Supply Chain Management (SCM) has become an integral part of many manufacturing companies’ production processes. SCM came to be recognized as crucial to the success of a business especially if there is high competition within the industry and room for inefficiencies are low. First pioneered by Japanese automobile companies like Toyota, SCM is essential in order for companies to implement lean manufacturing methods. SCM strategies need to adapt and evolve according to the needs of the economy. Hence, the early strategies employed by Japanese automobile firms are no longer fully applicable today. Especially in the recession stricken economic situation of today, new innovative ways of managing supply chains have to be devised. What follows are five such prominent strategies.
Strategy 1: Adopting a demand-driven approach to production based on inputs from real-time demand data. This strategy quite useful both when applied to pre-production and post-production supply chain processes. A key aspect of SCM is the ability to accurately predict likely future demands. But it is equally important to be able to fall back on contingency plans that could mitigate the effects of natural disasters, political instabilities and suppliers going out of business, etc. By planning for these, “companies then can adjust pricing and promotions strategies to shape demand, move additional product quickly, drive revenue growth, or further expand margins for a high-demand product with limited market supply. The key is to have the foresight to leverage opportunities and mitigate challenging events so that your business not only survives, but succeeds.” (Muzumdar, 2010)
Strategy 2 is Optimization of product designs for supply, manufacturing and sustainability so that innovative processes could be applied. In the highly competitive business environment of today, innovation can make the difference between survival and bankruptcy. Since SCM is all about improving efficiencies, incurred inefficiencies will show up in the cost of manufactured products. By optimizing designs and by controlling costs, resources can be made available for further innovations.
The alignment of supply chain with business objectives is the third strategy, whereby the linking of sales and operations planning (S&OP) with corporate business planning will fetch the company rich dividends. Integrated Business Planning can come handy in combining
“financial strategic budgeting and forecasting systems with operations planning. The resulting marriage of processes ensures revenue goals and budgets developed in finance are validated against a detailed, bottoms-up operating plan. Concurrently, the strategy reconciles the operating plan against financial goals. It also enables companies to achieve the right balance of supply and demand, aligned with strategic business goals. It provides real-time visibility to all the key dimensions for success–demand, supply, product, risk, and performance–across the organization and throughout the extended supply chain.” (Muzumdar, 2010)
Leveraging the power of Information and Communications Technology (ICT) is seen by some as a powerful SCM strategy. Since manual lean methods of the past are now proving to be inconsistent and inadequate, new technological aids are an imperative. The rationale for using ICT is that, “with complex global supply chains, enterprises need solutions that solve complex optimization problems that are simple to use, easy to deploy, and capable of responding to real-time information. They must also provide the collaboration required to drill down into demand drivers at a granular level, as well as integrate and align internal and external supply chain partners.” (Supply Chain Market, 2009)
An often overlooked SCM strategy is to incorporate sustainable business principles within supply chain operations. While it might intuitively look counter-productive to invest on sustainable practices, empirical data shows that companies that have treated this path have reaped impressive rewards than those that haven’t. Finally, another SCM strategy mooted by experts is to commit to the ‘lean philosophy’ on an enterprise-wide basis.
Works Cited:
Five Supply Chain Strategies To Improve Business Performance, JDA Software, Supply Chain Market, retrieved from <http://www.supplychainmarket.com/article.mvc/JDA-Software-Offers-A-New-View-On-Lean-0001?user=20&source=nl:23940> on March 25th, 2011.
Muzumdar, Maha, 5 Strategies for Better Supply Chain Management in the Current Economy, Oracle Supply Chain Management, retrieved from <http://blogs.oracle.com/scm/2010/07/5_strategies_for_better_supply_chain_management_in_the_current_economy.html> on March 25th, 2011.