With continuous improvements in technology and the increasing availability of information, along with intense global competition, it means the customer is not only more informed but more powerful than ever before! The demand is not only for innovative product features or services, but also greater variety, flexibility, sure-footed performance and consistent quality, all in a 'best-for-less' environment of competitive pricing.
What's more, customers are becoming more demanding and expect instant satisfaction due to technological advancements. It is no longer acceptable to persist in out-dated, forecast-driven, long, drawn-out supply lines. The challenge today in Supply Chain Management (SCM) is to be as lean and agile as possible to satisfy customer demands within a competitive market.
Traditional Supply Chain Management
Traditional SCM was known for being highly market-protectionist; being long-range forecast driven with a higher emphasis on perceived customer service than cost-effectiveness and maintaining high inventory stocks to head off fluctuations in demand and lead times.
Today, businesses need to be aware of much leaner SCM mechanisms. It is essential to operate a supply chain that is both lean and agile. Using a combination of lean and agile constitutes a hybrid supply chain strategy. These include full upstream integration with suppliers, commensurate, 'downstream' integration with customers and a prioritised emphasis on efficiency and minimum stock inventory. However, not only do producers need to be lean, they also need to be agile, by which they become notable for speed and flexibility, both in producing innovative products and responding to unpredictable demand.
A lean supply chain can help combat supply chain challenges; focusing on adding value for customers, while identifying and eliminating all waste will all add value. Being agile and responsive shows that your supply chain can handle unpredictability - even a constant stream of innovative products - with promptness and flexibility.
Leaner SCM mechanisms have had a major impact on traditional systems of inventory control and it is true that many companies focus their adaptation and monitoring of lean practice in the area of inventory control. There have been significant reductions through using methods such as Enterprise Resource Planning solutions (ERP), but it is still the case that many manufacturers carry around 25% more inventory than necessary.
A more agile SCM strategy will adopt a more 'wait-and-see' or ('postponement') production planning approach to customer demand, whereby actual production is not triggered until real-time demand is known. In many cases this will involve sub-assembling; a few modular components through a low-cost process, enables the final assembly to be completed as close to the time and point of requirement as possible.
A supply chain management system must be able to respond to real-time demand and analyse the available information to pre-empt inventory, as it were, by collaborating and integrating with key customers and suppliers. It involves flexibility, market sensitivity, a virtual (connected) network, the use of 'postponement' and selected lean supply chain principles.