September 2002 | Commentary | IT Matters

Building a High-Velocity Supply Chain Network

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Managing an extended supply chain network effectively requires coordination among many geographically dispersed partners. Done well, you can reduce operational costs and increase bottom-line profitability and customer loyalty. Done poorly, you can face increased personnel, as well as higher inventory and rush charges, all incurred in an attempt to avoid dissatisfied customers.

With increasing decentralization of business operations, managing the supply chain has become a complex responsibility that enterprise-focused systems and supply chain solutions cannot support. The old "machine-like" static enterprise is being replaced by a new complex, decentralized, high-velocity operation.

Customer-centric solutions require a new, decentralized supply chain design. This approach relies on an expanding network of contract logistics and manufacturing service providers that plan and execute much closer to the customer. To be effective, outsourced partners must be responsible for business processes as well as the sourcing, making, and moving of goods and services to the customer. The challenge is integrating these extended, multi-company networks.

Recently, the industry has focused on how to effectively plan across extended networks. Unfortunately, existing collaborative planning solutions cannot support real-time information sharing, coordination, and synchronized execution across supply chains. Instead, they focus on macro-level parameters, long planning horizons, and data that is frozen days or weeks before and after events occur.

The next generation of supply chain solutions is designed with goals of rapid implementation and adaptation of a supply chain network from the bottom up. These solutions are capable of managing a complex network based on agreements, flexible business policies, and execution rules.

While the goal of planning is to accurately predict what will happen and to optimize execution activities accordingly, the goal of execution is to account for planning shortfalls through velocity, flexibility, and up-to-the-second monitoring. Supply chain execution solutions aim to set a new standard that bridges the enterprise and the extended supply chain with a comprehensive level of functionality for planning and execution.

This comprehensive functionality should include a solution that:

  • Electronically integrates orders and inventory across complex supply chain nodes.
  • Synchronizes execution among supply base and service provider networks utilizing policy-driven indicators of supply/demand disruptions.
  • Provides real-time, accurate transaction reconciliation for all supply chain partners.
  • Utilizes the Internet as a common infrastructure to ensure availability of information in an ever-changing supply chain network.
  • Delivers this extensive functionality through rapid partner connectivity.

Effective execution requires total visibility into enterprise-class and legacy systems across the supply chain network. Businesses must be able to accurately assess the impact of exception conditions, affect their resolution, and ensure that resolution decisions propagate throughout their entire network.

With near flawless execution throughout the supply chain, companies can maximize their extended network of outsourced partners, customer relationships, and bottom-line profitability.

Meeting the Challenge

In the past, companies deployed enterprise-centric supply chain solutions. Today, they are committed to leveraging existing IT investments and employing new collaborative solutions with their extended network of suppliers. Consequently, the market is shifting away from a centralized configuration to one that is decentralized and inextricably more agile.

While planning is critical, without multi-enterprise coordinated execution, collaborative supply chains will fail to deliver improved costs, asset efficiencies, and customer satisfaction. To be successful, businesses must look to implement a network solution that integrates orders and inventory, synchronizes execution across the supply base and service provider network, and provides accurate, real-time transaction reconciliation.

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