Some manufacturers are experts at forecasting customer demand for their products; some are highly proficient at optimising plant floor operations, while others are skilled at ensuring they always have the right components on hand. However, few are able to execute all three tasks with any degree of precision.
In many cases, the lack of an integrated supply chain is to blame - typically one that is underpinned by disparate IT systems that are unable to exchange information. These systems may include a range of so called `point solutions` that directly manage the supply chain, but may equally include the mainstream back-end systems that govern financial accounting and procurement processes.
These unconnected systems create what are termed `points of failure` in the flow of information around the supply chain. They also have a nasty habit of showing up in the form of unfulfilled customer orders, plant floor employees working on expensive overtime or even standing idle, and an excess or insufficient inventory in warehouses.
Supply integration is much more than just data integration. Agility is another key benefit
Ashley Ellington, MD, Softline Enterprise.
Analysts at IT market research company, AMR Research, believe the solution is an integrated supply chain driven by customer demand, or in their parlance, a "demand-driven supply network" (DDSN). In the DDSN, customer data is fed into an integrated supply chain system and drives planning and ordering operations, so that the three elements (forecasting demand, planning operations and ordering supplies) all complement each other.
A forecast error is a given in a DDSN, but the company is constantly working through account performance, demographic and point-of-sale data to anticipate, shape and influence demand. As a result, the organisation is aligned in discovering the true needs of the customer and how to use its delivery channel to gain market share.
For many manufacturers, that degree of integration is still a distant vision. However, many are moving towards more united systems by deploying integrated software that can seamlessly exchange information about orders, operations and supplies. This ensures they can deliver the right product to the right customer at the right time and price.
For many manufacturing companies, that will - or should - involve implementing supply chain applications. But, it will also involve ensuring supply chain processes are tightly integrated with other related applications, including those for financial accounting processes.
Integrating supply chain systems with front-end customer relationship management (CRM) systems and back-end financial systems, avoids the need for people to input the same data more than once, thereby maximising data accuracy across the system. More importantly, it gives a single, company-wide view of operations across the business.
Supply integration is much more than just data integration. Agility is another key benefit. When we think of agility, we are referring to how easily manufacturers can react to change characterised by quickness, lightness and ease of movement.
Integrating the order management systems used by sales and financial accounting staff with the manufacturing planning systems used on the shop floor, may make a significant contribution to ensuring orders are prioritised and fulfilled in the right order. Likewise, integrating a CRM system into the process will also promote agility.
CRM systems allow companies to, among many other things, analyse the past requirements of each customer and, therefore, anticipate their future requirements. Adding CRM into the mix makes the entire pipeline visible, allowing managers to accurately forecast what orders are required and when. As such, they ensure the supply chain is proactive rather than reactive.
End-to-end supply chain visibility makes a significant difference to company-wide profitability. Whether tracking costs on a works order or defining items on a bill of materials, having an integrated supply chain enables companies to link all of their manufacturing, planning and finance operations to gain an all-important competitive-edge.
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