I found a very good article at CFO.com discussing the supply chain management challenges companies are facing today in light of the rising logistics and commodity prices. I posted a comment, entitled “integrating financial metrics into day-to-day supply chain management processes“ at the site and have included it here as well.
** My comment **
Great article covering the challenges that manufacturers in all verticals face today. The increase in shipping and commodity prices is hitting everyone and forcing them to re-evaluate all aspects of their supply chain management strategies – from network design, to logistics, to sourcing, etc.
At the heart of the challenge is the reality that volatility is on the rise. Whether it be customer demand expectations changing rapidly, supply disruptions or volatile costs, the fact is that things are changing at a faster pace. And, the implications of not being able to adapt are significant.
Too many manufacturers have a disconnect between their business and sales and operations planning (S&OP) processes and day-to-day supply chain management processes. Plans are put into place, metrics are passed down, but then people have to do their day jobs.
Given the rise in complexity and volatility, there are more and more high impact decisions that need to be made on the spot by your front-line responders. Taken individually, these decisions may not have a material impact on your financial metrics, but in aggregate, it can be very material.
What manufacturers need are to develop supply chain management processes, supported by the right tools, that integrate financial metrics directly into the supply chain management processes. The key is to ensure that the necessary high impact judgment calls are always aligned with the financial metrics of the company. Without clear and immediate visibility to the impact a proposed action would have on these metrics at the point of action, your risk saying yes to the customer and dealing with the ramifications later. The only way to ensure a profitable response to change, is by integrating financial metrics directly into the realities of today’s supply chain management processes.