Saturday, March 11, 2006

Make you supply chain agile (1)

Flexibility: That's like an oxygen for supply chains today, a necessity for competing in an environment where dynamic costs puts a premium on agility. Let's all hope we'll never see $100-$200 a barrel oil, but you sure better have a plan if we do. So, we have to gain an understanding of what is the characteristics of an agile supply chain and how to make it happen. Here comes some suggested by Dan Gilmore from Supply Chain Digest. This is the first part:

Continuously Plan Your Supply Chain Network

Traditionally, firms have treated supply chain optimization as a strategic event run every two to five years, until a major corporate event occurs, like an acquisition, or "the pain is so bad they can't stand it". This periodic analysis does deliver significant value; a firm typically will reduce the operating expense in scope by 5-15% upon implementing a supply chain network redesign. Despite the significant initial operating improvements, results often begin to deteriorate within months. Why? Firms operate in a dynamic environment, where constant change threatens to create new imbalances within their supply chains. Kilgore says that in order to sustain the value provided by sophisticated analysis, firms need to conduct continuous rather than sporadic planning efforts. Continuous analysis enables companies to accelerate decision-making, view the supply chain holistically, and answer ad hoc questions with fact-based analysis. SCDigest notes that while a small number of companies, such as Pepsi/Frito-Lay, have taken this approach to continuous supply chain network planning and achieved very positive results, they are the exception, at a time when it is more necessary than ever given today's dynamic corporate strategy and cost environment.