’s not enough.
Today’s supply chain needs to sense and respond to changes in real time and use information to drive intelligent decision-making. This requires tight alignment between planning and execution, decision-making, and collaboration.
But progress is limited by poor integration, a lack of supplier orchestration, limited visibility into demand, and poor data quality. Fortunately, solutions exist to deal with each of these issues.
Integrate planning and execution. Operational planning processes involve evaluating demand and manufacturing capacity and developing plans and schedules to meet that demand. But existing process is largely hierarchical, serial, and static. Most companies separate planning from supply chain execution—but tighter alignment is necessary as timescales compress. Sales and operations planning (S&OP) is the primary integration point between planning and execution. As such, S&OP is in a perfect position to align the objectives of finance, sales, marketing, and operations departments. Most companies lack the tools to support S&OP, but deploying optimization tools and increasing the frequency of S&OP activity can improve performance.
Planning can also be improved by electronically populating tools with more-granular business data—including market, customer, and product information—to more accurately reflect the complexity of the marketplace.
Improve supplier orchestration. Supply chain visibility has become increasingly complex as companies outsource manufacturing and form complex and strategic supplier relationships. Collaborative planning and process orchestration capabilities have not evolved to keep pace. Supply chain organizations must eliminate this latency to orchestrate activities across organizational boundaries.
Collaboration tools and intelligent alerts can electronically share plans and schedules, track supplier commitments, and deal with exceptions. Using a service-oriented architecture (SOA), companies can develop reusable, device-independent collaboration services to address these needs. Standards-based communication protocols can then be used to bridge system gaps with suppliers.
Improve visibility into demand. Many organizations have a lagging and incomplete view of demand due to both lack of information-sharing between channel partners and manual data collection and processing. Supply chain automation can sense demand across multiple distribution channels closer to the point of consumption and streamline demand management. IT systems can capture sales transaction data at checkout, measuring product sold to the end customer and distribution channel and gauging actual customer sales made against a contracted sales volume.
Improve data quality. Although process integration has significantly reduced order-to-delivery lead time, data latency and quality issues remain. Supply chain executives frequently cite difficulty accessing information for decision-making. Dependence on multiple supply chain systems with limited integration is typically to blame. System consolidation or standardizing on a common integration tool such as Oracle Application Integration Architecture can connect disparate systems, creating an integrated platform. By eliminating data latency and quality issues, managers can use real-time information to respond immediately to changing business conditions.
The real-time supply chain will immediately detect changes in demand, supply, and business conditions. Advanced analytics will drive real-time decision-making. Collaboration tools will promote interaction with partners and vendors, synchronizing activities across the supply chain. The resulting supply chain exhibits greater flexibility, better responsiveness, higher delivery service levels, and the ability to respond to changing business conditions while reducing inventory, risk, and cost.
Stuart Roy is senior director of industry strategy and insight at Oracle.