Customer driven supply chains
I found an interesting article here at supplychainstandard.com. Chris outlines a key trend in the market, namely that more and more companies are focused on creating more customer driven supply chains in response to increasing market pressures. He also does a nice job of outlining several actions companies can take to compete in this environment by creating a more customer driven supply chain.
I wanted to add another point. What I continue to find is that the first problem companies face as they work to become more customer driven is the realization that you can’t plan the customer. When manufacturers were more push oriented in their model, the focus was more supply than demand/customer centric. This model works best in a low volatility environment where you can much more effectively plan your supply, capacity and production. In this environment, your focus is on how to plan and execute to run the business like clockwork.
In today’s increasingly volatile environment, as Chris points out, you need to become more customer driven to compete and deal with the market forces. But because you can’t plan the customer, you have to re-orient your focus for this situation. In particular, it’s about how to thrive when the business doesn’t run like clockwork. Doing so requires you to push more decision making out to the front lines. When things don’t go according to plan, the centralized planning model isn’t the answer – you can’t escalate to senior management all of the decisions that need to be made in the trenches to deal with unexpected supply disruptions, last minute order changes, unexpected forecast changes, etc. There are literally hundreds of these decisions being made every day.
The problem is that most companies don’t have tools to deal with this. The tools they have were to support the central planning process with a focus on running the business like clockwork. To respond to changes when the business doesn’t run like clockwork, you need to empower your front-line decision makers with tools for risk tradeoff and response. They need to be able to act quickly and decisively with actions that are aligned with your corporate objectives as defined in your sales and operations planning (S&OP) process.
Re-orienting the business from a supply to customer/demand driven approach means ensuring that the organization is armed to deal with the fact that you can’t plan the customer.
