The current uncertainty in the global markets and the ever-increasing complexity in the supply chain suggests that we take a relook at the "Triple-A Supply Chain" concept (published in Harvard Business Review by Hua Lee in 2004) and the three A's of the Supply Chain: Agility, Adaptability and Alignment in light of the today's market conditions. Let us take each one:
1.Agility: How responsive the company is to near term market dynamics
Price is no longer a key differentiator for products. With new products, competitive pricing, and quick obsolescence, the product lifecycle is getting increasingly complex by the day. Hence, agility in making the product available with better ordering visibility helps enhance customer satisfaction. Agility can be achieved through a responsive Demand Management and Order fulfillment strategy coupled with tools as drivers.
The slowdown in the US and European markets and the growth in Asia have made predicting demand a challenge. New approaches are being developed, that use historical data for region-specific forecasting — for example, the uncertain economic conditions in the US and Europe mean that short term historical data (say one year's data) distributed in weeks, may be used to generate a forecast. This approach is agile and responsive to near term historical changes and will provide true representative data in the changing market conditions.
2.Adaptability: How adaptable the company is to long term market changes
One of the long term goals of a company's supply chain is that it be adaptable, changing its behavior as required by dynamic market conditions. This requires long term strategic planning, structural changes in the supply chain network and efficient utilization of technology. With companies dependent on suppliers and contract manufacturers across the globe and distribution networks not confined to specific regions, network optimization analysis along with right sourcing is important to sustain business in the long term. Advanced optimizers with what-if analysis based on cost components and penalties are being leveraged to identify the strategic warehouse locations and long term sourcing partners.
3.Alignment: How aligned the company is with its collaborative partners
As their supply chains mature, companies are increasingly focusing on collaborating with suppliers and customers. The objective is to improve visibility across the supply chain for further alignment of the common goals of cost reduction and customer satisfaction. This can be done by including Customer Forecast and Supplier Inventory in the Sales & Operations Planning (S&OP) process to improve decision making, ensuring higher customer satisfaction, lower inventory buildup and improved forecasting accuracy.
How have you tweaked your SCM strategies to deal with the current market conditions? Do write in with your suggestions – we'd love to hear from you!