We live in a “Now” economy with customers that are consistently expecting faster and faster delivery service levels with the same amount of care and in-full execution. However, doing so has become increasingly complex in the supply chain. Orders are coming in with greater variability due to more front-end options and the geographies we need to service with our supply chain are growing. So it’s not just about increased speed but increased speed with more tailored supply chains across increasingly expanding geographies.
This culmination of events is making it hard to scale and transform the supply chain as it’s not about just scaling investment in the supply chain but about using these investments in better ways.
How Companies Used To Scale
When we talk about entering new markets and geographies with our sales and marketing, it puts more pressure on the supply chain to service these customers. Not only is pressure placed on speed to serve these customers but you also see pressures in overall cost to serve and most importantly on inventory safety stock across the supply chain.
Traditionally, companies who grew would invest in distribution centers or partners that could serve the local geographies where they were looking to expand. While this helps with speed and over time transportation costs, what often happens is that these distribution centers only serve this local region. Where we get issues is especially in inventory, which often is siloed for that region across each distribution center.
This impacts two areas.
- It often means you have more safety stock across your supply chain network in your distribution centers and across partners for each product for each region.
- With inventory dips for each region we also see that product availability for customers is limited to the inventory that is in the local distribution centers, which can lead to lost sales and customer retention.
Dynamic Inventory Optimization Across Your Supply Chain Network
In order to build in flexibility and agility into the supply chain, we are seeing organizations truly build out their multi-enterprise business networks with multiple partners and suppliers as well as their own internal distribution centers and other parties.
However, this network is only as good as the visibility AND control you have to best leverage your internal and external parties to drive supply chain success.
With supply chain orchestration, you are able to begin to make this supply chain network more dynamic in how you use all parties. And this in turn can help you leverage your inventory better across all your distribution centers and vendor managed inventory with third parties in your network. Its impact on inventory can be the following:
- More Product Availability through eCommerce: With better supply chain visibility into inventory across the network, you are able to give customers full access to what is available. If there is a shortage in a specific region, this gives you the opportunity to leverage stock in other regions to satisfy a given customer order while the shortage is addressed.
- Lower Safety Stock: With use of your full inventory across the network, you can better manage your safety stock across locations. While transportation costs can be higher based on delivery from non-local locations, factoring in the cost of inventory, capacity, transportation costs, activity costs and delivery time when making decisions on how to satisfy a customer order is critical and a key benefit of supply chain orchestration.
This is not all conceptual. A growing agricultural spare parts supplier has been using supply chain orchestration to more effectively optimize inventory across the regional distribution centers that they run helping them to increase overall product availability globally while maintaining high OTIF deliveries and reducing transportation and holding costs. This has helped them improve the relationships they have with their customers while enabling their team to more effectively focus on high value add activities.
Supply chain transformation is moving to more connected processes and end-to-end supply chain visibility not less. How we build in intelligent automation to bring all our parties together into an optimized supply chain network, will determine success in our supply chains and business. Innovators are already starting to piece this network together, are you?