Supply Chain Management Essay Research Paper To

Supply Chain Management Essay, Research Paper

To balance the customers’ demands with the need for profitable growth, many companies have moved aggressively to improve supply chain management. Their efforts reflect what I feel are the seven most important steps in supply chain management. These steps can enhance revenue, control costs and asset utilization as well as customer satisfaction. In this paper I will discuss what I think are the most important factors to create and run an excellent supply chain management system.

The first step is to segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably. Segmenting customers by their particular needs equips a company to develop a portfolio of services tailored to various segments. Surveys, interviews, and industry research have been the traditional tools for defining key segmentation criteria.

Today, progressive manufacturers are turning to such advanced analytical techniques as cluster and conjoint analysis (Fredendall) to measure customer tradeoffs and predict the marginal profitability of each segment. Home Depot bases segmentation on sales, merchandising needs and order fulfillment requirements. Others are finding that criteria such as technical support and account planning activities drive segmentation. Research also can establish the services valued by all customers versus those valued only by certain segments.

Most companies have a significant untapped opportunity to better align their investment in a particular customer relationship with the return that customer generates. To do so, companies must analyze the profitability of segments, plus the costs and benefits of alternate service packages, to ensure a reasonable return on their investment and the most profitable allocation of resources. To strike and sustain the appropriate balance between service and profitability, most companies will need to set priorities, sequencing the rollout of tailored programs to capitalize on existing capabilities and maximize customer impact

For the second step you must customize the logistics network to properly serve your customer and remain profitable across your customer segments. In many industries, especially such commodity industries as fine paper, tailoring distribution assets to meet individual logistics requirements is a greater source of differentiation for a manufacturer than the actual products, which are largely undifferentiated.

International Paper Co. found radically different customer service demands in two key segments; large publishers with long lead times and small regional printers needing delivery within 24 hours. To serve both segments well and achieve profitable growth, the manufacturer designed a multi-level logistics network with three full-stocking distribution centers and 46 quick-response cross-docks, stocking only fast-moving items, located near the regional printers. (Kuglin) Return on assets and revenues improved substantially thanks to the new inventory deployment strategy, supported by outsourcing of management of the quick response centers and the transportation activities.

The third step is to understand market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation. Forecasting has historically proceeded very redundantly with multiple departments independently creating forecasts for the same products. Everyone using their own assumptions, measures, and level of detail. Many consult the marketplace only informally, and few involve their major suppliers in the process. The functional orientation of many companies has just made things worse, allowing sales forecasts to envision growing demand while manufacturing second-guesses how much product the market actually wants.

Excellent supply chain management calls for sales and operations planning that transcends company boundaries to involve every link of the supply chain from the supplier’s supplier to the customer’s customer in developing forecasts collaboratively and then maintaining the required capacity across the operations. (Riggs)

Channel-wide S&OP can detect early warning signals of demand lurking in customer promotions, ordering patterns, and restocking algorithms and takes into account vendor and carrier capabilities, capacity, and constraints.

The fourth step is to differentiate your product closer to the customer and speed conversion across the supply chain. Manufacturers have traditionally based production goals on projections of the demand for finished goods and have stockpiled inventory to offset forecasting errors. These manufacturers tend to view lead times in the system as fixed, with only a finite window of time in which to convert materials into products that meet customer requirements.

While even such traditionalists can make progress in cutting costs through set-up reduction, cellular manufacturing, and just-in-time inventory methods, great potential remains in less traditional strategies such as mass customization. For example, manufacturers striving to meet individual customer needs efficiently through strategies such as mass customization are discovering the value of postponement. By delaying product differentiation to the last possible moment and thus overcoming the problem

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