Designing the Supply Chain

Supply chain design is the practice of creating living models to represent the existing structure and policies of the end-to-end supply chain, optimizing to identify a better future state supply chain and continuously running what-if scenarios to test new strategies and react to changing market conditions. When a company’s supply chain capabilities are directly aligned with its enterprise strategy, the results tend to be superior performance and a strong market position.

Manufacturing giant Toyota uses extremely sophisticated inventory and product life-cycle management capabilities to move products through its channels in half the time maintaining excellent quality. This is a major factor in Toyota’s consistent ability to outpace its rivals in profit margins. Would Toyota’s supply chain model work for your company? Probably not. Every successful company should have an operational design and management style tailored to its own purpose and strategy. Here is a proven process to design a supply chain network that best meets your business objectives.

Clearly Define your Strategy-The most critical step of the network analysis and design process is to identify your primary strategy. If it’s too limited then you will fail to consider and prioritize all the market requirements and factors on which participants compete (features, price, delivery, etc). Strategies also cannot be platitudes, promising all things to all people. Corporate strategy needs to define how you are going to be different and better than your competitors, and it needs to set specific, measurable goals. Then it should be communicated to the organization thoroughly and repeatedly.

Use High Quality Design Data Today’s technology can help you make better decisions as there are many vendors offering supply chain network optimization tools. Alternatively, you can cost efficiently configure your own. Make sure the software you select fully addresses the decisions you need to make and can represent your unique business and logistics network. Typical model components include capacity limitations, customer service requirements, lead times by mode, operating capabilities and the cost of different options.

Structure Supply Chain to Optimize the Strategic Goals- Connect the dots between your strategic goals and how those get delivered by the company. Supply chains that are optimized for cost efficiency will look different than supply chains that are optimized for flexibility and responsiveness. Ask the question, “Which supply chain activity is perfect for my core competence and competitive differentiation?” This step is especially critical in making in-house/outsource decisions. So prioritize your supply chain objectives and accordingly build your supply chain network, choose your supplier base and business terms, devise inventory and planning policy that support your enterprise strategy.

Get Advice during Design Process- Many other businesses in your networking circles, supplier community or common technology users may be excellent resources for supply chain design experience and advice. Ask supply chain modeling software vendors about the design community they support and how you can get involved with other users. Many will be happy to act as a sounding board for your ideas and share the lessons they learned along the way.

Implement and Refine- The supply chain network analysis and design process is not static. Successful ideas are implemented and cost savings are realized. And then things change: a large new customer is added at a new location, more production capacity is added, demand takes a nosedive, or raw material prices swing dramatically. Thus, like all good planning processes, the supply chain network analysis and design process must be on going. This process should be revisited regularly (annually/quarterly) and/or when big things happen within the business.

Asprova provides useful lessons for future modeling and improves the overall effectiveness of network planning. Our advanced planning and scheduling solutions give supply chain designers a collaborative platform to expand the value of supply chain modeling throughout the organization.

 

Photo credits: Flickr © ILO in Asia and the Pacific

Supply Chain Visibility

farhanThe complexity and unpredictability of requirements make the supply chains most difficult to manage. One proven way to increase the reliability and responsiveness of supply chains is to increase visibility into everyday supply chain functions. Supply Chain Visibility (SCV) is the capability of a supply chain player to have access to or to provide the timely required information/ knowledge about the entities involved in the supply chain from/to relevant supply chain partners for better decision support. The aim is to provide controlled access and transparency to accurate, timely and complete events and data — transactions, content and relevant supply chain information — within and across organizations and services operating supply chains.

The need for visibility is driven by both the desire to improve the supply chain and the need for compliance from the customer and legislative requirement, especially for those who are operating globally. Visibility is often included in the risk management toolkit. By coupling process changes, the improved intelligence from supply chain visibility, and fast decision cycles, organizations hope to out-maneuver interruptions in the flow of material, capital, or information. Here are some tips to help enable end-to-end visibility across your enterprise:

  • Sense and respond are critical processes for supply chain visibility and can only be achieved through a collaborative network that is coupled with advanced analytics.
  • Visibility encompasses not only sensing data, but also how to analyze it and take appropriate action across the extended enterprise.  Use predictive and prescriptive analytics to support your visibility goals.
  • Eliminate silos within your organization to take full advantage of end-to-end visibility. Create an outside-in way of thinking within your organization by focusing on customers and trading partners instead of looking internally.
  • Utilize cloud-based shared process and information layers within your information architecture to sit above physical assets, supply chain, and operational applications.
  • Make it easy for trading partners to connect by eliminating barriers to on-boarding.

