The essence of what companies do should be simple. They produce goods or services and provide them to customers at a higher price than the costs required to make, sell, and distribute. However, this simple equation hides a mass of complicated challenges.
Generally speaking, supply chain and procurement professionals source materials, forecast and plan the quantities for production, and execute on the process of distribution via direct fulfilment or retail channel. Sales and marketing professionals create and forecast customer demand for the product they’re positioning. Essentially, these are two sides of the same coin.
They need each other: without customers, a well-organized supply chain is useless. Without efficient supply execution, customers’ demands are unmet. How can companies synchronize these sides of the business, and how can supply chain professionals guide the business to better performance?
Here are four areas to consider:
- Cross-functional collaboration on consistent metrics
Marketers use social media analytics and marketing automation software to determine promotion plans. Supply chain and procurement software ranges from ERP to point solutions for everything across logistics and warehouse management. To execute the supply chain at the lowest possible cost and with an optimal inventory balance, the two groups need to plan together. The information contained in their disparate systems should be reconciled and automated with consistent metrics.
A holistic view of data needs to reflect the impact of decisions made across the supply chain. Working in collaboration, both marketing and supply chain teams can take steps to understand and manage the expectations of customers. Avoiding out-of-stocks and delayed fulfilment will prevent lost sales and ensure customer satisfaction.
This level of proactivity and rapid response can be achieved with a digital supply chain analytics platform. Real-time visibility also enables decision making at the pace of customers’ increasingly demanding timelines.
- Identify the common objectives across teams
When you consider collaborating with the rest of the business, it’s worth finding common ground and understanding the integration between processes. For example, where the supply chain team might be facing unusually high return volumes and is managing receipt of faulty stock, marketing and customer service professionals should care about the customer experience that drives returns and its effect on reputation and relationships.
This shared challenge can provide a starting point for identifying opportunities for improvement. For example, the supply chain team can highlight data on the type of returns, costs involved and customers impacted. Marketing can analyze this information, particularly where product fit is concerned, and incorporate the insights into its positioning. Customer service representatives can ensure customer relationships are preserved, and product management teams can incorporate feedback into design cycles and understanding of product usage.
The emphasis should be on realizing every process is connected. Therefore, information gathered by one group can also provide insights to another part of the business.
- Breakdown silos with enterprise goals
Procurement can get pigeon-holed as an organization concerned only with savings on spending. While making savings is critical, it should not be the only performance indicator measured.
It’s important to look at wider operational aims and how they can be measured and tracked end-to-end. For example, understanding new product development plans will enable strategic sourcing teams to identify appropriate suppliers and include those in contract terms. This visibility will reduce the delays associated with sourcing new supplies, as well as increase savings on materials. Accelerating time-to-market on a new product is not typically a KPI associated with procurement, but its processes have a tremendous impact downstream.
Another example would be examining the costs for production, transportation and logistics. If production overtime and expedited shipping are required to deliver on fill-rate commitments, then the increased sales the promotion generates might not be worth the total landed cost. Procurement, supply chain, marketing, and sales may have all met their departmental KPIs, but overall margins were eroded with the siloed approach.
- Start small and build up
For many companies, the prospect of re-architecting a supply chain with digital technology and enterprise-wide visibility is attractive but daunting. It’s worth examining where gains can be made quickly without putting the business at risk.
For companies that depend on thousands of suppliers and a complex supply chain, it’s likely the data sources don’t speak to each other and require manual reconciliation, which is both time consuming and error prone. With a networked approach to Business Intelligence and Analytics, complex and disparate data sources can be aggregated into a common business model for analysts and executive dashboards. Over time, the analytics can be adopted more broadly within the organization, so different functions and business units share information that is accurate and consistently governed. Eventually, customers and suppliers can gain access and provide their own data for tighter planning and collaboration. This availability of information connects the ecosystem to operate in a synchronized fashion, creating and fulfilling demand at the lowest possible cost and in the timeliest manner.
To learn more, download the Gartner report, “Charting the Path to Digital Maturity in the Supply Chain.”
The preceding article was originally published in Spend Matters UK on August 4, 2016.