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Managing a Supply Chain
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In the January 1998 issue of Logistics magazine, a roundtable discus­sion held at MIT concerning the future of the supply chain was pre­sented. Listed below is the prognostication of how the future could look. In the U.S., the baby boomers retire. China and India are now economic powerhouses. Consumers are now shopping around the world electronically for most basic requirements and only shop for pleasure. New products are delivered electronically. Trade barriers have been eased. Consumers expect their Internet orders to be delivered over­night, configured to their specifications, and at a competitive price. This suggests that logistics and supply chain managers face enormous challenges in the next 10 years. They must help their companies man­age supply chains in ways that allow them to deliver better products reliably, faster, and cheaper; do it profitably; and do it everywhere. This also means it must happen in an environment of rapid change; technology, channels of distribution, environments, governments, and changes in demographics.

From the above, it becomes obvious that the suppliers of supply chain management solutions must address an increasingly global mar­ket. It appears that the three main strategies appearing that could help to support these needs are supply chain integration, supply chain opti­mization, and interenterprise collaboration. Obviously, supply chain integration is just that—it is the integrating of manufacturing, purchas­ing, logistics, and customers' systems. Supply chain optimization means the balancing of work regarding available capacity throughout the sup­ply chain. Constraints can occur anywhere in the process and these advanced systems can apply their logic simultaneously throughout the supply chain, even to elements not owned by the enterprise. This means that even supplier and customer constraints can be incorporated. These systems can, therefore, react to demand volatility. Finally, interenterprise collaboration means that no one has the total solution. It appears that most companies have part of the answer, but no one has all. The devel­opment of broader functionality by software companies, in my opin­ion, is the ultimate solution. Since most companies are very impatient, I see the trend toward collaboration. Unless these various software pack­ages are very carefully programmed, this approach could create addi­tional complexities that would require huge resources.


This presentation began with an objective of offering suggestions for being able to meet changing demands throughout the entire supply chain. In closing, therefore, I wish to offer a checklist of ideas con­cerning ways in which changing demands can be met. The checklist is as follows:

      Continue to be knowledgeable and conversant regarding new systems technology. Don't be the beta site, but be sure your software partner is aggressively supporting the total supply chain.

      Continue to concentrate on the value chain and use continuous improvement. Know what is required to serve your customer.

      Time and speed are the critical aspects of the marketplace. Continually work toward reducing total lead time. Improved supply-chain performance can help reduce working capital, which can improve profitability.

      Be sure to define the supply chain in your particular business. Could it include services such as in-home delivery, unpacking, installation, and removing packaging (recyclable)?

      Power in the distribution channel is shifting toward the customer.
Partnership arrangements are now a must. How about JIT II?

      The use of third parties will grow. Systems and integration with these parties is a must. If done successfully, it will give companies more flexibility to respond to economic changes.

      The trend is to move product directly from plant to customer. What is happening to companies who use public or intermediate warehouses?

      Future planning systems must provide control for the entire supply chain network, which also provides optimization.

      EDI and the Internet will become our main source of communica­
tions. Be prepared to utilize them.

      Select the appropriate supply chain measurements to define success. As an example, design third-party controls to offer incentives to the partners to achieve performance measures rather than to charge a fee to manage. Measurements must include cycle time reduction, speed to the customer, and cost to the customer.

      Group customers by distinct service needs. One must then tailor services to these segments. Examples are products that deteriorate, need refrigeration, quick delivery, and special handling and packaging.

      Sales forecasting and production planning should be more highly
emphasized and improve communications via these techniques. In­
stead of monthly meetings, maybe bimonthly meetings should be

      Use JIT and second-level master scheduling. Use final assembly scheduling for warehouse operations.

      Work with suppliers and use gain-sharing instead of negotiations.

      Use A. T. Kearney's four key steps for implementing supply-chain techniques: (1) assess the supply chain competitiveness of the organization; (2) create a vision of the desired supply chain; (3) define the actions required to close the gap between tomorrow's supply chain vision and today's reality; and (4) prioritize the action items previously identified and then commit the necessary resources.

       From the foregoing discussion, we can conclude that in order for the supply chain to become efficient, ever-changing demand must be identified quickly and communicated rapidly through the entire supply chain, especially to the suppliers. We have discussed that through the efforts of technology, which is improving at a rapid pace, our commu­nication efforts will improve. This will enhance our capability to in­crease flexibility and adapt to changing demand as never before. Greater use of the Internet will help to facilitate this effort.

Perhaps the most important mandate of all is to get closer to your customers. The supply chain realistically begins and ends with the cus­tomer. Therefore, in order to satisfy the customer, one must know what they want, when they want it, and then deliver the goods quickly. That is the true essence of supply-chain management.



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