Page 87 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes Big data solutions combined with Complex Event Processing (CEP) solutions are
being used more than ever this year to digest the enormous magnitude of available
data and turn it into executable actions. Leveraging these tools with supply chain
visibility solutions will quickly become a “must have” rather than a “nice to have”
as companies utilizing these tools set the bar for the new normal in supply chain
performance.

Source: http://www.scmr.com/article/five_supply_chain_trends_that_shaped_2012/

6.3 Implementation of Supply Chain Principles in a Company

Managers increasingly find themselves assigned the role of the rope in a very real tug of war—
pulled one way by customers’ mounting demands and the opposite way by the company’s need
for growth and profitability. Many have discovered that they can keep the rope from snapping
and, in fact, achieve profitable growth by treating supply chain management as a strategic
variable.
Our analysis of initiatives to improve supply chain management by more than 100 manufacturers,
distributors, and retailers shows many making great progress, while others fail dismally. The
successful initiatives that have contributed to profitable growth share several themes. They are
typically broad efforts, combining both strategic and tactical change. They also reflect a holistic
approach, viewing the supply chain from end to end and orchestrating efforts so that the whole
improvement achieved—in revenue, costs, and asset utilization—is greater than the sum of its
parts.

Adherence to the seven principles transforms the tug of war between customer service and
profitable growth into a balancing act. By determining what customers want and how to
coordinate efforts across the supply chain to meet those requirements faster, cheaper, and better,
companies enhance both customer satisfaction and their own financial performance. But the
balance is not easy to strike or to sustain.

Notes Each company—whether a supplier, manufacturer, distributor, or retailer—must
find the way to combine all seven principles into a supply chain strategy that best fits its
particular situation. No two companies will reach the same conclusion.

Principle 1: Segment customers based on the service needs of distinct groups and adapt
the supply chain to serve these segments profitably.

Segmentation has traditionally grouped customers by industry, product, or trade channel and
then taken a one-size-fits-all approach to serving them, averaging costs and profitability within
and across segments. The typical result, as one manager admits: “We don’t fully understand the
relative value customers place on our service offerings.”

But segmenting customers by their particular needs equips a company to develop a portfolio of
services tailored to various segments. Surveys, interviews, and industry research have been the
traditional tools for defining key segmentation criteria. Today, progressive manufacturers are
turning to such advanced analytical techniques as cluster and conjoint analysis to measure
customer tradeoffs and predict the marginal profitability of each segment. One manufacturer of
home improvement and building products bases segmentation on sales and merchandising

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