This type of alignment produces two results. First of all, all members of the chain have the same goal: to provide consumers with the best service. While the standard availability of spare parts in the automotive industry is between 70% and 80%, the availability of spare parts at Saturn dealerships is 92.5%. After taking into account transfers from other retailers, the availability of spare parts on the same day is actually 94%. Second, the right to decide on the replenishment of the inventory belongs to Saturn, who is best placed to make those decisions. The company shares the risks of stock-outs or overstocks with traders and therefore has an interest in making the best possible decisions. Rightly, the inventory turnover (a measure of inventory management efficiency, calculated by dividing the annual cost of inventory sold by the average inventory) of spare parts at Saturn dealerships is seven times a year, while at dealerships at other auto companies it is only one to five times a year. Investments in supply chain integration software and compatible information systems throughout the chain The main concerns of supply chain management are the costs of materials and the efficient delivery of products. Good supply chain management can reduce costs for consumers and increase profits for the manufacturer. After all, large companies align the interests of their supply chain partners with their own. This is important because every company cares exclusively about its own interests. When goals don`t align with those of other supply chain partners, performance suffers.
Sometimes the alignment process involves the use of intermediaries. In the case of VMI, for example, some financial institutions now buy components from suppliers from hubs and sell them to manufacturers. Everyone benefits because the financing costs of intermediaries are lower than the costs of sellers. While such an agreement requires the trust and commitment of suppliers, financial intermediaries and manufacturers, it is an effective way to align business interests in supply chains. While a supply chain involves all parties in satisfying a customer request and leads to customer satisfaction, a value chain is a set of interconnected activities that a company uses to create a competitive advantage. Constant communication, timely updates and reliable documentation are essential for an efficient supply chain. Companies need true end-to-end visibility into the supply chain and need to consider all aspects, including suppliers, partners, warehouses and freight forwarders. Real-time data exchange throughout the supply chain provides an overview of the entire chain and more detailed information about each node. The benefits of this transparency even reach the customer in the form of real-time tracking of deliveries.
Lack of alignment leads to the failure of many supply chain practices. For example, several high-tech companies, including Flextronics, Solectron, Cisco, and 3Com, have set up supplier hubs near their assembly plants. Suppliers hold just enough inventory in the hubs to meet the needs of manufacturers, and they replenish the hubs without waiting for orders. Such vendor-managed inventory (VMI) systems allow vendors to track component consumption, reduce transportation costs, and because vendors can use the same hub to support multiple manufacturers, achieve economies of scale. If VMI offers so many benefits, why hasn`t it always reduced costs? In Dell`s new virtual company, inventory levels are reduced by using timely information. The emphasis on physical assets is replaced by the emphasis on intellectual abilities; and proprietary business knowledge is increasingly shared in open and collaborative relationships. This complete integration of the supply chain can be seen as a shift from vertical enterprise integration to a virtually integrated enterprise (Magretta, 1998). Vertical integration was essential in the early years of computer manufacturing, when the supplier base was not yet well established and assemblers had little choice but to design and build components and assemble the entire final product in-house. Proprietary component technologies were a major source of competitive advantage, although in some cases they had little to do with creating value for the customer. As the industry matured, many component suppliers were enthusiastic, and at the heart of Dell`s success was its integrated supply chain, which enabled rapid product design, fast manufacturing and assembly, and direct shipping to customers.
Stocks have been significantly reduced thanks to the in-depth exchange of information, a prudent choice given the risk of technological obsolescence and the reduction in material costs, which can exceed 50% per month. Despite reduced inventory levels, Dell`s strategic use of information has significantly reduced the time between order and delivery, giving Dell a significant competitive advantage. Managing orders, customs documents, inspection reports, waybills and other supply chain documents can be a complicated process. Because supply chain documentation spans multiple business units, it often suffers from inconsistencies, disconnections, and misalignments of processes and goals due to siloed functions and services. This creates confusion and can reduce responsiveness while increasing errors. The term value chain refers to the process by which companies obtain raw materials, add value to them through production, manufacturing, and other processes to produce a finished product, and then sell the finished product to consumers. A supply chain represents the steps needed to bring the product or service to the customer, often OEM and spare parts. While compliance with various laws and regulations is a key factor in sustainability initiatives in the supply chain, leadership in this area can also strengthen a company`s brand value and reputation, as well as its bottom line. A survey found that 43% of consumers expect companies to hold themselves accountable for their environmental impact and that products marketed as sustainable grow 5.6 times faster than those that don`t. These statistics indicate an increasingly environmentally conscious clientele that is increasingly focused on the sustainability of the companies they buy from. Having too many or too few products in stock is a costly problem for businesses.
The first may mean that inventories are not moving because sales are down or the company has miscalculated and overbought demand. The second may mean that sales have increased, but supply is lagging behind, causing companies to miss out on revenue opportunities. Both are the consequences of inaccurate demand forecasting. Why can`t efficient supply chains deliver the goods? For several reasons. High-speed, low-cost supply chains are unable to respond to unexpected changes in demand or supply. Many companies have centralized production and distribution facilities to achieve economies of scale and only deliver product containers to customers to minimize transportation time, freight costs, and the number of deliveries. If the demand for a particular brand, package size, or assortment increases without warning, these organizations will not be able to meet, even if they have the items in stock. According to two studies I helped carry out in the 1990s, the required goods were often already in the factory`s warehouses, packed and ready to be shipped, but they could not be moved until each container was full. This “best” practice delayed deliveries by a week or more, forcing crowded stores to turn away consumers. So it`s no wonder that, according to another recent research report, when companies advertise product promotions, inventory shortages average 15 percent, even though executives have prepared supply chains for fluctuations in demand. It is also important to provide professional development opportunities for employees in the supply chain.
This means investing first in high-quality training to strengthen the skills of current employees. Creating clear roadmaps for promotions and focusing on cross-functional business mobility also helps companies retain talent and develop a well-rounded team that understands all levels of supply chain operations. The digital supply chain is the next generation of supply chain management. .