Extended Supply Chain Systems – the need of the hour
Supply Chain Systems today have become powerful with the advent and increase in use of the internet. Back in the 80’s the systems data usage and analytics was restricted and disparate in nature. Systems were in silos and not connected to each other. For example the manufacturer, supplier, and the retailer/end customer data was restricted to its network.
Today the data available for analysis at the manufacturer end can benefit the supplier or the customer or vice versa. Such data can be shared using standard communication formats using Electronic Data Interchange (EDI), Web Services, Partner Portals and the like.
Extended supply chains have become critical success factors in various industry sectors. Let us examine a few sectors to get an idea of how business scenarios and challenges can be addressed by an all-encompassing supply chain setup.
Large retailers today, share sales data, by location, with their suppliers resulting in competition amongst the suppliers to offer better prices, quality and timely delivery of goods to the retailer, which ultimately benefits the end customer.
Large Distribution centres extend their system to their stockists for them to get a visibility of inventory availability and place orders real time. Stock allocation happens accurately resulting in timely supply of goods to the stockists. The stockists also have visibility of quantity and expected receipts. Extending the stock allocation functionality to the stockist helps the distributor define his saleable and non-saleable inventory clearly.
Vendor Managed Inventory is fast gaining pace in large retail environments. Under this concept the supplier inventory is physically located at a Retail outlet on consignment basis until it is sold to the end customer. Such complex supplier-vendor relations require extending supply chain systems which talk to each other.
Automotive companies share “Quality Check” information with suppliers resulting in improvement in the manufacturing or assembly process at the supplier’s end. This results in reduced defective parts per million sent by the supplier, ultimately resulting in fewer car recalls.
Automotive companies and large ancillary parts manufacturers also extend their Order Management System to their suppliers, so that parts are received pre-barcoded and indented quantities are always accurate. Such systems help suppliers meet the agreed time lines. Reconciliation is fast and accurate at both ends, eliminating ambiguity.
Nowadays customers are not limited by geography. Large manufacturers engage 3PL providers for storing and handling delivery of goods and materials. Some of these deliveries are JIT and have stringent delivery SLA’s to be adhered to with huge fines for stock outs. Extending supply chain systems to 3PL operators to have real time information on orders received and good delivered helps manufacturers adhere to their SLA’s for JIT goods supply. Extended supply chain system also helps in cross docking for re-distribution or consolidation of inventory in a particular zone or geography.
Pharmaceutical companies set aside huge spends on brand creation. However non-availability of the brand or a stock out results in lower market share. Studies have shown that large Pharmaceutical companies lose out market share to local players when they cannot supply drugs on time.
Companies have to make strategic and tactical decisions in the markets they operate in to ensure their success. Visibility of critical information about their sales numbers not just at the primary and secondary levels but the tertiary or end consumer sale level is required. They need to extend their supply chain all the way to the retailer.
The flip side of the coin is that this same data has to be used to improve processes and ensure availability of their brands at the retailer all the time, while not having stagnant inventory. It is important to set up intelligent Warehouse Management Systems to be able to deliver goods on time and achieve better order fulfilment.