|Most companies will see their supply chain velocity continue to increase, rely far less on forecasts and much more on responsive, demand-based supply chains, incorporate high levels of product customization and tailoring, and embrace related supply chain process changes.
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Below is an except from the groundbreaking report on integrated supply chain planning and execution written by SCDigest’s research organization Chief Supply Chain Officer (CSCO) Insights. The full report can be downloaded here: Next Generation Supply Chain Management: The Integration of Planning and Execution.
This except provides a concise description of the third phase in the evolution to highly integrated planning and execution – moving to “Sense and Respond” supply chain networks (see graphic later in the article.)
Phases I (The Basics) and II (The Real-Time Supply Chain) take care of the fundamentals and move companies much closer to a state of integrated supply chain planning and execution. But getting to a true “sense and respond” network, in which operational and even tactical planning blur with execution processes, is where the supply chain is ultimately headed – and faster than many may realize.
What is close to available today and will become commonplace in the future is the ability to see in near-real time a complete picture of supply and demand data, across multiple levels – from supplier’s supplier to customer’s customer. The view will also not be “point-to-point” but “many-to-many,” requiring collaboration and synchronization around supply chain execution and tactical planning – in near real-time.
But it is a lot more than just technology, of course – it is completion of the journey from a forecast-driven supply chain, in which companies build supply chains around trying to predict demand, to a customer-driven one that is organized to respond to demand with lightning speed.’
While the picture will look somewhat different from industry to industry, “build to stock” will ultimately give way to “build or customize to demand” in virtually every one of them. Long production runs and costly changeovers will give way to much more flexible factories that can rapidly switch gears to cost effectively make short runs of product based on the latest near real-time demand data. Procter & Gamble has publicly stated its goal of being able to make every SKU every day in its plants, recognizing the cost of the weeks of inventory its pipeline still holds after years of attention and improvement in the forecast-driven model.
But this model cannot be implemented by a company stand-alone. It must be built with an intense level of visibility and collaboration.
As Nick LaHowchic (former supply chain executive at The Limited Brands) and Dr. Don Bowersox of Michigan State University recently wrote, if information “was shared fluidly between participating firms in a channel, then a great deal of “anticipation” would be replaced with facts. In a collaborative environment, it would not be necessary to forecast what others are planning to do or what they are planning to buy.” This is the critical point: visibility and information sharing will allow trading partners to simply sense and respond, within defined relationship rules. Of course, this vision of the integrated supply chain has been there all along – it was many years ago that the vision of a sweater being sold in a store in the US would trigger a sheep being shorn somewhere in New Zealand.
(Supply Chain Trends and Issues Article - Continued Below)