Johannesburg, 07 Nov 2008
Ashley Ellington, MD, Softline Enterprise, says that the objective in the supply chain and logistics industry today is to have the information flow running as smoothly as the flow of goods. Smart decision makers have therefore recognised the strategic importance of supply chain management and that technological advancements can unlock untold opportunities within the supply chain network.
He says there are important differences in the supply chains that serve Internet business and those that serve more traditional business models. “In supply chains serving Internet business, customer expectations are much higher. As customers are ordering online for convenience, they automatically expect a high level of service. Customers are interested in unique configurations of products as opposed to standard models. However, they also want the low cost that results from standardisation. Most importantly, customers want real-time information about the status of their orders. They not only want to have visibility about the shipment, they also want to know if the shipment is deviating from its schedule.”
In the traditional supply chain model, a company will plan inventory and production levels using forecasted estimates of sales based on information that may be three or four levels removed from the end-consumer. Based on the plan, the company will buy direct materials, make the product, move it to a distribution centre to wait for an order to arrive, and then sell the product.
Ellington says that information about what is sold is then gathered and used in further planning. This model presents challenges as, he explains, the majority of the supply chain has no idea about true customer demand and is simply operating in reactive mode.
The technologically-enabled supply chain, however, enables every member of the chain to become connected to part of a larger network in which everyone can see real-time customer demand and understand the impact of that demand on their operation. The sell function moves to the front of the process line, and the entire supply chain reacts to actual customer demand.
Here, the buying, making and moving of products throughout the chain of suppliers and service providers occurs in harmony to support genuine customer demand. Also, instead of merely reacting to demand, the supply chain network can influence demand by dynamically pricing products based on available inventory and capacity in the network. With dynamic pricing, available supply is matched to demand, which reduces excess inventory and maximises revenue. Instead of being reactive, the supply chain becomes adaptive.
“Technology has dramatically changed the structure and importance of the supply chain. Because of the very short life of many products, a company's supply chain must be adaptive and responsive. To ensure profitability, there must be a tight connection of supply and demand as well as first-rate customer responsiveness and communication throughout the supply chain. Companies that use technological advancements to transform their supply chains will gain a significant competitive edge, and realise a healthier bottom line.”
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