Volatility is one of the most significant supply chain challenges, and one that most companies can identify with because it affects how much of anything they need to buy or make. Globalization is clearly related to that as the supply chain disruptions of the past year - the earthquake, tsunami and Southeast Asian flooding - have shown. Higher customer expectations and new-product introductions are also related somewhat. Customers are ever more demanding for any number of things, not least of which are additional products. Companies have to cater to those tastes as surely their competitors will if they don't.
The implications of these factors? "We're finding more and more companies struggling to adjust their inventory levels," Saxena says. "We find more and more cases of inventory being at the wrong place, leading to obsolescence, higher write-offs, sales being impacted - and higher expenses incurred because of expediting. The standard problems you see in the supply chain are being exacerbated by the current challenges."
A segmented supply chain is one way to address these issues. Saxena says many companies realize now that under their "umbrella" are several supply chains that need to be tended to individually. He cites Dell, which has a direct model and products available on store shelves. Each has to be configured differently.
Another response strategy means being demand-driven, relying more on point-of-sale information. Even companies way upstream in the supply chain can use POS data to understand what's really happening with their products. Fairchild Semiconductor is able to make market predictions based on what it monitors in its distribution channels, Saxena says.
Sales and operations planning enables a synchronization across different functions, he says, but S&OP often is talked about more than actually implemented.
Supply chain management is the final response strategy. Variability is the enemy, he says, and inventory and capacity - both expensive to use - can be effective "shock absorbers." Leading supply chain companies figure out how to position inventory appropriately, utilizing postponement and segmentation techniques. At the same time, they understand well the risks associated with those decisions.
