SUPPLIER LOGISTICS MANAGEMENT � The Next Strategic Layer of Competitive Advantage Supply chain executives are in the hot seat given the flat economy and a slowdown in revenue growth. They are challenged by senior executives to find new and innovative ways to reduce cost, while still meeting customer needs. However, in today's customer-centric environment, meeting customer's expectations is not a competitive advantage, but a fundamental necessity of existence. Delivering products on time, at a higher level of service, is now a standard expectation, leaving limited room to leverage performance as a sustainable competitive advantage.
To reduce costs and gain a competitive advantage, supply chain executives need to focus on supplier management inefficiencies in their supply chain. Ignoring upstream supply chain activities can be costly. For instance, it has been estimated that the food and beverage industry loses $7 to $12 Billion per year through incorrect data flows between suppliers and retailers (1). Additionally, when European consumer goods and food retailers lost more than $17 billion in inventory last year, they could only explain about 41% of these losses (2). Results like this point to the strategic advantage supply chain executives can obtain by focusing on improving their fragmented and complex supplier logistics networks. Through improved supplier logistics management, supply chain executives can provide senior management the silver bullet they are looking for to minimize operational inefficiencies, reduce costs and gain a sustainable competitive advantage.
This is Part Two of three-part note.
Part One covered how Technology Enables Supplier Logistics Management.
Parts Two and Three cover the Seven Fundamental Issues Targeted by Supplier Logistics Management.
(1) �Kraft In Sync with Shaw's Supermarkets'
Consumer Goods Technology, Ralph Bernstein, June 2001
(2) �Unexplainable Losses'
Traffic World, John Parker, June 4, 2001
With the Internet as the road and Net-Native applications the vehicle, supply chain executives have the opportunity to drive significant efficiency improvements and cost reductions through Supplier Logistics Management (SLM). SLM enables companies and their suppliers to successfully synchronize information; thereby, allowing companies to extend supply chain optimization and process flows to their supplier base. With SLM in place, companies can target seven fundamental supply chain issues facing the management of successful supplier fulfillment:
1. Order Visibility and Event Management
2. Inbound Planning and Optimization
3. Information Synchronization
4. Supplier Management and Compliance
5. Available-to-Promise
6. Forecasting and Capacity Management
7. Resource Scheduling
Today, purchase order visibility is primarily a truck arriving at a company's distribution center and identifying order discrepancies at the dock door. SLM seeks to eliminate this fortune telling visibility by allowing companies to proactively identify risks upstream, giving time to react prior to shipment arrival. This would allow companies to cut cycle times by as much as 33% and reduce inventory by as much as 30%, both while improving in-stock customer service (3). "Inaccurate information that arrives late, or not at all, has traditionally been the Achilles' heel of supply chain management resulting in excess inventory, inefficient processes, higher costs, and unhappy customers. Therefore, having better visibility, along with exception management and workflow capabilities, allows companies to respond quickly and effectively to changes, and, in light of today's highly-dynamic business environment, this ability ultimately translates into a competitive advantage", states Adrian Gonzales, a Senior Analyst with the ARC Advisory Group.
Using SLM, companies issue suppliers purchase orders with desired order quantities and delivery dates. The suppliers are able to see and act upon the information related to the purchase order. Any changes or adjustments the supplier makes to the purchase order triggers a proactive event notification to the company's buyers. The process carries forward to suppliers creating shipments from the purchase orders, tendering shipments and transporting shipments. Along the entire supply chain path the company has complete purchase order visibility and is notified of any discrepancies from what was transmitted to the supplier. Allowing buyers to be proactive instead of reactive and to troubleshoot purchase order issues with the supplier prior to delivery, eliminates surprises when orders arrive.
To reduce costs and gain a competitive advantage, supply chain executives need to focus on supplier management inefficiencies in their supply chain. Ignoring upstream supply chain activities can be costly. For instance, it has been estimated that the food and beverage industry loses $7 to $12 Billion per year through incorrect data flows between suppliers and retailers (1). Additionally, when European consumer goods and food retailers lost more than $17 billion in inventory last year, they could only explain about 41% of these losses (2). Results like this point to the strategic advantage supply chain executives can obtain by focusing on improving their fragmented and complex supplier logistics networks. Through improved supplier logistics management, supply chain executives can provide senior management the silver bullet they are looking for to minimize operational inefficiencies, reduce costs and gain a sustainable competitive advantage.
This is Part Two of three-part note.
Part One covered how Technology Enables Supplier Logistics Management.
Parts Two and Three cover the Seven Fundamental Issues Targeted by Supplier Logistics Management.
(1) �Kraft In Sync with Shaw's Supermarkets'
Consumer Goods Technology, Ralph Bernstein, June 2001
(2) �Unexplainable Losses'
Traffic World, John Parker, June 4, 2001
With the Internet as the road and Net-Native applications the vehicle, supply chain executives have the opportunity to drive significant efficiency improvements and cost reductions through Supplier Logistics Management (SLM). SLM enables companies and their suppliers to successfully synchronize information; thereby, allowing companies to extend supply chain optimization and process flows to their supplier base. With SLM in place, companies can target seven fundamental supply chain issues facing the management of successful supplier fulfillment:
1. Order Visibility and Event Management
2. Inbound Planning and Optimization
3. Information Synchronization
4. Supplier Management and Compliance
5. Available-to-Promise
6. Forecasting and Capacity Management
7. Resource Scheduling
Today, purchase order visibility is primarily a truck arriving at a company's distribution center and identifying order discrepancies at the dock door. SLM seeks to eliminate this fortune telling visibility by allowing companies to proactively identify risks upstream, giving time to react prior to shipment arrival. This would allow companies to cut cycle times by as much as 33% and reduce inventory by as much as 30%, both while improving in-stock customer service (3). "Inaccurate information that arrives late, or not at all, has traditionally been the Achilles' heel of supply chain management resulting in excess inventory, inefficient processes, higher costs, and unhappy customers. Therefore, having better visibility, along with exception management and workflow capabilities, allows companies to respond quickly and effectively to changes, and, in light of today's highly-dynamic business environment, this ability ultimately translates into a competitive advantage", states Adrian Gonzales, a Senior Analyst with the ARC Advisory Group.
Using SLM, companies issue suppliers purchase orders with desired order quantities and delivery dates. The suppliers are able to see and act upon the information related to the purchase order. Any changes or adjustments the supplier makes to the purchase order triggers a proactive event notification to the company's buyers. The process carries forward to suppliers creating shipments from the purchase orders, tendering shipments and transporting shipments. Along the entire supply chain path the company has complete purchase order visibility and is notified of any discrepancies from what was transmitted to the supplier. Allowing buyers to be proactive instead of reactive and to troubleshoot purchase order issues with the supplier prior to delivery, eliminates surprises when orders arrive.
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