Supply Chain Optimisation: Part 5
... IT is critically important to the realisation of these cost reduction opportunities as it supports and enables supply chain agility in the following ways:
Supply Chain Optimisation: Moving Beyond Estimates, Expediting and Excel
Part 5: IT is critically important to the realisation of these cost reduction opportunities as it supports and enables supply chain agility in the following ways:
From this IT perspective therefore there are a variety of key supply chain performance enablers, these include:
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ERP - Enterprise Resource Planning
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APS - Advanced Planning & Scheduling
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SCO - Supply Chain Optimisation
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SCE - Supply Chain Execution
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SCM - (Extended) Supply Chain Management
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CRM - Customer Relationship Management
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E-commerce & c-commerce
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EAI - Enterprise Application Integration
Of these, however, Supply Chain Optimisation (SCO) is the leading current IT enabler for agility where the supply chain is too complex for manual optimisation and there is a need to integrate and continuously align demand with supply. The more agile a supply chain is, the more complex the supply chain issues become and the ability to replan frequently and at short notice becomes a necessity. Additionally, collaboration with supply chain partners is increasingly required and for this to be achieved a system supporting strong collaborative IT capabilities is required.
The core functionality of SCO (supply chain optimisation) as a process is depicted below:
This functionality requirement leads to the core architecture of a supply chain optimisation (SCO) system as shown below:
Process integration with business collaboration is depicted in the diagram below. CPFR – collaborative planning, forecasting and replenishment – is fast becoming a hot topic and emphasises the power and importance of information… when it is shared.
Supply chain optimisation involves a concerted effort from all parties and the necessary transparency of information requires trust which is a rare attribute in the business world and is viewed as being counterintuitive by many. Is all this effort and expense worthwhile? The benefits that can be yielded (published in the past by PRTM) include:
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Delivery Performance - 16% - 28% improvement
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Inventory Reduction - 25% - 60% improvement
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Fulfilment Cycle Time - 30% - 50% improvement
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Forecast Accuracy - 25% - 80% improvement
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Overall Productivity - 10% - 16% improvement
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Lower Transport Costs - 12% - 20% improvement
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Lower Supply Chain Costs - 25% - 50% improvement
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Fill Rates - 20% - 30% improvement
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Improved Capacity Utilisation - 10% - 20% improvement
Thankfully the SCO system does not need to be fully implemented in one single big project in order yield significant benefits to the business / supply chain. Realising ‘quick hits’ cements commitment to the implementation of the SCO system and keeps the implementation project’s momentum high which is always a bonus with change programmes. The table below shows typical stages of an SCO implementation and the benefits achievable with having implemented each stage successfully.
| |
Late Shipment Reduction |
Inventory Reduction |
Forecast Accuracy |
| Step 1: customer demand analysis |
20% |
|
|
| Step 2: analyse inventories |
|
15% |
|
| Step 3: collaborative demand planning |
10% |
|
25% |
| Step 4: implements S&OP & ATP/CTP |
30% |
20% |
|
| Step 5: constraint-based scheduling |
20% |
5% |
|
Summary of Supply Chain Optimisation (SCO):
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IT has more relevance in agile operations than lean operations
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Agility requires effective supply chain optimisation processes and software applications
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Without IT support agility rapidly leads to confusion and anarchy
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SCO is the key technological agility enabler
- There is good money in SCO projects
