3 Elements of a Responsive Supply Chain
- Increased inventory visibility for monitoring, tracking and exception handling
- Source-to-pay and procure-to-pay suites for faster velocity of transactions
- Reduced variability in demand and supply with better planning
Delays, shortages, bottlenecks. As supply chains become more complex and globally connected, the chances of disruptions and ripple effects have only grown.
Making supply chains responsive and resilient has thus become an important goal with a strategic focus on advanced software solutions for supply chain management.
For a company to have a responsive supply chain, it must focus on three key elements -- visibility, velocity and variability.
1. Supply chain visibility
It is the ability to view important information throughout the supply chain cycle – be it forward or in reverse.
Increased visibility along the supply chain can help an organization and its partners save costs and time and create value for end customers.
The inventory visibility capabilities in modern supply chain management software provide enterprises geographical view of stocks for multiple entities, including integrated suppliers and manufacturers across sites and locations.
Some examples of stock visibility are inventory in hand, in-quality inspections and goods movements (goods received, issues and stock transfers, etc.) at any point.
The inventory visibility module integrates with other modules like replenishment workbench, sourcing, contracts and procure-to-pay and demand planning to provide a seamless and intuitive user experience.
The modern control tower in this solution vastly improves monitoring, tracking and exception handling through a dashboard and an alert mechanism. This allows the organization to manage exceptions and outliers like missing response, late shipments, safety stock exceptions and missing forecast commitment from suppliers.
The control tower is already configured with the out-of-the-box laundry list of exceptions and alerts across modules. It can also create a situation room for an exception or an alert and add internal or external people to the room and lets the issue be resolved collaboratively.
2. Supply chain velocity
This indicates the relative speed of all transactions within the supply chain.
It desirable to have maximum velocity. This indicates a higher asset turnover for the stakeholders and faster order-to-delivery response for customers. The more rapidly payments are received from customers, the sooner the money can be put to work in the business.
Velocity can be improved by eliminating activities that do not add value, speeding up the flow of demand and cash and reduce the inventory idle time, queue time and wait time.
Increased movement of inventory reduces chances of damage or spoilage and cuts inventory holding costs.
This is made possible through source-to-pay (S2P) and procure-to-pay (P2P) suites that substantially reduce the time spent from sourcing to procuring. This is achieved through features such as digital contract redlining, digital signatures, contract renewals and operationalization of contracts into P2P. This increases the flow of transactions within the supply chain.
These solutions are also easily and efficiently integrated and exchanged across multiple systems and platforms. For example, points of sale information can be made available instantaneously across organization for planners, warehouses and manufacturing units.
Follow-on actions include scheduling shipments from warehouse to replenish the retailers' shelves and manufacturing units planning to meet the demand.
Simultaneously, suppliers get purchase orders schedules as per production plans. These are executed automatically via the inbuild integration framework, enhancing the velocity of each transaction.
3. Supply chain variability
Variability is a natural tendency of activities to fluctuate above and below an average value. In supply chain, it is paramount to reduce variability in both supply and demand as much as possible since this can create ripple effects.
Demand variability: The traditional offset against demand variability is a safety stock. Greater visibility along the supply chain results in greater velocity and eventually supply chain managers can better manage demand variability and reduce the amount of safety stock. Supply chain planning solutions today have AI-based optimum safety stock calculation algorithms that can be configured to suit customer expectations.
Supplier variability: This can be better managed by improving collaboration and information sharing with suppliers. Through a single portal, suppliers can collaborate from the first step of forecast collaboration till the payment is done.
For example, a supplier can respond to forecast commits, changes in forecast, acknowledge purchase orders, create advance shipping notice and share stock information.
Managing these “3Vs” (visibility, velocity and variability) throughout the supply chain positively impacts cost, time and elevates value for the customer. The benefits of streamlined operations are felt across functions.