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Cutting-Edge Ideas for Optimizing the Supply Chain

Wayne Zorn, vice president of customer solutions with Solvoyo, lays out the tradeoffs that sellers must make between satisfying customer demands and calculating cost to serve.

Many supply chains involve a number of organizational “stovepipes” that prevent sellers from meeting their order commitments. In a complex, multi-echelon system, “some people in the organization are looking at customer fulfillment, while others are making commitments to suppliers,” says Zorn. Often there’s a disconnect between the two areas. The most successful companies are those that can achieve an end-to-end view of inventory and orders.

Sales and operations planning can be an effective means of matching supply with demand. Still, “looking at the numbers doesn’t always mean the plan was coordinated from beginning to end,” Zorn says.

It’s crucial to be able to communicate a demand signal all the way up the supply chain, then act on it. Data needs to be readily available throughout the multi-echelon organization – the so-called “single source of the truth” that sellers need in order to accurately gauge demand and respond accordingly.

Not all orders should be fulfilled in the same manner. Suppliers need to gauge the profitability of each customer. Some might not merit same-day service, which can be cost-prohibitive.

“You have to look at the big picture,” says Zorn. “If I lose money on that [customer], am I going to increase demand?” The challenge of segmentation becomes even more difficult with the advent of the omnichannel, which often involves customers with sharply different profiles and levels of profitability for the seller.

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