How to Enable a Proactive Supply Chain
Tomorrow’s supply chains will be intertwined supply networks predicated on responding to supply and demand changes as they happen, not after the fact. Transaction and shipment exceptions are common, so businesses must be able to account for these variables by enabling a proactive supply chain. When problems occur, the earlier and faster information is communicated to partners, the better they can work toward finding an efficient and economical resolution.
Every transaction involves at least two parties— buyer and seller. But many others have a stake in its success, including raw materials suppliers, contract manufacturers, 3PLs, carriers, and freight forwarders, among others. Changes can come from either direction and from any partner: a spike in sales demand can trigger an inventory shortage; a fire in a supplier’s warehouse can shut down a production line; over-production and slack sales can create overstocks. When supply and demand fall out of sync, companies and their supply chain partners have to make quick, informed decisions to resolve the problem.
In a proactive supply chain, the end user is in a position to immediately address supply and demand shifts before they become critical.
5 Steps to Supply Chain Empowerment
1. Analyze the entire supply chain. Many companies often look at operations exclusively within their own enterprise, while the extended network remains a black box. They don’t know what’s going on in the offshore factory, or who is coordinating with the freight forwarder to move a shipment. Retailers, for example, are so focused on consumer-facing technologies and needs that back-end systems have become neglected. Companies need to analyze their weakest links and they can’t stop at the four walls. They must look at every process that touches a transaction from source to shelf.
2. Connect Electronically. If all parties are electronically connected to a common set of data, transactional information is communicated to everyone. If there is an exception, changes can be broadcast to appropriate parties across the extended enterprise. When applied to supply chain, social networking and cloud computing capabilities greatly facilitate this data collection and sharing. Pre-set alerts immediately trigger need-to-know parties and there is a central repository of information for partners to tap into.
3. Anticipate Issues. The majority of transactions do not go smoothly. Businesses will encounter hiccups, so they need to be able to manage process and change by exception. Early warning signs and alerts should be in place so that if something happens outside the norm —in accordance with a set of pre-determined parameters —necessary parties are notified. To identify exceptions before they become emergencies, companies must have logic that determines tolerances —yellow, orange, red flag triggers —as well as an escalation procedure that scales response according to urgency and alerts appropriate people.
For example, if a ticket printer breaks down in an Asian factory, the first alert should be sent to the facility’s management, not the stateside retailer. The supplier might be able to order tickets from another source, or ask the retailer for a delay. If the problem persists or escalates, a procedure should be in place for communicating information across a broader network of supply chain partners.
4. Set up Alternative Plans. Intelligent and proactive supply chains have a Plan B and Plan C. It’s important to set up alternative destination paths and integrate these into standard operating procedures. These contingency plans should be put in place with the expectation and understanding that they will happen.
5. Manage by Exception. Companies can be so overwhelmed by day-to-day operations that when exceptions occur they are not prepared to make fast and informed decisions. Instead they make rushed and rash decisions because they do not have a bird’s eye view of the situation. Exception-based protocols focus on what is most important.