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Author: Chuck Thomas, Director, Professional Services, Kinaxis

In our new white paper, “Why you need to re-evaluate your approach to supply chain planning,” there’s a discussion about the increasingly complex and distributed supply chain that made me think of how supplier rationalization drives the need for better tools.  This rationalization is driven not only by the continuous improvement initiatives of brand owners that have outsourced their manufacturing but also by contract manufacturers that expand and contract through acquisition and divestiture.  I have seen a growing number of situations recently where brand owner expectations and contract manufacturer objectives evolve to an out-of-sync condition resulting in the shifting of some or all of a brand owner’s business to other manufacturers.  While this rationalization is proving to be a fairly common practice, it adds additional complexity and unpredictability to an already complex equation.

Moving production from one source to another is seldom easy and it puts additional strain on the organization because execution to current plans must continue while making and executing new plans to effect the desired changes in the supply chain.  Large ERP packages were not designed to adequately support the rigors of these simultaneous activities.   What-if analysis and scorecarding are two significant levers that can be used to help with the significant level of change wrought by supplier rationalization just as they can be used with day-to-day execution challenges. 

Once the decision is made, the execution strategy associated with moving production from one source to another is typically one of avoidance – to avoid disruption in supply.  This generally supports the prevailing paradigm that shortages are much worse than too much inventory so it always safer to err on the side of inventory.  Whether you are a brand owner or contract manufacturer, the improved tools the paper describes help provide continuous supply chain visibility to both sides of the shortage-excess challenge so that continuous course corrections can be made throughout the entire sequence of events, rendering a better outcome for the business.

Tags: Supply chain

This entry was posted on Thursday, November 20th, 2008 at 7:33 am and is filed under Supply chain management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.