Page 89 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes
Figure 6.2: Market Level Logistics

Source: Anderson Consulting
Neither approach can achieve superior asset utilization or accommodate the segment-specific
logistics necessary for excellent supply chain management. In many industries, especially such
commodity industries as fine paper, tailoring distribution assets to meet individual logistics
requirements is a greater source of differentiation for a manufacturer than the actual products,
which are largely undifferentiated.
One paper company found radically different customer service demands in two key segments—
large publishers with long lead times and small regional printers needing delivery within
24 hours. To serve both segments well and achieve profitable growth, the manufacturer designed
a multilevel logistics network with three full-stocking distribution centers and 46 quick-response
cross-docks, stocking only fast-moving items, located near the regional printers. Return on
assets and revenues improved substantially thanks to the new inventory deployment strategy,
supported by outsourcing of management of the quick response centers and the transportation
activities.

Principle 3: Listen to market signals and align demand planning accordingly across the
supply chain, ensuring consistent forecasts and optimal resource allocation.

Forecasting has historically proceeded silo by silo, with multiple departments independently
creating forecasts for the same products—all using their own assumptions, measures, and level
of detail. Many consult the marketplace only informally, and few involve their major suppliers
in the process. The functional orientation of many companies has just made things worse,
allowing sales forecasts to envision growing demand while manufacturing second-guesses how
much product the market actually wants.

Such independent, self-centered forecasting is incompatible with excellent supply chain
management, as one manufacturer of photographic imaging found. This manufacturer nicknamed
the warehouse “the accordion” because it had to cope with a production operation that stuck to
a stable schedule, while the revenue-focused sales force routinely triggered cyclical demand by
offering deep discounts at the end of each quarter. The manufacturer realized the need to
implement a cross-functional planning process, supported by demand planning software.

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