Traditionally, supply chain management focused on efficiency. The goal was to give quality at the lowest cost attainable and to deliver it fast. Today’s consumer is turning this model on its head. Not only are they paying keen attention to the sustainability and ethical practices of sourcing and production, but they also want a wide variety of options to choose from. They want perks such as overnight or free shipping. For businesses to stay ahead, their linear supply chains must be digitally transformed into responsive supply chains.
To fail to plan is to plan to fail. Range forecasting allows a business to play out a variety of potential demand scenarios whether high or low and to plan corresponding actions. This type of forecasting can cover about 80% of potential future outcomes allowing a business to have a variety of contingency plans in place. This makes them more flexible, able to respond quickly to changes in the market, and to bounce back in case of losses.
Flexible Supplier Contracts
Flexible contracts allow a business to outline acceptable performance parameters to their supplier. This allows them room to fulfill the contract in ways that suit demand and their own obligations.
A supplier contract can specify when production should be doubled or tripled based on range forecasts. This gives the supplier an overarching view of multiple demand outcomes and they can optimize production to meet those surges.
Implement Strategic Sourcing
Single sourcing can lead to bottlenecks and stockouts because the supply chain is not flexible enough to meet the ebb and flow of demand. Strategic multisourcing enables businesses to categorize suppliers into different tiers. In the event of a supply disruption or a rise in demand, the business can activate second or third-tier suppliers. They will then be able to maintain or shorten lead times and ensure customer satisfaction.
A Holistic Approach to Supply Chain Management
The traditional approach to supply chain management has been to keep all functions separate. Many businesses give information to suppliers, partners, and logistics providers on a need-to-know basis. Although based on protecting sensitive and insider information, it results in process latency.
Businesses need to share information across stakeholders and encourage collaboration. They will unlock efficiencies and help to create more flexibility, resilience, and responsiveness in the supply chain.
Creating responsive and more agile supply chains should be one of the main objectives of supply chain management for any business. The aim is to be more proactive in forecasting and inventory planning to be able to respond to demand fluctuations rather than scrambling to mitigate loss after the fact.