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Troyer cites four requirements that are key to meeting customer demand. First is to have a supply-chain strategy that is tailored to the requirements of each product and market. Second is having the capacity to meet demand, which is especially critical given the long lead times required for adjusting one's global manufacturing footprint. Third is a formal sales and operations planning (S&OP) process, so that companies can continually adjust production to meet demand and inventory targets. Fourth, and most critical, is possessing flexibility in planning and execution. Supply chains need to be able to change production runs quickly in response to unplanned shifts in the market.
"Unplanned" seems to be the word of the moment. In Troyer's view, "volatile markets are the new normal." Lead time for some key components could be as long as four to six months. "Some customers will not wait," he says.
A flexibility planning regime needs to be implemented in phases. First, companies need to figure out just how much flexibility they need. Then they have to determine the options within their manufacturing networks. Thirdly, they need to identify components that have the longest order lead times, and develop a strategy for each. Finally, they must analyze their operations and find ways to reduce product complexity.
The ability to execute with efficiency depends on sensing changes in demand as early as possible. Once a company has determined how much more production is needed to satisfy a given market, it should be able to simulate the appropriate master schedule changes. In the process, it can uncover any product shortages.
There's always a delicate balance between flexibility planning and cost to be struck. "It's not free," notes Troyer. There are costs associated with overtime and the carrying of extra inventories at the component and finished-goods levels. Still, flexibility can make a significant contribution to the bottom line, generating added sales due to a supplier's ability to respond quickly to changes in demand. "It's important not to give [customers] reasons to shop with a competitor," Troyer says.
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Keywords: supply chain, supply chain management, inventory management, inventory control, supply chain planning, retail supply chain, sourcing solutions, supply chain risk management
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