Question

How would a deep understanding of supply chain execution and stronger capabilities in execution allow companies to make better supply chain planning decisions? PLEASE BE SPECIFIC.  For example, how would a better understanding of execution lead to better inventory management decisions?

Answer 1

A Supply chain can be explained as the logical and physical movement of goods and information. Consumer provides the requirements, shops or retailers provide them the good as per the requirements. This is the last mile of a supply chain. There is huge exchange of data, goods, and logistics involved behind the scenes that ensure that customer is getting the required product.

The entire process of a supply chain includes the following aspects:

• Procurement
• Planning
• Logistics
• Manufacturing
• Warehousing
• Quality control
• Distribution channels

Each of these aspects has a direct role in supply chain execution. The supply chain can be explained as the flow of activities that are involved to ensure the last mile need is met. This includes procurement, forecasting, warehousing, distribution and order fulfillment.

Having a deep understanding of the different parameters that impact the supply chain will help in getting better control of the entire process. These parameters and the impact it generates can be studies to prepare models that help in better planning of the product. Having an insight into these actions often helps in ensuring the maximum value can be generated. Consider procurement as a parameter. The procurement in an execution phase is often the warehouse and logistic service. The cost of a product or service is often dependent on all these parameters. Suppose the market demand is high and there is a shortage of vehicles for logistic movement, this would mean there is a higher cost for the end product in the short term. If the supply chain planners and management understand these aspects or have real-time insight into them it would help them to plan the production in areas that would be closer to the customer in order to reduce the logistics costs. The other parameter that can impact the execution of order is warehouse capability. Consider the scenario where the warehouse is not big enough to stock products that are high in demand for the customer. In such a case, the planners have to build the models and plan the inventory in such a way that there is always inventory when the customer needs them. Having excess inventory cannot be an option in this case due to lower warehouse space. On the contrary, consider a case where the warehouse is big but there is not enough demand for a product. If the planners do not understand the market dynamics and keep on producing materials, then it would not be viable for a firm to store up such high volumes in the warehouse for the long term since it leads to high holding costs.

These are few areas that show the impact that a change in the market dynamics and supply chain execution can have on planning. Almost all the major firms across the globe use business optimizers and planning models to build and plan the supply chain movement. To build these models it is vital to ensure all the different parameters are studied and captured properly. But all these parameters do not have the impact as each other. All of them would need additional weight or ranking to understand the impact and plan the supply chain. Taking these decisions would need a lot of analysis, insights, and understanding of each parameter. It is therefore vital for a supply chain planner to understand the impact all the different parameters have on a product or service since the entire model needs to be customized and tuned as per the changing demands.