BALANCE THROUGH IMPROVING INFORMATION AVAILABILITY
The source of balance between supply chain capabilities and marketing practices is information. The supply chain reacts to changes in customer demand as information is communicated back through all processes. The demand communication system that links marketing with the supply chain must provide accurate forecasts of demand and information on planned marketing activities. The supply chain can then plan for the changes in demand and provide product in the most cost-efficient way. When the balance is upset and the supply chain cannot meet demand with normal processes, the company incurs costs above the standard costs for the product.
In a synchronized environment, every node of the supply chain must be working from the same set of data. The alternative is sequentially passing information across each node of the supply chain that perpetuates duplication of data, missed information, and time delays. ERP systems are based on exactly this notion—real-time access to the same set of information by any user across the enterprise. Companies today are looking for technology solutions to manage the demand and fulfillment sides of the business. The element of time and access to information has been a major contributing factor in the growth of ERP systems. Companies and their suppliers must have integrated inventory-planning systems with information exchanged instantaneously as customer demand changes. ERP systems are designed to improve the access to information across the supply chain for all types of businesses.
Information systems will be required that can support such initiatives as continuous replenishment and vendor-managed inventory. In the consumer goods industry, a retailer's inventory may be maintained by the manufacturer by stock-keeping unit. Sales at the retailer are deducted from on-hand balances through point-of-sales transactions transmitted every day. Products are replenished by the manufacturer, either daily or in economical batches based on agreed-upon inventory models. Purchase orders are not transmitted and delivery schedules are not defined, and EDI systems and the Internet are used to transfer the information.
Successful supply chains will link customers and suppliers through collaborative planning and forecasting. In supply chain processes, suppliers, distributors, and carriers all play a role in satisfying customer demand. Collaborative planning allows companies to improve efficiencies by creating co-managed business processes where all partners share information on forecasts, product movement, inventory, and demand.
The proliferation of electronic access and delivery systems provides a wealth of new ways for companies to interact with customers. This new way of doing business, termed e-commerce, is having a tremendous impact on supply chains. Companies can move information between business partners without the use of paper documents. E-commerce represents a significant opportunity for integrated supply chain management efforts. E-commerce systems include EDI, e-mail, electronics funds transfer, bar-coding, shared databases, electronic bulletin boards, the Internet, and intranets.
As discussed in Real Time by Regis McKenna , companies best equipped for the 21st century will consider investment in real-time systems essential to maintaining their competitive edge and keeping their customers. They will use information and telecommunication technology to respond to changing circumstances and, more importantly, customer expectations within the smallest possible amount of time. Companies will understand that real time is exceptional responsiveness and that customer's expectations are being reset for hyper-accelerated response no matter what they are buying.
Supply chain synchronization closes the loop between supply and demand. As noted earlier, supply chain requirements are changing as customers demand faster delivery, a variety of products, convenient ordering, and better service. At the same time, technological advancements in the marketplace are driving companies to offer new channels of distribution, custom shopping, and other e-commerce vehicles. These demand changes are forcing companies to evaluate and overhaul their supply chains to make sure they are balanced to customer demand.
When supply chains are out of balance due to marketing activities, added costs are incurred. Companies must develop models that can quantify the true profitability of the marketing initiative. In addition to understanding the profitability impacts, companies should also improve their supply chain capability to meet demand in the future. The improvements may include changing organizational structure, internal process improvements, and implementing new measures to drive improved performance. Information systems must also be assessed to ensure that necessary information can be exchanged along the chain. An optimal supply chain will have nodes that are each able to produce and deliver to customer demand. A synchronized supply chain is based on reality, not on gross, rough-cut numbers. At a Gartner Group Conference on supply chain management, the industry analyst firm reported, "Average companies work with information averages. Winning companies work with information details, finding business value in the margins"
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