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5 Strategies for Better Supply Chain Management in the

Current Economy

By Stephen Slade on Jul 29, 2010

By Maha Muumdar ! pu"lished in #$%CS E&tra, July 2010 edition

'he past se(eral years ha(e "een mar)ed "y increasing economic (olatility,

as reflected "y not only the glo"al economic recession, "ut also the

insta"ility of customer demand and rapid mo(ement in ra* material, fuel,

and commodity prices+ Supply chain e&ecuti(es are under pressure to

de(elop more efficient, customer!centric supply chains and find inno(ati(e

*ays to reduce costs+ Mean*hile, they are "eing as)ed to ta)e ad(antage of

"usiness opportunities that may arise from the current economic conditions+

#s a result, company leaders are prioritiing proects that reduce in(entory

and logistics e&pense+ #lthough this may help matters in the short term,

professionals ris) ignoring the long term+ -rganiations must prepare for the

re"ound *hile responding to the conditions of the ne* normal!!a reduced

la"or pool, stagflation and deflation, and issues surrounding energy and

sustaina"ility+ Effecti(e strategies coupled *ith a *ell!defined plan and the

right tools *ill help alle(iate pressure today and ready managers for mar)et

changes in the future+

Strategy 1: Adopt demand-driven planning based on real-time

demand insights and demand shaping. 'he right prediction and

contingency planning tools *ill ensure a complete (ie* and an effecti(e

response to ris)s such as suppliers going out of "usiness, political uphea(al,

and natural calamities affecting manufacturing+ Companies then can adust

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pricing and promotions strategies to shape demand, mo(e additional product

.uic)ly, dri(e re(enue gro*th, or further e&pand margins for a high!demand

product *ith limited mar)et supply+ 'he )ey is to ha(e the foresight to

le(erage opportunities and mitigate challenging e(ents so that your "usiness

not only sur(i(es, "ut succeeds+

Strategy 2: Build an adaptive supply chain with rapid planning and

integrated execution.-nce e&ecuti(es are a"le to "etter predict demand

and ris), they need to adapt their supply chains to changing mar)et

opportunities and e(ents+ Companies must put in place dynamic planning

and continually fine!tune operations+ 'he old model *as to *ait until the end

of the month or .uarter to shift production and supply "ased on shipments

and sales+ 'he ne* model calls for more continuous, dynamic supply chain

adustments to rapidly respond to mar)et changes+ 'his can minimie or

e(en eliminate shoc)s across the supply net*or)+ 'he results include "etter

(isi"ility/ enhanced colla"oration across the (alue chain, including sourcing

and supply, manufacturing, transportation, *arehousing, and distri"ution/

and accelerated decision!ma)ing *ith "etter analytics and support+

Strategy 3: ptimi!e product designs "or supply# manu"acturing# and

sustainability in order to accelerate pro"itable innovation. %nno(ation

is crucial to "eing one step ahead of the competition+ But inno(ation doesnt

e&ist in a (acuum+ %n order to "e successful, products must "e manufactured

at the right cost+ ecisions made in the early cycles of product de(elopment

can ma)e or "rea) the product+ esigns must "e optimied for supply andmanufactura"ility, and all the true costs must "e accurately captured+ %n

addition, product inno(ation and competiti(e ad(antage increasingly stem

from the selection of suppliers and technologies+ %f a company can manage

the information, people, processes, and decisions regarding a product

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throughout its life cycle, it can achie(e strong di(idends and mar)et

leadership+

Strategy $: Align your supply chain with business goals by

connecting sales and operations planning %S&'( with corporate

business planning. #lthough S-$ processes pro(ide coordination among

sales, manufacturing, and distri"ution, there still are disconnects and gaps

among finance, strategy, and operations in many companies+ -ne *ay to

"ridge these gaps is *ith integrated "usiness planning+ 'his process

integrates financial strategic "udgeting and forecasting systems *ith

operations planning+ 'he resulting marriage of processes ensures re(enue

goals and "udgets de(eloped in finance are (alidated against a detailed,

"ottoms!up operating plan+ Concurrently, the strategy reconciles the

operating plan against financial goals+ %ntegrated "usiness planning, *hich

connects S-$ processes *ith corporate "usiness planning, ena"les

companies to achie(e the right "alance of supply and demand, aligned *ith

strategic "usiness goals+ %t pro(ides real!time (isi"ility to all the )ey

dimensions for success!!demand, supply, product, ris), and performance!!across the organiation and throughout the e&tended supply chain+

Strategy ): *mbed sustainability into supply chain operations.'he

triple "ottom line of people, profit, and planet has ne(er "een more

important than it is today+ Studies sho* that companies stri(ing for social

and en(ironmental sustaina"ility achie(e maor competiti(e ad(antages,

especially *ith regard to production efficiency, supplier management s)ills,and attracti(eness to employees+ Su"stantial opportunities e&ist for

sustaina"ility in supply chain operations3

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Company leaders first need to include sustaina"ility as a core

component of their supply chain strategy+ 'his means incorporating it as a

)ey re.uirement across all supply chain processes+

Second, professionals initially should focus on the "asics to achie(e.uic) *ins through real!time (isi"ility to energy and resource consumption

and resource or material mo(ement+ 'his ena"les reduction of car"on

inefficiencies, minimied energy consumption, less *aste *ith 4recycle!

reuse!refur"ish4 materials, and optimied tra(el and transportation+

Businesses can )eep the momentum "y ensuring continuous

impro(ement through systemic measurement, audit, and )no*ledge

management+ Compliance audits, "est practices, and "enchmar)s pro(idea go(erning frame*or) for sustaina"le supply chain operations and ensure

clarity around the en(ironmental impact of specific actions+

+he right processes# practices# and tools can help

the demands on supply chain managers to rapidly respond to change and

increase profita"ility are greater than e(er+ 'he good ne*s is that effecti(e

strategies and solutions e&ist that support each one of the pre(ious fi(estrategies, and they can deli(er immediate return on in(estment+ 'he *ay in

*hich companies implement these strategies can mean the difference

"et*een success and failure+

Maha Muzumdar is vice president, supply chain marketing at Oracle, where

he helps formulate, define, and drive the market strategy for Oracle's supply

chain applications.