Supply Chain Strategy Assessment
The Supply Chain and logistics industry in Australia has experienced considerable change over the last few decades. As each decade has seen the evolution of integrated distribution centres, new supply chain technologies linking vendors with customers and the use of advanced algorithms for predictive analysis, organisations have had to alter their supply chain strategy and supply chain management approach.
While some organisations still operate under a traditional supply chain model, Ecommerce supply chain organisations have recognised the need to move quickly to refine their supply chain model in order to meet the changing needs of customers. Lets take a look at the core factors within a new supply chain strategy.
- The role of mobile devices and their impact on manufacturing and distribution facilities.
- The rise of Ecommerce creating Omni-Channel distribution centres to support the demands of the customer.
- The internet of things and how it controls delivery modes with real-time track and trace capability for the customer.
- Supply chain analytics, the role and use of data, sharing and collaboration, to drive predictive modelling analysis to execution
The customer has become an educated shopper using tools at their disposal to generate high order volumes within shorter leadtimes on most supply chain organisations. The traditional supply chain model which operated on despatching to a destination when the container was full are out dated and never focused on customer service levels. Their aim was cost minimisation at the expense of customer service. Tomorrow's supply chain success stories will achieve more balance by adopting supply chain optimisation and agile supply chain strategies.
Responsive Supply Chain Strategy
Effective supply chain management requires a responsive supply chain strategy framework consisting of strategic, tactical and operational tiers within supply chain model. Progressive organisations understand that the right supply chain strategy will achieve success by aligning this framework with business strategy. Continuous improvement initiatives planned to enhance supply chain performance must be underpinned by a strong culture that learns from failures and promotes achievements.
Defining and developing a responsive supply chain strategy requires an understanding of the real gaps that exist at a tactical and operational level. The challenge is how to identify and implement the best initiatives to address performance gaps to strengthen your supply chain strategy. Here is a real account of challenges faced by a client through a business aquisition:
A new acquisition by the business has broadened its product portfolio to distribute products into a new mass market channel. As the existing premium range of products is servicing a separate distribution channel, the supply chain model will need to change, broadening its coverage to support regional locations with a higher cost to serve. Challenges:
- What is the depth and scale of the product range?
- How many SKU's are active and how many are due for transition or disposal?
- What is the current margin on these products?
- What marketing programs are in play and is there an on boarding program for key customers or distributors?
The additional product range will need to be sourced from a new supplier base. Existing supply contracts will need to be reviewed to understand any commercial implications, inventory commitments and indent cost changes based on different incoterms. Challenges:
- Increasing the supplier base may impact on resource levels, does the existing team migrate or is there a transition period to full ownership and control centrally?
- The physical location and capacity of vendors will require review and may present centralisation options to standard distribution supply points.
- Your supply strategy will need to be refined to incorporate these challenges.
Supply chain network
Our existing supply chain footprint consists of a 3PL that is based in Sydney and services all existing accounts from a centralised distribution centre. Existing deliveries follow a direct to store model, which is managed by the 3PL provider. The addition of the new product range will require a direct to store model to be supported from a multi warehouse environment based in each capital city. Challenges:
- Is this the most efficient supply chain model to support our supply chain strategy?
- Are there opportunities to consolidate storage and delivery points to minimise the supply chain footprint without impacting on service?
- Can our existing 3PL support a hybrid supply chain model at the right cost for our organisation?
- Do we focus on our sterngths to aquire businesses and consider a fully outsourced 3PL supply chain network?
The existing transport cost structure to support the direct to DC supply chain model is operated as a cost centre, the new direct to store model is operated as a profit centre. Additional management and coordination for line haul transportation may be required prior and post vendor consolidation. Local couriers will be an additional service to support the direct to store model. The management and coordination of the inbound logistics component i.e. freight forwarding, customs clearance and transportation will certainly require a review to identify consolidation opportunities, service contract changes or closer vendor management during a transition cycle.
Supply chain technology
The existing ERP system supports financials and inventory at an aggregate balance sheet level. The warehouse management system, which is operated by the 3PL, is integrated to the ERP by way of file interfaces that captures order management and inventory balancing. The additional business has a number of smaller scale systems that have full ERP capability, but lack real time information.
- Can these systems be integrated or migrated?
- How will financials be consolidated to provide a regional profit and loss statement and balance sheet?
- What support agreements exist and how can support be centralised, outsourced or managed internally?
- How is customer service to be managed, do we centralise or outsource?
Supply Chain Strategy Assessment
Our supply chain strategy assessment is an essential health check and is used as a baseline to identify or validate the level of alignment between your business strategy and your supply chain strategy.
- To formulate a road map to fully align & corporate strategy and supply chain strategy, incorporating a level of agility to support changing conditions.
- Depending upon the scale of the organisation, a road map may incorporate a range of components to support the new supply chain strategy.
- Changing the supply chain footprint through divestment, acquisition or movement to an outsourced 3PL solution.
- Create or modify your inventory policy to support changes to the supply chain footprint.
- Modify inventory flow to support a centralised, decentralised or hybrid solution through vendor consolidation
- Supply chain technology enhancements to support information management and integration within you business.
Feel free to contact our office for advice or to discuss any specific project requirements.