Buyers of clothing and certain consumer-electronics items are accustomed to seeing their models of choice disappear from store shelves shortly after purchase. For fashion-conscious consumers, there's always a new design in the pipeline. But the concept of "fast fashion" is now making itself felt in other areas, according to David Johnston, senior vice president of supply chain with JDA Software Group, Inc. Among the items experiencing shorter life cycles are home building accessories such as drawer knobs and bathroom hardware. Against that backdrop, JDA is working on planning applications that will help manufacturers keep up with the faster pace of change. Another big trend, according to Johnston, is retailers' growing dependence on generic and private-label merchandise, which is touted as a lower-cost alternative to traditional brands. Of course, someone has to make those goods, and private labels represent "their only growth route" for many manufacturers. As if that weren't enough, manufacturers and retailers alike are forced to become more efficient in order to meet new "green" initiatives and offset the crushing impact of rising fuel costs. All of these factors have caused companies to take another look at supply chain optimization software, offering tools for strategic network design, Johnston says. In the process, they ask key questions about the best locations for manufacturing plants and distribution facilities, while reducing their overall impact on greenhouse gas emissions.
Such efforts can only succeed, however, if they take place at a high enough level in the organization, and across multiple disciplines. Otherwise, companies are in danger of "sub-optimizing" their supply chains, as they field separate teams for managing demand forecasts, distribution strategies and production plans. Johnston stresses the importance of constant feedback among various departments, so that a company can determine, for example, the impact of an increase in service for one product on overall inventory levels. Or, conversely, how much the company stands to save by cutting back slightly on service in one particular area. Johnston cites Heinz as one company with a formal program for strategic network optimization, by which it can determine precisely how much capacity it needs at each plant and distribution center, to meet customer needs with maximum efficiency. This concern with process integration is still relatively new among most companies, he says, but it promises to have a big impact on decisions regarding the purchase and deployment of supply chain software. For the moment, he adds, only a handful of companies are taking demand intelligence gathered at the point of sale, and making use of it all the way up the supply chain. Such a practice requires better integration of multiple software applications than currently exists in most organizations. The development of service-oriented architecture (SOA) can help, but that capability is still three years away "in terms of true adoption," Johnston says.
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