Finding your spot in the supply chain
Rick Bushnell President, Quad II
By Rick Bushnell -- Modern Materials Handling, 3/1/1998
In my January column, I identified eight questions a company should ask and answer as it considers the information and control systems that will take it into the next millennium. Obviously, I can't answer the questions for individual companies. But, I can explain why I believe it's important to find the answers.Question one-actually a set of related questions-appears to the left. Here's my point: Every company needs to realize that it's in the middle of a supply chain. Understanding this fact seems more of a problem for manufacturers than for companies solely involved in distribution of finished products.
Manufacturers often visualize themselves at the end of a raw material chain and, consequently, focus on master schedules and inbound shipments. They automate the purchasing function, for example, tending to think of using bar codes or other forms of automatic data collection as inputs to the manufacturing process.
Most manufacturing businesses developed during a time when the only way to make real money was to refine the processes that resulted in their products. Distribution was an unpleasant but necessary expense. Today the game has changed. Distribution is now a vital link to customers that can greatly affect profits.
This is not to say world class manufacturers don't have sophisticated distribution capabilities. Many of them do. But many, many more treat the distribution of finished goods as a completely separate operation.
The reason understanding your position in the supply chain is so important is that the separation of manufacturing from distribution defies the foundation of the new integrated approach.
The "enterprise" concept that is the basis of "enterprise computing" requires thinking holistically. A company must consider raw material orders based on knowledge about manufacturing cycle time, stocking levels all the way through the supply chain, and volumes required at the point of use or point of sale.
Manufacturers don't buy computer systems that give them enterprise computing. They reorganize the company to run as one cohesive set of activities turning raw materials into products that are delivered to a paying consumer.
Companies who receive finished products and distribute them to the point of use or point of sale have to change their thinking, too. They tend to have less trouble recognizing their relative position. But they must see themselves as part of a value chain that goes all the way to and through the manufacturer on to the raw materials or subassemblies to build the products. Their systems must be responsive to shifts in demand and must pass information to manufacturers who use it to provide (back to them) the right product for the right price at the right time.
This information transfer is where bar code and electronic communication technologies become so important. They are inexpensive, reliable ways to pass discrete information about use and demand throughout the entire supply chain.
How do you answer these questions for your company:
* Am I at the top, bottom, or middle of a supply chain?
* What does that position mean to the purchasing, manufacturing side of my operation?
* What does it mean to the sales, marketing, and distribution side of my operation?
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