In the past decade, from 2000 to 2010, globalization has become prevalent; finished products dependent on a component sourced from another continent has probably become the norm vs. the exception. Whether it is a new telecom router or a round end table for your dining room, it is likely that at least a key component flows from a factory on another continent.
In this scenario, there is the need to understand not just how to ask a freight forwarder to move goods from offshore but to understand the thousands of different routes, rates, lead-time and consolidation opportunities. Whether it is just saving money in freight or spending more on freight to save time, there is a competitive advantage in linking transport lead time to sales and operations planning (S&OP). Using more dynamic choices for transport lead times and costs opens up numerous opportunities to flow inventory and fulfill incremental orders that would otherwise go unattended or delayed beyond the point of need.
S&OP is a process of judiciously matching demand and supply to use less working capital and promote cash flow in business operations. The secret weapon in S&OP is to realize all firms do some sort of S&OP but the addition of simple tools that simultaneously compress time and scientifically net demand and supply using time-phase netting can generate significant financial and customer service returns. The focus here is on a very specific enablement of S&OP transport lead times represented in the S&OP bill of distribution. Usually these lead times are static and based on a legacy distribution network. When much of your supply chain and production is outsourced there generally is not a legacy single way to do things. There is generally one significant constraint which is aligning your freight forwarder or other transport partner to your goals of flowing inventory vs. brokering shipments.
S&OP used in volatile markets of demand and supply disruptions offers an extreme competitive advantage to operate profitability through this volatility. These solutions can be delivered in the cloud or behind the firewall software and / or even delivered to your door as a turnkey appliance.
The S&OP philosophy and supporting tools will generate value regardless of your goal of selling more with the same level of inventory or using S&OP to reduce working capital to meet the same level of sales.
Supply chain / S&OP efforts should focus on creating rapid and sustainable business advantage. You should often start your S&OP efforts with an effort to find quick wins in aligning transport lead times to S&OP goals. This can take the form of common sense drop shipments direct from supplier to customer and / or the use of replacing the static lead times in the S&OP bill of distribution with dynamic transport lead times. Within a short period your organization will tangibly see the benefits of an S&OP philosophy and will then get exited about deploying S&OP rigorously throughout all roles and functions in the extended supply chain. Thus you get a quick financial return as well as the so often overlooked "quick win" and catalyst to change.
Read Full Article
Keywords: supply chain management IT, supply chain solutions, supply chain systems, transportation scheduling
Enjoy curated articles directly to your inbox.