1. Have visibility into what is selling
2. Streamline your product offering based on sales
3. Customize your supply chain to your product offering and demand signal (Read as “educate the supply chain of the product based on sales”)
A manufacturing operation that is disconnected from sales is bound to have high inventory and poor capital utilization – both being extremely detrimental to profitability.
While the top three tips may seem cliché or common sense, manufacturing is often disconnected from the true demand signal. Also – for companies that offer configurable products, visibility into what choice combinations are selling is very critical to demand planning.
Visibility into what is selling means that a company has a finger on the pulse of the demand signal and buying patterns. Customer buying is not random and has distinct patterns based on market conditions, region, demographics and seasonality.
Aligning with customer demand means that the inventory and materials planning is based on what is selling. It also means that the sales reps are armed with the knowledge of what is selling and can guide customers to the best product mix. This is also called Sales Enablement or Guided Selling. The value is that the company is aligned with the best selling product mix and sells more of a smaller subset of products – resulting in higher efficiency across the entire organization.
Many sectors do not have clear visibility into their inventory in the same way. For example – in the software industry the excess inventory is not visible at all. In the airline industry the inventory vaporizes every time a flight takes off, as it does in the hotel industry each night.
Manufacturing and distribution are nodes that are many steps removed from the point of sale. This can cause tremendous inefficiencies if the operation has to be responsive and deliver service with high product availability. Dell was highly successful in connecting the manufacturing node to the point of sale. However – even in this case, the cost of product complexity and proliferation caused tremendous erosion of profits.
Your product offering is the lifeblood of your supply chain. It is what your customers buy. It is what you built. It is what you design and offer. It is what you carry in inventory – as parts or as finished goods.
However – most supply chains do not have knowledge of the product. The supply chain is agnostic of the product that is supported. The supply chain that is implemented across companies such as Dell, Coca Cola or Caterpillar is essentially the same. That is a tremendous opportunity today.
A supply chain that is educated on the product it supports will have the capability to understand the demand signal as it pertains to that particular product and inform the various nodes along the chain of the correct response.
Here are a few examples -
– If the product is a car, the supply chain should know what feature combinations are selling. Red cars are highly popular with leather seats and 4WD.
- If the operation is a distributor of office supplies, the supply chain should know what products are bought together and what are good substitutions. This will help the point of sale to be responsive in real-time to customers with high service and availability.
In today’s world of high velocity, intense competition and unforgiving customers your supply chain can be your friend or your foe. A supply chain that is educated with knowledge of your products is a friend who will be there to help you and respond quickly.