The extended supply chain network is key to success
When key supply chain data, processes, plans, and people are connected inside an enterprise, organizations get on the right track for efficiency and cost savings. But even more important is the next step: looking outside your four walls to your extended network. Let’s call that “the connected enterprise.”
If connecting the enterprise helps you stay on pace with the market, connecting your extended network moves you ahead of the pace. The global supply chain for an industry-leading company encompasses a plethora of different stakeholders and connection points. Let’s look at a few examples of those stakeholders, explore an industry where the connected enterprise is vital, and dig into the benefits of building a truly connected supply chain network.
First, let’s look at some of the stakeholders involved in a typical supply chain extended network (see Figure 1).
The stakeholders involved in a typical supply chain extended network, from raw material supplier to the customer.
Now imagine that the seven different players involved to get the product from raw material to the customer all operate in siloes or with ineffective collaboration. The actions and adjustments made by individual suppliers, distributors, production facilities, and channel partners affect one or more of the others. This makes the connected enterprise a priority for efficient and profitable supply chain operations.
For example, when the extended network shares data through visible, collaborative networks, producers know how much to produce based on shared forecasts. Distribution centers know how much to send to warehouses, and warehouses know how much to load into their trucks to ensure that they’re lowering transportation costs by sending full trucks to stores. Efficiency is increased, costs are lowered, and waste is minimized.
Consumer demands in today’s omnichannel retail world are increasingly complex. I experienced this recently when I wanted to buy a product online and pick it up from a store near my office. One day it was available, but a week or so later, it wasn’t. That was one of those moments when a practical implication of the connected supply chain hit home for me. Although I might want an item at a certain time and place, it’s not always possible. However, the retailer that can execute that availability most effectively is likely to earn my repeat business. That’s where a single pool of connected inventory and a dynamic, optimized inventory planning system can set a retailer apart from the rest.
Besides earning repeat business in the retail world, what are some of the benefits of a well-connected extended supply chain network?
- Greater control and visibility across all network events and exceptions, minimizing the “bullwhip effect.” An example of the bullwhip effect is how an increase in sales because of a promotional push may lead manufacturing to produce more of a certain item, when in fact demand wasn’t raised but merely spiked, based on sales and marketing efforts.
- Quick response to deviations. When the extended network is synced, deviations don’t cause large disruptions because key players are connected and ready to respond with strategic, rule-based adjustments.
- The power of the “what-if” scenario. When each element of the supply chain is accurately connected, you can run hypotheticals that incorporate supplier capabilities, customer needs, and potential disruptions. “Be prepared” isn’t just the Boy Scout motto, it’s good business.
A connected supply chain starts with the understanding that a new market requires a new supply chain. Next, it requires building solid connections among the data, processes, people, and plans inside the enterprise. With that foundation built, the connected supply chain creates links across the extended network to create the connected enterprise.
To explore these ideas in more depth, check out our white paper, “3 steps toward achieving a connected supply chain.”