Supply chain management is a cross-functional approach to coordinating the entry of raw materials into an organization, managing the internal processing of materials into finished products, and then moving these finished products to the final consumer.
In B2B environments, the demand signal is out of phase for three reasons. The first is latency because time has shifted by the time the demand signal is processed. The second is amplification: changes in demand are exaggerated as each trading partner removes or adds hedges to the forecast. The third phenomenon is interference where market events add to uncertainty. The best option and the only option for us is to be very flexible and collaborative. That’s where focused supply chain management comes into play. The primary function of demand planning in a make-to-order or configure-to-order environment is to allocate capacity and materials to forecast demand rather than to stock end items. The key requirement is to forecast at multiple levels (end items or components) as well as being able to generate orders to consume the forecasts. Once the forecasts have been created, an important aspect is to keep track of how they are executed and how well they performed. Therefore, visibility and performance tracking are key.
Furthermore, collaboration becomes an important issue because there is a need to involve channel partners within the forecasting process. Lastly, minimizing the supply chain cycle time from order processing to the manufacturing and assembly process is one of the most crucial aspects.
As organizations strive to focus on core competencies and become more flexible, they have reduced their ownership of raw material sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more profitably. The effect is to increase the number of organizations involved in meeting customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts whose purpose is to improve trust and collaboration between supply chain partners, thus improving inventory visibility and velocity. .
