Increasingly, the technology is portable and cloud-based which reduces investments in equipment, software licensing, and implementation processes. Thus, technology should be viewed as a strategic facilitator of supply chain efficiency rather than as a costly expense.
Technology also supports supply chain network redesign. Over time, networks can lose efficiency if the supply base expands or contracts, transportation rates significantly increase, demand patterns and volume change, or customer service requirements become more stringent. Modeling tools help produce companies map out their existing networks and costs, and allows them to test various facility relocation, reduction, or expansion scenarios. The cost and service implications of each option can be thoroughly analyzed before any realignment decisions are finalized.
Segmentation
Segmentation is not a new strategy but it can be rather helpful when assessing supplier costs, customer re-quests, and product profitability. Rather than lumping all suppliers or customers into one group and establishing a single supply chain strategy, the groups are stratified for analysis, prioritization, and resource allocation.
Customers are often segmented on an 80/15/5 basis. The “A” customer group is a small group of very large customers that collectively account for 80 percent of revenue. They warrant a far greater level of supply chain service and much more competitive prices than the “C” customers—a very large group of small, infrequent buyers that account for only 5 percent of revenue. Giving “C” customers the same level of attention and service as the “A” group wastes resources. Lower service prioritization and imposition of service fees to “B” and “C” customers are logical approaches to supply chain cost savings.
On the supply side, understanding the performance of the A, B, and C groups can help a buyer evaluate performance more effectively and drive future purchase decisions. Better yet, when individual suppliers can be identified and analyzed, problems can be pinpointed to their sources, and improvement initiatives can be more targeted.
Treacy notes that some retailers are implementing the DataBar codes on PLU stickers for loose product to facilitate this analysis. He explains: “By adding the stacked barcode on the PLU sticker, which is unique to the supplier, they can now close the loop from a category management standpoint. The retailers will know their sell-through by supplier and item, not just by item.”
These four tried-and-true strategies are neither easy to implement nor quick hits. They require a strong time commitment and the engagement of multiple internal departments and companies along the supply chain.
Yet this type of collaborative engagement and coordination of supply chain processes is key to uncovering hidden savings that one organization cannot independently achieve.
