Breaking the traditional bounds of the supply chain:
By Katherine Jones -- Manufacturing Business Technology, 6/1/2001 6:00:00 AM
The traditional bounds of a supply chain have been limited to managing inbound and outbound logistics, feeding the production operations, and delivering orders to customers. Today's supply chain management environments must surpass this. A competitive corporation must move the internal corporate boundaries to simultaneously include engineering and design, and customer service, support, and repair. Supply chain planning, therefore, must incorporate the full product life cycle—from the proverbial cradle to product graveyard.
Involving suppliers as early in the process as possible affords the opportunity to work cooperatively on negotiating the form and fit of a supplier's component functionality—an opportunity to collaborate with intellectual capital that aids in better designs and more expeditious component assembly processes.
Begin e-sourcing early
Sourcing, which was previously considered only when the design was complete and production ramp-up was underway, should begin as early as possible. Faster sourcing leads to faster product development and introduction cycles. Selecting suppliers that have domain expertise and reliability—in both product quality and delivery capabilities—means the difference between a successful product ramp-up and failure to have the needed parts to feed the production process. Early sourcing strategies can have a major impact on component availability for production schedules.
When the inbound side of the supply chain is connected to the originating supplier, manufacturing companies can obtain data about available supplier inventory and capacity, work-in-process, status of existing orders, and the relevant transportation gates needed to send early warning signals—for example, a shipment is delayed en route—and then pass alerts on to the production planning and sequencing environment. Given sufficient early warning, a master production plan can be altered in time to prevent the disastrous impact of a materials shortage that would result in products that are only partially ready for shipment, or idle assembly lines. Other orders can then be elevated in priority to take up the slack and keep the capital assets in full use, or an air shipment from the original or alternate supplier can be arranged when the customer order cannot be delayed.
Important to both the manufacturer and the supplier is better demand information. This requires actual sales demand rather than predictive, long-range forecasting. Additionally, contractual systems can alert the planner to potential deviations from contractual obligations, as well as the dollar impact of how and when a product is delivered. The extension of this information into the decision process can reveal the overall impact on corporate revenue targets and the bottom line—and as significantly, on customer satisfaction and loyalty.
Today's customers are demanding shipping information that indicates arrival date, not solely ship date; and asking, "When does it get to my dock, not when does it leaves yours? What is my total landed cost?" Complete logistics information can be used to reverse-feed the production order plan to add the dimension of in-transit time into order-sequencing considerations. This is especially useful when multiple customers have the same shipment promise date, but different transit times. The logistics information also is invaluable in sequencing orders through the factory constrained by how the truck needs to be loaded—thereby reducing less-than-full truckloads, on-the-dock storage, and cross docking. After all, unshipped goods do not allow revenue recognition!
The new end-to-end
In essence, supply chain management should not be seen as completely separate from product development processes, and vice-versa. Yes, in one sense, new orders do trigger supply chain operations and kick off the order-fulfillment process. But the overall process of configuring and managing a supply chain can, and should, begin early on—coinciding with product development processes. Conversely, new product introductions that are cognizant of supply chain constraints will be much more successful. Manufacturers and suppliers that can work collaboratively to break the traditional bounds of the supply chain will be rewarded by quicker time-to-volume, and ultimately, improved responsiveness to demand and a better chance of gaining market share.
