Can Your Supply Chain Respond
to the Unexpected?
Look for Both Efficiency and Responsiveness in Supply Chain Management
David Daffner, Vice President — Managed Services
People typically stress the importance of efficiency when it comes to supply chain management. These descriptions illustrate that point perfectly: “Efficient production is making products without wasting materials, natural resources or man hours. Efficient facility management means running your business while reducing your energy costs and minimizing its carbon footprint.” It’s all about applying best practices based on your specific business and industry to achieve optimal cost and value.
But what happens when you’re faced with the unexpected, like a change in market demand, a natural disaster or a new regulation? You need speed and flexibility— not long lead times and high minimum order quantities. Is it possible to have both efficiency and responsiveness from your supply chain?
The current trade war is a good example of how businesses can be impacted by supply chain surprises — such as tariffs on at least $200 billion worth of goods imported from China.
A blog article posted by Supply Chain Movement asks us to change the way we think about supply chain management. They offer this new paradigm: “As responsive as required, as efficient as possible.” Let’s break that down a little more.
Achieving efficiency means getting your product or service delivered with maximum cost efficiency, removing any unnecessary expenses along the way. This allows you to be more competitive in the marketplace and boost your bottom line.
Achieving responsiveness means reacting to an unanticipated event while still delivering your product or service. Your supply chain may not be able to fulfill your request, or it may take longer and potentially cost more.
The retail industry has faced this dilemma for decades. Short product lifecycles and fickle consumers make forecasting difficult. Overseas manufacturing and growing distribution channels have put a strain on the supply chain. Inventory freshness is increasingly more important and a driver in profitability. This related video on responsiveness in the retail supply chain may be of interest.
The mobile device industry is impacted by technology upgrades and quick demand shifts that threaten to make a model obsolete in a matter of weeks. Interruptions in the supply chain can exasperates the problem. As an article in Supply & Demand Chain Execution pointed out, many high-tech companies couldn’t access necessary parts when their supply source in Thailand was hit with floods in 2011, leaving thousands of factories inoperable.
Healthcare has seen its share of dramatic changes, too — advances in medical technology, more mergers and acquisitions, growing demand from an aging population, consumer-driven engagement and legislative reform. Recently California passed a bill that will require hospitals to have a written discharge planning policy and process for homeless patients. It includes providing weather-appropriate clothing and additional apparel for hospitals to procure.
In the end, it really comes down to supply and demand — and finding the right balance in your supply chain. Inventory planning and proper forecasting are essential, as are agility and responsiveness from your suppliers and contractors. Efficiency and responsiveness shouldn’t be thought of as mutually exclusive, but rather two qualities that support the same goal: getting your product or service to the marketplace and satisfying your customers’ needs.