Many supply chains have more links in them than is initially evident.  The time it takes for information to flow up and down the supply chain can be directly proportional to the number of these links.  Moreover, some of these links in the supply chain can distort, as well as delay the information that needs to flow.  Most importantly, the right information needs to flow through the supply chain.  The speeding up of incorrect information or the wrong plan will only result in more churn, which can result in decreased customer service as well as increased inventory.

What is needed is the capability to simulate changes, determine the best response to these changes, and then communicate the response rapidly across the supply chain.

Consider the following diagram:

Based on the diagram above, there are at least two dimensions of links in a supply chain:  external and internal.  The external dimension is the links between one entity and another, such as a manufacturer and a supplier.  The internal dimension is reflected in the Bill of Material structure within an entity.

Each of these links can delay or distort the information flow along the supply chain.  Related to delays, a signal for a supply or demand change needs to likely flow via an MRP execution, normally only run nightly at best,  then there are potentially orders in place where the MRP execution creates exception messages that need to be acted upon by a planner or buyer before the change signal will flow.  In most cases, planners and buyers receive many more MRP exception messages that can be acted on within a day.  Obviously, since there can be at least several days of delay at each link, and considering these internal dimension links, the overall delay will sum up to a considerable amount of time.

Related to distortion, order policies to bucket orders into lot sizes or minimum buy quantities can magnify the change signal as it flows up the supply chain resulting in the traditional “bull whip” effect.  Given this, the wrong change signals can be continuously flowing through the supply chain.

Many manufacturers have attempted to reduce the delays and distortions along the supply chain by implementing automated rescheduling of placed orders, EDI, schedule sharing, supplier portals, small lot sizes, pull systems and the like.  All of these efforts help, but a more comprehensive solution is required to optimize the flow of the right information rapidly through the supply chain.

The comprehensive solution needs to provide the following capabilities:

• The ability to simulate demand and supply changes within multiple scenarios that can be evaluated against each other for the optimal response plan
• Provide the option of auto rescheduling orders and removing or changing lot sizes
• Include visibility into key supplier data and include in the simulation
• Evaluate the impact throughout the supply chain and communicate and collaborate the needed changes quickly

How many links are in your supply chain?  Have you considered this internal dimension of links?

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Tags: Collaboration, demand response, Supply chain flexibility, Supply chain management, Supply chain visibility, Supply management
Posted in Inventory management, Supply chain management
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