Unfortunately achieving visibility is quite difficult, particularly for global supply chains. Many different companies and individuals are involved in a global supply chain, and all are operating under a different set of motivations and constraints.  Although a supply chain feeds a specific customer outcome, each participant is focused on their own self-interest. They all want to maximize their own profit, even at the cost of the rest of the supply chain, a typical capitalistic behavior.

Asprova makes sure that information is available smartly at your disposal and to other firms in your supply chain which improves visibility dramatically. Our advanced planning and scheduling functions has the ability to “see” from one end to the other in the supply chain, providing players a clear view of upstream and downstream inventories, demand and supply conditions, and production and purchasing schedules.

 

Supply Chain Management

SPMAs Martin Christopher said “The focus of supply chain management is on cooperation and trust and the recognition that properly managed, the whole can be greater than the sum of its parts”. A firm in the supply chain must initiate the attempt to form partnerships and actively manage the chain. To do this effectively, it must show the partners where the improvements will arise and how these will lead to a gain for everyone in the chain. To establish trust among the members of the supply chain, the lead firm must also suggest how communication can be opened up and how every member will be ensured that it is receiving its fair share of profits.

One perfect example of this has been Toyota. For years it has gathered extensive data on customer buying patterns. Then Toyota has used this information internally to manage its own layout and inventory. Now it has shared all of this data with its most trusted suppliers. This approach has allowed its supplier who knows how to take advantage of this data an opportunity to improve its service to Toyota while decreasing its own costs.

Managing a supply chain is more complex and difficult than managing an individual firm. But, the principles of management used to integrate a firm’s own internal functions also apply to managing the entire supply chain. For example, a well-understood phenomenon in the management of a firm is that there is always a bottleneck that constrains sales. This bottleneck may be internal to the firm (a process that cannot produce enough to meet demand) or it may be external to the firm (market demand that is less than the capacity of the firm). This principle applies to the entire supply chain.

While the supply chain is driven by customer demand, it is constrained by its own internal resources. One difference is that these resources may not be owned by the same firm. It is possible for the output of an entire supply chain to be limited because one firm does not have capacity to meet surging demand. It is also possible for every firm in the supply chain to be operating at a low utilization because there is not enough demand in the market for the products from the supply chain. There are bottlenecks inside the supply chain just as there are bottlenecks inside firms.

Firms are using Asprova’s advanced planning and scheduling functions to aid their collaborative communication. Our software develops a set of methods by which supply chain partners could have joint sales forecast and/or production plans in which a revision by one partner would be immediately transmitted to the next partner. Therefore its members are aware of the location of their bottlenecks internally and also in the chain which allows for proper management of the supply chain.

Classifications in Manufacturing Industries Part I

Silk factory

BY PRODUCTION PROCESS

Assembly type

This is one of the most commonly used classifications. It pertains to factories where parts are assembled to make a product. This is also known as “discrete type”.

Process type

This is also one of the most commonly used classifications. It is where the product is produced from the material through a chemical change. Process type is also known as “non-discrete type”.

BY PRODUCT TYPE AND PRODUCTION VOLUME

Mass production of scant kind of products

From a factory’s point of view, this classification is efficient. This is mainly because it is easier to mass produce than to create different products.

Small volume production of diversified products

Recent trends show that mass production of scant products is slowly dropping away. This is why small volume production of varied products came to be. This is developed to meet the different needs of consumers.

BY STOCK POINT

Make-To-Order (MTO)

As discussed in the previous paragraph, consumer needs vary. So, in order to satisfy the growing needs of the populace, MTO was conceived. MTO is generally a business production strategy that allows customers to buy products that are customized to meet their specifications.

Make-To-Stock (MTS)

This is the traditional production strategy. It relies on demand forecasts that determine how much stock should be produced.